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

Good afternoon, and welcome to the Greencoat UK Wind PLC Full Year Results Investor Presentation. [ First, a recorded meeting ] [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. [ After, the company will ] review questions submitted today and publish responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to the team at Greencoat UK Wind. Good afternoon.

Thank you, Paul. Welcome to this webinar. Bit of housekeeping first. We'll probably run the presentation for about 20 or 25 minutes, and we'll hand back to Paul. And then we'll allow some time for Q&A, which I think John will oversee. There is also a pretty lengthy disclaimer in this presentation, which we encourage you to read in your own time. We won't start by reading it out now. So first of all, we wanted to just give a bit of backdrop and an introduction to UK Wind's business model. The clue is somewhat in the name. We invest in U.K. wind farms. We are the largest listed U.K. renewable investment trust. In terms of the amount of wind that we own, we're the largest nonutility owner of wind farms in the U.K., owning about 6% of all U.K. wind farms, and that generates around 2% of the U.K.'s electricity every year. For reference, that powers around 2,000 homes and in 2025, avoided the emission of 2.2 million tonnes of CO2. We've been going for 13 years with our relatively simple model, an annual dividend that increases in line with inflation as well as reinvestment in the business. And you can see here in the chart, it just shows what a simple business we have and how it works. So we own interests in 49 different wind farms in the U.K. Over time, they've generated 34.4 terawatt hours. So what on earth does that mean? Just for reference, that's roughly 12% of the average U.K. annual demand for electricity. That renewable energy turns into cash, and that's after paying all of the operating costs for our wind farms, paying landowners, paying to maintain turbines and so on and so forth. That, over our operating history, has given us GBP 2.4 million -- GBP 2.4 billion of cash that we can choose to do something with. And GBP 1.4 billion of that, which is -- was a staggering number to read out, has gone out to our investors in dividend form with 12 consecutive years of growing the dividend in line with RPI or better. And crucially, the distinct thing about our business is that we've reinvested the additional money, GBP 1 billion, back into new wind farms to keep the business model going. We've always demonstrated sector leadership, having created the sector through IPO in 2013. Obviously, it's been a challenging time in recent years for renewable energy investment trust, but we've been at the forefront of addressing those challenges, firstly, by being the first to launch a material share buyback program by leading a material number of disposals of our shares. And we are the first and only company in the sector to change the way that the investment managers pay fees. Those fees are now paid on the lower of market capitalization and net asset value. Nobody else has matched that. So we're fully aligned with the shareholder experience. If the share price is down, so is the revenue that we have. It's a point that's worth emphasizing because as an investment trust, we are the managers, but the Board controls the company. And we have a highly experienced Board and highly active that's equipped with strong expertise across all of the relevant domains to run UK Wind. And that is a really important feature of this business, is the strength of this Board, the alignment of us as a manager and our commitment to do the right thing for shareholders over the long term. So now just to give you some context to the results. The broader backdrop for the renewables market in the U.K. is positive. You may have seen the government's most recent auction round called Allocation Round 7, or AR7 for short, has procured record-breaking capacity for new renewable energy deployment of around 15 gigawatts. That's to state the demand for electrons that's coming. So we estimate that by 2040, we'll need about 50% more electrons than we need today. It could be as much as 100%. Renewables are the quickest way to get there. There are other options, but they tend to take longer and cost more. And we'll address that later in the presentation. That contrasts somewhat with the renewable investment trust background, which has been a bit more challenging with falling NAVs across the sector, which we'll address in a second, and below budget performance. It remains clear to us that this is a sector that is too large. It grew substantially during the years where money was cheap, and we think there is space for it to rationalize down to fewer companies that are larger. And we think that will be beneficial for us in terms of rerating as the founder of the sector and the largest company in it. So against that backdrop, we've been very active. In this presentation, we will cover how we have generated capital to use over 2025 and what we've used it for, buying shares back, reducing debt and so on. So we'll now look forward at the results for 2025, which we published last week. Steve will take you through those, and then I'll return to talk through the broader renewables market and our capital allocation priorities going forward.

