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

Good morning, and welcome to our 14th half year results presentation. Thank you for joining us online today. First, some housekeeping. We'll run for around 20 or 25 minutes, and we'll allow some time for Q&A at the end. John Musk will moderate that, and the operator will explain how to lodge a question. There's a disclaimer at the end of the presentation, which we draw your attention to, but encourage you to read on your own time. So Stephen and I will now take you through the results. But before we do so, I wanted to give an overview of the areas that we'll cover and make some remarks about the market and the sector. So the first half of 2026 has shown the strength of UK Wind's business model. Operational performance has been robust with generation 4.9% ahead of budget. Cash generation has been strong, and we benefited from favorable power prices. Dividend cover was 1.9x, and we continue to strengthen the balance sheet through refinancing, which Steve will take you through and further repayment of debt. Most importantly, the company continues to generate surplus cash beyond the needs of its dividend as it has done over its life. In today's market, we think that's an important distinction, and let me explain why. In our last 2 sets of results, we highlighted the imbalance between the number of listed renewable infrastructure vehicles and the level of investor demand for the sector. We suggested that further rationalization was likely. And since then, we've seen that taking place through asset sales, strategic reviews and other corporate activity across the sector. And as those developments unfold, the distinction between business models has become clearer. We believe the strongest propositions combine 3 characteristics: an attractive investor proposition at meaningful scale, a self-sustaining model that generates excess cash for reinvestment and low execution risk. Increasingly, investors are distinguishing between companies that already possess those attributes and those that need a transformational pivot or access to external capital, significant asset rotation or other features to get there. And those features often come with significant execution risk. In our view, UK Wind has a relatively advantaged position in that landscape. We already own a large portfolio of operational assets generating cash flow today. We already have scale. We're already able to fund investment organically. We've generated GBP 1.1 billion to reinvest alongside paying GBP 1.5 billion in dividends to our shareholders. So UK Wind has a clear pathway to enhancing its future shareholder cash flows without relying on external equity or a transformational pivot or undue execution risk. Put simply, we feel that many in our sector have quite a lot to do and in some cases, with quite some risk to achieve outcomes that we already have today. And that matters because the opportunity ahead for us at least is significant. Electrification continues to grow in the UK, and that demand will more than likely be met by a lot of deployment of renewables, especially wind. And we also see increasingly opportunities within our own portfolio for us to invest in. Businesses that have capital to deploy, existing operational assets and the ability to fund investment organically are particularly well placed to benefit from that environment. We'll come back to those themes later in the presentation. But the key point is a simple one. UK Wind remains a self-sustaining proposition, capable of funding both distributions and reinvestment from internally generated cash flow. Now to the results, which Steve will talk through.

