The Renewables Infrastructure Group Limited (TRIG) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining us here in person and those of you online as well. Just a couple of housekeeping points from me before we start and before I hand over to TRIG's Chairman, Richard Morse. Firstly, the presentation is planned to be about 30 minutes long. And after this, there will be a Q&A session. If you're viewing online, then you should see a dialogue box that allows you to submit questions, and we'll do our best to get around to everyone's questions. Now there is a fire alarm test at 10:30 a.m., but hopefully, we're done well before then. But if it -- if we're not, and you hear one, then please do take it seriously, follow the fire exit alarm -- fire exit signs, and there should be a fire marshal in the main lobby area. With that, I'll hand over to Richard Morse. Thank you.

Thank you, Mo. Good morning, everyone. A very warm welcome to TRIG's interim results presentation for the period ended 30th of June 2024. I'm pleased to be joined by the leaders of the TRIG management teams, Minesh Shah, Phil George and Chris Sweetman, who will be taking us through the results. We're also joined in the room by colleagues from Infrared and RES. TRIG benefits from some 30 dedicated staff at Infrared and RES as well as being able to draw from the wider pool that both of those managers represent. And you will hear today about the positive work the team has been undertaking to progress the company's strategy. This is a robust set of results. In the period, we have reduced portfolio level borrowings, reduced under our -- borrowings under our revolving credit facility, delivered strong gross cash cover of the dividend, signed accretive disposals at scale and reinforced the principles behind our approach to capital allocation, including the GBP 50 million buyback program, which begins today. With the Board's support, the managers are committed to driving forward to deliver attractive shareholder returns through a mixture of floating rate debt reduction, progressive dividend and our announced buyback program, and portfolio investments where these meet the stringent investment criteria demanded by the prevailing conditions. And with that, I'll hand over to Minesh.

Thank you, Richard. The fundamentals that underpin TRIG's investment proposition remain favorable, the twin themes of decarbonization and energy security with renewables being core to progressing these across Europe. And our business model is built on 3 pillars. Firstly, responsible investment. This is both financial responsibility through a durable balance sheet, a resilient dividend and rotating the portfolio where appropriate as well as identifying and responding to sustainability opportunities and risks. Secondly, a balanced portfolio. Our portfolio is resilient because it is balanced. And we spread risk across European geographies, renewable technologies, revenue types, counterparties and so on, and this gives us diversification at scale. And it allows us to pivot our investment activity to where we see greatest value. And finally, operational excellence. Our management team draws from the investment expertise of Infrared and the operational excellence of RES, and we are focused on driving operational performance using innovation and technology to enhance returns. So our approach has allowed us to successfully grow the portfolio of the company to over GBP 3 billion, and our 2.7 gigawatt portfolio comprises of over 80 projects across 6 power markets and 4 renewable technologies. This portfolio is capable of powering some 2 million homes. And we continue to evolve the balance of the portfolio. Our disposals have all been in the wind sector, and we're seeking routes to build out our solar exposure. Importantly, we are not dependent on equity issuance to grow. We continue to grow from our own resources. Our development stage investments provide us with a platform to grow organically, and our proprietary 1-gigawatt 2030 development pipeline can be funded from retained cash, rotating the portfolio and, over time, debt capacity without necessarily needing to return to equity markets. Now turning to the reporting period. The key themes for the energy sector in the first half of this year have been political change that has given central banks cause thus far to be hawkish in their approach to interest rates, a mild and wet winter and spring that has significantly reduced power prices and grid challenges. Now against this backdrop, TRIG's performance has been solid with a 1.1x net dividend cover or 2.2x gross cover before the amortization of project level debt. We reconfirm our dividend target for the year at 7.47p per share, and that represents over a 7% dividend yield of the current share price. Now we're expecting similar operational cash generation in the second half of the year before increasing to a more normalized 1.2x our net cover from 2025, with gross cash cover remaining in excess of 2x going forward. Now complementing our robust underlying performance has been a series of disposals as we've rotated out of GBP 200 million of our portfolio. This has been at a weighted average premium of 11% to carrying value, which really draws a stark contrast to the share price discount to NAV. Now the NAV itself is down 3% in the half year due to lower power prices and below budget generation, principally linked to a couple of cable outages, and Phil and Chris will go into this in more detail shortly. Our retained cash and disposal proceeds were used to reduce floating rate debt by GBP 30 million in the period as well as fund GBP 41 million of accretive investment activity. Project debt amortization in the period was GBP 103 million. Project gearing is 37%, which itself is moderate. And over the coming 2 years, 2024 and 2025, we have further scheduled repayments of GBP 400 million. And it is the strength of the balance sheet that underpins both the GBP 50 million investment spend this year as well as the commencement of a GBP 50 million buyback program. Now this next slide is new for us. It's a graphical representation of the sources and uses of cash across the group. And a key message here is that with discipline, you can achieve all 3. You can reduce gearing, you can fund growth and you can deliver attractive shareholder returns. Cash from operations and disposals on the left-hand side are being allocated to reducing leverage, within which the portfolio debt amortization is scheduled; deliver attractive shareholder returns, including starting a buyback program and make accretive investments to fund future growth. And before I hand over to Phil, we will briefly revisit the 1-gigawatt 2030 development pipeline within TRIG. This is made up of new greenfield battery sites and repowering colocation and site expansions in the wind sector. We set this out at year-end as an engine for growth. Taking projects through development, construction and into operations can typically deliver double-digit returns. And we're really pleased to see the first project from this pipeline, the 78-megawatt Ryton battery project here in the U.K., enter construction. To crystallize development value, we may also seek to sell positions, like we did with the 3 Irish wind farms last year. And true to our disciplined approach to capital allocation, we will appraise investment decisions against alternative uses of capital, including buybacks. With that, I'll now hand over to Phil to take us through the NAV and the balance sheet in more detail.

