Severn Trent PLC (SVT) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the Severn Trent Results Q&A for the year 2020-2021. I'm Liv Garfield, Chief Exec, joined by the whole senior team and looking forward to answering your questions. Now we all are experts on Zoom, so I'm sure you don't need any detailed explanation from me. But broadly, raise your hands and then don't forget to unmute yourself once you've been chosen. That is the broad rules. All right, then it's over to yourselves for some questions.

There we go. So Mark, we can see you. But we need you to unmute.

Yes. Sorry -- can you hear me now okay? Okay. I can't -- I can hear you now. So look, 2 questions. Firstly, on the bad debt provision, James. Can you talk us through the provisions that you've been making? Because evidently, cash collection is running ahead of trend. And it seems like you're providing very heavily. Is there scope for provision release if unemployment doesn't pick up, et cetera. Perhaps you could talk us through that? And secondly, on the Green Recovery program, I mean, it's a lot of extra spend. And sure there are different sharing arrangements on the upside. But I mean can you operationally talk, Liv, about how you can deliver this spend? Because my understanding is to deliver spend -- large amounts of spend on short notice is not easy.

Very good. So James is going to cover off first on bad debt.

Yes. Mark, so thanks for the question. Yes, on bad debt, look, I've been really pleased with the performance on cash collections. I think this time last year, we flagged a few risks and concerns about how the COVID-19 pandemic will pan out. And we did -- we were fearful that we would see a sort of quite deep recession and an impact on bad debt. But I think we've done a really good job. And I think as you saw in the presentation, we focused on a number of areas to improve collections and increasing our collections by over GBP 60 million in the year. It's been a good performance. And I want to maintain a prudent position on bad debt because none of us know how this is going to pan out. As lockdown eases as importantly as furlough schemes come to an end, it's going to be very difficult. And each region in the country is going to be impacted differently. And we know that in the Midlands, it has been tough for some people. So too early to call any sort of change in that policy just yet, but just to underline, I've been really pleased with the performance for the year.

Brilliant. And I'll start and I hope James and Helen will also give an extra little bit of detail on how we're going to spend the extra GBP 565 million. At a top line level, we are completely confident, and I think Ofwat did a full independent study as part of their documents as well to verify, not only we're on track, but actually, could they see that it was going to be feasible for us to spend the money in the course of the next 4 years. And they actually said, they would have been comfortable with us spending even more. So they authorized GBP 565 million of our original GBP 738 million ask, but it wasn't because they didn't think we could spend right up to GBP 738 million. So they've got independent confidence around us. We've spent more in previous amps and we've -- and whilst this is a fast start from only getting agreements on Monday, we've proven, I think, on other things, when we put our mind to stuff, whether it's ODIs or whether it's other activities, we are pretty much a force. And that's exactly what you should see now. So I'll ask Helen to talk about some of the schemes that she's been getting ready on the off chance we've got approval. And then I'll ask James, just to talk about a couple -- because some will fall into Helen's area because they're large capital big build profiles. Some actually are everyday activities, and we can get going literally in a matter of days. So Helen first.

Yes. So I mean, from a property delivery perspective, we're really confident about being able to deliver the schemes. We've obviously been looking at the schemes and understanding them. We've got our in-source design team, which we can use to design. We've got an expanded design supply chain as well. And we've got 3x more construction supplies than I had in AMP6. So I've got a vast array of resources. I'll be standing up a separate team to deliver the Green Recovery so that we make sure we're doing both really well. In terms of the schemes, we've got some water schemes, which we've got great experience on from AMP6. And we've also got some WFD schemes, Water Framework Directive schemes, which again, we've got our program for AMP7 and we've got loads of great experience for AMP6. So I'm going to be tapping into all of that past experience to help deliver these schemes. So yes, very confident.

Very good. James?

Yes. And just to reiterate Liv's point really, we've got a really good strong track record of delivery, and we're pretty proud of that. I mean that's something that we've delivered not only in AMP6, but we've carried through to the first year of AMP7. I think the 2 main areas that my team are focused on are -- and quite uniquely, one is an area where we've already got a heap of expertise, and that's in the lead pipe, supply pipe adoption piece, where we do this activity already at scale. And I think this is just the case of using an additional resource that we're going to be able to bring into the organization as part of our 2,500 jobs to really get on and deliver that. And we've been planning for that already. And then the second piece in Mansfield, again, taps into our area of expertise. But for me, it's something that's really exciting and broadens into an area that we've never done on this sort of scale before, but again, allows us to really set the path and the agenda for AMP7 and beyond. So whilst it's a big task, I'm really confident that we've got the right things in place.