Thanks, Matt. So I'll talk through the financial and operational performance of the business in this first half year period. It's been a very positive start to the period with GBP 222 million of net cash generation, which is a 36% increase on last year. That's predominantly been driven by above budget wind speeds and also some higher power prices received. Dividend cover has been 1.9x, a very solid result. And actually, with the cash already received during July, the dividend is more than covered for the whole year period, which I think is a great result for shareholders. NAV growth has been modest but stable, and we have a portfolio IRR of 11.5%, levered IRR. And that implies a net return to shareholders of above 10.5% after taking into account our fee structure of 0.8%. So where does that leave us for the rest of the year? So in terms of our guidance on the next slide, this positive start to the period means that we can be happy to say that we're on course to be at the top end of our guidance for net cash generation and the dividend to be on course to be at least 1.7x. We think that's a really good result for the business and leaves us with a significant amount of cash to deploy over the coming months. So about that cash on to net cash generation. Now UK Wind always has been and always will be a high-margin business. That means revenues are really important. And that's good news because in this half year period, revenues have been very, very strong with a 15% increase from this time last year. Again, that's predominantly driven by higher [indiscernible] generation, where we have seen a reversal of the trend from minus 14% this time last year to plus 4.9%. Higher realized power prices have also played their part. Just picking out a couple of other points on this graph would be to look at the tax position. It looks like we paid more tax in this period. And from a cash point of view, we have. But actually, this is just a result of some payments that should have been made late last year actually fell into early this year as well. The other point to note here is that you're starting to see the change in our fee structure to be on the lower of market cap and NAV starting to take account in terms of the cash savings to shareholders with a significant reduction in the fee paid to the investment manager. So moving on, we generated GBP 222 million net cash this year, and that's part of the GBP 2.6 billion worth of cash that we have generated for shareholders since IPO. And firstly, a quick observation. UK Wind has a structurally high dividend cover. That allows us to have the cash available to allocate in order to grow the business going forward. We compare this to lower dividend cover models. We don't have to go and sell assets. We don't have to place more debt. We don't have to raise equity in order to have the cash available to allocate to grow the business. We think that's a substantial advantage to the UK Wind business model. So what do we do with the GBP 222 million? Well, firstly, we paid GBP 114 million in dividends over this first half year period, and we've repaid GBP 54 million of debt as well. You can see here on the chart on the right-hand side, we've also made some share buybacks, and that basically marks the culmination of our GBP 200 million share buyback scheme. We have in place a new share buyback program, but we'll be using that more tactically rather than an enduring mechanism going forward. All in all, this means that we have an extra GBP 73 million worth of cash on the balance sheet to allocate over the coming months. So as we mentioned, a very solid 1.9x dividend cover for the period and GBP 60 million more net cash generation compared to this time last year. And the key point to really pull out on this graph is that within the business, we have around GBP 0.25 billion worth of cash to allocate going forward. We think this puts us in a really strong position to evaluate some of the investment opportunities that we see in the marketplace and which Matt will touch on later on. So moving on to the dividend track record. So earlier this year, we announced our 13th consecutive increase in inflation -- increase in dividend by inflation by 3.4%, which marks CPI to 10.7p per share. This sustained increase in dividends makes us one of a handful of FTSE 250 companies to achieve such a feat over this time period. We're really proud of that record. In addition, we have what we believe is to be a clear and unambiguous dividend policy. We increase it with inflation on an annual basis and shareholders can rely on that statement. In terms of what we paid to shareholders since IPO in terms of dividends, we paid GBP 1.5 billion and the historic dividend cover ratio has been 1.7x. And over the next 5 years from '27 to 2031, we forecast a 1.8 dividends time cover. And that will give us an additional GBP 1 billion worth of cash to allocate to grow the business. Again, we think that puts us in a very strong position going forward. So in terms of the net asset value, it's been a stable period for NAV, as we've mentioned, we're very pleased to see that, and we look forward to hopefully having NAV growth in the future. And looking at the graph on the left-hand side, what you can see here, which is part of the UK Wind business model is that the net cash generation has exceeded the depreciation and dividends in the period, i.e., we've generated cash in excess of the way that we are paying out dividends and the business is depreciating. It's a really key factor for the UK Wind business model. Looking to the right-hand side of the chart that you can see the key points to pick out would be inflation and discount rates. So quickly on discount rates, we increased these earlier in the year, and we believe that appropriately reflects the rate and risk climate for UK Wind assets. In terms of inflation during the course of