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

Ladies and gentlemen, welcome to the Greencoat UK Wind's Half Year Results Conference Call. My name is Grant, and I will be the operator for today's call. [Operator Instructions] I will now hand you over to your host, Stephen Lilley, to begin. Stephen, please go ahead.

Thank you, and good morning to everyone on the call for joining. This is our 11th half year results presentation. We went through a 10th anniversary about 3 months ago, so our 21st results [indiscernible] during the full year. So to some extent, you might think we've got a bit of a coming of age. I guess we've got a slightly more challenging background to the petition definitely in one sense, we will get the results, but we also want to cover some of the concerns that you can get, and we've had a lot of time with -- especially with analyst over the last few months. I just [indiscernible] nothing we should tackle some of those as well as the good results. So turning from the first half. Just [indiscernible] bank extension. So if you look to the right of that photo, obviously, you can't deliver to, but that's what that is. Carrying on that into the IMS results. Now there's basically flat in the first half. We go through some of the drivers. There were quite a few ups and downs in that in a few minutes' time. Cash generation still high, given elevated power prices and offset low wind resource in the first half, higher [indiscernible] and given cover of 2.1x as consequence of that. Secondly, I guess, the issues that we want to go through and tackle. First of all, debt. So we repaid 2 maturities a month ago with the RCF. We've got balance sheet where you can see what is 8% with the new term loan. So we didn't talk about that. We think it's planning. We put best in place. That was done about a month ago. And obviously, I wanted to get and tell a bit about that. On to par prices and assumptions were very clear. We've got very focused assumptions and just go through that. But I think the most important thing of that is were little about dividends and carry continue to increase, too. Yes, it's a very, very, very clear answer, and we'll sort of demonstrate that with sensitive very, very low power prices. Inflation then, we watch with a little bit of current. People thinking that inflation being higher than expected should mean that interest rates will be open there for. Our return is not as attractive, actually, in place is good for us. So we'll go through that a little bit as well. So those are 3 issues, if you like. And then sort of the most important part, I guess, the whole presentation is the portfolio around a 9% discount rate the wing off of where they were and actually pretty attractive versus risk free rate. And so 10% net return to investors is 6% above risk-free rate and an inflation there. So we'll get through that in a bit more detail as we get to the presentation. You may spotted London array being transacted on or announced on Monday, complete next week. But in pace with all the tax transactions and net investments, we're going to go towards the above 2 just, but above 2 gigawatts and in that process generating about GBP 170 million of value to shareholders. We'll go through that detail. That's largely for transactions and there's some consequences of going to bring value to us. So we start at this point every year doing GBP 200 million of excess cash against the GBP 200 million dividend, if you like. So we've got 2x through COVID. You can see that, and that gives us feasibility a pay down energy costs or to add some leverage and other assets or maybe disposals. You just got a whole range of things to be the neutral transactions we've done and have created a really valuable as it comes once -- so moving on, very quickly, I guess you can sort of see the chain the right simple model of the parties the cash generation. I think 2 points I wanted draw out. First about the total dividends paid, but I guess [indiscernible] the reinvestment. We're not sure the investment community stopped the business designs, not just have a dividend that increases with RPI, which we've done every year and we continue to do every year. But also by design, not by chance, but by design, we are reinvesting to preserve an annual basis. And we can sort of see that the mix of dividend, the dividend yield, I guess, maybe 5% versus the 5% of reinvestment, and we just think that clarity on the [indiscernible] is something we really want to really point out. And therefore, that takes it into the net 10% return to investors. That's really all we want to sort of drive from that slide. The interim through that $86 million is made up on Page 4. You can see that is just a fruit that the dividend cover is high and the reinvestment is high. And so we've got almost as much reinvestment has actually done paid and those together make up that 10% return that we're paying to investors.

