Greencoat UK Wind PLC (UKW) Earnings Call Transcript & Summary

Good morning or good afternoon all, and welcome to the Greencoat UK Wind Full Year Results Presentation. My name is Adam, and I'll be your operator for today. [Operator Instructions] I will now hand the call over to Stephen Lilley to begin. So Stephen, please go ahead, when you're ready.

Now, thank you, Adam, and good morning, everyone. Thank you for joining this call. I appreciate you probably thought that this was a better option than drag. So hopefully you'll enjoy the next little while. This is our 10th annual results presentation, we summarize a little bit what's happened over the last 10 years as we get to the end. Hopefully, you'll find that interesting. For the year, obviously, that's the focus of this morning predominantly. We started off with a huge cash generation in the year, 3.3x cover is obviously significantly higher than normal. Generation was slightly down, but the capture in the year of about GBP 180 11% discount to capture discount to today had price obviously, extremely strong. That leads that's where obviously the cash generation comes from. So a pretty strange year in some ways. We've gone in the year and invested GBP 340 million into new projects. We've got commitments outstanding at the moment. But the year really, I guess is a tense increase in the RPI in the dividend, I should say. So GBP 772 becomes GBP for 2023. We've had now increasing by nearly GBP 34 in the year. We go to all the movements in that at GBP 167.1. So in total, the NAV growth and listing of 69% versus RPI of 45% is this sort of the other couple-part to the out calling dividend. So we've continued during the last 10 years and through the last year to deliver on the simplest proven strategy that we had at IPO.  In terms of this presentation, we keen to highlight probably 3 things that differentiates. I think we don't feel that if our share price reflects these things, and therefore, we are going to talk about them again. Forgive us if you find them tedious because you've heard them before, but the RPI linkage of the dividend is fundamentally different to sector. We have conservatism in power prices that we will see as we go through, which we think is fundamentally different to the sector as well. And then sort of thirdly, we've tried to describe and we'll do so discount rates and in an increasingly higher interest rate environment, how our return once backed up to peers, but also back to begin to the market. So I think those 3 things we want to really sort of talk about conservatism, RPI linkage and high return. If we turn pages, just with an update on simple model stakes, wind farms become 45 now 1.6 gigawatts of capacity, and you can see the total cash generation dividends paid and reinvestment going around that cycle all the way through an RPI linked to dividend and real net preservation. So the simple story continues. On Page 4, we have -- again, this is a dividend cover of $3.2 million. Previously, everything has been in the 1s. So 1.9 million was last year, 2021, 3.2 big this year. You see on the third and second column from the right. We've explicitly showed this. So RPI for 2013 becomes the dividend increase of 2014. RPI for 2014 becomes the dividend increase of 2015, all the way through that. And obviously, the $13.4 million percent RPI line for 2022 becomes the dividend growth for 2023. If we carry on through to operational performance, let me pass on to Laurence.