this period, we've seen a spike in inflation predominantly due to the hostilities in the Middle East. As we finalized the period on the 30th of June, a ceasefire had been in place for around about 20 days. Obviously, with the news over the last couple of weeks and even this morning, that ceasefire seems to have ended. That is likely, and we agree with many market commentators to feed through to higher power prices, which eventually will feed through to higher inflation later in the year. So moving on to power prices. Just to recap the way that we come up with our power price forecast. Over the first 2 years, we use the futures market. That's the actual price that people are buying and selling power in the marketplace. You can't get a better proxy than that. After that, we bring in a long-term curve from our expert market consultant that also blends in futures pricing in the front end. So that means that it's not just a model. As you can see in the short term, power price is slightly elevated for the reasons we've already discussed. And in the long term, there's not a real significant difference. And you can see that power prices are decreasing in real terms. Now a quick reflection. Over the last 4 years, we've seen 2 significant disruptions to power markets, with Russia's invasion of Ukraine and the current hostilities in the Middle East. That makes us wonder whether that's rather a structural feature of the power markets rather than just episodic. And if you were to believe that and you look at our smooth curve here from the 2030s onwards, you wonder whether that's appropriate. Or put another way, will there be further price spikes in the future, which a business like UK Wind can take advantage of? Another point to point out on power prices is the active asset management that we've been undertaking. During the first half of this year, we've hedged around 1 terawatt hour of power for around about 1 year. That's about 20% of our annual merchant volume. That leaves us with fixed revenues for the rest of the year of around 66%. And actually, during the course of July, we've gone further, and we fixed another 0.5 terawatt hours or around 10% of the annual volume of our merchant risk during that period. And again, you can expect to see more of that from UK Wind as we look to continually take advantage of positions in the marketplace and manage the merchant risk on behalf of our shareholders. Last point to point out on this chart is something we always publish, which is the dividend cover sensitivity. And we think this is really important to give shareholders confidence in the dividend going forward. And you can see here that even down to prices such as GBP 30 per megawatt hour, are way below where prices are today and way below where the future prices are forecast to be, the dividend is more than fully covered. So on to wind resource. And this is perhaps the most pleasing or encouraging point of the whole half year presentation today. It really feels like there's been a reversion to the mean. We've been saying it for some time, and you can see it in the numbers here. We've been above budget this first half year period, 4.9%. And actually, over the last 12 months, we've been above budget as well. And of course, you can see the results of net cash generation that, that brings. We're very pleased with that position. In terms of availability, we're slightly below budget. We had a couple of wind farms -- offshore wind farms where availability was restricted mainly because of high winds, which meant we couldn't get out to fix the faults that were there and also an inter-array cable fault within a turbine, within a wind farm, which took a while to diagnose, procure the appropriate cables and then fix. All of those issues are now sorted. So moving on to the balance sheet and a reminder of the structure. So we have about 10% of the debt associated with our revolving credit facility, 20% associated with Hornsea 1, and amortizing debt profile there. And the rest is evenly spaced term debt with maturities that are spaced over the coming years that we believe helps derisk the proposition, both in terms of the liquidity and rate climate when we come to refinancing. We like this structure because it gives us low-cost, high optionality debt and allows us to decide how and where to allocate capital. Key highlight of the balance sheet management this half year period is we refinanced GBP 200 million of our term debt that was due to expire later this year. And we've managed to place 6-, 7-, 8-year maturities to replace that, all within the existing lending group, which we think is really positive that within our existing lender group, there's very strong support for UK Wind and its credit. And indeed, we're in discussions at the moment to refinance a further GBP 150 million due to expire in May next year, again, within the existing lending group. And you can expect to see more news on that towards the end of Q3 or early Q4. We've also repaid GBP 54 million worth of debt, and that brings the total repaid or debt principal reduction over the last 18 months to GBP 222 million, again, showing the prudent allocation of the balance sheet on behalf of our shareholders. Gearing stands at 41.7%, which is slightly above our self-imposed limit of 40%. And a quick note to say about that, that imposes no restrictions on UK Wind at all other than that we cannot draw on more debt, which is something we wouldn't look to do in the circumstances anyway. And we can see a clear glide path back to below 40% with the natural amortization of Hornsea 1's debt, along with growing the gross asset value by reinvesting excess cash flow into new assets as well. So that wraps up the financial and operational performance. And I'll now hand back to Matt, who will conclude -- will talk -- go into some more detail in his opening remarks before we move on to Q&A.