Thanks, Matt. So yes, I'll take you through the financial operational performance during 2025. So if we look at the financial highlights, what you can see here is a very strong and robust GBP 291 million of net cash generation. So that's the cash that this business has generated after paying all the costs that it needs to operate the business itself. That is the cash, therefore, that is available to allocate to shareholders. We had a dividend cover last year of 1.3x, and that's despite the fact that during 2025, we had some of the lowest wind speeds in the whole of this century, had a bearish impact on our generation, which led us to be about 8.5% below budget, but yet we still had our dividend covered quite healthily. A couple of other points worth highlighting here. So you can see at the top, we've published our EBITDA numbers. That would allow you to compare us against some of our broader peers in and outside the investment trust sector. And I think you'll see that, that would put us at a pretty good valuation compared to others. And then in terms of our returns of 11% portfolio IRR at our net asset value, if we just focus in on the yield itself, it's almost 8% on NAV and close to 11% on share price, which we think provides a very compelling opportunity for investors, especially when you look at our very high structural dividend cover. Moving on to net cash generation in a bit more detail. So as I said before, GBP 291 million of cash generated in 2025. That's grown from last year. One of the reasons for that growth is there's a strong CPI linkage in our cash flows, which helps the growth of the business year-to-year. In terms of some of the other points that's worth highlighting here, I think you can see, and Matt has already mentioned it in terms of the fee structure that gets paid to the investment manager, there was a GBP 6 million saving to the business in 2025 following our market-leading change in investment manager fee structuring. That's a cash saving. On a P&L basis, it would actually have been higher, about GBP 10.5 million. And going forward, the ongoing charges ratio, so that's the cost that you pay for us to manage your business, will fall to about 70 basis points over the coming year if the discount to NAV remains consistent. Again, we think that's market leading and a very compelling opportunity for investors. So in terms of dividend cover itself, so this is the amount of times we can pay the dividend from the net cash generation. As I've mentioned before, it's 1.3x despite the difficult circumstances of 2025. And as you can see, in 2025, we paid a dividend of over GBP 227 million to our shareholders. You can also see here some of the aspects of capital allocation. We've had a busy year allocating capital and doing the right things for shareholders. So we made GBP 181 million worth of disposals. That's selling assets at the net asset value, helping prove that, that fair value or net asset value is robust and realistic. We spent GBP 109 million buying back our own shares at a discount to NAV. That's been about 95 million shares and added some value to the business. And finally, we've reduced the amount of debt that the company has by GBP 168 million as well. All things, we hope, that are adding value to the shareholders on an ongoing basis. So moving on to the next slide, just a couple of quick points on here. So this is -- 2025 is the 12th consecutive year of paying an inflation-related dividend at or above RPI. We're very proud of that, puts us in a handful of FTSE 250 companies who've managed to achieve that fact. And we've announced the dividend target for 2026 at 10.7p, a 3.4% increase on 2025's dividend. Historically, our dividend has been covered at 1.7x, and going forward, we're forecasting 1.8x over the next 5 years. And obviously, that 0.8 gives us significant amount of capital over the coming years to allocate in the best interest of shareholders. That will be around about GBP 1 billion. Moving on to net asset value itself. We've talked a little bit -- looking left to right, talked a little bit around the difficult year we've had in 2025. So we were forecasting at the beginning of 2025 a 1.8x dividend cover. It ended up being 1.3, as I've already said. About 0.2 of that differential is due to below budget generation. About 0.2 has been also due to power prices falling during the year, principally as a cause of fall in the price of gas, which up until beginning of this week has been largely a normalization post the war in Ukraine. We'll come on to power prices in a bit more detail in the next slide. And 0.1 is a variety of other factors as well. What I think is also worth pointing out here is some of the government impacts as well, which we can talk about in more detail later on, about 3p per