Thank you, Minesh. I'll take you through the financial highlights and the valuation movements for H1 2024. The valuation of the investments and, therefore, the net asset value have declined in the period. The largest driver of this has been a reduction in near-term power revenue forecasts and below budget generation. NAV at the 30th of June 2024 is 123.4p with a portfolio value of GBP 3.4 billion. Being an investment company, the valuation movement reduces earnings, which in the period are minus 0.6p, which means after dividends paid in the period of 3.7p, that NAV has reduced by 4.3p per share. Dividend cover has been tighter than usual this period as we flagged in February, the most significant cause being cable failures as 2 of our offshore wind farms, we're out of 2 of our offshore wind farms. One of these failures is now fixed, and the other one is soon to be fixed with commercial protections in place. Dividend cover before project level debt in repayments in the period of GBP 103 million was 2.2x. Dividend cover after those repayments was 1.1x. And we expect this level of dividend cover to improve to more normal levels of 1.2 to 1.3x from 2025. And over the last 12 months, we've agreed the disposal of 7 wind farms, all at good premium to our valuation. And the disposals above NAV provide good confidence in the company's portfolio valuation. Stepping through the valuation bridge shows a trail from the opening valuation of GBP 3.509 billion to closing valuation of GBP 3.358 billion. And starting from the left, investments of GBP 41 million have been made in the period, funding the end of construction works, the Ranasjö and Salsjö wind farms in Sweden, which are now operational; the start of construction of our first merchant battery project at Ryton; and our investment into Fig, our U.K. NG projects development. GBP 51 million of cash proceeds were received from the sale of 2 Scottish wind farms and the sales of Pallas, Gode are expected to complete in H2. And cash flows up from the projects in the period were GBP 125 million. The rebased portfolio value was GBP 3.374 billion. And the rest of the bridge represents the operating income shown in the profit and loss account. I'll be going into more detail on most of these items in the following slides. But briefly, power price forecasts have declined in the front end of the power curve, reducing NAV. Discount rates are unchanged. We increased these significantly during 2023 to reflect the higher returns environment. And we've slightly trimmed our 2024 full year forecast U.K. inflation, which slightly reduces NAV. On the bridge, we showed the movement in foreign exchange for our euro-denominated assets. Sterling has strengthened 2% against the euro, resulting in a loss before hedge offset of GBP 32 million. The company hedges FX outside of the portfolio, and the gains on these hedges always entirely offset this loss. On the final item on the bridge, portfolio return for the period is GBP 74 million and represents an annualized 4.5% increase. This is behind the expected return represented by the opening portfolio discount rate of 8.1%, and this reflects below budget generation in the period, detracting from that by 1.5p, the majority of which resulted from the cable outages. And other items include disposal profits, reductions in origin certificate forecasts and a provision against the battery projects purchased by TRIG in 2022, and we'll have some more detail on these items in the following slides. This slide provides more detail on power price forecasts. Power price forecasts have declined a little in the near term, following a mild and wet winter. Near-term forecasts on power prices have improved a little from Q1 to Q2, with gas prices increasing. But nevertheless, overall over the half year, they've reduced. In the medium to longer term, forecasts were a touch higher than before, albeit the overall impact is slightly negative to NAV. We continue to provide data on our average assumed wholesale power prices. And the donut showed a proportion of our forecast revenues that are fixed per megawatt hour and