Centrica Aktie

Good morning, everybody. It's brilliant to be here today. And as usual, I'm joined on the stage by our CFO and the new YouTube sensation, Russell O'Brien, for those of you that watch this video, no doubt, our leadership team here in the front row and our Chairman, here as well of other Centrica people.

So 2025 is a year of significant progress, building further on our journey to make Centrica a stronger, higher-quality business, building on the foundations that we've been laying for growth. We're recycling capital from noncore assets, investing in assets like Sizewell C, Grain LNG and the meter asset provider, assets that will both grow and stabilize our earnings profile, eliminating downside risks. We're adding long-term value, and we're building future optionality. 2025 showed our resilience and our further improved operational performance but it also had its challenges. Conditions remain difficult for Centrica Energy throughout the year as it did for many, many commodity traders.

But I'm delighted with what the team delivered in 2025. But as always, I'm looking for more. And it's a mark of how far we've come that collectively, we are not satisfied with GBP 200 million of EBITDA from optimization. And collectively, we're not satisfied with more than 11p EPS in a difficult year because our expectations of what Centrica can deliver have fundamentally changed. Over the last 5 years, we've invested GBP 3 billion, and we've returned around the same amount to shareholders, including increasing the dividend by 22% this year. Balanced capital allocation, reflecting our commitment to growing the business and to rewarding our owners, our shareholders.

We've now bought back 1/4 of the company since 2022 at an average price, which is well below where we are today, in the low GBP 1.30s. That's real value delivered. And we've decided to pause the buyback for now as we see incredible value creation opportunities for our shareholders from investing the capital that we've got. Our pipeline is so much richer now than when we started buying back shares in 2022, and some of those opportunities could come through quite soon. Our financial framework hasn't changed and neither has our discipline. If the projects don't stack up, we won't invest and surplus capital will always come back to shareholders, always.

We expect to invest at least another GBP 700 million this year, maybe more, mainly in assets that fundamentally strengthen our portfolio. And we expect to continue investing at about the same rate right through to the end of this decade. And that's what underpins our confidence in delivering GBP 1.7 billion of EBITDA or better by the end of 2028. And it's why we can tell you that we'll continue to grow that beyond 2028 to GBP 2 billion by 2030. Now both of these numbers include the impact of expected but not yet confirmed extensions to the 4 existing advanced gas cooled nuclear power stations into the early 2030s.

GBP 2 billion of EBITDA in 2030 would see our EPS more than double over the next 5 years. But I'm never satisfied. So rest assured that my aim is to do even better than that. By focusing on value, we've made Centrica a much stronger business than it was 6 years ago. We're running the business as well as we possibly can. We're investing in a disciplined way, and it's the same approach that will deliver the next phase of our growth.

We spoke in July about how we saw opportunities to transform Centrica. Our transformation program is going well. It's a key part of delivering our full potential. We've made progress anchored on 3 simple principles, all underpinned by technology. Number one, improving customer experience further; number two, driving more commercial growth; and number three, continuing to deliver on cost efficiencies. A lot of this benefit will be in the retail business, but there's huge potential across the entire group.

Last year, we delivered net benefit -- net benefits of GBP 100 million. And unlike other companies, we're not recording transformation costs in exceptionals. If we had done that, 2025 EPS would have been 2p higher. So another company, it would have been 13.2, not 11.2. The program will ramp up this year, and we expect to take another GBP 0.5 billion out of the cost base by the end of the decade over and above what we've already done, underpinning earnings growth and helping to create new opportunities.

Now AI is a part of that, and it's a huge opportunity for us. We're working with world-class partners to explore how we can further deploy technology, including AI but not only AI to transform our customer service and to reduce costs. And I'm going to lay out some of the specific examples of that later.

So with that, with the opening, I'm going to pass you over now to YouTuber and CFO, Russell O'Brien, who's going to take you through the numbers.

Thank you. Okay. Thanks, Chris, and good morning, everybody. So over the past years, we have reshaped the way we run Centrica with a focus on 3 business units: retail, optimization and infrastructure. And we've taken this opportunity to simplify our reporting, aligning the segments to the way we now run the business. And we've also shifted to EBITDA as our main performance and guidance metric, which is a better measure for the business as we invest in the portfolio and grow.