share reduction as a result of some smaller government interventions, specifically around the renewables obligation moving from RPI inflation to CPI inflation. So in terms of power prices, you'll see on this slide on the top left-hand side here, our power price forecast. This is the annual price that we can see in each of these years. Obviously, there's a lot of volatility in power pricing intra-day, intra-month. As we've seen with the unfortunate events over the weekend, there's been a spike in power prices this week. How we actually forecast our power prices, what we do for the first couple of years is that we take the futures market's pricing that people are actually buying and selling power for in the market. So it's the most accurate reflection of the power price at any one time. And then after that, we use an expert consultant who builds up the whole generation stack, so what type of nuclear, wind, solar, gas is on the system, and it matches up to the demand in the system as well. And we think there's a very strong case for demand growth in the U.K., principally from the increased use of artificial intelligence, which leads to massive build-out in data centers. You can look across the island at the moment, where about 24% of their electricity demand over the course of the year comes from data centers alone. That's from around about 0 only 4, 5 years ago. And we also see increasing demand from electrification of heat and transport, too. We think that gives some significant upside opportunities there in terms of power prices. So over the last 12 months, we've reduced our power price forecast. Between now and the end of the decade, it's about 10% lower, and in the 2030s, it's about 5% lower. As I said, that's mainly due to a fall in gas or a normalization of gas prices post the highs from -- following Russia's invasion of Ukraine. We've actually seen that reverse a little bit in the very recent times given what's going on in the Middle East. And that shows you that having some judicious exposure to power prices can reap its benefits. And notwithstanding that, we're very active in terms of our way of managing power price risk. About 60% of our cash flows over the next 5 years are fixed and the vast majority of that is linked to CPI as well, so inflation linked. We think that's a strong feature of the business. And we also have the ability to improve on that either through ways of hedging power physically or financially, so we're going out and adding fixed prices in terms of the way that we sell our power. There's also insurance products available as well, again, to help manage that power price exposure where it's in the best interests of shareholders. Now again, the dividend is a core part of our proposition, and we've set out here, on the bottom left-hand side, some sensitivities to what the dividend cover would look like at some pretty bearish power price scenarios. And I think you can see that even after paying an inflated dividend over the next 5 years, we can still cover our dividend comfortably even down to low power prices such as GBP 30 per megawatt hour. So moving on to wind resource. I mentioned 2025 was a difficult year, especially during that first part where we were under budget for 5 of the first 6 months. That's principally because wind speeds were abnormally low, some of the lowest wind speeds this century. There's been a big normalization in the second half of last year, which has continued into this year as well. And we're now above budget for the beginning of this year, plus some positive tailwinds from cash being generated towards the end of the next year and received in our bank accounts in January and February this year. An important part of managing real assets like this is making sure that the assets are available to generate when the wind blows. Pleased to say that last year, we were on target in terms of our availability assumptions. And so therefore, when the wind was blowing, we were available to capture it as well, maximizing the revenue for our shareholders. Just a couple of words on balance sheet. So we have a mix of different debt products. Majority of it is term loans at the holdco. We also have some debt, which gets repaid annually as well associated with one of our projects. We think this is an interesting debt structure because it allows us to decide how to allocate our capital because we don't have to necessarily repay it all every single 6-month period or yearly period. We think that gives us the flexibility to use what cash we've got in the best interest of our shareholders in the long term. So that wraps up the conversation around 2025 performance. I'll hand back to Matt now to talk about the renewables market and further strategic capital allocation priorities for the business.