exposed to merchant pricing. The point to note is the high portion which is fixed, 2/3 over the next 10 years, providing some protection against variation in power prices and good inflation linkage. This slide covers discount rates and inflation. On discount rates, the slide shows the risk-free rates or the benchmark government bond yields relative to the portfolio discount rate. The overall portfolio weighted average discount rate has increased during the period to 8.3%, which mostly recognizes the addition of Fig Power at a materially higher discount rate than the average of the portfolio as well as changes in portfolio mix with disposals and a small impact from the movement through time nearer to more merchant flows for projects or subsidies. Applying a blend of U.K. and EU risk-free rates representing the portfolio composition is to a weighted average risk free rate of 3.6%, with an implied risk buffer from the portfolio return to the risk free rate of 4.7%. The company carries out an independent valuation exercise each year and also commissions a review of the valuation discount rates, and the independent valuer has confirmed the valuation is appropriate. This slide also includes inflation assumptions, which have changed only slightly from before. We've assumed the full year '24 outturn U.K. inflation comes in slightly lower than before, and hence, trimmed RPI by 0.5% and CPI by 0.75% for '24 and left all other inflation assumptions unchanged. This next slide covers some other items, including within the balance of portfolio return. Successful disposal activity in the period, with sales signed year-to-date of 4 projects across 3 countries has realized a gain of 0.6p per share. Projections of origin certificates pricing have declined, a larger decline in relation to the EU certificates, GoOs for the U.K. ones; REGOs of unusually wet weather earlier in the year having boosted origin supply from hydroelectric producers in Spain and Norway in particular, depressing expected prices. In the period, we've been capturing REGO prices of around GBP 6 per megawatt hour and GoO prices of around EUR 5. And finally, on this slide, we've made a small provision against the development premium paid in 2022 to purchase 4 development phase battery projects, one of which is now in construction and two are close to construction start. Projected battery revenues have declined since the projects were acquired almost 2 years ago. And having benchmarked these to the current market, we've applied a discount that has a NAV impact of 0.3p. This does not impact the Fig Power business case. This slide bridges the NAV per share during the year and analyzes the movements between macro items, the impact of lower generation and active management in the period, which has been focused on disposal activity. And this slide shows our focus on reducing the floating rate debt on our revolving credit facility. And during the period, we've invested in construction spend on high returning projects and delivered above valuation disposals, with the RCF balance reducing by GBP 30 million. We have further disposal proceeds expected to come in H2 from the sales of Pallas and the partial stake in Gode, which would reduce the RCF balance to around GBP 195 million before the impact of our announced share buyback program, leading to a projected year-end balance of around GBP 220 million. And we are working on further disposals and the refinancing opportunities, which would enable us to reduce RCF during to around GBP 100 million during 2025. And my final slide looks at long-term debt at the portfolio level. The vast majority of our debt is long-term, fixed rate and amortizing during the revenue fix -- sorry, during the fixed revenue period, as shown in the chart below. Long-term debt is repaying at the rate of around GBP 200 million per year. Our gearing level at 37% is moderate, and we have gearing headroom in our structure with a good level of projects without gearing in place. That brings me to the end of the financial items, and I should now hand over to Chris, who will cover our operational performance.