Now I recognize there are a few moving pieces. So I put a very funny video explainer on the website, as Chris is mentioning, and some other materials just so that no one is confused by the re-segmentation and it unpacks everything in a little bit more detail. The main change is splitting Bord Gais and Centrica Business Solutions into the component parts. So Irish retail, for example, is now reported alongside the same U.K. activities, Irish optimization within Centrica Energy. And we've also moved our Irish power assets and our growing Meter Asset Provider into their natural home and infrastructure.

So now to the numbers. I'd like to highlight 3 key points. First, we've reported solid numbers overall in the context of external challenges, demonstrating the resilience of our business. Second, our progress on investing and transformation program gives us more confidence in our medium-term earnings outlook. And third, our balance sheet remains strong, giving us the financial platform to execute. Adjusted EBITDA for the year was GBP 1.4 billion, and adjusted earnings per share was just over 11p. We delivered operating cash flow of over GBP 900 million, while we had a free cash outflow of GBP 200 million after doubling investment to GBP 1.2 billion.

And after returning over GBP 1 billion to shareholders through the dividends and the buyback, adjusted net cash closed at GBP 1.5 billion. Retail & Optimisation delivered almost GBP 800 million of EBITDA, with Retail contributing GBP 574 million, broadly flat year-on-year. Within that, U.K. Home Services delivered almost GBP 170 million of EBITDA, and the 7% top line growth reflected improvements to our commercial propositions and pricing and was supported by a razor-sharp focus on costs. Margins expanded from 4.3% to 6.8%, and we're pleased to have moved out into the profit range we outlined ahead of schedule, and there is still much more to come.

Business supply also delivered a strong result. U.K. home energy supply and Optimisation both faced external headwinds and saw EBITDA decline, and I'll come back to both of those areas in a moment. And finally, Infrastructure of GBP 728 million of EBITDA was lower due to a combination of asset sales, realized prices and outages in Q4, offset by a lower-than-expected loss at Rough. As usual, you can find more detail on the business performance in this morning's release. As consumer demands change, competing effectively in the retail market requires efficiency, innovation and resilience, and we were behind the curve in many of those areas. But the evidence is clear, we are moving in the right direction.

For the first time in over a decade, we grew customer numbers across all of our retail businesses simultaneously, underpinned by the simplification and the use of technology. This includes the migration to ignition and modernized planning systems and services, unlocking commercial flexibility, deeper customer insights and cost efficiencies. Those dynamics were key to the improvements in services. Retention is improving. We're building new growth channels, and we're managing margins effectively.

But as ever, we are not satisfied. We are still losing customers we shouldn't be losing, and there's more we can do commercially. We want to continue growing our retail customer base, but we won't adopt the pricing behavior we're seeing from some of our competitors. We believe it is unsustainable. We'll remain nimble, of course, and compete hard, but our primary focus is on delivering value over volume. And with more insight, we're able to identify and focus on those customers who really want our products and services, helping them get better solutions for them and creating more value for Centrica.

Home Energy Supply delivered a resilient performance in 2025. As expected, the market continued to pivot towards fixed price tariffs, which had a dampening effect on margins and weather was an GBP 80 million headwind through the year in the U.K. Now on the other side, the energy price guarantee scheme reconciliation saw us record a gain of GBP 42 million related to revenue from prior periods that was not recorded at the time. And the results, as you've seen, benefited from our cost and revenue phasing from earlier periods.

Bad debt remains a challenge with the latest figures showing over GBP 4 billion of debt past due across the industry. And our bad debt charge in U.K. Home Energy Supply increased to around 3% of revenue. Now we continue to advocate for Ofgem to take more proactive steps. to help those who genuinely can't pay and address those who can but choose not to. But in the meantime, we do not expect -- we do expect those additional costs we face this year to be recovered in future periods. And the ups and downs reflect the essence of the U.K. home energy supply business, short-term volatility, offset by through-the-cycle predictability. And since the price cap began in 2019, as you can see, our average margin is 2.3%. That's above the 1.9% allowed during the first 4 years of the cap and broadly in line with the allowance since then. Supported by the price cap mechanism, this is a business that generates solid through-the-cycle regulated earnings and cash flows.

