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

Good morning, and welcome to our 12th half year results presentation. Thank you for joining us. We expect to run for around 30 to 35 minutes and to allow some time for Q&A at the end. Stephen and I will take you through the results shortly. But before we do, we wanted to make some remarks about the market backdrop and our response to it. It's encouraging to see share prices across the sector rerating with our share price up around 12% since the end of last quarter. There's further encouragement in that the sector is showing some signs of consolidation or exit to rebalance the supply of investment companies with today's demand. But as of this morning, we remain at a significant discount to our NAV. We wanted to reiterate that we and our Board remain dissatisfied with where we are and we're fully aligned with shareholders to continue to improve the company's overall attractiveness against the market backdrop. We've always taken a long-term view in managing UK Wind and we're guided by taking actions that are in the best interest of our shareholders. And just to remind you, that includes being the first to agree on a appropriate rebasing of our investment management fees, which is unmatched across the sector, being the first to start a material buyback program, which has been extended to GBP 200 million and recognizing that as gilt yields rose, our return needs to adjust accordingly. We've also focused strongly on capital allocation and committed to appropriate asset divestments to fund it. We're pleased to announce this morning further disposals to continue funding our capital allocation program. These disposals were once again at NAV, once more highlighting the disconnect between our share price and private market valuations of these assets. The sale of these assets with a total value of GBP 181 million takes us to GBP 222 million of realizations in the past 8 months. We remain strategically opportunistic in assessing further disposals. The proceeds will support our buyback program, degearing and in the medium term, provide optionality to the business. Going forward, we remain active and committed to doing more to support the company's value proposition and to foster its rerating. We'll now move into the results. Our half year results show resilience against the backdrop of some of the lowest observed wind speeds in the U.K. during the first half of this year. Indeed, according to DESNZ, the first quarter of the year was the least windy since 2010 and this was compounded by low wind speeds in April and May with some recovery in June. This left us 14% below budget but still with robust dividend cover of 1.4x for the half year, demonstrating the resilience of the portfolio. NAV has also been impacted by undergeneration, both cumulatively and in this period and a softening of power price futures and forecasts and we'll address power prices in more detail later in this presentation. Gearing stands at 41.5% but is forecast to fall below 40% on completion of disposals that we just mentioned, assuming all the cash is applied to repaying debt. The immediate increase in gearing reported in our results is partly a result of the decrease in NAV and movements in the mark-to-markets of our swap valuations. On to capital allocation. With the increase in dividends that we announced earlier this year, we've now paid GBP 1.3 billion in dividends to our investors and reinvested GBP 1 billion in the business. And we expect to have further capital over the next 5 years of a similar magnitude to reinvest from future dividend cover. Our near-term capital allocation priorities remain clear and are supported by the disposal we've announced this morning. At the completion of the current program, we bought back GBP 132 million of shares, retiring around GBP 10 million of forward dividends with an accretion to NAV. This and degearing is supported by the disposals that we announced. In the medium term and we'll look at this later in the presentation, we have to consider the appropriate allocation of our capital and graded against the discount that we're trading at and the opportunities that we see in the market. We do believe that opportunities do and will continue to exist that could compete with the value afforded by buybacks over the medium term. I'll expand on this later in the presentation. The overall picture for the sector remains positive. We're starting to see a rerating of share prices and some progress on sector consolidation. We also now have certainty on government policy with regards to pricing, which we'll touch on later. And it's clear that wind continues to be the store of the future U.K. renewable deployment. Allocation Round 7 is in progress and it's clear that wind will do the heavy lifting. Strike prices have now been published at an increase over AR6 and the CFD term has been extended to 20 years from 15 years. We expect this will be supportive of the investment climate. With a net return of 10% to shareholders at NAV or 12% of the current share price, UK Wind is well positioned to remain as the sector leader in terms of target returns, scale, fees and the future investment landscape. Next, to a reminder of the UK Wind business model, it remains a simple business model, buy wind farms, generate electricity, receive cash. And with the cash we generate, we've now paid GBP 1.3 billion of dividends to our investors, which is more than the size of some of the products in our sector. We've also increased our dividend by RPI or more in each of the 12 years since IPO, making us one of a handful of 250 companies who have done that since we IPO-ed. Crucially and our distinguishing feature is that we've also generated GBP 1 billion of excess cash flow to reinvest in the portfolio by buying further projects, which supports our aim of preserving NAV in real terms. Looking at the balance of portfolio revenues, that remains on a discounted cash flow basis, around 50-50 between fixed and floating. And over the next 5 years, 60% of that -- 60% of our cash flow is fixed and explicitly linked to either RPI or CPI, which we think is valuable given the recent uptick in inflation. What I've just said about dividend cover and reinvestment is shown on the next slide, showing dividend cover of 1.8x over the life of the product and the GBP 1.3 billion of dividends and GBP 1 billion of reinvestment. Also a reminder of what we own. It's a diversified portfolio of 49 wind farms. It turns out that they're all in 1 zone as far as it matters. It's also a scaled portfolio, representing 6% of all UK Wind assets, making us the leading financial owner of wind in the U.K. and the fifth largest owner of UK Wind assets. There's further detail on the portfolio here, which I know is a slide that will be familiar to those who followed the fund for a period of time. We're spread out across the regions that we operate in, asset types, turbine manufacturers, all of that. The only thing I'd tease out from here is age. So the average age of the portfolio now is 9 years versus 5.5 years at IPO. So over 12 years, our assets haven't aged very much. That just talks to the benefit of refreshing the portfolio with investment and recently divestment. I'll now hand over to Steve to talk through financial performance for the half year.