Thanks, Phil. Hello. I'm going to talk you through the operational highlights in the period. During the first half of the year, we generated nearly 3 terawatt hours of renewable electricity. The 2.7 gigawatt portfolio is capable of displacing 2.2 million tonnes of carbon emissions per annum, enough powering 1.7 million homes. TRIG's portfolio of over 80 projects is spread across the weather systems and markets of Western Europe in onshore wind, offshore wind, solar and batteries, with a wide range of manufacturers and models, limiting our exposure to any one technology or counterparty. Whilst electricity pricing has fallen since last year, it remains elevated compared to the long-term average, and REGO prices were strong. The portfolio benefits from a high proportion of index-linked revenue contracts. Generation was 6.9% below budget in the period, which you can see split out by region within the table. Resource was mixed with better-than-average offshore wind and worse than average Scandinavia and solar. March and May were down across all projects. 2/3 of the portfolio's generation shortfall related to third-party cable failures, which are used by 2 of our offshore wind farms in the U.K. without which the portfolio generation shortfall would have only been 3% below budget. One of these cables is now fixed and the other is scheduled to be repaired in the second half of the year with insurance in place. Spanish solar generation was impacted by excess rainfall, which increased run-of-river hydro generation, depressing prices and resulting in curtailments at Cadiz. New route-to-market agreements are now in place to compensate low pricing curtailments. I'm going to take you through the construction progress in a few minutes, but I'll leave this slide by emphasizing that safety remains a top priority with a 7-day lost time accident frequency rate per 100,000 hours, now down to 0.18, which is below industry benchmarks. Within the graph on this next slide, you can see how the weighted average wind and solar resource varies over time by region compared to the long-term mean. Long-term averages were over 20 years, and so variances are to be expected over the shorter period. You can still fundamentally see the weighted average, the dash black line smoothing out the regions, delivering a better result and will be available with concentrated geographical deployment in a single technology. You can see in the period how our offshore assets experienced higher resource than average than Scandinavian and solar. How we manage our projects is key to delivering value, and with various District Operations Manager, we're uniquely positioned to benefit from their deep knowledge and capability. RES has been at the forefront of the renewables industry since inception over 40 years ago, with specialists across the globe that we use to ensure that our assets are performing their best and to deliver value enhancements. You can see here the maturing time line of a sample of the ongoing enhancements. We typically adopt a phased approach and benefiting from RES's research and development on trial projects, which are then rolled out more widely as their performance is validated. Each project's potential upgrade is individually appraised on its own merit to account for varying energy yield uplifts and value creation, with small generation uplift in percentage terms still generating significant value. Touching upon some of the highlights. At the full year, we spoke in detail about the AeroUp blade hardware to improve blade aerodynamics. The trial installation phase completed this summer at 4 sites with a total capacity of 59 megawatts, and the data collection has now commenced. Blade hardware installation is also well progressed at 4 joint venture projects totaling 66 megawatts. TuneUp has been installed at the trial turbines at Hill of Fare, enabling the turbine controller to adjust the way the turbine operates to maximize the gains from the aerodynamic improvements from the blade hardware with very strong indicative results. Once validated, this will be rolled out across the remainder of the project later this year as well as the wholly owned AeroUp turbines. The wake steering trial Altahullion in Northern Ireland has completed with independent analysis confirming a 1.3% energy yield uplift. This pioneering enhancement increases production, while also decreasing turbine loading with wider application now under consideration. Together with TuneUp, the Altahullion uplift will total 3.4%. Solar inverter optimization trials are progressing in the U.K. to dynamically manage inverted temperatures to avoid overheating, thereby reducing downtime and inverter wear and tear. This next slide consists of development and construction activities. Ranasjö and Salsjö were fully operational and contractually taken over in April. These projects diversify TRIG's wind and regional price exposure to our other Swedish projects, Jädraås and Grönhult. The 78-megawatt [ 2-hour ] Ryton battery project commenced construction in April. Progress is on schedule, with enabling groundwork complete, and electrical works commenced in July. Energization is expected in late 2025. Spennymoor is the next to our storage project, following the successful grid connection acceleration from 2031 to 2026. This means it will progress just ahead of Drakelow that require some wider grid reinforcement works. Meanwhile, the first fixed storage projects are being progressed through their development milestones. And repowering works continue in France with Cuxac executing a new inflation-linked tariff and a slight increase in site capacity up to 25 megawatts. The preferred turbine supplier has also been selected. Ultimately, we're looking forward to progressing the company's 1-gigawatt development opportunities into construction by 2030. Minesh, over to you.