Thanks, Steve. So I thought it would be a good idea just to look at the criteria that we spoke about at the beginning of this meeting and then just look at how UK Wind relates to that. So first of all, just a reminder of UK Wind's business model. It's a very simple model. It's been operational for 13 years. It's proven and it works for us. Buy wind farms, 49 of them, generate electricity and that generates net cash for our shareholders, GBP 2.6 billion so far, more than our present market cap. GBP 1.5 billion of that has gone out to our investors by way of dividend and GBP 1.1 billion has been available for us to reinvest. And all of this comes from an existing operational asset base. In effect, excess cash flow arrives by design, not coincidence. So when we think about accelerants to the capital that you can allocate, these are reaccelerants for us. Those are asset sales and capital raising. They're accelerants. They're not existential requirements for us to have capital to allocate in the first place. And just before turning to how we look at capital allocation, just a look at the next 5 years. So this is, of course, based on assumptions, and we've got a range there. But if you look at our expected net cash generation over the next 5 years, the middle of the range is around GBP 2.3 billion, again, roughly our market cap. And after paying a further CPI-linked dividend over those years of GBP 1.3 billion, that will leave us with roughly GBP 1 billion, let's say, as the middle of that range to reinvest back in the business. So I think the question for us really becomes not whether we will have capital to allocate, but how we will allocate it when it arrives. So to look at capital allocation. First, as always, as it has been since the beginning of UK Wind, the dividend, which has given us 13 years of increase by inflation or better. But in our view, an attractive dividend in today's world is not enough. Just having that feature alone just isn't enough. A sustainable dividend requires further reinvestment, and we'll look at that in a minute. And that's why excess cash generation was part of our design. The return from this business is far more important than the dividend yield. So look, we have self-sustaining cash flows in our view. We then just have to think about how we allocate that. And we'll look at in a minute the market opportunity that we have. I think you also need to think about when people are allocating capital, what risk are they taking. Fundamentally, if the pathways for Steve and I to reinvest in assets that we already understand in a growing market, we're basically just doing what we've been doing for the rest of our careers. So it doesn't require an undue amount of risk. It just requires the usual investment discipline. So just to underline the importance of reinvestment. So it's no secret that the assets that we own are finite. We think our assets will last for 30 years. And at the end of that, in our model, we don't value them at anything. So if you don't reinvest in that portfolio, then over time, the amount of free cash flow, and this is shown in the chart on the slide that you can see there, it will reduce over time. We don't think that's any kind of secret. But if you reinvest, you get a vastly different outcome. And again, this is why we were designed this way. And all the blue bar on this chart does is assume that the cash that we generate each year that isn't used to pay our dividend is then reinvested back in the business at the average portfolio discount rate. So nothing particularly exciting or racy about that. And so therefore, we've included the payment of the dividend and the reinvestment of excess cash flow beyond that. So really then the risk of reinvestment comes back to what I said earlier. It comes back to, well, are there enough opportunities in the market? And are we well placed to execute? Well, investing in wind farms for Steve and I doesn't require any sort of transformational pivot or reimagining of strategy or career. It's basically what we've been doing for most of our working careers. Just to look then at the opportunity for reinvestment. And we covered this in detail in many of our past results presentation. So electrification in the UK continues at pace, depending on which forecast you take, you're going to need another 50% to 100% of electrons over the next 20 to 30 years. It's vast. It's a huge amount. And as you can see from the chart on this page, wind is going to do the heavy lifting. It's scalable, it's deployable, and it will probably actually be more than 75% of the new electrons that are created. So that's a market that's going to go from our estimate, around GBP 100 billion of asset value today to about GBP 200 billion probably in the next 5 years. So when you grade against that GBP 1 billion that we estimate we could have to reinvest over the next 5 years, we obviously don't need to capture a significant potential of the market to be able to deploy the money that we have to reinvest. And also, we have opportunities within our own portfolio. We have 49 assets. There are a variety of things that we feel that we can invest in there. That could include the ability to extend those assets over life or ultimately to prepare some of them for repowering, although as we've said before, that isn't a one-size-fits-all answer. So really, there's plenty of opportunity for us to reinvest in. Really then it's just about Steve and I applying judgment and discipline in an area that we're very well founded in. So just to bring that to a conclusion before we open up to some Q&A. We've spoken at length before about the sector, the rationalization that's ongoing, the retirement of paper in this sector, corporate actions and so on and so forth. And we think that is fundamentally healthy for this sector. And against that backdrop, we feel that the successful propositions are going to have an attractive investor proposition of scale, a self-funding model and low execution risk. We think those characteristics matter more than ever in today's market. And crucially, these aren't characteristics that we're trying to create for UK Wind. They're characteristics that were part of our design and that we've shown we can deliver on over the 13 years that we've had since IPO. And we believe investors are increasingly making that distinction, and that's why we believe that UK Wind occupies a relatively advantaged position in the sector. Thank you for your attention for the last 20-odd minutes. We're now going to open up the line to Q&A, which John will moderate.