First, thank you. Let's cover financial performance. So that's cash flow and net asset value. So on slide, we've got 2 slides this time around. So we can quickly get on to our key things is the cash flow slide, as Steve mentioned, a very robust dividend cover of 2.1x. You can see that at the top of the table. So in the period, GBP 204 million of cash generation covering GBP 96 million worth of dividends paid, 2.1x dividend cover. Moving down the table. The acquisitions, that's GBP 55.9 million. That's primarily the -- I'll talk about that in more detail later. That was 51 points, GBP 5 million, the little extra on top of that is just further investment into our extension investment via the loan, the construction loan of the financing. You can also see a little bit further down the table the GBP 290 million net amount drawn under the facilities. That's the GBP 640 million of new term loans minus the GBP 350 million of debt and payments that we undertook about a month ago. More detail on that later. It would have been higher than 2.5% dividend cover both for the wind resource. So generation was down 18%. We have P50 wind resource in the half, and that 2.1x dividend cover would have been nearer to the 3x. So that's cash flow. If we move on to the balance sheet, where net asset value. We've got a new look bridge, where we've combined cash generation, dividends and assumption changes into a single bridge. We hope more useful for readers. You can see the GBP 204 million of cash gen and GBP 96 million on that. So might pay [indiscernible] of cash flow and dividends. Clearly, the difference there of 4.7p is increasing the NAV. This is this reinvestment theme again. It's not sure if people have been focusing on the fact. But if nothing else changes, this company grows organically every half every year into the investment future. If you let me move on to the assumptions, I'd like to take a couple of toes as a couple of -- so inflation change to our short-term inflation assumptions and the early assumption would change from this later is our 2023 RPI assumption. Changing the 2023 inflation assumption only has added GBP 8.1 for NAV, which is a nice offset to 11.4p, a decrease in the NAV coming from the 1% increase in discount rates. Steve is going to talk to you later in more detail about both of those that they really should be seen as a cover. Inflation is good for this business. Offset further increasing interest rate, increasing discount rates. The other main assumption there that's changed is the power price assumption. So power prices are down over the half. That's a 6.8p deleterious effects on that, over GBP 150 million. This is where it's filling out a little work. The electricity generator levy, which were all very painful as we were talking to you about it late last year, is our trend. On the 31st of December and the year-end now, we were expecting forecasting, if you like, to pay GBP 30 million of electricity generated EBIT over the next 3 years. It turns out that we're now forecasting we'll only pay GBP 50 million of electricity generated over the next 2 years. So sort of 30 this year, 20 next year. So that's a GBP 150 million difference in the forecast CGL payments. That's GBP 150 million down protectors from [indiscernible]. So what I'm saying is perhaps that power price movement would have been up GBP 300 million hit to now. But for the benefit of AGL. The number we paid 40%, 20% of everything we gain above GBP 75 on the metro to the government. What used to be a GBP 10 per megawatt hour hit versus now only GBP 5. Quite interesting. The last thing I'd like to talk about on this page is the committed investment line, GBP 132.5 million of 5.7p increase in the NAV. To be clear, that does not include London Array. London Array was only signed over the weekend and announced it on Monday this week. It didn't exist. It was debt to this either 30th of June. However, at the 1st of June, we did have a couple of certain and imminent upcoming investments that's been signed many years ago. In fact, 1 was South Kyle, the other is light year extension. Taken together, the mark-to-market value of those commitments is GBP 132.5 million above the expected investment costs. And you can read more about that in Note 13 to the accounts, I think the contingency. They've always been there, at least since 2020. They've been working there at the contingencies and commitment there. But they've always been recorded at no value. Now at certain amount recorded at a mark-to-market value, and that's GBP 132.5 million. So great net accretion from upcoming investments. We move on to the sort of key themes section. And so sorry if that was a bit brief on the results that we think it's important to get on to the key themes. I'll take to and then hand over to Steve. For the first one, if I could talk to you about debt on stating something that both ready of GBP 6 million, GBP 4 million was drawn down at the end of June, GBP 150 million once straight down, that went down to repay our near-term maturities leasable loans with CBA and NAV maturing November and December this year. They're repaid. But we can stop worrying about those if they work. We also repaid GBP 200 million of the RCF for, so was 0 drawn at the 30th of June. We have GBP 500 million sitting on our balance sheet, ready, of