Thanks, Chris. So I'll conclude today's presentation with a recap of the key strategic drivers for TRG. Firstly, TRIG sits at the nexus of the energy transition with investors' desire for resilient, inflation-linked returns delivered through both income and long-term capital growth. Second, this is being delivered by an experienced management team, actively managing both capital allocation and the investment portfolio. Third, maintaining and building upon the balance of the portfolio is key to both investment and disposal decisions. And the 4 disposals signed so far this year have totaled nearly GBP 200 million at an average 10% premium to carrying value. This is in parallel with new investments being made at double-digit returns, so both sides of the coin, enhancing return expectations. And finally, operational excellence, it's core to our management team's mindset seeking to achieve more from the portfolio that we have through commercial and technical enhancements. So today, we've continued to highlight the strong underlying performance of TRIG's portfolio and with that with a disciplined approach to investment management, it is possible to reduce gearing, deliver attractive shareholder returns and invest accretively to progress the long-term strategy of the company. In doing so, we will continue to drive total returns going forward. Thank you for your time. And with that, I'll hand over to Mohammed to take us through the Q&A session.

Thanks, Minesh. So we've had a number of questions come through online, but we'll take the questions in the room first. And so I'll hand it to the floor. Any questions from the room?

It's Iain Scouller from Stifel. I was wondering if you could just give us a bit more color on some of the future opportunities you're seeing. I think you're talking about sort of 1 gigawatt potentially ready for construction by 2030. I think about 2/3 of that is battery. What other technologies are you seeing opportunities in? And just given the sort of returns that we're seeing to date in batteries and the lower projections, do you think you've sort of scaled back some of your ambition in that area or you [indiscernible]?

Thanks, Iain. So if we start with portfolio construction, our portfolio is roughly 60% U.K., 40% rest of Europe. We expect that percentage between there and 50-50 to remain going forward. The portfolio from a technology perspective is 80% wind, 15% solar, 5% flexible capacity. That really reflects wind has been the dominant technology in Europe, thus far. And we flagged a few times that we're looking to increase, both our flexible capacity and our solar percentages, flexible capacity from 5% up above 10% towards 15%. The pipeline that we have, about 600 megawatts in that 1 gigawatt pipeline will look to get us there. Solar, over time, we'd like to get from 15%, up above 20% towards 25%, and we're looking for routes to increasing that. You mentioned returns coming down. I think the fact that we are investing at the development stage and then acquiring a proprietary portfolio and taking that through development construction into operations can deliver the double-digit returns that will continue to enhance TRIG's return expectations going forward.

Any other questions in the room?