Brilliant. Thank you, Mark. Over to Martin now, if that's okay.

Excellent. I've got a couple of questions if I can. The first one is to continue on the theme of the Green Recovery investment. Can you talk us through where you think this can deliver additional value to 7 trends? And I'm thinking there about the ability to deliver that program below what Ofwat is allowing you. I believe that there is a small outperformance retention on totex, smaller than what is in the wider PR19 settlement. But I guess, more importantly, how you think about this with possible interactions with ODI rewards further down the line. And then the second question is just on the numbers today. I wonder if James can talk me through the GBP 33 million accounting presentation change, which I see has boosted turnover. Looks like it's been reallocated from expenses. But when I look then at the PBIT bridge slide, it appears to be actually a negative impact in that. So if you can just talk me through what exactly is happening there, I would be very grateful.

Very good. So as you say, it's definitely one for James to talk you through the detailed waterfall. He's looking forward to that question in a second. And in terms of Green Recovery, so you shouldn't assume there's going to be any totex outperformance at all. So we've got 6 different schemes, very confident to dive in for those numbers. And the changes between the GBP 738 million that we asked for and the GBP 565 million we've received were broadly scope, not efficiency. So we feel good that we got the right allocation for that budget. And -- but I think, to be honest, there's been lots of conversations and lots of queries between ourselves and Ofwat over the last while, with them quite rightly verifying that we would need this amount of money. And we deemed that the number we've been given is spot on right. So we're not expecting any outperformance on totex. We're confident we can live within it. But I think actually, the right thing in this circumstance to do if we were looking to be slightly ahead, would be to do a little bit more. This is about innovation for the sector to recover the green agenda. It's around job creation for the time when the nation needs it. So I think the exciting thing from investors is around the RCV growth, but they definitely shouldn't assume that we wouldn't predict or probably do any totex outperformance against it. In terms of interrelationship with ODIs, the vast majority of the Green Recovery is actually on areas adjacent to our normal remit, so it doesn't really interfere much with the ODIs. So again, I think you've got to assume this is around us understanding what the art of the possible is for us to work on things like service water, drainage management or customer-owned lead pipes. So I think we'll get some brilliant learning that would help with shaping what PR24 looks like, but again, we've been clear to try and remove any ODI linkage between the 2, because it will be unfair to gain this scale of totex extra funding. And at the same time then, that's benefited in any way on the AMP7 ODIs. So there will be no AMP7 ODI upside as a result of Green Recovery, although we've got a pretty good AMP7 ODI performance already. So I think we're confident we can still continue to do well in that particular space. Thank you, and I'll let James to do the bridge now.

So the -- just to be clear, Martin, the GBP 33 million is purely an accounting change. So there's a little bit of higher turnover. And then there is correspondingly higher IRE and OpEx as a result. And what it is, it's just income that we collect for diversions and other activity that's done for developers. We're now including that income as turnover. And previously, it was just offset against costs in the IRE and other cost line, I think. So completely PBIT neutral.

Very good. Okay. We're going to move on to Chris then, if that's okay. Chris, please.

I apologize. I missed the first couple of minutes, but hopefully you can hear me. The question I had was just, I guess, the follow-on. And the same, again, in terms of your question on the ODIs, but in terms of totex, you've not posted any totex gains so far. But you have actually taken a small hit on totex, which is a surprise to us. Can we assume that, that is restored as you move through the AMP? And do you think that there's scope for some upside to you already from totex?

So we're very, very comfortable that we'll live within the totex allowance for the 5 years. So we're definitely giving clear guidance that you assume 0% outperformance. And -- but that also means on the basis that we're confident this is just a timing debate in terms of the fact we've chosen to do things that don't assume there's going to be any negative news. But equally, don't assume for any positive news. We've said all along, we will invest to do stronger on ODIs. And that's what we did this year. The reason the totex is slightly different this year is because we could see an opportunity to spend more on things like blockages and also on biodiversity. They're both very strong forming ODIs, but they require investments. There is no such thing as targets that don't require investments. And for us, that's the way we chose to do it. So we're choosing to say, absolutely, we'll live within the totex allowance. But we will spend up to it on the basis we think we can make good ODI performance by choosing to invest that way. So that's our strategy, is to land higher ODIs but by choosing to invest in totex.