[Operator Instructions] We'll take our first question from Joseph Pepper from RBC Capital Markets.

Just 3 from me, please. You spoke about scope for reinvestments and I guess ultimately reducing gearing through NAV growth, but any excess cash that goes towards reinvestment rather than debt repayment will ultimately slow the degearing profile even if the denominator is increasing? Just curious to know how we should think about what you really see as a stable state for the gearing profile for UK Wind in the long term? And then also how quickly we should expect it to decline from here? And then the second one, linked to that, I suppose, on reinvestment. But in terms of the opportunity, it would be great to get your latest thoughts in terms of where you see the best returns are across construction, operational and also reinvestment in current assets. And then finally, this is perhaps slightly more of a medium-term question. But just thinking about the opportunity for repowering and the end of asset lives in terms of the latest thinking in terms of the IRR potential for instance, I think you've seen some projects in France that have struggled to repower due to no availability of new small turbines and then there's also been planning issues blocking larger projects and whether you think the government needs to step in order to potentially incentivize repowering projects in coming years? Or you think the economics are attractive on a stand-alone basis?

Thanks for your questions, Joe. I think we've brought them all down. I wonder, Steve, if you'd like to talk a little bit first about the pathway to degearing and the importance of keeping the cash in the business and growing the gross asset value. And perhaps then I can address your questions about opportunity investments in repowering specifically.

Yes, sure. So in terms of the pathway to degearing, as I mentioned earlier, Hornsea 1 has an amortizing profile. So there's already sort of an inherent process to degear the business that exists. It's around about GBP 45 million a year, give or take, depending upon the year because the profile is already sculpted. So there is that natural sort of level baseline of degearing there. And then with the excess cash that we're generating, we've talked about during the presentation, using that to grow the gross asset value is the other pathway, which we see as best fitting the strategy to degear the business. And that also has the benefit of that -- it's a growth business, and we believe that's going to help retain our current shareholders and attract new shareholders into the register who want to be part of this growing marketplace.

Thanks, Steve. I mean just to add to that, we haven't been prescriptive about a target date and a target range. The reason for that is it depends pretty much on what the gross asset value is as much as the debt that you repay. And we've repaid GBP 222 million, as Steve said, over the last 18 months. Unfortunately, because you know in the last year, our NAV declined, that amplifies the percentage gearing ratio, but in absolute terms, our debt is reducing significantly. I think a sustainable pathway for the business is to get back below 40% and mid-30s to 40% as a sort of an ongoing range seems appropriate for the assets that we have. Certainly, in private markets, you could see businesses geared far more heavily than that. And we're certain that if we did change, which we have no plans to do, our self-imposed gearing limitation, the debt will be there, evidenced by the strength of our refinancing recently.

And perhaps just one further point on the refinancing that we concluded earlier this year and that we hope to do a further refinancing. We have significant support from our current lender base. So the level of gearing that we have, whilst we do want to reduce, as Matt just explained, we have low anxiety about our ability to refinance going forward, and we have significant support from our existing lender group.