Thomas Martin. On the investment program, I think it sort of smoothed out over time and extending over a longer period in terms of your committed spend. And you also spoke about the issues around grid access on one of the battery projects to now being accelerated. So is that smoothing of the investment program entirely related to the phasing of those battery projects? I think the total magnitude of spend might have been up a bit. Is there anything else new that's gone into those projects? Are costs higher than you thought they were going to be on those projects? Can you talk a bit about what's going on there, please?

Costs are slightly higher, but not an awful lot higher. The -- you're right, there's been a bit of a delay in the connection date for the second project, Drakelow. So that's pushed that one a bit further back. That's also a factor, I think, in the answer to Iain's question as well is that I think that it will take some time to build out that pipeline of battery projects. And therefore, you can switch on the way if you decide you've already got enough exposure or if you think that market is not going the way you'd like it to go. You're not committed to doing it all in one go. And we have other battery projects spending more that look like they're coming forward and so may well fill in that gap. And so we may well see that coming to FID decision during early next year. And if it did, there'll be around another GBP 50 million of commitments kind of going in that gap there. So we do want to build out those opportunities. They've got good returns on enhancing the portfolio. And we can fund that through rotation and through introducing a bit more debt in the portfolio. We're going to see ungeared projects. So we see sources for finance in that on top of the cash flows we expect from the portfolio to exceed the dividends and, therefore, have some contribution to construction spend from that direction as well.

Any other questions in the room before we turn to the online questions? No? Brilliant. Thank you. So we've had a number of questions around the topic of the market liquidity for secondary assets and the health in general of the secondary market and what the disposal has done to date says about that. So Minesh, if you can comment on that.

Yes. So I think since interest rates went up, we have been noticing that the secondary market is thinner. I think there's no getting away from that, but that means that maybe processes can take a bit longer. But I think it's credit to the team that they have identified buyers to secure the significant premium, 10% premium, to carrying value for the disposals that we've signed thus far to date. So there is capital out there looking to deploy into the sector, and we're able to crystallize this to continue to improve returns and generate cash for these new investments that we're making at double-digit IRRs.

So on that, there was also a question about whether our double-digit IRR is the minimum hurdle rate now.

I think the crucial part of that question is now. In prevailing market conditions, clearly, you benchmark your uses of cash against the various alternatives. That includes buybacks, and buyback is setting a particularly high hurdle rate at the moment. So we'll continue to do that. And yes, that, at this point in time, implies a double-digit hurdle rate. The projects that we've taken FID decisions on meet that.

Great. Thank you, Minesh. And Phil, for you, a couple on gearing side. So firstly, given the growing scope in the power markets for recontracting assets over the longer term and, hence, derisking tail-end revenues, is there any scope for reducing project-level debt repayments in order to increase near-term cash generation?

I think there are increasing scope to swap merchant revenues for fixed revenues. We look at that in some detail because we don't want to take a large haircut to swap from one to the other. And sometimes, that is what's offered. But overtime, we can find really nicely accretive fixes. So we're quite discerning of what we're up to there. I would probably -- I think what's more likely is that we introduce fixes on the power side that give us more headroom for borrowing against projects, which are currently ungeared than we slow down the repayments on the current gearing, and that will probably -- that should give us headroom to building out more development projects. I think on the battery side, we've seen a lot of talk of tolling agreements. That's good. These are coming in. I think that TRIG, in particular, our idea is that we can cope with the merchant revenues from batteries because it's a small proportion of revenues, and we see a nice hedge between those merchant revenues and the potential risks to Renewables revenues in the U.K. with cannibalization increasing over time. So as we want to keep that hedge, so I think we'll be reluctant to take the haircut on battery revenues by swapping those out to tolling agreements. But we'll obviously keep a close eye on that market, and we would do that if we thought it was a value-accretive move.

Thanks. So another one on a related topic. You talked about gearing capacity in the future within the portfolio. Would you be looking to exclusively use project finance? Or would you consider other types of financing for the portfolio?

We will consider other types of financing. It's been our usual and preference for project level debt, that is amortizing and fixed rate. But I think you would look at the options, but the project level financing is our norm. And so that's the more obvious route to go.