course, you now know, to invest into London Reg on Monday next week. The other thing we'd like to draw out on this page is the sort of weighted average cost of the debt, it's 4%. And that's a lot higher. And for the GBP 640 million of new term loans with placed because clearly, interest rates are higher the down. But the point is it's not 6% or 7%. It's 4%. We didn't refinance our entire GBP 2 billion debt stack a month ago. This has been put in place over many years since 2015. And it very deliberately had a set of mixed maturities. It's not all maturing next year. It's not maturing in 5 years' time. It's maturing gradually over 2024, '25, '26, '27, '28, '30, '31, '36. That's very deliberate. We will refinance these term loans and when they mature or presumably slightly before that, and we'll be looking at rates whatever the rates are at that time. So I think like if you have GBP 100 million, you don't invest at al the stock market probably on 1 day [indiscernible] and over time. We're very deliberately refinancing these loans on a mixed maturity basis. You'll see again in the table that obviously, the RCF is sitting now at 0 drawn. I want to imagine that some of that will be drilling to invest into South Contest. If all this out is floating, obviously, it's not the mass majority of it is fixed. If all of it was floating and if interest rates went up by further 1% by definition, 1% of GBP 2 billion, that cost is next GBP 20 million per annum in interest just to note that's 0 on the dividend cover. Anyway, it's not work placing. It's mostly fixed. If it was not placing an interest when rates went up by another 1%, total GBP 20 million extra debt servicing cost 0.1 dividend come. So we're in a very strong and stable place debt-wise, we think is a correct strategy for this business. And so now, again, the GBP 500 million of cash sitting on the balance sheet as at the 30th. So last slide for me for a little bit, sending over our process. The only movement here since December has been at the short end of the curve. We will take us here or not our assumptions, it's the forward curve. So we've merely updated the forward curve for 2023 through 2026. And then we apply our conservative 20% discount to that curve. Just to note, our actual captured price in the first half of this year was 4% below base load. We're not buying a 4% discount to the forward curve. We're applying a 20% discount to the forward curve. So substantially more conservative actual discount was suffering. So we think we're in a very good place on power prices. We also think people have perhaps missed the point that these are 3 PPA discounts. A typical PPA might say something like the plan purchase it. It might say something like we will pay you 9% of the index price. Others might say we'll pay the index price minus GBP 3 [indiscernible]. Some of them are obviously fixed prices. But if you take a representative of power purchase agreement, EG 90% of the index price, the dotted line on this chart represents that. Some of our peers only show you post PPA discount price. Up until now, you always show you the pre-PPA discount price, we're showing you that. We've also taken the trouble to print an entire table in half year results. You don't have to get your rule around and trying to read across from the ground to the y-axis anymore. We've also printed an incredibly busy table giving you every detail every single PPA we've got across all 46 operating assets. So it's still transparency. You can make your own power price assumptions, but I would strongly suggest that forward curve is as good a guide as any. It represents millions of pounds of daily transaction volume with the 5% or 20% conservative discount to that. The other thing we've included in the results on indeed here, just underneath the graph is a sort of forecast dividend coverage table. Now we can inflate our dividend at PI indefinitely. We've just shape a 5-year run here. And you can see the base case dividend cover of above 2x. You can also see the inflating RPI dividend. So we're 8.76p next year. If December RPI for 2023 were to be 7%, next year's dividend will be 9.37p per share. If it is, we're forecasting 2.3x dividend cover. And then to show you what would happen if power prices were GBP 50, there were GBP, there were GBP 20, if they were GBP 10. Bear in mind, by the way, the value of carbon alone on our price is about GBP 40 [indiscernible]. But if we believe that power prices were GBP 10 per megawatt hour, our dividend is still covered, including having inflated at every year with RPI. It's quite interesting. A lot of people say all those trade green cases with their largely unhedged strategy massively exposed to power prices will -- we might be more exposed to power prices in certainly a funder of fixed or dispo prices. The sensitivities are relative depends on the starting point. If you starting point at 2.3x dividend cover, then you can afford to be quite sensitive to power prices with protected, for instance, all the way down to GBP 10 a megawatt hour. If your starting point is 1.2x dividend cover, you might well be less sensitive to power prices. But I'd like to see some of our peers relative to GBP 10 and not what I tell you what they're doing last power prices. I'll now hand over to Steve and talk to you about inflation.