Okay. Thank you, Matt. So I'm going to talk through the financials, as Matt just said. The first thing to point out on the slide on dividend cover is we are comparing H1 '24 against H1 '25. And given the lack of additions to the portfolio over the last couple of years, they're actually fairly comparable. So what I'll try to do is highlight some of the differences. So the first point is to mention that net cash generation was GBP 163 million and this is despite the low wind speeds across the U.K., which Matt has already mentioned but also because of the softening of power prices over the first part of this year. Still though, we have a dividend cover of 1.4x, which shows the resilience of our business model. Now also, it's interesting to look at the net cash generation from '24 because actually it's a similar number. And you might be thinking, well, why is the number the same or similar to H1 '25 when it has been -- had such low wind speeds over the first part of this year. And the answer is availability. Availability this year has been very strong, which means that we're able to capture the wind that we've received and turn that into power and therefore, cash in order to show the strong revenue that we're showing here. Final point to mention on this slide is that we had a 20% higher dividends in '24. And that's largely because of an increase in the dividend that was paid in '24 as a result of the very high power prices received during '23 and '22. So moving on to cash flow on the next slide. It's a pretty similar story before. Revenue similar to last year but with the lack of wind and lower power prices mean that we haven't -- we've lost around GBP 50 million there. EBITDA, though, 75%, which is, we think, a pretty strong ratio and is typical for these assets, which are very strongly cash generative. Just to tease out some of the other differences here. So operating expenses, you'll see a GBP 12 million higher. That's principally as a result of higher inflation that we have seen this year and also because of some major component exchanges on some of our offshore wind farms. Tax also slightly higher this year and that's largely a result of some catch-ups in corporation tax from '24 and a writing of the tax payments this year. You'll also notice that the SPV level debt amortization was slightly higher in 2024. The reason for that is that we received some one-off weight compensation payments, which we used to repay debt. Final point on this slide is around management fees. As you will see here, the cash payment to the manager has been GBP 1.8 million less during this period. That's on a cash basis. On a P&L basis, it's actually GBP 4.3 million difference, which shows that the changes that we made at the end of last year, which Matt has already referred to, are actually aligning us further with our shareholders and we believe that's a very important point for us going forward. So moving on to NAV. NAV is 7.8p down. This is primarily due to near- and long-term power prices softening but also due to the mark-to-market on the swaps. The table and chart on the left-hand side of this slide show this but we'll focus on the chart down the bottom left. So as you'll see, net cash generation pretty much matches dividends and depreciation. Again, this is because of the lower wind speed and the softening of power prices during H1 but we still have this very resilient dividend cover of 1.4x. In terms of capital allocation, this half year, we have bought 35 million shares at an average price of about 115p, and that has added 0.6p to the NAV. In terms of some of the assumptions, we've already referred to power prices and we'll cover that in more detail on the next slide. That has led to a reduction in NAV of 7.3p. Inflation, we've seen it tick up. I mean you'll see it here in the slide. And if you look at RPI at the end of June, it was 4.4%. Mark-to-market, as we've already mentioned, in terms of where we are in the swaps there, that's minus 1.4p. So on to power prices. So the key thing to note about power prices that they are a part of our strategy. Indeed, over the life of the fund, they've been part of the reason why we've managed to achieve 1.8x dividend cover. Because they are part of the fund, we also believe that it's very important to publish transparently what our power prices are and you can see that in the top left-hand side. The prices start around today, around GBP 65 to GBP 70 per megawatt hour and they trend down to around mid-40s per megawatt hour before we apply a PPA discount as well as a capture rate or cannibalization as some of you may know it. This, as a result, has led to a 7.3p reduction in NAV. Now we thought it would be good to take a step back here just to recap on how we actually come up with our power price forecasts. So in the very short term, we use the futures market. So this is where actual traded power is changing hands in the marketplace. And we believe that is the best proxy for what we can expect to achieve in power