Thanks, Steve. So I mentioned at the beginning that we wanted to give a bit of broader context for renewable energy and the U.K. electricity system. So the first thing to note, as I said earlier, is that all forecasts are unified and seeing a significant increase in the amount of demand for electricity out through 2040 between 50% to 100%, depending on which forecast you take and depending on which range and the same forecast you look at. All demand for electrons is obviously good for us. We generate electricity. We sell it. And increasingly, a lot of that demand is smart demand, so it's price responsive. So think of an electric vehicle. If you have a smart cable and you have a half hourly meter, you're able to charge your car in the cheapest half hours for you. And frankly, I don't mind when my car is charged as long as by 7:00 in the morning, it's charged to 80%. That is even further constructive for intermittent generators like us. We don't choose when to dispatch the wind, it's windy or not. We generate the electrons anyway. So having an underpinning for demand when there might not otherwise be a lot of demand on the system is really helpful for intermittent generators. So we see that from electric vehicles. You mentioned heat pumps earlier, so both creating heat and creating cold. Data centers are also becoming increasingly adaptive in how they use power. So all of these factors are good if you're selling electricity and very good if you are selling intermittent electricity. So we expect the demand for electrons to be there. It's simply a question of how much they will be. The question that naturally arises, well, where will the electrons come from if we accept that we need them. There's no need to look at the sort of the charts in the bars here. The most important thing is that renewables, why are they going to be the winners who provide the new electric capacity that we need over time. Well, first of all, speed. Renewables are actually relatively quick to deploy. Once they're consented and have all the permits in place and successfully get through an auction like this that gives a route to market or a fixed price for a period of time, they're relatively quick to deploy. Onshore wind could take 12 to 18 months to build. Solar, perhaps half of that depending on the size of the site. Offshore wind naturally takes a little bit longer to build given the complexity. And it's interesting, just to contrast that against the other sources of potential new electrons in the U.K. Nuclear, I definitely think has a role to play. But you look at the time horizon from awarding Hinkley Point a contract, so a route to market that I mentioned earlier, that was 2013. So then 2030, when [ that produces ] first electron. That will obviously be quicker for newer plants, other plants that are being built along the same design that isn't instantaneous. The same is true around creating new gas capacity in the U.K. There's a peak in global demand for gas turbines, so there's roughly a 5-year waste at moment. So for now, renewables are relatively quick to deploy. They're also secure. Once you've built it, it's there. It generates electricity. You don't have to worry about what's happening in Qatar per se. Cost is another feature, and we set out here the prices that the auction participants have been awarded here. They're all materially lower than the government's cost expectation of what one would need to build a new gas plant. The government estimates that at about GBP 150 a megawatt hour, whereas the cheapest solar is about GBP 65 a megawatt hour. So I think fundamentally, if we look at the backdrop for the market for renewables, it's constructive and positive. It's supported by the government with this allocation round. And there'll certainly be a lot more capacity for people like us to invest in going forward. So we've seen there's a need for significant investment. We see lots of opportunities, and we wanted to just contextualize that with how we've been allocating capital this past year, 2025, what we expect to do in '26 and beyond. So capital allocation is just a fancy term for where you get the money from and what you do with it, right? So we've shown here, we generate, as we said before, excess net cash every year. We can sell assets if we choose to. We've sold GBP 222 million worth of assets in the last 14 months, all at the prevailing fair valuation of those assets. And in 2025, we used the money that we generated either through disposals or organically through our portfolio to, as Steve said, satisfy a dividend of GBP 227 million being its fourth consecutive year of increasing at RPI, better. We also repaid or distributed a significant amount of debt, GBP 168 million, and spent GBP 109 million buying our shares back. That, of course, is quite a big demonstration of the board of managers' commitment and activity over 2025. It seems perhaps, thus far, unrewarded in terms of share price performance. So there is a need to do more. So let's look ahead at what we expect to do over 2026 and beyond. So again, we've shown this in a sources and uses kind of way. On the left-hand side, where will the money come from? Well, our central case for net cash generation this year is GBP 380 million. We put a range there because there is variability in power prices [indiscernible]. We have a bit of excess cash on balance sheet as well, and we could well pursue further disposals to give us more capital to allocate. Where is that going to go this year? So we've committed to a dividend that now increases in line with CPI. It's a very clear signal for investors. We have a 12-year track record of paying a dividend that's increased in line with RPI or better. Going forward, that will be CPI. As I said, it's a clear unequivocal commitment. It's not the word progressive, which could mean that the dividend doesn't go up at all. And that's always been a strong hallmark of UK Wind's capital allocation priorities. We also expect that, that dividend should be well covered in the next 5 years, and we'll look at that in a second. Our immediate priority will be to reduce gearing in the business. That isn't because we have an inherent problem with the amount of gearing that we have. On the contrary, the banks who lend to us would be happy to lend us more money. We view that as giving us optionality for the future. And this year, we expect to make a disciplined return to reinvesting. That is something that UK Wind has done a lot over its time at the beginning. You'll recall, I mentioned that UK Wind has generated -- organically invested GBP 1 billion back in this business over time. This year, I think, that will be characterized by relatively low cost but high optionality investments that already exist inside our portfolio. Looking beyond 2026 and the landscape forward. We've set out here the excess cash that we expect to generate and have our ability to use over the next 5 years. We've shown EBITDA. We've shown net cash generation and GBP 1.2 billion in CPI-linked dividends for the next 5 years. And that leaves us on a sensitized range between GBP 800 million and GBP 1.2 billion to allocate. As we said before, in its past, UK Wind has successfully reinvested in its portfolio, and we thought it worth illustrating the power of reinvestment. So if you were to look at the chart on this page, when you invest in finite life assets -- and we think our wind farms will last for 30 years -- obviously, if you don't replace them, they get older every year and so on and so on and so on until, at the end, they have no value. We think there probably will be a residual value for our wind farms at the end of 30 years, but we don't price that into our net asset value. But over time, you can see, if a portfolio that is an average 9 years old gets older, then the cash flow that comes off of it -- and this is the free cash flow available to us to do something with. That's the green stack here -- it's going to reduce over time. Naturally, it would. These are depreciating assets. But over time, UK Wind hasn't had that experience because it's reinvested in the business, and this green chart just shows what happens if you don't generate any excess cash beyond your dividend; and if you did generate cash, you don't do anything with it. Well, if you reinvest it with discipline as we have historically, you get to grow the cash flow that's available to investors over time. That's why the blue stack on top grows over time. And that gives us yet further free cash flow beyond our dividend to reinvest back in the business and maintain UK Wind's status as a permanent capital vehicle. So just to summarize before we hand back to Paul and then John for Q&A. Management and the Board recognize that it's been a challenging year, but we do see some of the signs of rationalization in the sector that we think will favor fewer larger products, ourselves included in that. We continue to be active. We've shown you the activities we've been up to in 2025 and our plans going forward. And there is a market opportunity here and cash flow available to us to invest in that opportunity. So in many respects, with the return to disciplined reinvestment, the future can be quite positive for UK Wind PLC. Going to hand back to Paul now and then John for Q&A.