[indiscernible]. On to inflation side, I guess, the update is we're receiving [indiscernible] of guidance [indiscernible]. So that's before we go to the fact that just to try to nail the whole cash waste effectively poses into U.K. revenues explicitly is the for PCs and CPI, but also implicit in the power prices you're obviously in higher ship because of power facilities in relation to those is pretty strong. In terms of the tax, so the prices in place by the average of the year's inflation numbers. So last year, not as [indiscernible] said. So when we go into beginning of this year, we increased the dividend by 13.4%. That was December. So this year, 8% of RPI is 7%. The dividend will get to GBP 9.37, which is obviously the previous slide. [indiscernible] different caveat so that we started the year at 30.4 in at 7%. And the average of those is going to be roughly 10. So you would mention that broad prices coming into next year by 10%. You can see that on the chart on the right hand side the -- so -- and it's all about timing and where inflation is going up or [indiscernible] of last year was 13.4% in increase, but rocking by 11.6% reversals. [indiscernible] So the dividends has once [indiscernible]. So if you like the on increasing would be 13.4% that to see that. And that's someplace -- we watch with some frustration as you say, follow that's probably too strong frustration asset, some of the response to higher inflation numbers than expected and it's been announced in the by the government and our share of [indiscernible] opposite as answered earlier on, I think we have inflation. The word, I guess, was that -- I mean, the interest rate because of inflation. And if inflation's gotten and the interest rates are bad and the revenue balance starts out actually, to the problem presorted you can see a balance of the scale on the right-hand side at the bottom there be clear. Coming on to possibly the most important to butane whole presentation is the turn. We've a year ago started to increase distant rates. We haven't reduced nontractor market 1%. They're now above my point of distance where we started that. But we started about a year ago. We have not a very aggressive statement at the top, but we do think the sector is not getting point asset pricing has changed. What I do think you see in the market. It has to be because the risk of rate has changed, it has to change. And therefore, discount rates have to move up significantly. We've already done it. So we've heard it differ in a good place, but it has to happen across the sector. We have now got a levered return of 11%. So that means taking a fast down to just 10 special linked as well. We think bodes for the beginning to be peculate 10-year 4.2% to 5.8% above that. Remember, over the last 10 years, that hasn't been particularly -- the business has been very low volatility. We have high historic and also projected to cover over the next few years, as you saw in previous slide of the 2.34. So we think that, that is a great product. I guess, trying to the same at [indiscernible]. Yes, again, yes, that 10% is not a [indiscernible]. But it is 10%, and there is GBP 836 million of dividend has been paid in the last 10 years of investment set of [indiscernible] reinvestment, that's means 6 of the reinvestment are to be ignored. And if the model is properly understood, that term return is a good product. If people bought obviously, below where the share price currently is, that's even higher analysis as going to continue on taxes before total. Yes. So it's over to you. All 4 of the transactions, I'm going to give you a little bit more detail on the coming well as of bilateral. So there are 4 out of 22 bio transactions that we've executed out of our total 49 assets. Is that bilateral nature, our ability to access these [indiscernible] valuations that have driven what will be. We expect GBP 170 million of total value across these 4 transactions. GBP 132 million of that or GBP 132.5 million, as you know, comes from South and [indiscernible] extension because those 2 being our forward commitments about the 30th of June appear as a value on our balance sheet. But there's another GBP 40 million there coming from London Array and Galanti. And as I said, 4 of these are bilateral, which is what drives that will come into a bit more detail shortly. The other point -- last point I want to make on this slide is the self funding point. As Steve mentioned, we're generating GBP 200 million a year of free cash flow over and above our GBP 200 million dividend. That's what GBP 2 dividend kind of nets. That's GBP 200 million that we can do wherever we want it. We're not going to set prior to it. going to bury it in a hole, rather going to repay debt, which would increase now. We're going to make further investments, we have accretive -- we can even borrow more for every GBP 200 million of excess cash flow, we could borrow GBP 100 million and invest GBP 300 million in other accretive investments. We could go further, maybe sell some assets at NAV in order to reinvest better than that. And of course, we can always trading co-investment partners. As we have done over many years, I think our first co-investment partners was Swiss Life back in 2014 where you bought some assets from AES. UKW took a 52% stake. I think it was for GBP 85 million. And Swiss Life came in along its for GBP 80 million, GBP 165 million in those days is a large chunk of change. But we brought co-investment partners there over many years, and we can continue to do so. But is that important than in the