Hi, so picking up from Slide 6, you can see the wind resource and generation mapped out there. We are 5% down in generation terms in 2022, actually an outperformance relative to the wind speed, which was also 5% down. We'd normally expect something like a 1.7x ratio. But I wouldn't read too much into that. There's a lot of noise in these figures, geographical location, particular wind. But perhaps the best graphical representation here is to look at those green lines, which are the annual averages, they don't actually diverge very much from the 10-year average volatility from wind speed feeding into generation is actually pretty low, it's 6% standard deviation year-to-year in terms of wind speed, which with that 1.7x ratio translates into 10% standard deviation in terms of generation. If you divide that by the square root of 30, you'll see that the standard deviation over the useful life of a wind farm is very low indeed, below 2%. So there's not something to be concerned about. Biggest risk exposure of this fund, the upside and the downside comes from the power prices, not from the volume of generation.  However, giving you more detail on that volume for 2022. Moving on to Slide 7. This is the operational performance of each asset. You can see there the total 4.4 terawatt hours of production in the year. That's 5% below budget, and you can see the individual assets highlighted there. We always like to point out the top issues, operational issues facing the portfolio. They're listed on the right, a blade failure at Windy Rig, for example, pitch motor exchanges and certain generator issues at tune glass, for example. Just to say, these are all very normal business as usual operational issues that anyone would expect on operational assets, such as Wind farm, in some total, they're contained within our base case availability assumption. For a normal year in terms of operational performance, particularly when you consider the conversion of that lower wind resource into generation. Going with page to page 8, financial performance. What does this translate into in money terms. Steve has already mentioned the power price, and that's really driving this very high net cash generation number of $560.1 million that you can see at the top line there on page 8. That's divided by GBP 175.8 million of dividends paid in the year. That's the 3.2x dividend cover ratio.  Interestingly, if you take the 2.2x, so that's over above the 1x dividend, and you take that 2.2p times the 7.7p dividend, that's 17p per share. So of the 34p total NAV growth over the year from $133.5 million to $167.1 million at the end of the year, about 34p NAV increase, half of it is cash.17p is cash. The further 17p comes from movement in portfolio valuation. We'll go into that in a lot more detail shortly. But I think it's really important to think about that 34p total NAV growth in the year. Half of it is in the bank or has been reinvested in other wind farm investments, as Steve mentioned. If we turn the page to page 9, these are 2 tables where we sort of give a different breakdowns and different ways of that $560.1 million net cash generation. The bottom table, I won't talk to in particular now. I've referred to that before as for the comes. It allows analysts and anyone else of that bent to high the 560.1 million our preferred net cash generation number back to the statutory accounts, the only reason it's included. But the top table is more interesting. In particular, this year, you'll see 2 extra line in the top section there, SPV level debt interest and SPV level debt amortization. This is the first year we've had these numbers in the table, and that's because we've acquired a 12.5% stake in the Hornsea One offshore wind farm, our largest single investment as measured by its $1.1 billion gap, and GBP 400 million equity investment. But the GBP 700 million debt that sits on that project or our share of the debt that sits on that project, obviously, have to service interest and there are periodic debt repayments.  And you'll see, in particular, in this period, a GBP 20 million and GBP 19.9 million debt repayment there on Hornsea One. So to be clear, our dividend cover ratio of dividend cover of 3.2x is post all SPV level or portfolio level for one of the better words, debt servicing, interest and amortization. Turning the page to page 10. This is now effectively moving away from P&L, moving away from cash flows and moving on to the balance sheet. You can see there the movement in net asset value set out in terms of millions of pounds in the top table. You can see the GBP 1.2 billion of total investment in the year. Again, these are gross numbers. And there are more details of that in the annual report is primarily the Hornsea One investment as we've discussed. Steve perhaps will go into more detail later in this presentation as well. But what I'd really like to focus on here is the movement in portfolio valuation, the $383.9 million or roughly 17p in to share terms. You can split this really into 2 parts. One is all to do with the power price. The other is all to do with macroeconomic assumption. So if I could group the various components in those 2 ways and perhaps start with the macro assumption.  You'll see that an increase in inflation assumptions has delivered a 14.5% increase in the NAV in the year, and that's been offset by only partially offset by an 80 basis point increase in the discount rate of 10.4p. So on a net basis, you've got over 4 points coming there. Yes, we've increased our discount rates that's entirely appropriate, but that's been offset by increases in the inflation assumptions. These are only increases in the short-term inflation assumptions. So those are the actual printed inflation assumptions for 2022 and also assumption for 2023. We've left the longer-term assumptions. So from 2024 onwards unchanged. They've been pretty constant for a long time now, 3.5% for RPI and 2.5% of CPI. Our 2023 assumptions at 8% for RPI and 5% of CPI. We still believe those are conservative, and I'd expect some upside on those. If you take the RPI assumption of 8% for 2023, for example, that's an average inflation rate for the whole year 2023. We've already had January's number. It was 13.4%. So if you start the year at 13%, and if one were to end the year at 3%, then you probably find that 8% is a reasonable estimate for the average over the full year. But I'll be mildly surprised if that 8% doesn't turn out to be conservative by the end of the year, that we shall see.  Perhaps now moving on to the power prices. Sticking on Page 10 for now, and then we'll come to Slide 11, the power price slide. You can see 33p is attributed to the increase in forecast prices. However, if you look a little bit further down that table, you'll see depreciation amounts to 13p for the year. What you should really think of is the net of those 2 assumptions. So 20p, 33 minus 13% as being the increase in power price assumptions that still in the NAV. But over the whole year, we've increased the power price assumptions by 33p per share equivalent. But then 13p worth of that has already been delivered through those higher power prices in 2022. On a net basis, 20p is still in the numbers. And then you have to do a further netting because you have to take off 8p for the electricity generator level. So what I would suggest to you is that still in the numbers as at 31 December 2022, on a fully netted basis, net of taxes and net of depreciation as a 12p total increase still in the numbers from increased to price assumptions, and we'll come into more detail on that very shortly.  