[Operator Instructions] Just like to remind you that recording of this presentation along with a copy of the slides and the published Q&A can be accessed via your investor dashboard. We've received a number of questions, both pre-submitted and throughout today's meeting from investors, so thank you very much for that. John, if I may just hand over to you just to read out the questions where appropriate to do so, and I'll pick up from you then.

Thank you, Paul, and thank you, everyone, for your questions. We've got quite a few. And I'm not -- because they've come in quite quickly here, I'm not necessarily going to be able to group them all together, so we may jump around a little bit. But let's start with this one. The company's in [ commented ] expert miscalculation in wind speeds has led to a decline in net asset value over recent years. Given the turbine workload has been lower than expected, should the estimated -- should this see an estimated gain to NAV through increased plant longevity?

Thank you, John. So I wouldn't characterize our estimations of wind speed as miscalculations, if you like. Wind is a volatile resource on an intra-year basis. Standard deviation of energy output from wind speed over 1 year is around 10%, but over 30 years, it's around 2%. So one should expect properly calculated wind speed estimates looking forward to have some variability. And indeed, if one looks back to 1996, which is when data was harmonized in the U.K., it is characterized by 3- to 5-year periods of over and underperformance in terms of wind. So we and the Board are very confident that the process that we went through at the end of 2024 to realign our budgets going forward for the long term was the right process done with a third party and scrutinized by the Board. And we have, as Steve said, seen somewhat of a normalization of wind in the last half of last year and are on budget to date. To get to the nub of your question, yes, if you have less workload through your turbines than anticipated, then, generally speaking, that equipment will probably last longer. But that isn't the only factor in asset longevity. One has to make sure one has planning permission to operate for more than the 30 years that we expect and also land rights. But those last 2 are the sort of things that Steve and I work on securing for the future of the portfolio. But less physical load through the turbines does mean that their status and maintenance and equipment duration should be longer.

Yes, I think that's right. And the only probably other thing to add is you could potentially run your turbines a bit harder as well. So when it is windy, you can let them run a tiny bit harder to get some more energy out of the wind as well. And that's something that we're continually looking to do in order to enhance the portfolio day to day, either through software and/or hardware updates in order to extract as much energy and therefore, revenue out of the wind as we possibly can.

Okay. Thank you. Next question here is from [ Alex C. ] on disposals. It's good to see disposals at or near NAV, especially when the shares are trading at a discount to NAV. It would be helpful to understand if these disposals are representative of the portfolio or somewhat unique or cherrypicked.

Thanks, John. Yes. So as we said, we've disposed of interest in a number of our assets over the past 14 months at NAV to deliver GBP 222 million of gross sale proceeds. How do we select those assets? Well, I characterize the onshore wind farms that we sold as, in effect, middle of the road for our portfolio. And the way that we sold them was through bilateral process rather than launching a broader sort of auction process. We felt that was the best way to give certainty to delivery, and we divested to partners that are known to our business before that many of us have worked with, where you're pretty clear that you're going to have a meeting of minds and that you'll get to the level of pricing that you want. So the onshore wind farms that we sold were middle of the road in our portfolio. The offshore wind farm that we sold an interest in is our largest single asset, and we felt that it was sensible to deconcentrate the business in that asset. That is the only asset, by the way, that has debt downstairs in it, so SPV level debt. So by selling an interest in that asset, you automatically degear the business a little as well. So that was why we were attracted to partial sale of that asset.

Okay. Thank you. We've had a few questions on batteries, but I'll go with this one from [ David D ]. Does the reduction in battery costs offer an opportunity for adding storage near turbine sites?

I think at present is more of an opportunity for solar sites in my opinion. So colocation of solar and battery has a lot more synergy than wind and battery in our minds. So certainly, you have a very predictable daytime peak. You would have seen that yesterday, somewhere between 11 and 1, 10 to 12 in the summer. And that suits the characteristics of a battery in terms of charge and discharge. The challenge with wind is really in terms of sizing. So wind, it tends to be windy for 24, 48 or 72 hours at a time. So the magnitude of battery that one would need to capture any meaningful energy from a wind farm when it's windy, which, of course, is typically the time when power prices go down a bit, is so big that you wouldn't be using it. If you did size it to suck down a lot of that power, then the other 90% of the time, you'd have to use it in the arbitrage market, which is, generally speaking, how batteries make money. So we don't really see the appeal of wind and batteries on a colocation basis at present, but the question points out likely that the cost of battery CapEx is falling. So that's one that we will stay close to. On a stand-alone basis, for us, batteries, when one looks at the risk return of a purely merchant battery model versus the fixed cash flows that are available from investing in wind farms, the return premium isn't really there at the moment. But as batteries get cheaper, it's something that we'll think about and look at.

Thank you. Next question from [ Sam ] talks about capture discount, so the price we achieve on our electricity sales versus the baseload price. That was 13% last year. Should we expect that to widen further over the next decade?