page, is it allowed us to access larger transactions. Yes, the that moves from showering comes to will be on Monday and we of that in total comes from UKW. The rest comes from co-investment funds that allows you to access these larger transactions. We were very excited to announce this on Monday. It's obviously a flagship deal. It's a page on its own. And don't worry, we haven't got a page for each of the other 3 transactions. I'll cancer through those. All 4 deals were bilateral, as I mentioned. So you've got 2 questions to us there. Why were they buying actual? Then why us? London Array in many ways resemble warming, asset we invested in 2 or 3 years ago. We own 25% all together with investment partners of London Array. We ultimately have some wellness, about the same semen.6-megawatt turbine. They will both bilateral transactions, and they were both critically financial for the same reason. There were past transactions where they were co-owned by 2 utilities as well as other investment partners. So we're only with SFC selling it, passive financial stake for us, leading also as the operating utility. London Array is reversed. It's all set as the passive financial investor selling its stake to us leaving RWE on the operating. This is very different from when a utility wholly owns a project and then maybe disclosures of a 50% or 49% stake to financial investors. It's a lot more awkward for these guys on the 30s there, not least access to information if they're a passive financially sort of not the operating utility, but also a whole sort of complex sort of series of confidentiality provisions, preemption rights, tank rights, put options, all sorts of things. So it's a lot easier for these to keep it below the radar and only announce it when it's happened. But you saw it 2 or 3 years ago, we got 25% of volume from SSE. But actually, and you've seen it again in London Array. Why us? We're a very good partner to both SSE and in this case, also I think covers Greencoat is also the largest global partner. But turning to page, a bit more quickly to regulatory, Page 16, the candidate expansion. Delandy, that was a bit like Mardi back in the day and [indiscernible] back in the day. We've built on this asset and auction process. We were kickback as our transport [indiscernible], through time, through [indiscernible]. However, the sellers that appointed as the preferred bidder for that fail to execute what to the seller to make turn for the most dependable counter-party that is fine. Obviously, we are good partners with SSC and [indiscernible] the sixth asset whichever dependently applied from buyback. So we managed to pick that up by naturally at a lower price than the 1 we first bid into the auction, about 20% now accretive for us or about GBP 10 million. [indiscernible] and cater extension are quite interesting. They were bilateral because they were both transacted in 2020 when the market was really seeing its low on subset how to price them. particularly a utility like [indiscernible] doesn't want to sort of necessarily television to selling asset, but everyone has the specification to work out at a price and structure for sale or a subsidy asset, particularly a large one for GBP 320 million. So they both ended as bilateral transactions. And that, clearly, because they were priced in 2020, everyone thought the power price was GBP 50 a megawatt hour. Now that the power price for the first half of this year was GBP 100 a megawatt hour, clearly a lot more valuable. It was exactly placed back in 2020, and it was a bit while placing and it's paid off the norm. But as you can see, the combined value of the market value of the commitments on those 2, South Kal and a GBP 5 million short version, you can be a leading market position around the access these assets. It's a very, very good use of shareholder funds, as we said, GBP 170 million worth of that accretion for either recent or the investments. So really [indiscernible] is what the business looks like I would have said no to table to guess shortly, you'll see 2 million as a investment case there as you know we did and the 2 projects last year extension to see that 2.3%, which announced, I guess, the [indiscernible] number of homes, now GBP 2.5 million OF C02 [indiscernible] generation seasonable senior guess, we're also continuing that 10-over 10 years ago, we said capital being more build up into buildout sector. all the that you're familiar with us 9 communicating Ecuador. I mean that's pretty interesting is that kind of having [indiscernible] very helpful on all the offshore experience you've got nice months. Coming on to some finished now in the period of an as we've been through high cash generation large power prices despite the resource still to sell it today. We've shown option dividend to continue to even as extreme circumstances purposes, et cetera places. Hopefully, I am not to worry, have been coming in [indiscernible] return of 11% and net [indiscernible] get 4.2% growth. And I hope we've demonstrated that we can buy some taxes actually and create value by knowing well that there'll be flexibility going forward, maybe that we would get to the cash generation in ability to do and [indiscernible]. So we feel in good shape. We -- one is estate share as performance on think it reflects most of the ones. And we're looking forward to see investor over the next few weeks and then giving more detail so more at this point. Can we have any questions perhaps maybe some lost presuming we have to explain everything. So maybe [indiscernible] questions.