So Joe, to your question around the opportunities that we see in the market, as you know, the sort of range of things that we can invest in our construction opportunities, and we have done that previously, standard operational assets and perhaps as this emerges a bit more, older assets that have the potential for repowering. Frankly, how we look at all of those assets is with discipline and portfolio fit in mind. So there isn't any one particular answer as to what's the right opportunity, how well it's priced and how competitive the market is. As you can see from our results, we've been quite busy appraising new investment opportunities. We haven't concluded anything yet, and that's an expression of discipline rather than lack of opportunity. So I would expect you'd be able to hear more from us on that in the next quarter. And when it comes to repowering itself, I think the first thing to say is that you can't assume that it works for every site because it won't. There are some sites where you've mentioned some of the challenges that you've experienced in other jurisdictions, perhaps -- it's about what you're trying to do. So a relatively small wind farm that isn't in a particularly windy area that perhaps the economics worked because there was a good subsidy regime at the time, and that's unlikely to be economically competitive when it reaches its life. The other thing to remember is that when you have an asset that suits repowering, you're already valuing the cash flows that stand between you and the date that you repower it. So you have to do a calculus of when it makes most economic sense. That said, what one can do is secure the option for repowering through negotiating land leases and ultimately by submitting planning applications. And this is an area where we think it makes sense for us to invest in the near future.

And maybe just to conclude on that, Joe, you asked around whether the government needs to step in, in terms of helping projects to be repowered. And we've been in discussions with the government even over the last couple of weeks where this is actually on their mind, both in terms of helping assets that life extend, but also in terms of repowering as well. So I think the government has is on its radar, and we believe that the government is sensible, which we believe there will be, there will be appropriate support for both life extension and repowering of projects going forward.

We are now taking our next question from Conor Finn from Barclays.

A couple from me, please. So firstly, a question on the debt. Obviously, you've done the refinance in the period. The margin has gone up slightly. I guess the question is, what are banks saying around kind of appetite for lending, maybe, say, for longer-term facilities where obviously, there's going to be say, maybe increased merchant risk when these facilities come to maturity? And then secondly, on the dividend, if you go back to the time of launch, obviously, you're paying, say, closer to, say, 6% NAV at that time over kind of the period since then, it's grown to 8%. I guess what question would you be comfortable with that kind of rising to further?

Thanks, Conor. Maybe, Steve, if you want to address the debt point and then I can come back to the dividend.

Yes, sure. So as I mentioned earlier, we've refinanced this current maturity of GBP 200 million with our existing lending group. We actually have banks knocking our doors wishing to join that lending group, but we're very happy with the current lending group that we have. Margins have gone up very, very slightly. The overall cost of debt has gone up. That's more a reflection of where swap rates are, which isn't a measure of the business' risk. It's just where rates are at the moment. So in terms of the way that they're looking at the longer term and the exposure to merchant revenues, I think they're comfortable where the business is now, but it also plays into what we're talking around reinvestment. Reinvestment is key to this and managing that merchant exposure is also key as well. We've also got many tools in order to manage merchant exposure. We talked about some of them earlier today. We've hedged 1.5 terawatt hours over the course of this year to date, significantly reducing merchant exposure, but there are other mechanisms as well. So we can put in place longer-term fixes or [indiscernible]. We can enter into corporate PPAs, of which we have several in the portfolio, and you might well see us do more as current PPAs expire. And there's also, of course, reinvestment into new assets with a CFD for 15 or 20 years, which again helps manage that merchant risk in order to make sure that we've got the lenders to carry on lending like this. We have low anxiety around the position we are at the moment, and we think we've got all the tools available in order to manage the merchant risk over the short, medium and long term.