Centrica Energy posted a softer result, primarily driven by gas and power trading. Against that backdrop, we've remained focused and driving long-term value. And GBP 200 million of EBITDA in a tough year is a big step forward from where the business was a few years ago. RETO, our renewable route-to-market business again performed well. Assets under management grew by 17% to over 19 gigawatts. Centrica Energy is now consistently one of the most innovative, responsive and commercial partners to asset owners across Europe, strengthening our ability to grow more in this area.

In LNG, the teams have fundamentally transformed the portfolio over the past couple of years. We are now 100% hedged until 2028 and over 80% until 2030. So we've protected any downside and retained valuable physical optionality. Now we're not satisfied with the absolute performance in gas and power trading but we do take comfort in strong relative performance. In really difficult markets, the team generated a positive margin and remained consistently disciplined through the year. Consciously reducing risk rather than chasing aggressive positions is a core principle of how we operate. This limits downside with returns skewed to the upside when markets allow.

In the short term, more rational behavior is returning with gas trading recovering a little bit in the second half. But events, as we've all seen in the past week, demonstrate the market remains very volatile, and it looks like it will take some time for them to stabilize. So given all that, we expect Centrica Energy to be below its sustainable EBITDA range for this year. We remain confident, though, in the longer-term outlook with earnings supported by expanding our geographic footprint and capabilities, adding further diversification and growth options to the portfolio.

So of course, the challenges we saw last year demonstrate why it's so important to continue building a predictable contracted infrastructure portfolio. And 2025 saw us more than double investment year-on-year, spending almost GBP 400 million at Sizewell C, GBP 200 million in Grain and GBP 225 million in the MAP, which was higher than our target. After other movements, including decommissioning and disposals, we saw a free cash outflow of GBP 167 million. We returned GBP 1.1 billion to shareholders in '25, which means we've invested and returned GBP 3.6 billion over the last 2 years. The balance sheet remains strong, and we expect surplus capital to emerge over time as the business continues to perform. But as we've demonstrated, we keep the balance sheet under close review and our commitment to maintaining that discipline is unchanged.

Now to the outlook this year. Alongside streamlining our segments, we've simplified our guidance ranges but there's no change to the underlying numbers. All we've done is restate on an EBITDA basis. In 2026, we expect Retail to be in its EBITDA range of GBP 500 million to GBP 800 million, and that's after the transformation spend in the year. We currently expect optimization EBITDA to improve somewhat relative to '25, but remain below the medium-term sustainable range at around GBP 250 million.

And assuming the second Spirit Energy disposal completes around the middle of the year, we see GBP 500 million to GBP 650 million as a sensible range for Infrastructure, including importantly, about GBP 175 million from the key regulated and contracted assets. As a reminder, earnings from the Spirit disposal assets will continue to be recorded through the P&L until the transaction completes later this year.

We also assume Rough will be around breakeven, driven by a continued focus on optimizing indigenous gas sales and cost discipline. We expect investment of at least GBP 700 million. This includes transformation, further investment into the MAP and our power assets, including Sizewell C. Today, we've also laid out guidance on interest and tax to help with your modeling, including a structural decline in the effective tax rate as we pivot the portfolio away from highly taxed Spirit Energy earnings.

So we're all excited about our transformation program, which has accelerated over recent months and underpins our plan to deliver top line growth while driving underlying efficiencies through the organization. Our operating cost base is just under GBP 2 billion, including bad debt and depreciation. 3% annual inflation on that is a GBP 300 million earnings headwind by 2030. So driving cost efficiency is both opportunity -- is a huge opportunity and a necessity. And we're ramping up multiple work streams, and we're already taking actions that are making a real difference, which Chris will talk about shortly.

In 2025, we reduced OpEx by 3%, net of inflation and cost to achieve of GBP 100 million. Looking forward, we aim to deliver a further GBP 0.5 billion reduction by the end of the decade. And we have around half of those savings identified already and are working hard to lock in the remainder. That means we expect our nominal cost base to remain broadly flat by 2030 with efficiencies fully absorbing inflation and the cost of supporting growth. And from what I can see today, there are probably around GBP 600 million of cost to deliver those benefits, around GBP 400 million of OpEx and a further GBP 200 million of CapEx. And we will be as disciplined in our OpEx investment as we are deploying capital generally.