Yes. Good question. Thanks, [ Sam ]. So the way that we forecast capture rates actually does show an increase in that capture rate over the next few years. It's obviously a difference between the balance of the demand at any one time versus the generation from intermittent resources. And we think that is going to increase over the next few years. So that's in our production forecast. It's in our net asset value. So it's fairly represented in our balance sheet, and we're comfortable with that position. There is some uncertainty on there. If the build-out of wind is faster than demand, then capture rates could go up but also vice versa. If demand starts to accelerate like we've seen in other markets, especially around data centers, we've also seen that. The other thing that I think we're going to see over the next few years in terms of the electricity market is a real change in terms of the dynamic use of power. And I think things like Matt mentioned earlier on in terms of heating and cooling, air is a very good way of storing energy, be that in the form of cold or in the form of heat. Electric vehicles are another great way of storing energy as are batteries more generally. So I think you'll see a lot more dynamic usage of power, especially when power starts to become a bit lower, which will end up increasing or decreasing depending which way you're looking at the capture rates that we see and therefore, maximizing revenues for a company like UK Wind.

So this is a follow-up question or a somewhat linked question from [ Sandy ]. Can you help me understand why in the context of rising forecast demand, perhaps more dynamic demand? Is it that we expect power prices to fall over the forecast period? Is it because -- is it that supply is forecast to exceed the forecast power consumption increase?

It's fundamentally because renewables are cheaper than other forms of generation that are on the grid now. And you can see that in the Allocation Round 7 results. If you look at the gas price that the government are forecasting, it's around GBP 150 a megawatt hour. Offshore wind is coming in at GBP 90 per megawatt hour. So the more renewables you push on to the system, the cheaper the overall system becomes. Then, it becomes that balance between demand and supply, we've just been talking about there. So that's why we're forecasting and so most forecast is a reduction in electricity price over the next 5 or 6 years because more and more renewables are coming on to the market, dampening the price of renewables, which ultimately is what consumers see in their bills when it comes to paying that every month.

Moving on to a separate topic. So if the continuation vote were not to pass at the AGM, which is scheduled for May, is it a -- is the NAV, sorry, a reasonable assumption of the value of the assets that could be sold in the current market? And how long would it take to sell 49 assets?

Yes, that's what net asset value is. It is the fair valuation of the business as we see it and as our auditors validate, as our Board validates. How long would it take to sell that number of assets? I think it's always challenging to tell until we start a process. And I think a decent proxy will be another fund in the sector that is presently undergoing a sale process. So I think you'll learn and see quite a lot from that. It's like anything, I mean, the way that assets sell in this market, there's a price duration curve. If you wanted to sell all of the assets tomorrow, I'm sure we would get a price, but it would be NAV. If you took a 6-, 12-month strategic approach and found the right kind of capital to come in and buy the assets, then I think you could achieve NAV over that time period. So it would take time for sure. But that is the point in asset value. That's what it is meant to represent.

Okay. Thank you. A question from [ Vasco ] on the current spike or recent spike in oil and gas prices. Is there a corresponding expected increase in electricity prices? And are you expecting this to increase profitability?

So yes, good question, and thank you. Yes, there has been an increase in electricity prices in the U.K. following what happened on Saturday and what's been unraveling in the Middle East since prices have increased by anywhere between GBP 10 and GBP 20 per megawatt hour over the next couple of years. We haven't seen pricing beyond that duration move substantially. But over the coming 12 to 24 months, pricing has increased and UK Wind has some exposure to that. Some of that, we've actually hedged away this year and settled some fixed price contracts, and some of that will be exposed to going forward in terms of taking advantage of those higher prices that we're seeing at the moment given the unfortunate situation there.

I think it's really, Steve, as you mentioned, it's a function of how long this conflict lasts. It's the marginal units of gas coming from Qatar that is going to drive price differentials in Europe and in the U.K. At present, we're not seeing that really have a significant impact on power prices a couple of years ahead. But for this year, as Steve mentioned, at present, power prices have increased appreciably. Such is the nature of volatility in the sector that, of course, it could all end with one tweet. So we have to be measured when thinking about that.

But it's -- part of our job is to manage that exposure to power prices and be able to take those quick reactions in order to secure upside where we can increase probability.

A slightly linked question here. So how will wind power be priced when the connection to gas prices is broken, assuming that is something that we can do eventually?

It's a really good question, actually, and it's one that the government, in some degree, is grappling with through its review of electricity market arrangements at least at the beginning of the genesis of that process. So if you think about it, where every unit on the system has a relatively low marginal cost, the marginal cost isn't 0. We, of course, pay operating costs on a pounds per megawatt hour generated basis. So whilst we don't have to pay for a resource, you do have to pay for maintenance. It's clearly unsustainable if the commodity that you produce is only ever dispatched at your cost of production. So the way that we see this working in the future is by having, if you like, a voluntary CfD system that's sometimes referred to as Pot-Zero, you can read about it online, where, in effect, generators who are fully merchant or where there's no linkage to gas price and the selling power in the market can bid into a mechanism to secure a price for a long period of time that gives both them certainty as to what they will receive going forward and that it's worth continuing to maintain the assets we have and also give consumers and government price visibility for a decent period of time. Now that's yet to emerge. And I think we're quite some way away from the scenario that you described, but it's a really thoughtful question.