And can I jump in with a follow-up on ODIs? And stop me if it's been asked already, but it was my first question in my mind. The progress from here -- I guess the question is, so far, which ODIs have been the contributors? Are those ODIs capped? And how much sort of runway do you have until you hit the cap if there is one in your mind through this AMP? Because you're starting at a cracking pace, and it looks like from guidance for fiscal '22, you're going to continue that strong performance, which is terrific. And so how high is the sky?

How high is the sky, so I love your confidence, Chris. That's brilliant. And it's not been asked before, so you do get to ask the question first. That's obviously one I think people want to talk about. So the -- what's been lovely about this year's performance operation is the fact that we've done so well across the board. So 80% of the measures have been lit green, which is fantastic. And that's been in water, in waste, in customer and environment. And so we've seen a good number of measures that have contributed towards the fantastic GBP 79 million and that the team has produced. And that's the answer, going forward, isn't it? It's to keep that spread of measures, that's fair balance across the piece. Because that's -- the way that the pricing works this time around, if you have an annual cap each year on water and waste, then you don't have it until it doesn't build. So effectively, this year's performance didn't hit any caps. So that's where it is. So to answer your question specifically, I know last AMP, you had a cap that kicked in a couple of years in...

Cumulative.

It was cumulative. It's different this time around. It's on an annual basis. And in terms of measures doing particularly well, then the waste measures were very strong for us again to the public sewer flooding blockages and [ excesses ], a whole range of those were very positive for us again. And we do think we are the leader in the market on those waste plus business. But actually, even lovelier is the water measures came good. So water biodiversity was a really strong performance, so was low pressure. But I think we feel leakage was good as well. We've got a good performance across the piece. So you should expect that we've given plus GBP 40 million guidance for the year ahead because the targets get harder, number one. Number two is, we did gain from the fact this year that restaurants weren't open. So we probably had a bit more of a nice situation on some of the waste measures. So as we get more of those factories, greases, more restaurants, more food places open, there is a risk on some of those measures. So we've been quite clear, that's why we've brought the guidance to GBP 40 million. And of course, we'll give you an update at the half year. Does that cover the questions? All right then. So Mark, we have your hands up again. I wonder if that's an old hand or whether it's a new hand, but we have your hands in the air again.

Yes, I have another question. Just on the technical guidance for the GBP 50 million of revenue in 2022 related to HS2 diversions. Is that just a follow-on from the change in accounting in the year we've just had? And secondly, can you remind us on some of those diversions, how they're remunerated? Because although my understanding is that Severn Trent water companies can still make some good margins on them. So can you talk us through the accounting there?

Yes. Thanks, Mark. So I just -- I highlighted them for a couple of reasons. One, because it's a fairly big number, and it is an accounting change. So I didn't want people thinking that, that was sort of additional kind of -- I mean, effectively, it's going to be PBIT neutral for us. It's not a big opportunity for making money on those. So it's -- broadly speaking, there's a recovery mechanism. It just basically says we get the revenue based on what it cost us. The reason I put it in there is because HS2 is cracking along as I understand, but there's always going to be a little bit of uncertainty as to how far the project advances in the next year. So I will give you an update at the half year as to how that revenue is coming through. And what I didn't want to happen is that there was quite a large number in there that could be plus or minus GBP 10 million, depending on how progress develops. And so you can -- you've got visibility of it.

Very helpful. Thank you very much, Mark. Verity, we're coming to you next.

I have a question about grade recovery, and in fact, one of the schemes because that has been [ front of ] interest. I'm quite interested in -- if you could talk through the GBP 78 million of the new bathing method. Is this quite an innovation that nobody else is doing in the sector? Or is it just more of the normal things that you would be doing? Clearly, it's quite high-profile at the moment. So is it normal or is it special and new?

