United Utilities Group PLC ($UU)

Good morning, everyone, and welcome, and thank you for joining us at such short notice this morning. This morning, we've released preliminary fiscal '26 financial results slightly ahead of schedule and launched an GBP 800 million equity placing to accompany upgraded capital expenditure guidance. We have around 45 minutes for today's call, giving us plenty of time for you to ask questions. And with that, I'll hand straight over to Lou and Phil. Lou?

Great. Good morning. Thanks, Chris. Look, good morning, everybody, and thank you for joining Phil and I to talk through our FY '26 results and details of the additional AMP8 growth submission and equity raise that we have launched this morning. I'm really keen to talk through our results and to share more about the exciting plans that we've submitted to Ofwat today. As we move through the deck, you will hear 3 key messages. Number one, we've made a really great start to AMP8, and we are delivering on the things that matter most to our customers, our communities and the environment. We've delivered a strong set of financial results with a 7.5% asset growth, coupled with a 42% increase in underlying EPS. We're delivering improved environmental and operational performance, and our supply chain is mobilized and our delivery pathways are well established. Number two, our supportive regulatory backdrop and a new approach to incremental investment provides the opportunity for rolling submissions. This has enabled us to announce investment plans of GBP 1.4 billion as part of Ofwat's 2026 Re-opener process, representing the first phase of our incremental investment program. With this investment, we're focused on providing the water infrastructure for thousands of new homes, powering data centers, enabling clean energy and strengthening the resilience of our infrastructure. Due to this, we have added an additional circa GBP 2.5 billion to our CapEx guidance, the balance of which is expected via future Re-openers as we continue to invest further in the Northwest through the AMP. Incremental CapEx is to be fully funded with an GBP 800 million equity placement that we have launched this morning, of which GBP 400 million is a cornerstone investment from ATLAS with the Future Fund. And lastly, I'm pleased to announce our upgraded financial framework. Our asset base is growing to GBP 25 billion by 2030, equating to a compound growth rate of around 10%. This growth is fully funded, and we're now guiding to regulatory return of 10% to 11% across AMP8, which is an increase of 100 basis points. So let's start with year 1 performance. Look, I'm not going to cover everything that's on this slide, but I'm really keen to pull out a few key highlights. While the U.K. experienced a relatively dry year, the Northwest still saw average rainfall. Despite this, our spill performance improved despite that above-average rainfall and with activations falling 23% and duration falling 27% versus the prior year. The focus on pollution incidents remain. But importantly, we've recorded no Category 1 pollutions, the most serious form of pollution. We've seen an 80% year-on-year improvement in our performance measures. And this year, we fixed more leaks than we've ever done before. We replaced over 150 kilometers of mains more than in the previous 5 years combined, supporting long-term leakage reduction and fewer supply interruptions. Our in-year leakage performance is the best the Northwest has ever seen. But despite this progress, we do expect to miss our regulatory 3-year rolling average target for FY '26 because that reflects the impact of prior years and the time it then takes for the rolling methodology to capture this year's really good improvements. Our in-year ODI penalty of GBP 35 million is in line with management expectations for the year 1, and we're confident in delivering net rewards across the AMP8 period. Delivering a high-quality service every time for customers is really important, and it's central to building trust. We've got a Trustpilot score of 4.5, which is excellent, and we remain above median and in reward position across all regulatory customer service measures. With bills rising this year, we are focused on robust credit control and our bad debt charge is in line with expectations at 1.8%. With the size and scale of our capital program, health and safety remains our top priority. Our lost time injury rate has reduced by 30% during the year, reflecting strong continuous improvement. Engaged committed colleagues are central to our success, and we're really proud to report an outstanding 90% engagement score, well above global and U.K. high-performance benchmarks. And our strong culture is also reflected in our Glassdoor rating of 4.6 out of 5. The strength of our brand as an employer is really critical to ensure that we retain and that we attract the very best talent we need to deliver our ambitious plans. And lastly, on financial performance, we've delivered a 42% uplift on underlying EPS compared to the prior year, coming in at 