The earnings benefit will come through over time. As Chris says, we'll be transparent about the costs, and we don't expect exceptional charges. We want to give you the tools to assess our performance. And more importantly, we want to ensure our colleagues are fully focused on delivering value. So to summarize, Centrica's performance in '25 was resilient in the face of some external challenges. The assets we brought into the portfolio over the past year mean we are increasingly confident of being able to maximize sustainable earnings, the foundation of our financial framework. And we're successfully balancing rewarding our shareholders with retaining the strength to support our growth ambitions.

And with that, let me hand back to Chris.

Thanks, Russell. The trends shaping the energy system became ever clearer in 2025. U.K. electricity demand grew for the second year in a row following many years of decline and intermittent generation rose to over 1/3 of total supply. Now looking forward, demand growth will accelerate and renewables penetration will continue to grow. So will the need for zero carbon baseload electricity, dispatchable backup electricity generation and electricity storage to keep energy secure and affordable for the households and the businesses that will drive the economic growth the U.K. needs.

There's a once-in-a-generation investment cycle underway to meet these growing needs. The challenges of delivering new projects are real. Planning, grid connections, supply chains. None of this is easy. Like a couple of years ago, you could pretty much pick up a gas turbine off the shelf. Today, there's a 5-year waiting list. So existing capacity will also be needed for much, much longer.

And as you can see, the expected proportion of gas-fired electricity generation in the mix in 2040 has almost doubled. That creates huge opportunity for us, and it's why we believe our strategy is the right strategy, focused on the assets that will be needed to support a fair and affordable energy transition. Whilst remaining pragmatic and retaining the flexibility to adapt however the transition progresses. The right strategy is one thing but it must be coupled with the ability to deliver. And that's way more than about reshaping the portfolio. It's about way more than that. It's about rebuilding a platform that allows us to compete in a rapidly evolving retail market and about building the capability to identify, develop and operate the infrastructure assets that will define our future.

And we've now got the foundation and the transformation program that will help us deliver this next phase, focused on the core areas that I mentioned earlier, customer service, commercial growth, cost efficiency. Transforming customer service is critical to our success. We've made progress improving our digital contact channels but we're consistently identifying more areas for improvement. Our aim is to reduce contact by at least 30%. Now it's not that we don't like speaking to our customers. We really do. It's that we want to give them fewer reasons that they have to contact us. We want to use technology to help us make their lives easier and to offer more relevant products and more relevant services. And if we achieve that, that will be a significant efficiency gain, but we want even more. We're also aiming for a further 40% of customer contact being handled through enhanced digital channels, including far more use of AI to support our colleagues.

By ramping up the use of technology, we're freeing up time to solve the thorny issues, really difficult issues for customers and to drive commercial performance, creating the right jobs in the right places as we grow our business. We're investing in the skills and the capabilities that we need for this future, rewiring how we work to sharpen accountability to grow expertise and to help us serve customers far more efficiently. That extends to our central functions. We've reduced headcount there already by around 5%, mainly by eliminating duplicated roles following the restructure of the business. And by embedding new, more agile ways of working, we can make our core processes much, much more efficient. The savings potential from this area alone is well over GBP 100 million a year.

Improving commercial performance is still the biggest opportunity that we've got to grow the business. Russell mentioned the success we've seen in retail. There's no magic behind the improvements. They've been driven by focusing on the details of our processes, getting to the root cause of poor performance and identifying the solutions. And take boiler installations as an example. We've seen decline in profitability there for years, which was a bit of an issue. But by working to improve each individual step in the process, for example, job pricing, scheduling, we were able to unlock a GBP 20 million profit improvement. That was a key contributor to the better performance in services last year, and we're already moving on to the next target areas.

We're implementing a combined customer lifetime value model across retail so that we can identify opportunities to maximize value across the group. Now that might mean that we trade off value in one part of the business to secure more value elsewhere. We're happy to do that. The overall group benefit is what matters. This is only possible by having the right people in the right structures with the right data, the same capabilities that are supporting our investment program.