So it's brand new. So it's the first time in the U.K. that we will have a bathing water quality scheme like this. So this is to be the first location in the U.K., the River Teme and the River Leam will be the first. And I know in the press, there has been a conversation about the River Wharf. But what the River Wharf isn't is it's not the bathing water quality standard. It doesn't get the whole river to be that exact standard. It's almost like point measurement. This basically takes 50 kilometers worth of river and actually raises it right up to our standards. Now both James and Bob are chomping at the bit to say -- James, say something, because I can see his -- how is this business, James?

Yes. So I think what's really interesting about rivers, as I'm sure you're aware, the ownership of the actual water quality is actually quite disparate across various industries. And there's no one individual that really owns quality and that river on the EA do everything they can. But there are so many factors can influence that particular quality. I think what's really innovative about the approach that we're doing is we're stepping into the space of, well, we're going to own this, and we're going to really try and own the change within the river and work with various industries, with agriculture as well as improving our own asset base to really drive up that quality standard and not only designated bathing water quality but try and sustain that bathing water quality throughout the year for extended periods of times so people can enjoy that local amenity.

Bob, anything you want to add to that?

Okay. Obviously, this is a bit of a blueprint for the future because we all want [ our water ] to be better. And I believe there's going to be a lot of learning for that.

Brilliant. So wild swimming for the next results. That's the situation, Verity. Yes. Okay, next -- yes...

Sorry, it's Jenny Ping here. I upgraded my Zoom last night and my camera doesn't work and nor does the hand raising function. So I'm going to have to jump in. Sorry. Just going back to the core business, can you talk to us a little bit about sort of some of the inflationary pressures that's coming through whether it's on power, energy inflation? Clearly, it's sipping through what your forward hedging looks like. And then any other material costs that is creeping through? That would be really helpful.

Very good. So I'll position this and then I'll hand actually over to James and then to Helen. So at the start of AMP7, we all knew that there were going to be some costs that would increase by running effectively the sector slightly differently. So we're trying to make sure that river quality is good. The cost would be that often means putting more chemicals into various tumor works to make sure that the phosphorous levels are even lower than they've been in previous AMPs, and that's why you're seeing chemicals increase. And we knew that pass-through costs were going to arrive. So I'll get James to talk about some other things, but they've all factored into AMP7 -- before and then after James explains that, I'll ask Helen. Because, one of the things that we're really passionate about is long term, it's about self-generation of our own energy. That's part of our USP that gives them a difference, and it also makes, we think, a decent difference to the bottom line. So I'll pass to Helen as well to talk about how performance has been in that area. So James?

Yes. So as Liv said, the kind of the increase in the main areas where we're seeing inflation are where we expected, chemicals and power, and that's -- that is going to be largely driven by things like the Water Framework Directive. On power, we're well hedged against the wholesale price, but it's the pass-through costs that the whole sector, in fact, the whole economy have seen. As we green the electricity supply, it comes through as a pass through cost. We've been working really hard to keep consumption down, and that's helped. And of course, remember, unlike a lot of other companies, we've got a really good natural hedge in terms of our own self generation. And we're now up to 53% in terms of the energy we use, we generate in equivalent terms ourselves. And Helen is looking after that. So maybe you can talk about some of the kind of growth opportunities we've got on energy generation?

Yes. I mean, as you know from our half year results, Green Power was hit by COVID in the sense of food waste volumes. But I'm really pleased with the way we run the plants and the efficiency with which we run the plants, means our generation has actually gone up, and we've also bolt on the Derby plant as well. So that has an impact on our -- so even in very difficult circumstances for that sector, we've still increased our generation. So really, really pleased with that. And as we come out of lockdown this year, we're expecting that to bounce back.

Thank you. Jenny, does that help? And I don't envy you, the little bit of extra IT trauma this morning. Anything else from you before we hand over to Peter?

No, that's perfect. Sorry to butt in.

Not at all. Peter, over to you, now.

Can you just discuss how the Green Recovery plan and the placing today is going to feed through into your earnings and also your leverage during the current period? Perhaps just give us a flavor for how that's going to shift at the beginning of the next period when this CapEx gets trued up into the regulated asset value. And also, secondly, can you just talk a little bit about your tax position as well and how that's going to look given the government's accelerated capital allowance was kicking in?