Okay. Moving on to some other areas and just to prove that we're not softballing all the questions. If the share price is such good value, why aren't we seeing it supported by highly paid directors buying shares?

It's a completely fair question. I can't speak to the directors' personal circumstances, but that is often a question that is raised at our AGM, which investors are welcome to attend in May this year. I think the point speaks more broadly to alignment. There's a couple of things there that are important. I mentioned that we are the only manager in the sector who's paid solely on the lower of market cap and NAV rather than NAV. That means our fees are a lot lower than they used to be. That's fine. It's the right thing to do for shareholders. It also means that we're fully aligned to improve the situation for shareholders. Another point to note is that management are paid a significant amount of the management fee and shares at any given moment. Our employer, Schroders Greencoat LLP holds around 6 million shares. I personally hold a large number of shares, and some of my compensation has been turned into shares for UK Wind. So I think there's no lack of alignment around the table for manager or Board in terms of addressing the situation that we find ourselves in.

Similar question on performance. My investment since the 2021 share offering is sitting at a capital loss of 28.4% and both the NAV per share and the share price are falling significantly. What is causing these deteriorations? And what are you doing about it?

It's a very fair question, and my own personal investment journey is almost exactly the same. I think I bought my shares in 2022 actually. So there's a number of things here. We've addressed that power prices have been falling. Power prices rise. Power prices fall. They rose appreciably in 2022 and '23, and that was highly beneficial to the fund. Since then, they have fallen. And that, as the person who asked the question pointed out, has led to NAV falling. It's also corresponded with 2 years, and this does happen, of relatively low wind speed generation. The broader context is that the renewable energy investment trust sector, in my opinion, grew too big when money was cheap. So all the way through to the end of perhaps '21, money was very cheap. There were lots of products in the sector. And much of that expansion was supported by investors that were seeking income, certain types of institutional investor who, post the Liz Truss budget, have other areas where they can get income. That means you have a lot of sellers. You have more sellers. I mean they're always the same number of sellers and buyers, right, otherwise shares [ would be clear ]. But the point is if you have more selling sentiment than buying, then that drives discounts down. We find that our share price is the largest vehicle in the sector and having done the most significant buyback in the sector has been perhaps a bit of a [ -- been used as ] liquidity for others. And I think you also need that situation to resolve itself with fewer larger companies in the sector for a return to health as well as working hard to deliver on that metrics and cash generation, which is what Steve and I focus on every day. Those to me are the 2 parts to correction in this sector. I understand how you feel about your personal investment journey. We're entirely aligned to make things better for the business.

So following on from something you mentioned there around the supply and demand in the sector. So the question is you mentioned the need for consolidation. What are the drivers for this? Is it synergies, mergers across different technologies, diversification, other factors?

I think it's a combination of things. I mean it's consolidation itself, as Matt outlined, won't necessarily be the answer. We think the sector needs to shrink. So putting together different funds and not shrinking the sector without there being some type of material hand back of capital to shareholders probably won't work. So I think that you've got to look at it in the round in that way. In terms of the other factors that would make a theoretical merger work, yes, there would need to be synergies. There might need to be some diversification benefits, but it would have to work in order for our shareholders for us to even consider this. And the bar is pretty high. We think our portfolio is very strong. We have the ability to invest in our portfolio, invest in further onshore, offshore wind assets in the U.K., especially with an Allocation Round 6 or Allocation Round 7 contract, which will give us 15 or 20 years of fixed revenues for the business and allow us to be confident to cover the dividend very strongly and carry on reinvesting excess cash flows. So the way that we would look at it was what is in the best interest of our shareholders. And unless it was clearly in the best interest of our shareholders, we'll continue with our current investment objective.

And move on to a few more operational, let's call them, questions. So over the next 5 years -- this is from [ Tim ]. What portion of CapEx will be needed to fund the repair or replacement of existing wind farms as they age?

So the way that we look at this is probably quantify it more as operational expenditure rather than capital expenditure. But I can see why the question has come through that way. Effectively, you've got the turbines. There's some major components within the turbine. You have the generator. You have the blades, and you have some other aspects, which on -- over time, sometimes need replacing. In terms of the costs that we saw as an overall business last year, it's about GBP 227 million. Of that, it's something like 30% to 50% in any 1 year, which goes towards the overall operations and maintenance of the turbines directly themselves. And that will be funding the physical hardware, which is used to replace failed hardware, also refurbished hardware as well as well as paying for some of the risk management along with the staff that are obviously on the wind farms doing the actual work themselves. As we go forward and we look to repowering, even though that's some way away for us, that will be a different conversation at a different time. The cost for onshore wind and offshore wind have reduced over the last 10 years. So we expect that if we were to invest in new projects, required genuine CapEx, that those costs would be pretty competitive, and as you see, much more competitive than the cost of gas.