And to your point on dividends, Conor. So you're right to observe where our dividend is as a percentage of NAV, but the expression of our forward comfort in that can be found in the numbers and the dividend cover sensitivity that we have. We're very comfortable with that dividend. This is why reinvestment is crucial, right? So reinvesting back in the business sensibly will grow the future cash flows, and that will support a dividend at this level.

[Operator Instructions] We'll take our next question from Iain Scouller from Canaccord.

I've got 3, if I may. Firstly, just on inflation, can you give us a bit more color on that because that was obviously quite a big gain. I mean how much of it was from the reporting period? How much is related to the future forecasts? And then secondly, on the NAV bridge, there's a negative 1p for other. Can you give us a bit of a breakdown on that? And then thirdly, I mean, obviously, debt remains high. I didn't see any comment on sort of potential disposals. Can you give us your thoughts on that?

Yes, happy to, Iain. Thank you. So I can -- I'm happy to talk about inflation. Steve, maybe if you want to address the point on the other line on that, and then we can come to debt and disposals. So when it comes to inflation, to directly answer your question, Iain, this all comes from the next 2 years of inflation pricing, the movement. So you'll note that in Q1, our inflation assumption went up. And in Q2, it went down. The net is still up. So how do we price that? Well, we look at an RPI swap index. That's the swap that's traded frequently. We get that quote from elsewhere in our building. And we then moderate that to get to a CPI and CPI inflation expectation. We have not changed our expectations for inflation for '28 onwards, and they're all published in the half year results. So simply, the drop from Q2 versus Q1 in inflation is an expression of where expectations for inflation for the next 6 to 12 months stood on the 30th of June. And as Steve mentioned earlier, that was a more benign environment. There was a ceasefire. Power prices have come down significantly, and they're a driver of inflation. So this is really just a mark-to-market. There's no subjectivity in what we've applied. It's entirely objective. And as Steve suggested earlier, that's likely to pick back up if we see the power prices at levels that they are today sustained, and that will feed through into inflation. But that's really a matter for us to address when we get to the next valuation cycle.

Okay. So in terms of the 1p of other costs, so we're constantly looking at our assumptions over the medium and long term and looking to refine those. And so this reflects the ongoing review of where we're seeing contracts where we're seeing the market. So it's principally to do with long-term assumptions around operational costs for the business that we use data that we see in the marketplace, but also try to bring in forecast as well. So we think it's a margin increase. We think it's prudent, and we think it's the right thing to do in terms of the NAV bridge.

And when it comes to debt, I think there's 2 things to look at, right? So there's the gearing percentage, which is certainly a valid metric to look at and then the absolute amount of debt in the business. The latter has gone down significantly over the past 18 months, as Steve mentioned. I think the other thing to think about degearing is it's a self-imposed limit. As we've said before, banks are quite happy to lend more. And I think you raised a good point around disclosure on what that means from a financing perspective, and we've put that in our half year results. It frankly has no consequence or bearing. In fact, our lenders see us as less geared than the 41.7% because they exclude Hornsea 1 as a project, both equity and debt. So as the lenders see us, we're far less geared. We don't have, as Steve said, anxiety either about the level of debt that we have at the moment or the ability to refinance that in the future as demonstrated by this year's refinancing. When it comes to disposals, we don't see the need to sell assets to retire debt. As we said, we have a pathway over time for debt to reduce below our self-imposed limit. But even when it does, we're not particularly planning to borrow a lot more because we can sustain and fund our business through organic cash flow. So that's our approach.

And frankly, the money that we have is better invested in operational wind farms than it is reducing gearing. It serves a better return for our shareholders.

Or optically, we have GBP 240 million on the balance sheet. Obviously, not all that's usable. Some of that is SPV working capital and remains so, but we could optically have repaid some of the RCF and taking gearing down. But actually, the cost of that is pretty marginal to have the RCF drawn because we're earning interest on the cash that we have in the bank. So we're really only paying the margin on the RCF. And having the optionality to then have the cash to make the kind of quality investments Steve and I are looking at, we feel is a better approach from a treasury management perspective.