Very good. So obviously, they are very good questions, James. I mean broadly, just to bear it in mind, what's great about the Green Recovery is it is treated exactly the same way as if it had been a bit of the PR19 price reviews. So this is exactly the same as normal RCV growth. So it gets through the same way, we've just got some differences based on when it arrives. James?

Yes, it does. So there's a bit of a timing impact, as you can see from the kind of Ofwat document that where they want -- they're keen for us to get cracking with the project, so they're going to be spending the money. But most of the -- around 85% of the revenue is, as you know, is going to come through in AMP8. Now we do get rewarded for that at the WACC for AMP7. So that is the good news. But I would say there's a bit of a mechanical as opposed to an economical impact on short term earnings, just as we wait for that money to come through into AMP8. In terms of the impact on gearing, I think one of the reasons why we've done this combination of getting shovel ready, making sure that we can make a really fast start and also the placement today just means it helps us maintain the capital structure that I think has served us well through AMP6 and AMP7. So I think overall, the combination of the 2 puts us in a really good place with this really exciting growth opportunity.

And tax?

And tax, yes. Yes...

They were asking 2 questions.

Yes. So yes, on tax. So next year is going to be -- well, the next 2 years are going to be quite interesting because the government really want companies like us who've got big capital programs to get moving. I think this plays well into the opportunities we've got with the Green Recovery. But the super deductions are going to be quite meaningful in cash flow terms. So we're ready to crack on and take full advantage of those, which I think is what governments expect us to do. So yes, it's going to be a slightly different tax profile for the balance of AMP7, so a bit in a positive way.

Perfect. Thank you. Okay. Martin, over to you again.

Follow-up on Peter's question there around this all feeds through. And obviously, you will be spending the money. So when you -- we look at what you declare in totex, will we then be comparing that against lower allowances, i.e., those allowances that were set by the PR19 process? Or do those allowances actually get moved upwards for the AMP7 period?

So I think the question is, do we get the -- so we get the original WACC, so the WACC that we receive is the PR19 WACC, it's not the post-CMA one, if that's the question. And...

Yes. I think the -- they'll separate out the totex. So they'll keep the sort of PR19 totex, will be what we'll report on. And I think there'll be a mechanism for separating out the Green Recovery. Because as you know, there are also separate kind of cost share -- efficiency sharing mechanisms on that. So they will be kept separate. So we're going to keep a track of how we're doing on PR19 and the totex allowance we've got there. And then also separately on the Green Recovery.

Well, actually -- sorry, and we'll actually report on both that as well as part of the requirements and the Ofwat documentation on Monday, which I think is good. Every year, we give a really detailed submission on exactly how we're doing on the commitment and also the spend profile. And then if that gets signed off each year -- so there won't be some big moments at the end of the AMP. Instead, each and every year is reported and it's managed and it's assessed. So yes, at the half year, we'll have to begin that joy. So we haven't worked that through yet, but we'll begin that during the half year.

And there's a real sort of slightly tacky detail in the Ofwat report. It says that notwithstanding that, they do recognize that the shadow RCV, which is used for things like gearing, will include the additional Green Recovery spend. I think what they're intending to do is to make sure that you're your gearing metric isn't disadvantaged by the fact that you're kind of spending money early, which is exactly what they want to do.

So the way to think of it is when you do the annual reporting plan for FY '22, there's probably going to be another set of tables in there that compare what you've been allowed for the Green Recovery against what you spent for the Green Recovery and what was in PR19 will be in the same way it's always happening.

Yes. Exactly. So there will be double the number of tables, I guess, if you would like.

Very clear.

You're looking forward to that, I can see. But not as much James is. Very good. So no questions currently. We'll just give it a second or 2 incase somebody is waiting to press the button. One question coming through. There we go. Brilliant. [indiscernible]

Two questions actually from me. Firstly, I would like to ask you about this consultation document on Green Recovery and firstly, whether this [ 533 ] is a base case, and if there's any upside or downside to this. And as I understand, also a consultation document, so is there anything you don't like in this, you would like to change and still discuss with Ofwat? And secondly of your 79 million ODIs, how much of this is actually sort of nonrecurring related to, I don't know, favorable weather, something out of your control? And how much is actually fully in your hands?