107.1p. We're making real strides on our CapEx delivery with spend in line with expectations of GBP 1.5 billion. We've delivered asset base growth of 7.5% and a regulatory return of 13%. And our balance sheet remains strong with gearing at 60% and a final dividend of 35.78p per share. So look, let's move on to the capital program. As we've transitioned into AMP8, we've made a great start managing the ramp-up in the capital investment. We've successfully recruited over 1,300 new colleagues to join United Utilities, whilst at the same time, onboarding over 100 suppliers that's helped us deliver our ambitious AMP8 program. And the scale-up of our activity, which you can see demonstrated here on the graph on the left-hand side, hasn't impacted the quality of our output. Our effective and efficient delivery of the capital program has enabled us to achieve our year 1 regulatory outcomes and our spend is in line with profile. As the pie chart shows on the right-hand side, AMP8 is scaling up with projects progressing through the delivery cycle. And our award-winning approach to standardization project blueprint is playing a really vital role in the key stages of project delivery. The methodology and focus is keeping us within cost and quality allowances while accelerating delivery for customers and our communities. By standardizing those designs and bulk purchasing materials and embedding more efficient maintenance regimes, we're cutting cost and time across multiple projects. This approach allows us to identify repeatable solutions, streamline design and secure critical components early. Government policy and regulation is now underpinning a multi-decade of growth. And the opportunities as we see with tightening environmental standards, a need for greater asset replacement, coupled with new housing and industrial growth targets focused here in the Northwest, a region that has some of the strongest growth of anywhere in the U.K. The recommendations from the Cunliffe review provide the conditions for a new direction for water, resetting regulation with a single integrated regulator and the need for balanced risk and reward. Today, we submitted to Ofwat our proposals for additional investment to support growth in housing, the new green economy here in the Northwest, coupled with proactive asset replacement. And the new regulatory landscape I just outlined is evidenced by Ofwat's new approach to in-period adjustments. This new and much welcome change allows us to now address new and emerging requirements that have been established since our PR24 Determination in a way that is more agile, enabling us to respond to national and regional growth requirements whilst also supporting a more sustained capital delivery profile as demonstrated in the chart. The additional CapEx that is proposed for AMP8 enables us to maintain and strengthen the supply chain and support economic growth as we transition into AMP9 and the delivery of a sizable future investment program that will be supported by this retained and deployed supply chain capacity. The GBP 1.4 billion program submitted today sets out how we will deliver the vital infrastructure required for thousands of new homes across the Northwest region, unlock capacity for data center expansion and facilitate decarbonization. We've also outlined investment in our gated delivery schemes to drive improvements at Lake Windermere as well as investments in our assets to strengthen the resilience and reliability of our networks, treatment works and services. Beyond this, there are additional regulatory windows in 2027 and 2028 and to propose further investment to support asset health and regional growth alongside other targeted areas specified in the AMP8 determination. Taken together with the prospect of additional investment in the final years of the AMP, we expect this to lead to circa GBP 1.2 billion incremental investment in AMP8. And subject to approvals, in total, this would deliver an additional GBP 2.5 billion of capital investment on top of the current AMP8 program previously announced. That supports a circa 10% compound growth in the asset base between 2025 and 2030. The growth will be facilitated by an equity placement of GBP 800 million that has been launched today. So we expect to remain within our gearing target of 55% to 65% throughout AMP8. The visual shows the communicated time line for decisions and also dates for future in-period submissions. We expect a draft decision in August for the submission we have made today and the final decision during December. Our focus has been ensuring we have a high-quality submission that reflects the categories and investment areas that Ofwat has identified and expects to see. We're really encouraged to see the changes to in-period adjustments that Ofwat has embraced and the signal that this sends about the changing landscape ahead. This will help us to deliver with pace and flexibility, the infrastructure that's needed to support the rate of growth that we're seeing here in the Northwest. I'm now going to hand over to Phil.