Thanks, Phil. And then moving on to another key area of interest, and this is probably for both Chris and Phil, which is around the offshore wind cable outages and the nature of -- the nature and extent of the commercial protections in place.

Yes. So typically, well, a, you need to prove that it's an insurable event. So we're quite clear about that on one of them and the one which is still outstanding repair. And you typically have an excess period in days that has been exceeded. And so from that point onwards, you're still working as fast as possible to encourage the [ off-tow ] owner, because we don't own these cables, they're owned in the U.K. by the separate party that owns the [ off-tow ] to encourage them to move as quickly as possible and to make the repair. But it does put us in a -- yes, that insurance does put us in a good commercial position protecting the lost revenue. Clearly, because we don't own the assets, we're not exposed to the underlying cost of repair either. That's for the third party. To be really complete, the revenue protection is up to the lost revenue, there's not some kind of haircut we take on the revenue either.

Great. Thank you. And following on from that, maybe Minesh, this is more for you. But regarding the cable outages and variance in asset performance, are you comfortable with the concentration in the portfolio, both Hornsea One and East Anglia 1 or top 10 assets?

Yes. Portfolio concentration has always been a key focus for us. Our top 10 assets are about half of the portfolio, and our largest asset is about 11%. And as a historical rule of thumb, our largest asset has always been about 10%, 11% as well. And that's really important to exactly this point. In a large portfolio, there are going to be some assets with challenges, and making sure you're not overexposed to any one is important. We've had the 2 cable outages and yet still delivered net dividend cover for the first half of the year, 1.1x, gross dividend cover 2.2x. That's a really resilient performance when you've had a couple of cable outages.

Thanks, Minesh. And then moving on to Phil, this one will be for you. But for REGO and GoO assumptions, so why have pricing assumptions of guarantee of origin certificates moved so materially within 6 months? Were forecasters overly bullish?

We think it's mostly driven by the unusually heavy rainfall in Spain and the high hydrology resource in Norway, and that has been an unusual feature. And those that track utilities will have seen that the revenues from hydroelectric producers has been much higher than normal. And I think that's been driving that down because the hydroelectric producers are able to sell their guarantees of origin certificates, and that's then produced a lot of surplus in the market. And I think that will hang over for a year or 2 because the reservoirs will be fairly full as well.

Thanks, Phil. And then staying on the topic, better question. Can you please outline the key drivers behind the increase in GoO revenue forecast in the late 2020? So I think this is the 2025 to 2030.

This is -- in the long term, it's a reduction, yes. And I think that forecasters are considering the supply and demand, and the number was fairly low anyway, and now it's slightly lower, and that's been a driver of reduction of our REGO forecast as well. I think in the medium term, it's merely just returning to a more normalized level in the short run of that sort of free euro. So I didn't see a significant near-term GoO price being assumed.

Okay. And then sticking with the valuation, there's question here. Cannibalization assumptions, can you expand on which technologies and geographies suffer from higher and lower respective cannibalization rates?

So I don't -- that way. I don't know if you can -- so in there? Okay. The slide in the appendix on that, I don't have it to hand, but it does list out the significant -- well done, what number is that? 30, thank you, Luke. So we've got -- well, most of them are similar as in GB onshore, wind, offshore wind, German offshore wind, Swedish onshore wind in the high teens or low 20s. The standout is Spanish solar at around 40%. And I think that's a commonly known aspect of Spanish solar when we invested in it. We knew it was that sort of level of cannibalization, and our base case forecast assume that. All of the forecasts assume a significant amount of build-out of new renewables and, in many cases, especially Spanish solar and GB offshore wind, a lot more build-out than that, which leads to more cannibalization of those technologies. That might well in time give us more opportunity for storage technology in those geographies as well.