Very good. So a couple from me then. So on the consultation, I think the fact that Ofwat themselves slims down the consultation from being 6 weeks, which is what they originally said, to 3.5 weeks means that I think that's the guidance that says they're expecting people to take what they received, look at it and reply back. So I think we've got a couple of questions on a couple of details. But I think broadly, it looks to be a very fair, very well written, to be honest, very slick process. I mean this has gone from being -- the idea came from Defra, I guess, 7 months ago. And from start to finish, it's been 7 months. So you can't do anything else but say, hopefully, this is the new model for price reviews, is to have very clear guidance upfront, and it makes the process slicker. So we would anticipate that this is -- there is consultation, but I think we broadly think that we're happy with this. So we need to begin working, that's why we've begun to recruit. And so the GBP 560 million is not going to go up. I'd be very amazed if suddenly -- out of nowhere, they suddenly decide to give us more money. We're not anticipating that. So I think you should assume this is the right amount of money. In terms of the ODIs. So I mean every year, the problem with ODIs is they're not recurring. You start fresh every year. It's one of the interesting things, is like I understand is it looks sometimes maybe to people not in ops, like they must just be like generated really easily. And actually, you start the first day of every financial year where everything is 0. And effectively, you've got to begin fresh. You've got to deliver every single one of those 41 metrics from scratch again. And so it will come down to our performance. We've given guidance of at least GBP 40 million, which is pretty bold already. Last year, we gave guidance of GBP 25 million at this stage. We have upped it to GBP 40 million, but you do have to deliver that for 12 months of the year, for 365 days consistently. And that's why you cannot predict it. Ops just has an element of unpredictability to it. And people don't have the same way, customers or teams all the well.

Or the weather.

Or the weather. So I think it is -- view it as being something that by the time we get to the half year, we have 6 months in the bag, we've got a better assumption. But at this stage in the year, there is a whole range of uncertainty on every single metric. Very good. No questions currently. We'll just give it a second or two...

Sorry, Liv, James. Can you hear me at all? I think also, you've got James Brand, got a similar issue to me as well. So...

Oh, good. Dominic, Nice to hear from you.

Yes. Sorry about it. We can't -- I think that we're like Mark for the first time, like we can't raise our hands so we've been waiving wildly in the background. I've got 3 questions. Sorry, James, I'm just jumping in. Three questions. First of all, one for you, James. On the -- you said on the credit ratings for this placing, could you give us some color as to what your credit rating expectation and requirements are? And did you explore other options to replacing such as like a hybrid? Secondly, on the Green Recovery investment, is there any form of cannibalization going ahead that what you spend in AMP7 is less CapEx in AMP8. And thirdly, could you just remind me here on -- your WACC is obviously the same. I presume that is in AMP7 for the Green Recovery. Can you just remind me again what the cost of debt is that you get given against that GBP 565 million versus your marginal cost of debt that you're raising today, please, which I presume is lower than your all-in cost of debt?

Okay. So I'm going to hand over to -- number one to James first on credit ratings.

Yes. So expectations on credit ratings that we're very comfortable with where our credit ratings are. The metrics are good. And one of the reasons why we've done this combination of this additional investment together with the placing is, I'm very comfortable with the capital structure that we've got and then also where the credit metrics are. So we've had early discussions with the ratings agencies, and I think they're very supportive of what we're doing. So you asked as well whether we did explore some other options, and the answer is yes. We explored a range of options, but we landed on this. It's simple. It's straightforward. It gets us moving straight away. And I think, overall, it gets us in the right place for kind of the flexibility and resilience that we have, so that's good. I can't give you the exact number in terms of what we get as an allowance. I can pick it up and send it to you later. But the key thing is that we will be given -- so the allowance that will be given for debt within the cost of capital that we'll be earning on the Green Recovery will include the embedded debt element, but I will be raising debt -- new debt. So my expectation is that we'll be raising debt inside the allowance for debt. So I think there's some potential upside there.