Thanks, Lou, and good morning, everyone. So now turning to the FY '26 financial highlights. At the headline level, underlying EPS was up 42% on the prior year, coming in at 107.1p. This was driven by rising tariffs, resulting in 20% revenue growth, partly offset by rising costs, which I'll come to in a moment. We're making real strides on our capital program, and our CapEx stepped up around GBP 0.5 billion this year with the same increment coming through to take us up to the GBP 2 billion mark for FY '27. Lastly and importantly, our dividend continues to grow in line with inflation. Next, turning to the underlying profit bridge. Underlying operating profit was up GBP 274 million, in line with expectations. Underlying revenue increased by GBP 431 million, reflecting the PR24 Final Determination. Consistent with the typical regulatory approach to setting prices, there's a big step-up in allowed revenues in the first year of the AMP, which increases in revenue allowances over subsequent years expected to be lower. This is partly offset by a GBP 40 million adjustment relating to diversions activity to accommodate the now aborted Northern leg of HS2. And as I mentioned earlier, operating costs were up year-on-year, primarily due to 3 factors: expenditure associated with the expansionary impact of the AMP totex program, inflationary pressures impacting the cost base and specifically employee costs, rates and regulatory fees, and with other costs, including both a step-up in contributions to Ofwat's innovation fund and the impact of dry weather last summer. We continue to maintain financial discipline with balance sheet gearing at 60%, benefiting from near-term inflation. Our capital investment program is progressing well, resulting in the RCV growing to GBP 16.5 billion, a 7.5% increase year-on-year with net debt at GBP 9.9 billion at March 2026. In the year, we raised around GBP 1.5 billion in term funding, outperforming the Ofwat debt indexation mechanism by around 80 basis points and locking in sustained benefit across all 5 years of the AMP8 period. This funding, together with the renewal of committed bank facilities, extends our liquidity profile to the second half of FY '28. In the first year of this new regulatory period, our regulatory returns strengthened to 13%, supported by near-term inflation. Financing performance continues to be a robust underpin to our return on regulated equity or RORE, while we also benefit from both a gearing impact given the notional company's gearing of 55% and the higher level of near-term inflation when calculating the nominal regulatory return on the actual capital structure. Now turning to look ahead. I'm pleased to set out here our near-term technical guidance. Underlying revenue next year is expected to be between GBP 2.7 billion and GBP 2.8 billion, with underlying operating costs increasing by around GBP 100 million, in line with the regulatory allowance. We continue to benefit from our disciplined and prudent energy hedging. Our hedging levels remain above policy minimums, reflecting proactive execution during the benign market conditions, which means we're fully hedged for summer '26 and over 90% hedged for winter '26, '27. Depreciation will be up by GBP 50 million to GBP 60 million, reflecting the continued asset base growth, while underlying finance expense will be lower and underlying tax is expected to be negligible due to full expensing. As I've already mentioned, CapEx will step up again significantly to around GBP 2 billion next year, resulting in asset base growth of around 10%. ODIs are expected to improve markedly, resulting in a net lower net penalty. We remain on track for a cumulative reward over the AMP. And lastly, our total dividend for next year is expected to be 55.54p per share. Complementing our near-term technical guidance, we have our medium-term financial framework. I'm pleased to be able to upgrade our financial framework today, reflecting both the revised outlook for capital investment and the associated GBP 800 million capital raise also announced today. Key aspects of the upgrade to the AMP8 financial framework are regulatory returns expected to be in the range of 10% to 11%, an increase of 100 basis points in the level of outperformance. AMP8 capital investment is now expected to be around GBP 11.5 billion, an increase of GBP 2.5 billion, and that results in an RCV annualized growth over AMP8 accelerating to around 10%, an increase of 3% in the compound annual growth rate. Thanks. And I'll now pass back to Lou to take questions.

That's great. Thanks, Phil. Look, the plans that we've outlined today see capital investment over AMP8 move to circa GBP 11.5 billion, which in turn delivers a strong compound asset base growth of circa 10%. Our robust balance sheet will be supported by the GBP 800 million equity placement that we've launched this morning. And this enables us to maintain our 55% to 65% target gearing range across the AMP. Underpinning strong regulatory returns of 10% to 11%, this is coupled with the progressive inflation-linked dividend. So I want to just summarize before we go to questions. We've made a really great start to the AMP. We've delivered a strong set of operational and financial results. The GBP 2.5 billion investment plan will enable the growth that is needed in our region. And finally, the plans that we discussed this morning reflect the upgraded returns guidance that we've taken you through. More importantly, it also sees our asset base growing to circa GBP 25 billion by 2030. I'd really like to thank you for your time this morning and recognize that you've jumped on a call quite quickly. So more than anything, really keen to get to questions, and Phil and I are keen to hear anything that you'd like to ask. Thank you.