Just pausing on the electricity generator levy, struggled to use that term. Sometimes the word windfall tax comes out of my math. But I'm told to use the phrase electricity generator levy. Obviously, at many levels, we'd rather not be paying less. We're modeling in our base case, GBP 200 million worth of Electricity generated levy payments over the next 3 years on an NPV basis, that's GBP 176.9 million, as you can see in this table on page 10. The tax is actually in place for 5 years, but our assumptions fall below GBP 75 per megawatt at in years 4 and 5. So we're actually only modeling paying that GBP 200 million spread across the first 3 years of the tax. So at one level we rather it wasn't there. But there's 2 other levels that frankly, is not a bad thing. It's actually a great damper for sensitivity to power prices. You can look in the annual report or indeed at the back of this investor presentation that the NAV sensitivity table. And you'll see that we're actually less sensitive to power price movements than we have been in previous years. That's because an effective tax rate of 70% applies to all revenues above power revenue above GBP 75 per megawatt on. So a movement of GBP 10 per megawatt hour is having the same effect in the old days as GBP 3 per megawatts they used to have. It's actually a useful damper making us less sensitive to power prices.  And then at a much sort of different level paying tax is not necessarily a bad thing in the country and consumers are facing all sorts of cost of living issues at the moment. And people with money at the end of the day, should expect to pay some of that for the common good. Let's move on to Slide 11, power prices. The top left, I won't dwell on. That's hopefully a reminder for most of you of the components of the power price, primarily gas. I think everyone reading the papers has worked out. That's why we've had high power prices over the last year and indeed still have higher power prices. The top right graph is the model power prices in 2023 real terms that we have in our model before PPA discounts that all the power prices you see on this page are before PPA discount. These are the discounts demanded by our offtakers to compensate them for their own costs, give them a little bit of profit perhaps and in particular, to cover balancing costs, they might amount to something like 5% of the power price on average. None of the numbers on this page take those into account. These are all pre-PPA discounts, not all of our peers report on the same basis in that respect. I'd point out a couple of things on that top graph, top right graph, the power prices. Firstly, the average over the first 5 years, 2022 to 2027, there is about GBP 90. Again, we think that's lower than many of our peers. And also, just to point out, we've tried to highlight it with a little gray triangle on that graph, the increase over the year. So the 20p if you like, before the EGL is taken into account the 20p that's still in the numbers, that's really in those medium-term numbers. If you were to look at this graph that we showed you from this time last year. It starts at the same place, GBP 120 and ends in the same place, GBP 45. It's just that it fell like a stone to GBP 45 and stayed there, the key difference in the power price forecast from all of the reputable forecasters over the 12 months is this great triangle. It's the fact that prices will take longer to fall back to those long-term levels of about GBP 45. So as we've said, every number on this page is before PPA discounts, but what discounts are included in the numbers? Well, firstly, there's what we call the catcher discount. This is just the fact that we're an intermittent generator, just like solar is an intermittent generator. And therefore, you can't expect to achieve the baseload price.  The bottom left table shows you that over the last 4 years, we've kind of averaged 10% roughly as our 10% as our capture discount. So for instance, last year, the average baseload price was GBP 203 at 79, we managed to capture GBP 181 at 76, an 11% discount to that. In the long term, we assume 20%. Those are, we think, sensible assumptions and that the historical data. What we've done in the short term is we've applied bigger discounts to the short-term forward curve. At one point in September, there was an effective 70% for that forward curve that we were assuming. So the graph on the bottom right is the 2023 forward curve as we advance through 2022. We started the year last year, assuming a 30% discount to the forward curve, and we've started the year this year, assuming a 30% discount for the forward curve. That's way more than our capture discount would suggest. It's just a desire to be conservative. We did not chase the forward curve up in March, June or September. We increased our discount for that forward curve. And that's why, as we've released some of that discount, a 70% discount is now a 30% discount, partly because power prices are lower, so they've got less far to fall and partly because we now have certainty in respect of the EGL levy as we've released that discount, and that's really why our NAV increased particularly in Q4, whereas perhaps some of our peers were flatter.  Very quickly then turning the page to Slide 12. This is the 10-year recap. The only thing I would point out to you is at the end here, the green line NAV per share has accelerated away from the inflation line. I think it's obvious why it's not just got inflation powering the numbers. It also got the above inflation increase in the power prices powering the numbers is the fun. Slide 13 is the total shareholder return. So it's moving on from NAV and seeing how that translates into the share price and obviously the paid dividends. it's higher than our peers. As Steve mentioned, that's one thing we'd like to really come across throughout this presentation. And on Slide 14 just compares us to potentially comparable indices. So the 4250 on the one hand and a corporate bond index on the other. We've outperformed the 4250 significantly since listening. This is a good investment. Turning on to Slide 15. Again, this is trying to make the point that we might well have a 5% or 5-point-something percent dividend yield. That's good, but it's not the full story. We have an 8% unlevered discount rate. That's equivalent to a 10% levered discount rate. There isn't 0 leverage at fund level between the leverage at fund level and our pro rata share of the Hornsea One leverage with 31% year at the year-end.  We aim to be 20% to 30% geared on average over the medium term. So assuming 30% gearing, the 8% unlevered return is the direct equivalent of a 10% leverage -- this fund before season costs is delivering a 10% return. You'll see in our annual report that our ongoing charges ratio, I think, is 0.93%, so lower than 1%. You take 1% off the 10% gross return. That's a 9% net return to you guys the investors. That's a 9% return. That's pretty good. Again, if we were paying a 5% dividend yield, and we are a 9% total return, then we should be growing at 4%. So we're not just a 5% dividend yield, we're a 5% dividend yield, plus 4% growth or a 9% return. The 5% dividend yield inflates what the dividend inflates with RPI, the NAV grows with RPI at that sense, we look like an RPI in net linked, just instead of paying 0.5%, we're paying 5.5% currently. We're a 500 basis point premium to the equivalent in net linked. We think that's pretty healthy. Onto page 16. This is more inside the fund now. This is our discount rate since listing. It started at 8%, down to 7% as interest rates fell to all-time lows. It's now increased back to 8%. That's the green line, but is significantly above the 10-year build. Again, it's a circa 500 basis point gap. Hopefully, I've managed to explain the effectively the P&L for the year on the balance sheet and also deliver some messages in relation to returns. With that, I'll hand back to Steve.