Disciplined investment is central to our progress and it's central to our future growth, driven by the stronger capabilities we've built across our infrastructure businesses, Power under Dave Kirwan, Gas under Martin Scargill and Spirit Energy focused now on Morecambe Net Zero. Teams with deep technical expertise, proven operational discipline and a value-focused mindset that creates broader growth options for the company. In Sizewell C in Grain LNG and in the MAP, we're investing in high-quality, long-duration regulated and contracted assets that will fundamentally reshape Centrica and deliver critical national infrastructure for the U.K. We're doing a similar thing in Ireland with our peakers. And we made our initial contribution to Sizewell C in November. We've got earnings in 2025 relating to Sizewell C and earnings will grow in a predictable way for the next 15 years. We expect our share of the RAB to grow to around GBP 8 billion by commissioning. That will be against a net equity investment of around GBP 500 million and project financing of GBP 5 billion.

Real value creation with very, very low risk. The MAP is also a real success story. It's hugely outperforming our expectations, the expectations we had when we set the business up. We installed over 1 million meters last year, which makes us the fastest-growing MAP in the U.K., and we've now got more than 1.6 million meters on the wall just around 2 years after we set this business up. The capabilities that we've built are unlocking future growth opportunities, both in the U.K. and overseas. Dan, Gareth and the team deserve huge credit for what they've achieved but they don't get any special treatment. Now we've seen what they can deliver in '25, I expect even more this year.

We're still early in the ownership journey, for example, at Grain but the value of the asset is clear. Earnings are highly contracted. The importance of the terminal will only increase as the U.K. becomes ever more reliant on imported gas. And I've been delighted to see the strong alignment we've got with ECP, our partners on the key priorities for the asset. And I'm confident we've got the right team in place to deliver on the full potential of this absolutely critical business.

Now we've got to acknowledge that not everything has gone completely to plan. Commissioning, for example, of our Irish peakers has been delayed and are now due around about the middle of this year. And that's partly due to grid connection delays. And we secured a modification to the capacity market contract to compensate for that, mitigating the value impact but it also reflects missteps that we've made as we build back our construction capability. We're not happy about that but we have learned valuable lessons, and we're confident that will be applied to future projects. We've not really built big infrastructure for over a decade. And we've also been proactive in managing our portfolio, recycling capital from noncore assets. You saw a recent disposal last month. Portfolio simplification has allowed us to accelerate value, sharpen our strategic focus and reduce our exposure to commodity price volatility.

Collectively, the actions we've taken are fundamentally reshaping our company, steadily shifting our portfolio towards more regulated, more contracted earnings. As Russell laid out, Home Energy Supply has a regulated underpin while services and B2B both generate more stable cash flows from contracted activities. The trajectory in the existing infrastructure portfolio is very, very clear, and we've got several opportunities that could even accelerate that pivot. The government consultation, which will decide the path forward at Rough closed yesterday, and we expect a public update hopefully later in the first half.

We're optimistic about the outcome given the critical importance of gas storage to U.K.'s energy security, which was acknowledged both in the consultation document and by NESO recently. But we remain super focused on the value proposition. And we won't keep Rough open speculatively. We need clarity to justify redevelopment. The government is also due to publish a decision on financial support for nuclear life extensions over the next few months, including the potential for a CfD at Sizewell B to underpin a 20-year asset life extension. These are 2 very clear opportunities to pivot merchant-exposed assets to regulated exposure and to substantially extend asset lives. Even Centrica Energy has got an element of predictable fee-based earnings and has materially reduced the downside risk in the LNG business way beyond, I think, what people appreciate. If you look further ahead, the steps we've taken to expand our organic growth pipeline, for example, our partnership with X-energy and further development opportunities at Grain allow us to be disciplined to focus on the most valuable opportunities and to adapt as the energy transition develops.

Our investment focus remains the same, assets that support security of supply, assets with a regulated and contracted underpin where we can add value through optimization, assets where we can bring our incredible capabilities and our extensive experience to bear. Now we will remain predominantly a U.K. and Irish business for the foreseeable future but we don't restrict ourselves by geography. We're focusing on areas where we have or can build a durable competitive advantage that will allow us to create more upside than if we just focus exclusively in 1 or 2 countries. So I would hope that in 5 years, Centrica will be more geographically diverse but it will be in targeted places where we have deep market experience and insight primarily from our trading activities in Centrica Energy. That's what supported us investing in batteries in both Belgium and Sweden, and it's how we can deliver future value from future opportunities.