Thank you, Louise. Okay.If you would -- if you'd all like to use the raise hand function to ask a question, and given we don't have a lot of time, if you could keep your questions to one or two to begin with, then we can come back with follow-ups if we have time at the end. So, jumping straight in, Pavan, would you like to go ahead? And if we could see you, that'd be brilliant. Thank you.

Congrats on getting the strategic update out. So my -- my question is you're raising today even though the Re-openers have yet to be approved by Ofwat, we have to get the draft and final determinations later in the year. So what gives you the confidence that this additional spend you're requesting will be approved? Is there an automatic element that was embedded in the FDs? Or have you had conversations with the regulator? And the one small add-on I'll add to that is, can you talk about your engagement with the supply chain in terms of actually delivering on this CapEx? I'll keep those questions.

Okay. Thanks, Pavan. Look, I think there were sort of 3 elements to that question. So I suppose let's start first with why now. I think what's really clear is we can see what's ahead. We've been able to see the ambitious growth rates have been put here for the Northwest the additional housing, the new towns. As we look forward, we can see that runway. And more importantly, given the size of the 2026 Re-opener that we've put forward today as well as the fact that Ofwat have now set out that annualized process, which is moving much more consistently with what you're used to seeing from an energy and an Ofgem perspective, we can see that future runway ahead. And the call that they've put forward for asset replacement and supporting additional growth across the region. So those things combined mean that we've now got full visibility of what that future runway looks like. In terms of the regulatory process, look, as I said, there are sort of 3 opportunities, if you like, '26, '27 and '28. What we thought was really important was providing visibility to the market about what that future runway and that pathway looks like and being in a position where we were fully funded to ensure that as we put those submissions in, they could actually be delivered. We're really clear that the drivers of the investment that we are putting forward are absolutely aligned with the government strategy. What we are seeing is a rapid rate of growth here in the Northwest. Manchester is growing at a rate that is much greater than what we're seeing in the rest of the U.K., but significantly across Europe. I've got a huge amount of defense spending that's going to be happening here in the Northwest with BAE, for example, and the submarine program that's been announced in Barrow. So there's a number of strategic programs that are going on here in the Northwest that have been announced that this growth is also underpinning. I also think what's really important is the point about the supply chain. And I think you saw it in one of the slides. What we're actually doing here is strengthening the supply chain. We've been really pleased, Pavan, with the start that we've made to year 1. We've moved from a supply chain model that saw us have 2 key suppliers and a sort of sub model that's underneath that to 100 suppliers now working and embedded across the supply chain. The submission that we've put in today goes in as well with support from the supply chain and also support from local politicians, Andy Burnham and the team at GMCA, for example, in terms of underpinning the growth. And I think what's really important, it's remembering that this work that we're putting forward is predominantly civils driven as opposed to component driven in terms of some of the infrastructure growth that you're seeing elsewhere. So we're seeing that capacity in the supply chain. It's enabled, it's here. It's working with us already in the Northwest. And more importantly, we're committed to make sure that it is actually maintained as we go through that AMP because we know AMP9 is going to be a big plan, and we want to make sure that, that supply chain is strengthened and continues to grow as we move from one AMP period to the next.

Terrific. Thank you. Pavan. Dom, would you like to go ahead?

Yes, it's Dominic Nash here from Barclays. Two questions from me. Firstly, clearly, you're putting this GBP 2.5 billion of extra sort of totex. Could you give us some color as to the impact on bills and what you think -- how you think you're going to be profiling bills and the revenues for this extra spend? And secondly, I think you've given a new RORE update for AMP8. Could you give us a little bit more color as to sort of the breakdown of the components within the RORE component as to where we think the outperformance is going to come from?