prices over the short term. In the medium and long term, we then use a third-party market consultant who comes up with their power prices and we use that in order to forecast those medium- and long-term power prices. And it's important to note that even that consultant in that medium-term period blends in some of the future prices so that there's always a view to not just the bottom-up economic analysis but also where power is changing hands in the marketplace. So the next question is why are power prices down. So in the short term, there's been some geopolitical headwinds, which have resulted that the gas prices effectively are a bit lower in June -- end of June compared to end of December last year. And what would be interesting actually is to see is that if we were to use power prices in the futures market this week, it would add almost a GBP 0.01 to the NAV, which shows you there is some volatility there. In the medium term, power prices have remained broadly stable and that's principally as a result of some project cancellations or potentially postponements and there's one particular project in AR6, which gave back its contract a few months ago and I'm sure you all know what I'm referring to. In the longer term, there's been a rebasing on -- in here from 2023 to 2024 in terms of inflation. And we're quite surprised to see that, that hasn't resulted in a higher power price forecast from our consultant, especially given where inflation sits and the aforementioned AR6 project, which gave back its CFD because of the lack of power prices in the market. Also, it's interesting to note that under AR7, the administrative strike prices for offshore and onshore wind have increased by 11% and 3%, respectively, showing that the government shows that there is some pricing pressure for developers in the marketplace. Now despite all that, the dividend cover is robust. And if you look at the chart at the bottom left-hand side, you'll see that down to almost GBP 20 per megawatt hour, the dividend RPI linked is fully covered all the way through this period. Further, as Matt has already mentioned but important to reiterate, there is GBP 1 billion of excess cash flow that we can expect to be able to use for capital allocation over the coming years. We think that gives us some very interesting opportunities to maximize return for our shareholders. Finally, just another point to make. 60% of our cash flows between now and 2029 are fixed and with some linkage to CPI and/or RPI. So moving on to debt. So debt is additive. Why? Our average cost of debt is 4.59% versus our unlevered discount rate of 9%. Therefore, that gap means that when we bring in leverage into the portfolio, there is a significant uplift in the overall returns we can offer our shareholders. If that discount -- if those debt numbers were to narrow, then you would start to question whether the debt is actually additive for the shareholders given the risk that debt brings. But for us, we're very, very relaxed. As of the end of June, we had a gearing level of 41.6%. But with the disposal proceeds we've announced this morning, if we've applied all of those to repaying debt, we would stand at 39.5%. In terms of the structure of the debt, you can see that in the top right-hand side of the text here, GBP 2.26 billion, of which GBP 500 million is amortizing and relates to Hornsea 1. The rest is RCF and term debt. We believe this is the best structure for us, giving us low-cost optionality and it is easy and flexible to change. Just as a side point, if we were to make no -- to have no share buybacks over the last couple of years, that would mean there would be around about GBP 100 million less on the gearing, which would be something like 1% lower gearing levels. Now that's not to say that the share buybacks are the wrong thing, it's just to show and highlight that capital allocation has trade-offs. So finally, we often get asked about refi risk. And if you look at the chart at the top left, you can see some of the maturities and the coupons that we have in the structure. So if we were to take, as an example, the next 2 maturities, which adds up to about GBP 350 million of debt with a weighted average coupon of 4.6% and we were to think about refinancing it today where we think rates are today, probably between 5%, 5.5%. And even if we took that top figure of 5.5%, we would end up with just GBP 3.1 million a year in terms of extra interest costs, which we think are insignificant in terms of the overall size of our fund. Further, when we refi-ed the GBP 725 million last year, we had very, very strong support from our lenders. Indeed, we didn't need to go beyond the existing lender base, which shows how much they support us. Therefore, overall, we're very comfortable with our debt structure and we believe it gives us the flexibility, along with the support from our lenders to have a sustainable situation. I'll now pass it over to Matt to talk about key themes before wrapping up and moving on to Q&A.