Thank you, Laurence. On to probably come through the rest of this relatively quickly. But you can see the portfolio on page 18, now 45 wind farms, 1.8 million homes that we power, looking to 19% of the U.K. wind market, about 1.6% of UK electricity. And you see the split between onshore/offshore and the big projects that we own, largely English offshore and Scottish onshore for kind of obvious reasons. If you carry down, we bought from 20 different sellers now to the independent execution credibility, really important to design of the business 10 years ago and continues to be so. So we continue with our range conversations across the whole sector. And I think we calculated, as you see right at the end that we bought one in 9 projects that we've looked at 11% conversion, if you like. And obviously, that means that have gone it elsewhere are not got sold. On to page 21, you see the $100 billion market and what we sort of bought you we better work that out on page 21. The number of projects that we looked at and the number we bought one of the others 19, you can see that. And then on to the year '20 selling GBP 51 million warranty ZAR 1.1 billion. You can see that and then some investments into company expansion throughout the year, the remaining bit small amount coming shortly or as the next few months roll through, both of those come extensions have a big onshore project with 4.8 megawatt Nordic machines, which will be quite large when you see them on land, normally see those sort of types of turbines offshore.  So those will be probably worth visiting at some point. In terms of committed capital that's 332 million. I think as Laurence said, we would imagine that we'll pay for most of that from the cash on the balance sheet and from the cash that's generated between now and then. So we would unlikely  draw too much on the revolving credit facility. In terms of the 20 shilling and the Hornsea, let's not say to most pretty straightforward project to 20 shillings. You can sort of see that on page 23, the subsidy pre-project that fits nicely with the CFD project, Hornsea One being one of those on 24. I don't know whether you watch Guy Martin on the TV, probably flew at the top of it, if you've been watching that on Sunday night. If not going to one place, it's worth a visit. He actually get it on to next door, but give you some feel for one scale; and 2, the sort of operations of an offshore wind farm. You'll also be interested to see the size of the cable that they lay as they put it out there. It just gives you some sort of feel for the -- like this. But that's the project that we bought into in the summer, we've probably been talking to the owner for 6, 9 months at that point, a long, long time first project that we've got with and any sort of limited of course definite and you worked out on previous slide of how discounts rates work and a project that comes off as we get from Gap to now, et cetera, as well as only the other debt that we have at the corporate level.  So moving on to 25. We've got all of our rock projects that's of those on the left-hand side into the 45 in the middle. We then got subsidy-free project one of those, which we complement with safety projects, Hornsea One being one of those on the right-hand side and the cash flow profile that you see at the bottom this year, 50-50. In terms of market activity, you can see on page 26, how we've built out type on the bottom of the GBP 100 billion mark and not a GBP 70 billion market and I think what you don't pick up as you proof read this presentation. And working on through into ESG to page 28. So we have got a great story to tell, if you like. The obvious things are the number of homes that we powered, 1.8 million homes and the 2 million tons of CO2 that we avoid. We have to report on TCFD. So these are emissions for 2022. We've always said that scope 3 seems slightly arbitrary and pretty meaningless sort of figures here. We've also calculated what we think is more relevant to the carbon payback that actually a turbine is used, the carbonate that uses to build it is done in 5 to 6 months. That's hopefully pretty decent to the fact and they actually far more relevant than to go 3, I would argue. Article 9 qualified. So we published in the back of the new results, the disclosures in the PAIs -- you also see that on the website, the 3, so we're asking qualified that photo if your interest is deepening Nicolas and that is what's called cultivator on the left-hand side. If you're watching Jeremy Clarkson farm, the thing that took his tractor over backwards. That is one of those, but an old file version of it.  If you carry on through to 29 sort of social and health and safety aspect, GBP 4 million of local community funding into projects. Lots of different policies that we need to make sure that we are in place the best in close on those types of things that we hold there. One thing that we've done throughout the year is try to work at how our funding can also support an some extra funding there as well, discretionary into food banks, local cost of living, et cetera. I think that's sort of the key thing that we've been keen to make sure that we can help with a little bit in health and safety is obviously quite important. If you're interested, the fact there is a generator exchange at real flat. So you can see the crane lifting off several tons of generator up on Epitome. The red thing on the left actually is the jack one of the 4 jack on the jacket pod. So that is ramped into the ocean floor and the ship is pushed off for much like you have a car when you change a tire, but that's what that is if you're interested.  