Brilliant. I'll pick up impact on bill, and then I'll hand over to Phil to pick up on RORE. In terms of the impact on the bill, the sort of package and the sort of cumulative impact, if you like, of the GBP 2.5 billion that we talked about is circa GBP 10 on customer bills. I think what is very clear is that, obviously, this is investment that's happening now. And what we've announced this morning is 4,000 additional jobs. That's in addition to the 30,000 that the AMP8 plan is already supporting. So this is an increase in bills, but it's for growth today for a bill impact that will materialize somewhat later on. I think it's also important to note that, obviously, we've got strong financial support out there. Our bad debt charge is absolutely in line with management expectations and what we were expecting to see. And more than anything else, we've got a robust package of support that's there for customers as they may need it and United Utilities is recognized as doing so. So we've had lots of conversations about what that bill impact is, but that's materializing a little bit later on, but for the growth that's happening now and underpins both the government and the regional growth strategy. Phil, on RORE?

So on RORE, when we set out our AMP8 guidance initially when we accepted the FD, we said the 100 basis points of outperformance was coming across a number of different areas, financing, ODIs, PCDs and totex. And we were very clear that the substantial underpin to that was financing outperformance. As we move forward through this first year of the AMP, we've had more visibility of things. Things have settled down. And in the context of the financing outperformance, we've talked a bit more about that today in the context of continuing to outperform in terms of the new debt that we've issued. So there, we've outperformed by 80 basis points in year 1 against the Ofwat debt indexation model. So that's locking in more outperformance, both in year 1 and through the rest of the 5 years of the AMP that's supporting the overall position. And then obviously, you'll have seen me talking through the bridge in terms of the current year performance. Obviously, that position is leveraged because, as you know, the sort of the way the regulatory model works is the focus is on real returns and so the higher inflation environment is also leveraging the financing outperformance as well. So that's flowed through into the numbers. And as we look forward for the 5 years of the AMP, we're now sort of confident of revising our guidance to at least 200 basis points of outperformance.

Okay. Thank you very much, Phil. Mark, over to you.

Firstly, on -- how -- I mean, my understanding is the filing has to be with Ofwat tomorrow. How much have you actually asked for relative to the, I think, GBP 1.4 billion CapEx? Have you risked the amount that you've asked for and said, look, Ofwat will not give us -- it is unlikely to give us all of that? And secondly, in-period adjustments, when we spoke, Phil, if I recall correctly, you did mention that you will do some work with consumers to see if you can recover some of the returns and the amortization of that within this review. So within that GBP 1.4 billion CapEx or in addition to that, how much fast money is there to help support the balance sheet? Those are my 2 questions.

Okay. I'll take the first question first. So the GBP 1.4 billion is the totality of the submission that's gone in today. And there are sort of a number of key elements of that. GBP 400 million is the sort of the asset classes that Ofwat have specifically asked to see. So that's where they have invited submissions based on certain types of asset types. And then the rest is around supporting housing growth and industrial growth here in the Northwest, which is sort of underpinned by really strong, sort of, growth and planning activities that are already here and underway in the Northwest. And as we also said, there's some elements in there as well that are also around our gated submission that we've been in very detailed conversations with Ofwat about. And I'll hand over to Phil to pick up on the in-period adjustments.

Yes, so in terms of the in-period adjustments, sort of, as you know, the revenue is subject to sort of effectively further discussions with Ofwat. And as you sort of highlighted, that's also subject to customer engagement, which is a normal process that you go through. So we are expecting and planning to have revenue coming back into the back end of the AMP. We're not particularly looking to accelerate fast money, as you sort of outlined. So effectively, most of this is -- the investment is slow money CapEx going into the RCV. Clearly, there will be returns and other sort of contributions coming back through revenues, but we're not accelerating beyond the normal rate of, let's say, depreciation, fast cash effectively.

So basically, what you're saying is that you asked for GBP 1.4 billion you expect 100% of what you've filed for because you've, the gated -- you've spoken to Ofwat or you see it such a short thing. And there's not really much in terms of impaired adjustments at the back end.

I think what we're saying, Mark, is that we've guided to GBP 2.5 billion worth of CapEx. We see that across '26, '27 and '28 submissions. Those submissions will go in. As you know, there are always discussions backwards and forwards with Ofwat. But based on that forward trajectory of what we can see, the fact that they've now put forward annualized processes for investment, particularly around asset replacement and with the growth that we see over the totality of the period of the remainder of AMP8, we're guiding to a central point of an additional GBP 2.5 billion CapEx. That will be over those 3 submissions, and that's the entirety of what we see for AMP8.