Thanks, Steve. So now that we've been through financial performance for the half year, I thought it better to just zoom out not for the camera but to a wider lens just to look at the market context. So we have a slide here on the developments in the U.K. wind market. I think the overall message is that wind remains the core renewable technology in all future system scenarios. You can see the scale of build-out needed from the chart on the top left and that's material. It's roughly 3x the existing offshore capacity and almost twice the onshore capacity. So for us, that's -- if you really just follow the market, that could be GBP 170 billion of new assets to aim at. So the market there, the market opportunity for us is, frankly, vast. We also have clarity on policy. We've spoken to many of you about the review of electricity market arrangements. And the government has now ruled out zonal pricing mechanism. We and other generators in the sector felt that if you introduce a zonal market and you didn't do it in the right way with the right commitments for owners of existing assets, that could lead to uncertainty in the investment community, which in turn could jeopardize the outcomes of Clean Power 2030. So we're pleased to see that there's a -- the zonal market has been ruled out. There's more to do. The national market reform is also something that we'll continue to engage with our peers and with government on to ensure that we get a good outcome for both consumers and investors. But overall, I'd say this policy development is positive for the investment climate in the U.K. for wind. We touched on AR7 earlier. And as Steve mentioned, the strike prices are there. They've increased versus AR6. And we know that the CFD term for AR7 assets will be 20 years instead of 15 years. And there are some other important ingredients that, of course, we don't know, most notably the overall budget. But we think that there's good basis to believe it could be an attractive auction round. So I guess I'd say, overall, recent policy developments are favorable for the investment climate for wind in the U.K. I also thought it was worth just to zoom out and talk a little bit about the work that we do on a day-to-day basis on our assets. We touched on this in our Capital Markets Day in May last year. And I think it's such an important part of what we do that it's worth rearticulating. So there are 3 key limbs to the work we do on managing our assets, generation, so maximizing the number of hours we get from our sites, both in the short term and also in the long run. Revenue, so optimizing what we get paid for the units we produce. And whilst as Steve mentioned, it's less a part of the overall net cash flow factor, operating costs are important, far less sensitive than revenue but there's still quite a lot that you can do to drive efficiencies. In terms of the -- making sure that our sites are available to generate and getting the most out of them, availability has been a strong feature of our performance this year. Whilst we haven't had the wind that we would have hoped or expected, our availability has been really good despite some outages at some of our sites. To talk about what we do in terms of improvement, there's a number of things that you can do to wind turbines and many of you who follow this sector will be aware of these things. Physical upgrades as well and you can see that in the bottom left there. It's simply fixes to blades to allow you to capture more energy from the same amount of wind. And there's also a lot of technological development in terms of the efficiency of how the turbines operate and in particular, having them operate at higher wind speeds than originally projected without compromising the long-term life of the assets, that does add a material amount to the wind that you can capture. We should also talk about longer-term optionality. So whilst we've got a predominantly young portfolio, it's less than 1/3 of the way through its life on average. We have some older assets where we start to think about life extension, repowering and not exclusive to older assets but also site extension by perhaps adding turbines. And there's no universal rule here. I think often repowering is spoken of as something that's going to work for every single site. We don't think that's the case. And also before you can get to repowering, you also have to consider that if you do it before the end of an asset's useful life, you're giving away the cash flow you can get from generating and you have to take that into account in the calculus of whether it works from a returns perspective. And also, frankly, not every site is suitable for repowering. If you have a smaller, older site, you're probably going to need quite a lot more land to develop a modern, bigger site. You need to space out the turbines more. You may not have the right size of grid connection to repower it. That said, there are some assets in our portfolio where we're starting to think about the longer-term optionality of extending leases and perhaps in the future repowering. It's a site-by-site assessment. In the last year, we've made quite a lot of progress on securing land rights and securing lease extensions across a number of our assets. We also continue to work quite hard on life extension of our assets, just to get more out of the assets in terms of time as well as the revenue optimization that I mentioned earlier. The modeled failure rate of our turbines in their 30th year of operation is somewhere around 1 in 10,000 if you