We told you in July that we're targeting above GBP 1.6 billion of EBITDA by the end of 2028, underpinned by the transformation program. That's unchanged. Within that, retail and optimization will deliver growth whilst infrastructure pivots from merchant to regulated exposure. By 2030, we expect retail to reach around GBP 800 million. As Russell explained, we can keep OpEx flat in nominal terms with top line growth flowing through to higher margins and higher earnings. And that's after a couple of hundred million pounds of additional OpEx that we put in to support the growth that we see.

Expanding our capabilities means that optimization can move back towards the top of its existing range of about GBP 400 million of EBITDA with opportunities to do much, much better in the right conditions. So that's GBP 1.2 billion of EBITDA in total. We expect Infrastructure to grow to about GBP 800 million of EBITDA by 2030, and that assumes further nuclear life extensions and almost 2/3 of earnings from regulated and contracted sources from Infrastructure by that point. That's up from less than 5% today, far higher quality earnings.

If you bring that all together, we've got good visibility of reaching GBP 1.7 billion of EBITDA by the end of 2028 as underpinned by the GBP 4 billion investment program we've already told you about. And depending on the opportunity, we may spend even more than that as long as the value is there. Beyond 2028, we expect to continue investing at the same rate, around GBP 600 million to GBP 800 million a year until the end of the decade but only if we see the value. By 2030, we're aiming for EBITDA of around GBP 2 billion, with around 2/3 of that EBITDA coming from businesses to regulated and contracted earnings.

Now of course, there's going to be a range around those numbers to reflect the year performance. There always will be. But that range will tighten as we grow the share of lower volatility, more predictable, more contracted, more regulated earnings. And given the structurally lower tax rate of the new infrastructure we're building, post-tax earnings will accelerate faster than EBITDA. We're aiming to more than double our EPS in the next 5 years by 2030.

So the picture is clear. We're building a fundamentally stronger, higher quality, more predictable Centrica, a Centrica, which continues to morph from a gas company with a shrinking asset base heavily exposed to merchant prices into a power company with a growing asset base underpinned by a substantial proportion of contracted and regulated returns. Our operations remain resilient even in a year marked by external challenges. We've made real progress reshaping this business, more regulated, more contracted earnings, reducing downside risks, creating upside opportunities, delivering against our investment program and recycling capital from noncore assets into higher quality growth opportunities. At the same time, the transformation program is taking hold. It's supporting earnings today, GBP 100 million of benefit in 2025 and it's laying the foundations for the future.

Now GBP 2 billion of EBITDA by 2030 and more than doubling the EPS is ambitious but it is very achievable. I am very confident of that. To do that, we'll continue investing. There are fantastic opportunities for us to deliver value by doing that, super opportunities. Centrica is a far, far stronger company than it was 5, 6 years ago. So even a far stronger company than it was just a year ago. We've built resilience. We've diversified our earnings, and we've created huge optionality for the decade ahead. We're really looking forward to delivering on that opportunity for our colleagues, for our customers, for our shareholders to creating real value.

So with that, I'm going to stop talking with an aim of making 30 minutes, probably going slightly over, so I apologize for that. Russell and I will be delighted to take -- my God, a hand up already. We'll be delighted to take your questions. And I'm sure a lot of them are going to be number of questions or questions on videos that we put on this morning. So with that, happy to take all your questions.

There's no questions on the phone from online. But if you're online, you can type your question and I think Fraser is going to have a speaking part later to relay those questions. And we trust Fraser that they're not his questions that they're actually coming from online.

So Ajay, you hand up first and then we'll come to you. Ajay?

Ajay Patel from Goldman Sachs. Two questions, if I might. Just one on the 22p of earnings. So your CapEx beyond '28 runs at GBP 600 million to GBP 800 million. If you look at that and you think towards the end of the plan, you should be around still net cash or broadly breakeven. What assumptions have you made about buybacks in that 22p? Or alternatively, is there balance sheet headroom here to further invest or return to investors when the right opportunity arises?

And how does -- I heard really good comments around risk mitigation, the hedging that you've done on the LNG, the investments you're making to make a higher-quality business but your credit metrics don't change over the last 3 or 4 years. I imagine that should start to bear some fruit, which should only accelerate the opportunity you have for growth and value creation.