And in terms of cannibalization, so there's 6 projects that got approved. And I think it's fair to say there's 1 project, which is definitely an acceleration of AMP8 spend. That was what we ask was, and that was around WINEP. So we have accelerated about GBP 100 million worth of spend that you could argue, yes, is AMP age river quality WFD work that we've brought into AMP7. That's fair. And at the same time, I think what we also think is that there are 5 really creative other schemes. And out of those other 5 schemes, they aren't things that we currently own at all. They're outside of our current remit. There's a real opportunity there for us to see whether that is something good for the sector to do and whether that's likely to lead to blueprints for additional AMP8 spend. So that's the answer, is 1 of the 6 is bringing forward some AMP8 spend early. The other 5s are additional spend and actually creative new innovative areas to the left and right of our current remit. Does that cover the questions, Dominic?

Yes. Although, James, could I just come back to you? You didn't give us any quantification of what credit ratings numbers you're aiming for? I mean could you give us like a debt to wrap target or range say, end of the review that you want Severn Trent to sit in, for example?

Yes. So the -- I think we've got -- where we're going to end up for the end of the year, I think, is broadly where we were going to end up before the Green Recovery. So the way we funded it will keep us broadly neutral in terms of the impact on our credit metrics. And that was kind of the key assessment that we wanted to wanted to achieve.

We've always said that we're comfortable aren't we? I mean 67 -- 67.5%, we've said that's been consistent. We've said for the last few years, and we stay in the same place. So we're comfortable at about 67.5% will be the very top end, but so that's what we are. Very well. So James, apparently, you should be on the airwaves as well. So James Brand, can we hear you? It's like waiting for the voice of God. Is James there?

I can hear you James, for what it's worth. Yes, if you want.

Maybe Dominic can relay the questions...

I think Dominic is going to relay the questions. He's got some.

Right, James, this is Chinese whispers here. Liv, James, can you hear me okay?

Yes.

Yes, we can.

Brilliant. I think the question from James was on the RoRE underperformance on totex, is that a genuine underperformance? Or is that because you've accelerated your CapEx programs? Is that fair, James?

So...

No, that James first. Yes, that James says that's the right question. So now our James...

It's the right question. Yes. Good. Okay. Thanks, James. Yes. So there's definitely a bit of timing in there. So the fact that we pulled ahead, some CapEx will have impacted that. But also some of the OpEx work we've done to drive really great operational performance, in particular, on the waste side, has meant that we spent a little bit more. Our view is that you spend that in year 1, you get yourself ready to be doing a really good job on ODIs in year 1, but also some of that will flow through into future years. So it is a little bit of an investment that will have impacted that totex number. Keep in mind, there's also the impact of the additional bad debt provision that we put through that wasn't anticipated -- so COVID was not anticipated in PR19. So we've put a little bit of extra money aside for that. And of course, in the retail price control, that has a little bit more of an impact, pound for pound, than in the other price control. So there's a little bit of that in there as well. But the key takeaway, I think, and the point that Liv raised is when we look at AMP7 as a whole, notwithstanding the really difficult year that COVID has thrown at us this year, we're still absolutely committed to living within our totex means over the 5 years.

That's a really good answer, and that's the key point isn't it? We have definitely been hit by bad debt, and we have chosen to overspend, but it's overspend on areas that have driven ODIs. But we back ourselves to deliver more efficiencies over the course of the next 4 years. So we'll neutralize out, but we did make the call to go in heavier this year on some of our IRE and OpEx. Good. Is James happy, Dominic, with that?

He does have a second question.

Brilliant, James, the second question relayed through Dominic.

Very good, James.

Just building tension. Okay.

Right. Okay. Have you -- I don't know if you -- if Liv, you heard, James, you heard that. But basically it's a question about your dividends. You basically gave us guidance that you wanted to grow your dividends at CPIH unless things were better. James' question was, things look like they're getting better. And therefore, is there any chance that you could -- or you should be growing the dividend faster than your original guidance? Is that fair, James?

Are you sure that's the question he asked, Dominic? You sure, that's not you? Asking a question for your friends. So the dividend policy is clear. So it's at least CPIH isn't it? And where it is now is that we're literally 1 year in to a 5-year price review. So there's definitely no dividend guidance change today. So we'll just keep an eye on it. But as it stands today, it remains at its current dividend level. I appreciate the things are going well. Okay. Any more questions come through? I don't think so, unless Dominic's got other friends with other questions that we need to pick up on. No? Right then. So we're going to call it then. So thank you very much, everyone, for dialing in, much appreciated. And we'll speak to you all again soon. Thank you very much.

Thank you.