have the appropriate levels of forward maintenance and that's something that we pay a great deal of attention to. So there's scope for profitability beyond that. Also around existing sites that you have, you can see extension opportunities. It tends to be the easiest place to get planning for a new wind farm is next to an existing wind farm. It has to be spaced out appropriately, you need land rights but we look across the portfolio and we see a number of extension opportunities and we'll continue to explore those. Frankly, all of this is about the day-to-day work that we do but also thinking about the longer term and creating long-term optionality and frankly, not very much cost. That's the business that we're focused on with asset management. Capital allocation is obviously an important slide in today's climate. So the first thing to reiterate is dividends have always come first. We've paid an RPI progressive dividend for the past 12 years, as we said before. And beyond that, we generated GBP 1 billion to reinvest. We expect a similar amount over the next 5 years, assuming at par performance. And that's capital that we can use to allocate. We also have, of course, today, the proceeds of the disposals we've announced, so GBP 181 million that supports our near-term priority, which is the completion of our second GBP 100 million tranche of buybacks, as well as the gearing. Beyond that, I think it's worth looking at capital allocation over the longer term. It's pretty easy to work out what you think the return is from buying your own shares back at a discount. So if you have a net return of just above 10% as our fund does on NAV, you buy your shares back at a 20% discount, you have 10 divided by one minus the other, you get a 12.5% return. So that on the face of it looks fantastic in terms of an investment opportunity. Presumably, you like the assets that you're buying. You're rebuying in the same portfolio. Otherwise, you wouldn't own them. But we think there's a piece missing from the economic calculus because every time you send GBP 1 out of the company, you make the company smaller but unless you've done something to your debt, then the next day is exactly the same amount. So I think it's worth reconsidering in the medium term, what the returns from buybacks actually are. They clearly have a place in supporting our share price and they've been useful to us and we'll continue with the rest of the program that we have for sure. But if you take into account making an investment of GBP 1, that's 12.5% return, you also have to take into account paying roughly 40p of debt for every GBP 1 that you spend. And for us, that marginal rate of debt investment is around 6%, around the cost of our RCF. And when you merge together the returns of those 2 instruments, it isn't the 12% that you started with, it's more like 10%. And depending on your discount, it could be as low as 9%. So we've shown that in the chart at the bottom. And if you look at the -- where the green line intersects with, say, buying an asset at a 10% IRR, as you trend in with discount, it starts to be more and more compelling to buy assets. All of this really is for the medium term. It's just a point that we wanted to land around how we consider the calculus of buybacks. We do think there will be investment opportunities. There's a lot of projects that are going to get built under AR7. There will be a lot of recycling of existing projects to allow the equity to build projects in AR7. And as I mentioned before, we have some interesting opportunities in our own portfolio. So we look at this over the longer term and ask our shareholders just to think about the benefits of alternatives to buybacks. Of course, the benefit of reinvesting is that you get to keep the cash inside the company and that further supports an RPI progressive dividend and preservation of NAV in real terms. I've ended on returns there. I mean, returns are really -- that's what the attractiveness is or should be. Our portfolio levered discount rate is unchanged at 11% and at a 15% discount, that would be 12%, 12.5% as we said before. So if you look at the 10-year gilt today, it's 4.6%, 4.7%. Given that our investments also come with explicit inflation linkage on at least half of our cash flows and as we mentioned earlier, for 60% for the next 5 years, I think that's quite a valuable attribute to the fund given that we've seen an uptick in inflation over time. Last and by no means least, a word on ESG. So sustainability and long-term value creation, they go hand in hand. We've published our ESG report. That's available for you to view on the website. We published it in April 2025 and you'll have all the details there of the good work that we do in communities, the amount of carbon that we abate, the homes that we power and that's a really good read. So it's there for you to look at. And I think, look, we just end with a few closing remarks before we open up to Q&A. So in summary, our dividend cover remained robust against very low wind speeds. We made quite a lot of progress on disposals and we've been very clear on capital allocation. All that lands against the backdrop of, I think, legislative clarity and political support for wind. We know there's a lot to do to improve the attractiveness of the company and we'll keep working on that very hard. We'll now hand over to our call operator to take questions from the conference call. And after that, if there's time, we'll address any questions that have been submitted through the webinar portal.