And Mark, just to add, I think in terms of the revenue coming back, there will be a modest revenue, but we're not accelerating lots of fast cash, which I think was the gist of your question. So this is effectively CapEx and slow cash money, but the normal depreciation and the return rates, et cetera, will be flowing back into revenues. And that will be potentially a 3-figure number. So we need to have those discussions with Ofwat as we step through the process.

I think it's also worth, sort of, just reflect on the fact that these Re-openers are going to act like a mini price review. So the submission that we've made today is exactly what you'd expect to see in terms of, from an AMP8 perspective, the level of assurance, the level of submission that's gone in. Again, we'll get an interim determination view on that in the summer, opportunity for further conversations in December. And we've already got wrapped and stack what's going in for 2027 and have started some of that early engagement with Ofwat. So from a regulatory process, this will be conversations backwards and forwards. But what we can see is that forward trajectory and based on the demand that we're seeing here in the Northwest and how that underpins the strategic growth the defense program, submarine program in terms of Barrow, the new town that's been announced in Manchester, et cetera, that's where this is the new news and the additional growth, coupled with the asset replacement Re-opener process as we move forward.

Great. Ajay, your turn, mate.

Is it fair to say that the bulk of the increase we're seeing in the return side is coming from higher inflation? And what inflation assumptions are you assuming over this period, just so -- or at least maybe how they've changed so we can kind of factor that in? And then the second one is on ODI performance. The start has been a little bit more disappointing than maybe the beginning of the AMP. And can you just maybe just revisit the picture of getting to a positive territory by the end of the AMP?

Certainly. Do you want to pick up inflation assumptions and I'll pick up ODI stuff?

Yes. Great. So the bulk of the -- as I said, the 200 basis points is significantly underpinned by financing outperformance. So yes, it's coming from financing outperformance. And as I said, that breaks down into 2 components. On a nominal basis, we are outperforming the Ofwat debt indexation model, as I said, by around 80 basis points. So that's a very significant level of outperformance from debt issuance on a nominal basis, nothing to do with inflation. When we step into the inflation part, because we're regulated with a real cost of debt, any high levels of inflation do play through and leverage that position further. So there's a combination effect going on there. In terms of the inflation assumptions in our plan, we're assuming a 3% average inflation over the sort of AMP8 period. Obviously, that's higher at the front end, reflecting the higher near-term inflation in year 1 and the expectations for higher inflation in year 2, given the sort of recent events in the world. But that reverts quite quickly back to Bank of England sort of target levels at the back end of the AMP period.

And Ajay, in relation to your question on ODIs, I mean we've always been quite clear that we see a negative start in terms of the AMP period, and that will build to an overall positive position over the AMP. In relation to those measures, they are taking time to build. So as I say, with leakage, had a cracking year 1, but actually, I've got a rolling average from the previous 2 years that needs to roll through. So those ODI returns are exactly where we thought they'd be and over the period of the AMP contribute a positive performance as part of the overall returns guidance that we've provided.

I think next up, we have Ahmed Farman.

And congrats on the update. Maybe just Phil, a quick clarification question for you. We -- as I see on consensus right now for 2030, the net income is about GBP 800 million. So bringing together all the pieces, the higher RAB, the outperformance, but then the profiling of the revenue. Could you give us a sense of what sort of -- what does the new plan means in terms of potential upgrade to the 2030 sort of numbers that we see on consensus? Or is the earnings benefit more in AMP9? I just want to maybe just bring it all together to get your views on that. And maybe, sort of, a separate question from the transaction today. Could you just remind us where we are in the sort of the reform process now and your latest expectations on the transition plan, et cetera?

Do you want to pick up the first bit, and I can then pick up the transition plan?