Question from [ Stephen ] on wind speed. So why do we have below budget wind generation almost every year? Can we improve the budgeting process?

Thank you for the question. It's a very fair one to address. So we did a holistic review of our wind speed estimations in 2024, as we said before, using a third-party consultant. We took the -- that exercise very seriously. Our Board was heavily involved in it. And we felt we did exactly the right exercise that led to a reduction in our long-term expectations of energy generation of about 2.4% every year. We've even looked at whether there are any climatic effects that one could speak to as to wind speed variability going forward. As yet, there are no conclusions from that. There's a reasonable degree of uncertainty given the climate modeling. So if you look back over the data set, as I mentioned earlier, back to 1996, it is characterized by periods of time where you have over and underperformance of wind speed versus the long-term mean. So going forward, our expectation of our central case estimation remains to be assessed in 2024. We're as interested as you are in having a budget that is deliverable, but as it comes to the science and the industry practice and standards that we've applied, I think we've done that, exactly the right exercise, and we've done it quite prudently. As we said earlier, the last 6 months of last year were a more normalized wind climate and beginning to this year, it is relatively strong, too. So perhaps that is a year where you will see a reversion to mean.

Another question on generation and wind speeds, I guess. Is curtailment a problem? And how does it affect impact -- sorry, affect income?

So curtailment is an issue for the interim. It's principally a factor that the grid is not being built out in the way that was foreseen for the distributed energy system that we have now. You might see, if you look at the likes of RWE and SSE, there is significant -- and National Grid, significant investment in the grid coming up over the coming years, which will alleviate that problem in order to make sure that the grid is there for when generation generates, it can be transported to the right area. In Northern Ireland, where we hold a number of assets, it's slightly different, where there is no compensation for grid curtailment there. That's subject to change in the future, but that's all factored into our fair value with what we think are prudent estimates. In the U.K. for some of our assets, there's something that you might have heard of called the balancing mechanism. And that's a factor whereby if a wind plant is curtailed, it can bid into this mechanism and be compensated somewhat for the loss that it has from not being able to generate. And that helps National Grid balance the overall position in terms of supply and demand. But the key to this is investment in grid. Investment is coming.

Okay. Just taking note of the time, we'll try and get a couple more questions in, and then we'll have to draw things to a close. There's 2 here that are quite similar. So what is the net gain to the company of buying back shares versus using the same funds to reduce gearing and therefore, the cost of debt?

Thank you. So on an economic analysis, if you buy a share back at a, say, 25% discount, then the return on that is whatever you think your return is at NAV divided by 0.75. So that, at present, is a relatively high return. The return from paying off debt is you then stop paying the interest on that part of debt that you've repaid. So taking the cost of our revolving credit facility as an example, that would be around 6%. So the return on buying a share back is undoubtedly higher than buying -- retiring the debt. But as we said, for the long term, if the company continually buys its shares back, it will shrink itself into not existing. It will, of course, add some value to the pence per share in terms of NAV. But our expectation is in the medium to long term that we'll be reinvesting back in the business to create future cash flow. The good thing about that future cash flow in and of itself and growing NAV is that it inherently reduces your gearing. I also think, by the way, that retiring some of our debt doesn't really affect the cost of any new debt that we take. That's really a matter of the market at the time, where interest rates are and perception of credit. And that isn't anything that we've really been challenged with at all. We did a GBP 750 million refinancing in September 2024, which was very competitively bid and worked out very well for us.

So maybe we'll end with this question. Would it be prudent to diversify into other renewable assets or even buy another investment trust at a big discount to NAV to help secure future revenue growth?

So we were very clear to signal in our results that there is a dislocation in the market at the moment. And that could present opportunities for a business like UK Wind. We have to see how that develops over the course of the coming years. So to hypothetically answer your question, yes, it is in theory possible, assuming that one could actually make it happen, to buy another company using one's own shares. But we would look at it as we look at all new investment for the business. Is the thing that you are buying additive to the return profile that your business presently has? Does it outperform the things that you could inherently already invest in? And is it in the long-term best interests of the shareholders of the business. Those would be the principles that we would be guided by in your theoretical question.

So I think that concludes the Q&A session, and I can hand it back to Paul for -- to close today's session.

Thank you, and thank you for taking all those questions. Could I please ask investors not to close this session. You'll now automatically be redirected to provide your feedback in order the team can better understand your views and expectations. This will only take a few moments to complete and is greatly valued by the company. On behalf of the team at Greencoat UK Wind PLC, we would like to thank you for attending today's presentation. That concludes today's session, and good afternoon to you all.