Brilliant. Phil, another one for you. So what was the rationale in softening your target and then -- in reducing the RCF by the year-end? I believe you previously communicated reducing the RCF to GBP 150 million versus the GBP 220 million announced today. What rationale in softening the targets that previously you announced the GBP 150 million by year-end. Now it's looking at -- looking like GBP 220 million by year-end. Why?

It's -- we may well outperform the GBP 220 million by the year-end. That's based upon the disposals that are announced now. So it's possible that we do achieve further disposals by then. We decided that disposals were going well enough that we shouldn't wait longer for a share buyback program and that the opportunity now on that is good and that the amount is manageable. And so we're confident to carry on reduce that RCF. Sales, as Minesh observed, are taking longer than often than the -- would have been the case in a hotter market, but still getting through. We don't want to rush disposals and have a weak negotiating position on those. But we are progressing well. I think we progressed very well compared to pretty well any other fund in the sector, which we will carry on doing that. So I think we're comfortable we're going to carry on, again, that RCF reduced, which gives us headroom for other potential investment opportunities and still deliver a buyback program alongside it.

Thanks, Phil. And then on the theme of investment opportunities. With the disposal of Gode and the issues around uncompensated grid outages, are you pulling back from Germany?

Germany is a significant market for renewables deployment. All the forecasts show that. And the commitment in Germany politically to building out renewables, to decarbonization, to energy security remains across the political spectrum. So we see going forward, Germany continue to be part of our portfolio. And we'll continue to assess investment opportunities in Germany.

Brilliant. Thank you. Chris, one for you on yield enhancements. So we showed on Slide 21 the yield enhancement program. Are the enhancements available to the entire portfolio? If not, what is the likely impact of potential improvements on a whole portfolio basis?

A bit of a mix. Some of the enhancements are very technology specific. We have the solar inverter optimization. Clearly, that just applies to the solar projects. And some of the enhancements are turbine model or turbine manufacturer specific. Sometimes, you get a -- you can have a similar enhancement on different platforms. So we're always looking for those as well, and I've secured a number of them. And yes, sometimes, you're doing an enhancement, yes. If it's a physical enhancement, if you're able to do that on a large turbine, that's clearly much more cost-effective than doing a large number of small turbines. So there's a bit of a cost benefit balance there. So I think that's one of our fundamental strengths. We can pick the best enhancement for the best -- for the right project, and so always apply it rather than just trying to take a more general approach and apply all of the enhancements to all sites.

Some of the newer larger turbines might have some of these enhancements in the first place, albeit in years to come. I'm sure we'll find further enhancements to apply to those.

Indeed. So we typically, on the blade enhancements, those are more focused on sort of 5- to 10-year-old blades. And a lot of those improvements are already in built or substantially within the brand-new turbines. So yes, a bit of a mix. So it's just being targeted on our approach.

Great. Thank you, Chris. So I think this is the final question we've got time for, and we will come back to those. We haven't answered online. I've just seen a number come in now. But if we -- if I could direct this to you, Phil. So in terms of future commitments and the development assets, when do these move from being valued at cost to being valued on a DCF basis? Is there an additional risk premia within the relevant discount rate applied to assets that are still under construction, such as preconstruction? Are you able to quantify this in basis points?

Okay. So we're carrying the battery projects at cost. I think as you get close to the end of construction, you'll probably move to DCF. We are testing them all by DCF anyway, which is what led us to make a small provision against the battery projects. And we're looking at pretty high IRRs for those projects. And the IRRs are different, depending on which battery curve -- battery revenue curve you assume, and there's quite a difference between those. And we're on a lower curve, but we're still nevertheless in the above 10%, towards the low teens. So -- but we would agree that as you move them through construction to operations, you'll see yield compression. And I suspect that the battery once operational would have a discount rate of maybe 9 or 10. So you would see a bit of compression as you go through that. if I answered the whole question on.

Yes. I think it does well. Thank you. So with that, that draws the presentation to an end. Thank you for the questions in the room. Thank you for the questions online. We will endeavor to come back to you as soon as we can on those we haven't managed to get to. But with that, thank you very much, everyone.