Going on to 30, governance. So we're getting through the end of the -- rather sad line one into the direct as we've been with us since IPO, retires at the AGM, very able replacement takes over at that point. And actually, if editors moves up, it takes the place as the Senior Independent Director with then recruiting for a fifth non-exec director at the moment, and that's like operational background. We expect coming on to some of the case studies. Key restoration, obviously, key thing we talked about last year. Again, it's almost one of the best things that we can do in terms of the carbon sync nature of peak any damage construction so actually getting peapod working more efficiently. Topago has been built for quite a long time. So this isn't really about restoration, but making sure that we can interests, protect against overgrading and undergrading, which is sort of interesting when you think that overgrading kind of obvious, but integrating. If you don't have enough on the land, you end up not having a pruning your garden, I guess you don't end up clearing the rubbish. And so therefore, plants decay as a consequence of making that sort of work better and then also including working on drainage is pretty important as well. Going through then to the -- another sort of case study from a social perspective, I guess, the Greencoat work that we've done here. That's Jack McCollin the picture there, if you recognizing the First Minister of Scotland, last labor one, but I can't remember where there's one between him and some of that things actually but a very nice man, met him a few times.  Carrying on through into 33. Another thing that we're doing, we're just about to announce, I think sign and announced projects that we've got for our blade recycling work to universities. You're obviously surprised when you find what they are. And I don't mean not some Cambridge or by saying that. But more engineering bent universities will or going to be in some work with those pretty shortly. Carrying through then before we get on to a summary on page 34, you've seen the sort of scope 13 reporting. We've done that last year and again this year. The office aspect is a with the various annexes published as we have to UNPRI we continue to report into that they will do so again. So we didn't do last year because it wasn't it wasn't done last year, the commitment to the net managers initiative. And then the UNSTO that we had, if you like, in those that we pick up through the community funding quite significant one. Obviously 7 and 13 of the obvious ones that we do very nature be our business is.  Coming then in terms of the summary for the year, so the 3.2x dividend cover largely of extremely high power prices. We've had a high capture of those even though we can observatively modeled a lot lower than that. We've got attempt up increase of the dividend up to 8.76p for 2023. At the same time, NAV increased significantly in the year by 34p and in total between listing and end of the year, 69% versus 45% of RPI. So that sort of model of ARPO linked dividend and real note preservation. In fact, growth, substantial growth is -- in fact, it will continue to be so. We've done a lot of reinvesting that excess cash to 40 million into new projects and commitments to come with some of the excess cash on the balance sheet being used alongside that will be produced shortly and a market cap of as of today, about ZAR 3.7 billion, not GBP 3.5 billion. So we continue to lead the factor that we created. If you carry on to 37, we're not quite 10 years old, give us a month of leeway, but we produced nearly 19 terahash power could be helped produced over that by now actually versus avoided 7.5 million tons of CO2 generated nearly GBP 1.5 billion of cash and GBP 800 million dividend.  We've increased -- as we've repeatedly said, dividend 10x by RPI now again from 6p to nearly 9p in 10 years, and that has increased 24% above RPI inflation. We've bought 1 in 9 projects, 45 investments at the 400. TSRs has increased by -- or TSR has been 153%, and we have the market cap has grown significantly in that period. The chart on the right shows the projects that we started off with nearly 10 years ago. So Brazed and arcane in Scotland, in Manton and Tapan in Northern Island, real of the North Wales Coast and then Corktown in Kent. We've obviously got a lot more projects from them, you can see the increases in that -- but all the way through that, I guess, we've tried to deliver and have done an RPI that increases with dividend increases RPI, you've seen that 10x. Now preservation done that in spades, conservatism at a high return, a 9% return. And all those 3, I think, are significantly different to peers. We don't really think of ourselves as having peers. We are a company that has fully been 200 shortly. And we want to continue delivering those of our business. And hopefully, investors will appreciate that in the share price shortly. I think as for us in terms of to the formal presentation, Adam, do you -- if there any questions, and we can sort of pick those up.