[Operator Instructions] Our first question is coming from Alex Wheeler, calling from RBC.

Three questions from me, please. First one, just on policy, the end of zonal pricing debate, clearly, a big tick in the box. How are you thinking about reformed national pricing and how that may go? Do you have any indications at the moment about how that may look or the impact it may have? My second question is just a confirmation really. Just can you confirm that you're happy on current P50 estimates following the revisions that you've already done and just confirming that you're happy with where you sit in terms of budgets? And then the third one is just following the conclusion of the recent disposals at NAV, would you see any value in further disposals given the current discount?

Thanks, Alex. Good to get not 1, not 2 but 3 questions out straight away. So as it comes to policy, yes, the end of zonal, as we said, I think, is a supportive move for the investment climate. As we said before, we and other generators made a very clear case to government around maintaining the attractiveness of this market and the landscape of certainty. And I think that's been listened to and honored. That doesn't mean that the discussion is over. It's pretty clear that the other alternative review of electricity market arrangements is to reform national market. Frankly, I think a lot less work has been done on that, given that the focus had been on zonal. So we await detail to emerge. But when it does emerge, we will be engaging with government on it as we have in the past. I mean I think the main risk is how you express locality in a reformed national market. That has to be at the core of what happens. That could happen through a rerating of network use of system charges. And that I think will be the thing for us to engage on. Anything to add to that, Steve?

Well, I think it's clear to see from the government's decision on zonal that they have respected the rights and protections of existing generators. And I do believe that any changes that will come through national market reform would also follow those same principles as well. And as Matt said, we'll be very involved in that directly but also working with other stakeholders and peers across the industry to make sure government hears the needs and desires of shareholders. So whilst there is still some uncertainty, it's less on the zonal and we believe that government are very much aligned with supporting the current generators but also making sure that the investment environment is attractive so that they can continue attracting the GBP 40 billion a year that they need every single year between now and 2030 to meet their Clean Power 2030 marks.

Alex, your second question was on our P50s and our generating budgets. So as we spent a great deal of time talking through this in January and in our results presentation in February, so the exercise that we did in the run-up to December was full and holistic across our portfolio, including working with a third-party consultant. We're happy with the work that we did. We think it was right. We think it was appropriate. We spoke in detail about the changes that we made. So we're happy with those budgets. It's obviously frustrating that having to reset that the first half year that follows it leads to a period of underperformance from wind but it is an exceptionally low wind speed period. I mean, I think, look, just to take the question head on, the question is always there, is this a trend? You do have periods of wind speed, if you look back to the 1990s of over and under for 5 years, we're in a period of under wind speed. Whether that means that there's a systemic change or something climatic happening, I think, frankly, is unknowable. It's something that we've started to explore with consultants but it's pretty clear when you get into the analysis that it layers uncertainty on top of uncertainty. There's uncertainty in climate modeling. There's uncertainty in wind yield estimation. You put 2 together, there's frankly no real firm outcomes that we're able to draw. It's something we're cognizant of. It's something that we'll be talking more about. But for now, we're happy with where we are in P50s. Your last question, Alex, was on disposals. Given where we are, given that we can sell our assets at NAV as we've demonstrated repeatedly, I think, yes, there's a case for continuing to remain strategically opportunistic when it comes to disposing of further assets. And we've set out pretty clearly what we think we could do in the medium term in terms of capital allocation. Our first priority, of course, is completing the buyback program that we have, which we're well funded to do and degearing, both of which we've mentioned in some detail today.

And perhaps just to add on to that, that we have an investor roadshow coming up where we'll speak with many of you and we'd love to hear directly your views on this. So we will engage with you over the coming weeks and months. And obviously, the capital allocation program will remain dynamic to the feedback and wishes of our shareholders.

Our next question will be coming from Iain Scouller of Stifel.

I've got a couple. Just firstly, on the power price and the 7p impact. Can you just sort of split that out between what was below expectations during this period? I mean I think you're saying like a catch price of GBP 77.65 against a market price of GBP 88. And how much of it is related to sort of short-term curve, longer-term curve? And then the other one is just the 10% increase in the OpEx. You did sort of touch on that. But again, can you just give us a bit more detail around that because that's quite a big move.