Yes, I'll take the first question. So I guess, as you know, we have a regulatory model, the way the regulatory model works, as I sort of discussed when I was stepping through the revenue bridge, there's a very big step-up typically in the first year of the AMP and then a, sort of, modest progression of revenue going through the AMP period. That's typically how the regulators have profiled revenue. So you're right, there's always a lag in terms of a regulatory model of revenue coming through. So the real accretion to EPS here will fall into effectively AMP9. As I sort of talked earlier, we are going to be talking to Ofwat around revenue adjustments in AMP period as well. So at the back end of the AMP, there will be sort of revenue coming back into the numbers as well. But the sort of material component of the step-up in the value will flow really into the AMP9 period. So yes, that's fine.

Yes, perfect. All right. And your question Ahmed about where we're up to with reform and the regulatory agenda. You may or may not have seen yesterday that the government announced Dame Julia Black, who is essentially going to lead a lot of the transition activity and the transition to a new regulator. And I think that's a real positive step and something that we really welcome. Obviously, we've got the King speech in the next 2 weeks, which again underlines a number of the elements of the water bill more broadly. So we are starting to see movement. And I also think that the Ofwat communicating the processes in terms of in-year submissions is also a really great signal of the transition that's starting to be made to the new regulator. So that announcement only happened yesterday with Dame Julia Black's appointment, but there's a lot of work going on now to enable this transition, and we look forward to seeing what's outlined in the King's speech in a couple of weeks' time.

Perfect. Alex Wheeler.

Two from me, please. Just following up, I guess, on the Re-openers. It sounds like you're pretty confident in the submissions. But if there were to be a haircut on the number that you ultimately got there, should we still think about it as a GBP 2.5 billion total CapEx? Would it be a case of bringing CapEx forward from AMP9? I know you've spoken in the past about that AMP9 CapEx plan being very large. So interested to get your thoughts there. And then just on the gearing, Phil, I'd just be interested in where we land now. And I know you talked about the 55% to 65% range, but what's the sort of expectation on the moving parts there and the phasing upwards?

Great. Thanks, Alex. I'll take the point around the CapEx and Phil from a gearing perspective. I think what we're really clear about is that we've got these Re-openers, '26, '27, '28. There will be movement in scope across those dates. We're already starting to build what's in 2027. Some things may move around according to planning time lines and things like that. But that's that sort of central view of what we can see, also coupled with the asset replacement that Ofwat are pulling for. In relation to the point about transitional investment, it's a really great point, Alex, because we've been really clear. And if you remember AMP8, I talked about the fact that we needed an adaptive plan. There were things that we would -- that we push from AMP8 into AMP9 circa GBP 1 billion worth of investment, for example, on the Manchester Ship Canal. So as well as the '26, '27 and '28 Re-openers, we also have the opportunity around transitional investment as we move into what is going to be a sizable AMP9 program. So all of those combined is what's added or what's led to us upgrading our CapEx guidance to a central point position of an additional GBP 2.5 billion for the AMP period. Phil? Okay.

Alex, yes, picking up the gearing point. So today, we're at 60% gearing, and that position is sort of benefiting effectively from the near-term inflation position we've had in the last 12 months. So when we've looked forward in terms of the equity raise and the GBP 2.5 billion of additional CapEx we expect to see, you'll note that we're raising less than 40% of the additional amount that we're expecting to raise. Post the raise, we'll fall to the lower half of our range, and we'll see that trend back up through the range. And we are using the balance sheet capacity that we've benefited from, from the sort of near-term inflation sort of the current year outturn and the expectation of higher inflation in the next sort of 6 to 12 months will support some aspects of the program and leave us with a degree of headroom as we get to the end of the AMP period.

James Brand, moving straight on to you.

I just have one question. Obviously, the RAB growth in AMP8 is going to be very strong now. But how should we think about how that transitions into AMP9? Is the prospect that you could be looking at 10% RAB growth per annum for the next decade? Is that feasible? Or do we see things kind of slow down a bit in AMP9 at least in percentage terms?