[Operator Instructions] Our first question today comes from Colette Ord from Numis.

Just a quick question for me. Obviously, really great disclosure. So thanks for that. Just on your debt position. We know what your commitments are, but could you talk a little bit about the outlook for refinancing? Obviously, some facilities coming up end of this year as well. So you're generating lots of cash, but you've increased the base dividend, you've got a reasonable amount to be drawn on the RCF and some maturities. Could you just give us a sense for your thoughts on what the increased pricing might be or I presume you're relaxed about it, but just some color on the refinancing outlook.

Yes, and I think that the cash generation is kind of helpful because it means you got a bit of choice. We are pretty relaxed about it. We've got as most utilities, if you like, health debt that goes this year and actually at over an extended period. So we're comfortable with cash generation, but I do that. But also low leverage means that actually we can go and get that very easily. Obviously, there's an it cost at the moment. Laurence, do you want to have a pickup on that?

Yes. We are very lightly geared 31% at the year-end, and that's ignoring the GBP 161 million of cash. So that's all net gearing, it's a gross gearing. Including our pro rata share of that Hornsea One debt. There are GBP 150 million sterling of maturities, I think, with National Australia Bank and CBA due in November this year. I can't speak for them, but it would be nice to think that they might want to roll those commitments into longer-dated maturities. It happened before  Obviously, with all our great term debt, fixed rate, the benchmark rates are now higher. Just for reference, when we calculated that 10% levered equivalent discount rate, we assumed a 5% all-in interest cost, which was essentially 3.5% was a swap rate plus 15 margin, giving 5% all-in cost of debt. Our current weighted average cost of debt is 2.67% across the term debt, at some level just for interest. So yes, the cost of debt is currently higher than it used to be, but it's not high relative to the overall gross returns of the fund.

Yes. That's helpful clarification on the 10% bit. So that's really helpful.

The next question comes from Alex Wheeler from RBC.

Two from me, please. The first one is on power prices. Clearly, you're conservative on power prices versus peers. I think maybe that some peers get called out in that regard. However, given that the market is not giving you credit for the strong amount of NAV growth in the portfolio over the coming years, is there any connotation to unwind some of that discount and crystallized in the NAV? And then... I mean, because we've been too conservative. Yes, yes, I was just curious on how you think about that. Yes. All right. That was the second question. Second one is, are you seeing significant opportunity on the merchant asset side as you look to combine with CFD assets. Clearly, we're getting a strong acceleration of renewables, but I'm interested to understand how you're seeing that. I'm wondering whether a lot of that is subsidy driven and -- or what the merchant opportunity is out in the market at the moment? Thank you.