[Operator Instructions] Our first question comes from Alexander Wheeler from [indiscernible] Bank of Canada.

Three questions from me, please. The first one is just on discount rate. I appreciate you've shown the offset there with inflation. I'm just interested in what your thought process is here. I mean you're already materially ahead on discount rates of the peer average and you had quite a big premium versus the wider market. So I'm just interested to understand how you think about that and the process that you were going through and what you think the premium should be, I guess, in the sector to the risk-free. My second question is on the [indiscernible] transactions, clearly beneficial, and you've done a lot of them. How much opportunity do you think there is to continue to do these off-market transactions compared to going through that more traditional bidding process? And then my last question is just on the space in the market and how you're thinking about offshore versus onshore in terms of portfolio mix going forward.

I'll do the first one and Laurence is going to talk about this balance and then obviously, onshore. As on onshore, we're agnostic. We think there's opportunity from the bet basis more offshore perhaps going forward, just at the scale and build out for the 3 is even got season. In terms of #1 discount rate. So it's a really interesting question. Do we think that as in some ways other than peers. Do we think our discount rates and return it's more relevant the return to investors. So we think return is good enough and best comes versus the rest [indiscernible]. Yes, absolute, we did. Do we think that others are not? Yes, absolutely, they're not. I think that's sort of the headline. Why have we moved it? [indiscernible] sign that because we have can disclose [indiscernible] previously and probably logically, yes. But actually, we need to get to a point where the return is something that people think value for the rest that we have produced. I think we have some of the benefit and the disposal having some not discount in, I guess, is that we be able to merchant cash flows the one the fixed cash flow obviously has to be as high to our cost of debt effectively as a concrete cost of debt and therefore decline is a lot higher than our cost of debt. that methodology, you end up possibly peers thinking that the [indiscernible] above. But actually, if you verdant risk, the business related to the [indiscernible] the rate will actually be the delayed. So we're having that split is to rate is really helpful to give you the discipline obviously price risk property. I think we prices. We think this note is significantly higher the risk rates come certainly on [indiscernible]. And on to the second question, Laurence, do you want to pick that up?