Thanks, Iain. I'll take the power price question and leave Steve to give a bit more detail on operating costs. So looking at the overall move in power prices, it's around 3-ish p from the front end of the curve and 4-ish p from the medium to longer term end. And you can observe that front-end part by looking at '25 and '26 futures back in December versus the 30th of June, which, as Steve said, that's when we cut our NAV. And the 4p in the long run is partly down to inflation expectations manifesting into real '24 power prices and also a reset of gas and commodity prices. Those are the key ingredients that go into the forecasters model. Short run, as Steve said, if we were to redo our NAV as of last night, that front-end part of the futures curve would lead the NAV back up by GBP 0.01 or so. So it's a moment in time. We obviously understand that it's not great for your power prices to go down. We do have that exposure. But over the long run, our model remains good. It's intact. Our business -- our dividend cover going forward, still down to GBP 20 a megawatt hour is there and covered and still plenty of excess cash flow generation to expect. Steve?

So on OpEx, so there are a couple of points that I mentioned earlier on around inflation and some extra component exchanges in our offshore assets. So in terms of the inflation, the way that the contracts work, they're typically looking a year behind. And so what we're seeing in the beginning of this year is the very high inflation that was experienced during 2023 and 2022, catching up in terms of the OpEx contracts. So as we all know, inflation was running into double-digit numbers and that is now reflected in the costs that we see. In terms of the offshore component exchanges, these are specific programs that we had. They were budgeted. So we knew about them and they come as a surprise. And they were -- actually one of them was known when we actually acquired the asset as well. So these are known figures that we were always planning to spend and it's just part of the prudent management of operational wind farms.

Okay. So if you stripped out the -- that component exchange, what would the increase in OpEx be?

Sorry, can you just repeat the question?

Yes. If you stripped out the offshore component exchange, if you hadn't done that, what would the increase in OpEx have been?

Okay. I don't have that exact number, Iain, but how about I get back to you separately, if that's okay.

Next question will be coming from Adam Kelly of JPMorgan.

I just wondered with the sale of the Hornsea 1 stake to another fund managed by the manager, was that externally marketed as well? Was that something that was considered in terms of looking at the valuation for that sale? And related to that, as said in the statement, Schroders Greencoat has got GBP 10 billion of AUM. What of that is private funds with a comparable mandate that could potentially acquire other assets from Greencoat were it to sell? And to what degree does that fund or funds have cash available to buy assets?

Thanks, Adam. So -- as we've said, we've sold 2 interests of roughly 1% in Hornsea 1. This is something that we had externally marketed for a period of time last year and we were pretty close to the altar of a transaction, price agreed. And for idiosyncratic reasons, that didn't happen. So that left us with an effect a whole load of external due diligence that could be relied upon that had already been prepared and if you like, a shrink wrap transaction. That then happens to align with inflows into 2 mandates in Schroders Greencoat that do have an overlapping investment mandate with UK Wind. And just to be clear, UK Wind retains its priority allocation of all wind investment. And that's, frankly, how the marriage happened. We're obviously a regulated manager. We obviously understand how conflicts work and separation of function. We have a Board. We have a private markets investment committee. We also had, in this case, external transaction valuation validation. So I think we followed exactly the right process and we're very comfortable with it on that basis. To answer your broader question, yes, Schroders Greencoat has around GBP 10 billion in assets under management. It has in the past had quite a few mandates that could co-invest with UK Wind and we've done that on several of our investments in Burbo Bank, London Array and others, for example. So that part of our business has always been additive to how UK Wind goes about deploying assets. This is the first sale that we've done to another mandate. There are -- there is some available proceeds from some of the funds. I probably shouldn't mention which ones, so I won't. I think more broadly, looking forward, this transaction lended itself well to both the buyer and the seller. I wouldn't think that it's necessarily something that we'd go and repeat. It was a moment in time and it worked pretty well. So we're not reliant on other money coming into Schroders Capital, into other funds to conclude our divestment program. Indeed, the other disposals that we've done have been to third parties who have done their own diligence and made their own investment decisions.

Maybe just one small point to add in terms of the sale to the Schroders Capital managed fund. There was an external valuation by an external provider, which helped provide that arm's length valuation. So we were very comfortable with that. The buyer was very comfortable with that. And I think that should give our shareholders comfort too.

[Operator Instructions] We'll now move to Conor Finn, calling from Barclays.

Just talk through the process for the reassessment of the P50 numbers. I mean you obviously did it for FY '24 and you obviously referenced using third-party consultants. But one of the things that was referenced at the time was the addition of more in recent years bringing the long-term average down. Should we assume then that if '25 carries on as it has in the first half that there will be a further reassessment at the year-end?