So always tempting to change assumptions so you now can go up. So that's a little rather flip an answer to the first question. Having said that, I think we have an obligation to present NAV as we think fit. The fact that the capture discount for last year and similar for the years before. Does that mean that we've been overly prudent. I don't think so. We've had volatility over the last couple of months, actually. So the 30% we had at the beginning of the year is less than that as we sort of stand at the moment. But we're very relaxed and that we've got the right thing. We've done the right thing. I think that as you go through last year, we were up from 30% to 70% at one point in Q3, what I've referred to in some cases is notably territory. And we just feel very comfortable putting that into our now because we didn't think it would ever be realized I guess what it wasn't. So I think the common sense position that we've always had, if you like, we sort of played out. And hopefully, we sort of stand at the end of the year with some credit in the bank having, hopefully, sensibly walked through what was a very rising year, interesting in terms of infrastructure. I'm never sure is a good combination. But we went through last year and managed that pretty well. So hopefully, we get the -- as we are at the moment and how the NAV looks and we feel comfortable with where we're at. So I haven't really answered your question, Alex, but that's what we're going to do.

Perhaps I can pick up the question about merchant assets in the market. So we did very well in 2019 and signed 5 forward commitments stroke, funded the construction in one case, subsidy-free projects. So that was Douglas West. Ben Kayaki, Tenty shiling, Wind Rig and South Kyle. 4 of those are already in the portfolio. South Kyle is due to come in sometime in Q2 this year. They were all priced clearly when we thought everyone thought power prices were around GBP 50 a megawatt. So they've turned out to be good deals, let's say. The reason we were in that position is that was really the birth of the subsidy-free market. The conservative one and absolute majority in 2015. I think it was brought the rock regime to an early end. And there was a bit of a hiatus. And no one, including utilities really knew how the market was priced merchant wind farms. We were bold, we were able to do so because we had a portfolio of 30-odd rock and CFD assets at the time. So used a little bit of our balance sheet very efficiently in terms of the forward commitments to lock in some merchant assets when others were unable or unwilling to do so. There was then a hiatus, I would say, another hiatus caused perhaps by the pandemic when -- if I could characterize those 2 years, 2020 and '21, people were busy executing on stuff that had been originated before but very new stuff was getting instigated, very little new stuff that's getting instigated.  I do expect that to unlock now, and there probably will be a new surge in onshore subsidy-free assets. I think, obviously, offshore where you're committing multibillion pound at a time over a long time period. People are still much more comfortable with the CFD ratio. But I think we will, whether it be through Rock assets, there's still plenty of those that we don't own merchant assets and CFD assets, we should be able to maintain our desired blend of fixed and merchant revenues for the time being. It may be just because of the volumes and who knows onshore versus offshore growth, it may be that we end up a bit more fixed over time just because of a greater supply of offshore assets with CFDs or indeed some onshore CFD assets. But time will tell. I think we're looking forward to plenty of opportunities in both segments. That's the merchant onshore and the CFD offshore over the next couple of years.

[Operator Instructions] We have a question from Iain Scouller from Stifel. As we have no audio from Iain, we'll move along.  [Operator Instructions] As we have no further questions, I'll hand back to Stephen for any concluding remarks.

Iain, give me a call, I'll answer your question. It would be nice to chat with you as well. Thank you, everyone, to join us this morning. I think -- I mean all what we tried to demonstrate there's obviously pretty -- a very strong year, and we've got lots, there's lots to come, and we are well placed for that. The one thing that we really, really been trying to do and why we put the NAV and spoke to quite a lot of people about the NAV as well. And this is also the second at the same point is we are different. We have got some of the key things that are really, really pertinent, I think at the moment with a dividend that increases with 13.4%, not 5%, but 13.4% because that is what RPI was. That's continued for 10 years. We'll continue to do that. These a pretty key component to our offering. We've also got NAV growth that is particularly important as well. The fact that we are up to 167p of now it could be more if we didn't take as a conservative position, I guess, on power prices. And I think if you look across the sector, you will see how that is the case and how even this year, we're going to be conservative on that. But the thing that drives everything, if you like, is that our return is just higher. So our 9% return to investors is just higher, and that drives everything. And so I think that those are sort of the message that we're trying to sort of drive out to investors that actually, especially in an interest rate environment where returns are higher. We fixed the roof while the sun's been shining. We're in good shape and so we're well prepared for what comes next. And we so hope that the market understands that. Thank you for joining the call this morning. We look forward to catching up with some in person, either on the phone or actually physically. Have a good morning.

Thank you. This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.