Yes. So look, we bought '22 transactions are 49 bilaterally over a 10-year period. The hit rate of the bilateral verticalation process is probably relatively even over that time. I think it's possibly the usual of 4 out of the last 4 incoming investments, but all are bilateral. Remember that in Santander [indiscernible] signed back in 2020. I do think it's a good time to buy assets at the moment. If you will cut to losses as we are, I think it's a really good time to make investments. It's totally for instance, London on that can be demonstrated 1 of the big flagship headline draping transaction, [indiscernible] GBP 50 million. If we buy for GBP 50 million and it can be valued even on very conservative assumptions of GBP 60 million, then the other creative why should we not a key in. I think we'll be able to continue competing I mean we've been kicked out of 4 auctions for offshore wind done this year because our price wasn't home. History might suggest they might get invited back into while, but we don't mind competing auctions. And if we bought 22 bilaterally out of 14 and we've obviously bought 27 through competitive processes, again, they're all good investments. So -- and I think no change. It gets natural between the 2.

Okay. That's clear.

We're saying just in a candy was an auction semi-auto process that broke. Financial simply same with [indiscernible] back in the day.

We have our next question comes from Iain Scouller from Stifel.

I've got 3 quick ones, if I may. Firstly, can you just talk a bit about SPV level debt and what the strategy is there and what the ratio is at the moment? I see you -- there was a debt amortization of about GBP 26.6 million over the period. I mean, are we likely to see that sort of amount increase going forward? The second one, you've got GBP 161 million of cash at the SPV level. Why wasn't that brought up to the group level for the June 30 accounting period? And then the third one is just on power prices. I thought at the start of the year, you were assuming about EUR 120 million for this year. Looking at the chart on Page 10, that now appears as they are using 80p for 2023, 2024. Have I got that right?

Yes, [indiscernible]. In terms of the SPV level debt, that's formed. That's the project that we have potato. So I think the [indiscernible] projects can a butene projects and in the portfolio other than that the opcos that they point there. In terms of the group ever, do you want to pick that one? --

The SBB cash on streaming. It will be onstream 1 imagines in August. It's just the quarterly cycle. So quarter end [indiscernible] the June in this case is normally around the SPV Board meetings. Some of those are good people because we 100% own the SPV. Some of those are with joint venture partners. I think we're about half and half of the 46 operating assets, around roughly half are JVs, half are 100% owned. But it's a Board meeting typically at the end of July to the next month after the quarter end and the dividends flow up typically in August. So they'll be all upstairs ready to pay UL investment to shareholders at the end of August. That's standard, just cash timing. In terms of power prices, yes. So all the what access short term to occur. So [indiscernible] grow in our full year results. It was GBP 120. It's now GBP 80. And in fact, you don't need to get your [indiscernible] any more and read it roughly GBP 80. You can see precisely what it is on the point table. I actually haven't got it in front. But to showing it to me. So actually for the rest of this year, it's GBP 78.93p to be precise. So yes, it's fallen. And that's why the amount of money we're expecting to pay to the government under the of we generate a small from, as I said, GBP 200 million over 3 years to now GBP 50 million only over to you. So ahead to the at -- you can see in the abridge it's not presenting in any way. Steve vaguely alluded is very asymmetric risk. -- power prices can go as high as 500 and day. Yes, they can. It happened last year, but I'm not going to talk to sota he start with a sort of a GBP 40 sort of boats, the risk is wholly asymmetric a lot more upside here, and we're very well placed at structured [indiscernible].

[Operator Instructions] Our next question is from Adam Kelly from JPMorgan.

Going back to what you said about portfolio returns, I just wondered if you could give a bit of color on how you're thinking about debt within your levered IRR, you say 11%. Is that something that the current level of gearing is maintained? And what are you thinking about in terms of costs for future debt if you are assuming refinancing?