James, thanks for the question. I mean, we've always been very clear that AMP9 is a sizable program. And we can see here what we need to deliver as part of the Environment Act requirements that are coming through. We can also see how additional requirements are stacked with what's coming through from the drinking water inspector, et cetera. And that's before we get to anything that's additive around things like PFAS or forever chemicals. So the amount that we need to do in AMP9, we were always quite clear was significant. And so I think as we move through and we start to provide greater visibility and clarity of that, you will get a sense of the shape and the scale. I think that's the other reason as well why we're taking the opportunity to provide that forward guidance for the -- looking forward in terms of the end of AMP8 is because what we're also doing is shoring up that supply chain. I don't want to be in a position where we've worked so hard to mobilize that supply chain. We've got that commitment that as we literally start to go into AMP9, it starts to come down the other side only for us to give back up again. That makes no sense. It makes no sense for what we need to deliver in AMP9. It makes no sense in terms of the regional economy because actually you're going to be managing job losses only to then sort of 12 months later turn around and say, well, actually, we now need to all back again. It makes no sense. So it starts to smooth out what currently is looking like a traditional curve and provide that smooth trajectory as we move from AMP8 to AMP9. So we can see what's out there right here right now based on legislation alone, and it's a significant program that we need to deliver.

It looks like last but not least, Sarah Lester from Morgan Stanley, please come through. Actually, one more from Bartek after that. Sarah?

And sorry, you either see me or hear me today because tech is not on my side. So for the question, you can hear me. It's another question, please, on the Re-opener quantum, but it's slightly different to the ones you've had so far. I mean, we obviously knew the Re-opener opportunity was there as part of the PR24 process since business plan submissions back in 2023, you did have that very intentional step down in the later 2 years -- the last 2 years of the AMP. And as you've talked about, the LTDS showed that massive step-up in AMP9. I'm just curious, if we isolate the GBP 1.4 billion of the Re-opener, had you always intended to spend this much as part of that process? Or has that increased recently? Were you sitting there one day going, look, we're talking about a larger than we had initially expected.

I think what is really coming through is a lot of new news. And I think it's remembering that when the AMP8 plan went in, it was back in 2023. The current government weren't even in position. If we think about the additional housing that's been announced, the 1.5 million homes, I've got new towns that have been announced here in the Northwest, the shipbuilding program, there's a huge amount. HyNet has been designated as one of the government's strategic programs and that pipeline running from Ellesmere Port. So there's a huge amount of regional growth that's been enabled that essentially is new news. We've always been very open and talked about how we manage that transition for AMP8 to AMP 9. So it's those things combined. I also think that Ofwat being very clear, they've left a number of sort of hooks, if you like, for additional opportunities in the price review process, particularly around certain elements and also regional elements. So for us, they've left wind to me if we wanted to go back and do anything, which we're obviously putting forward here. But also, I think the moving to this annualized process and welcoming Re-openers in relation, not just to the additional growth items, but in relation to asset replacement is a real step forward and I think a recognition of how Ofwat are moving and transitioning post Cunliffe's recommendations. So again, I think that's something we push for and something we're, therefore, really, really keen to embrace as well.

Okay. Great. And one last quick question and one last quick answer. Bartek, fire away.

Let's see the answer. Just a very quick one. How do you assess the risks that the regulatory framework may evolve in the way where your financial performance will be eliminated or kind of will go down, meaning, for instance, the regulator will move to a framework where cost of that will be a pass-through or more company specific as we are seeing in other countries?

Look, I mean, I'll let Phil specifically answer that question. But I think what is important is that post Cunliffe, there was a very clear direction that this needed to be a sector that was clearly -- had a strong investment profile. And there is a recognition that everything that we need to do, not just in AMP8, but AMP9 and AMP10 beyond, there needs to be the returns that accompany that. And I've not heard anything that moves away in any way, shape or form from strengthening that narrative. Phil?

Yes. It's sort of hard to comment definitively, but I guess I'd probably make the observation that incentive-based regulation is really important to maintain incentives on companies to deliver and perform. And you can see lots of potential dangers of just having a direct pass-through mechanism in terms of cost of debt. So I think we'll have to see how things evolve, but I don't really -- I've not really seen anyone talking about that as a proposal effectively.

Thank you very much, everyone. That brings us to a close. Thank you for your participation this morning. And as always, the team is available for you if you would like to contact the team, and good morning. Thank you.

Brilliant. Thanks so much for joining us. Have a good morning.

Thank you.