Thank you. Yes, it's really simple. So at the moment, we're 34% geared, and we had an all-in cost of debt at 4%. Obviously, the mix maturities there as we just have to assume some kind of refinancing. So I can say precisely what we're doing. We're assuming 35% average gearing over the long term, and we're assuming a 5%, so higher than current 5% all-in cost of debt. So you can do the math really, really something. If you do 35% times 5%, plus 65% times 11% equals 9%. So there's a 200 basis point delta roughly between the unlevered and the levered return. So 11% time. To repeat very clearly, 35% year-end, 5% in cost of debt plus 65% equity times 11% net of return equals 9%, which is the unlevered return. So we're assuming 35% gearing at December interest rate. Obviously, our given CAPS-40. So we're currently 34%, and we'd expect to hover in the 30% to 40% range, I guess, going forward. So I think 35% gearing is, a, what we'd expect and b, not at all scary.

And just to clarify with that. I mean that you would assume that you would be able to continue to gear at the same level even beyond the subsidy life for the projects that do have subsidies?

Yes. because obviously that have bought more assets that are same CFT assets we will affect some of the losing cash flow. So we are aiming to maintain very deliberately the sort of rough 50-50 balance between sales and gross premiums. But ever gains out of WAC, i.e., it becomes a bit to floating when we will fix it. we write about this actually in the text that the half year report. The most likely way we'll fix it is by buying this lens into the supply of CFT offshore wind farms. So the likelihood is and we actually have to sign a fixed price PPA because we did some CFD assets. But if for some reason we get a bit floaty and the ratio gets out of WA, we'll just saw some fixed price PPA as we actually have done with the likes of say BT and Tesco. You'll see an answer that is West and [indiscernible] assets. We did that really just to prove we could.

One of the benefits of having the rate methodology as plan goes by and as the circuits come off that to be the seat we sending across obviously the ability to post effect if you want to. So that logic is -- the methodologies in place is effectively self-correct on value for a reason. Obviously, crisis, and if we've understood risk of being done, it was done a certain time. But yes, another way, 35% gearing is a sort of 3:1 loan-to-value ratio. You'll always be able to borrow money if you're only looking to be 35% year. You only need to contract 80% gearing if you want to be 15 that just borrowing over, say, 3-year period. And you're only 35% geared [indiscernible].

Our next question comes from Marcus [indiscernible] from Peel Hunt.

A quick one from me is that are you seeing cost price inflation of new projects coming through? Obviously, we've had news about pretty high-profile development projects no longer being economically viable based on prices they've struck with subsidies search or CFDs. And then the second part of that is, is that then supportive of existing operational asset prices?

So it's not really our business. We just buy operating assets that we are aware because we are in the wind industry generally and tangentially that, yes, people are talking about CapEx inflation. Yes, there are some high profile projects where the CapEx inflation is such and the cost of capital increases such put the 2 together means you can now undersupply originally agreed tariff. So yes, sorry, we're aware of that. It's slightly lower than we just start orating projects that someone's already had to buy them we don't price the cash flows as they are -- so I think all of that has any read across into the value of operating assets. No, not really. Operating assets are series of future categories we then read men the distant rate that you used first. Well, just because steel and concrete costs a lot more to drive the cash value of cash flows is driven by discount to OpEx is obviously very small. And the very high margin businesses. So you asked about CapEx to the extent the inflation, it's not really a large part of the cash flow. But even if the chances are your revenues are going up by more than your operators, then again, inflation is going, inflation is our friend.

[Operator Instructions] We have no further questions on the line. I will now hand back to Stephen Lilley for final comments.

Yes. So thanks very much for joining. Great questions. Obviously, we don't enough. We've actually talk to people for 1 month or 2 now. I think this is a very stable business and obviously some perceptions of things that are a problem that hopefully, things like debt inflation, car prices. But we're in good shape. But ultimately, domestic in a higher interest rate environment at [indiscernible] been high is obviously pretty critical. And that message to get out, that will be the thing we're talking about over the next few weeks. And then alongside that, coming the transactions accretively and potentially even so enough, and that's something that we are taking to you. But thank you for being here this morning. And you have a good rest of the day. Thanks. Bye.

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.