And then the last one, I'm being a bit greedy here, so apologies. Just on the assumptions, what do you assume in the numbers for 2030 for commodity prices, obviously, quite a lot of volatility. So just to help us understand what are you sort of holding yourselves? Like for example, are you making any assumptions around Rough gas storage size will be? What gas price assumptions, what power price, anything you can give us on here just to help us really believe in that achievable 2p that you talked about?

So most of those, I think, of Russell. Let me touch on briefly you mentioned about the hedging in LNG, just to explain what we've done there. I don't think the doubling of the share price is dependent upon us having lots more buybacks. So there's potentially capacity in there. But on LNG, those of you that have covered the company for quite some time will remember when we had just the Sabine Pass contract, we basically bought U.S. LNG and a Henry Hub index and the sink market was NBP or TTF in Europe. And the closing cost was $300 million. So if we didn't lift any LNG with a $300 million liquefaction fee to be. Now if Henry Hub is low and European gas prices are high, happy days. But if that's not the case, then it could be slightly more stressful.

What the team have done, I think, unbelievably well, and it highlights one of the benefits we've got in Centrica is over the last couple of years, we've entered into deals with U.S. domestic gas producers effectively to buy gas off them at a European gas index. So we went to producers and said, look, would you like to diversify your range of income, those that don't sell LNG. So you can have some Henry Hub exposure, you can some TTF exposure. And they said, yes. Ultimately, what's happened with a number of deals is we now effectively have taken out the basis differential risk. So we now effectively buy Cheniere on a U.S. Henry Hub index -- sorry, on our European gas price index. So we've matched that. So the sink sale market and the purchase of the index risk has been taken out, which is absolutely huge, massive derisking of the portfolio.

What that's then done is it's given us a position in physical pipeline gas in the U.S. And that's given us the encouragement to open -- we're going to open an office in the U.S. now. So those deals make sense just to derisk a huge risk of the portfolio. But what we like to do in Centrica is to look for optionality. So by doing that, we've now got a team in the U.S. that are managing our domestic gas position, and they will deliver value out of that. When we went into powertrain in the U.S., we did that from -- you can do that financially, we did that from Denmark mainly.

But now we've got a team and we intend to grow that business. And the reason I wanted to kind of pause on that is I'm not sure people realize we've taken that risk of the Cheniere contract but it highlights what we like to do in the company. Let's do something that makes perfect sense but it's got potential upside. So now with that, there's lots of difficult questions on our assumptions. And if I got that wrong on assuming buybacks, Russell, please tell.

So let me just sort of walk you through the spreadsheet a little bit of how we got to those numbers, which might help everybody. So of course, the GBP 2 billion worth of EBITDA at the end of 2030. So CapEx-wise, we assume we complete the GBP 4 billion program by the end of 2028. And as a proxy for now, we've assumed that we have GBP 600 million to GBP 800 million worth of CapEx in the years thereafter, which will begin to generate a little bit of additional earnings. There's no assumption for additional buybacks in the share count number. That's not because we're not going to do buybacks. It's just to keep your modeling very simple. So as surplus capital emerges and buybacks become an opportunity, that's definitely something we're looking at.

You remember last year, I took you through a waterfall of how the balance sheet will evolve in the coming years to end of 2028. Nothing really has changed there. So we see that we will invest in the next couple of years but also begin to build up positive cash flows, rebuild our balance sheet strength, and that gives us optionality either for more investments or returning surplus capital. So you can use that as a proxy, I think, for modeling still.

The other thing that's important, I think, on the modeling is when you look at that headline EBITDA and try and work out how that goes down to EPS, you got to remember that the tax rate of Centrica will be going down in the coming years. That has a sort of implication effect on the EPS. We've got the second big Spirit divestment this year. Once we've cleared that out, you can see the tax rate will be getting a lot closer to the sort of 25%.

Risk mitigation you asked about and credit metrics and those types of things. So you said it's been the same for the past couple of years, which is actually not correct. So if you go back to the summer and you read the S&P review of Centrica, we were very happy to see that they have started to give us credit for the investments we've been making in the past couple of years. So the FFO to net debt metric of 50%, which has been there in the past has now been adjusted to 45%. But more importantly, if you read the schedules and the outlooks that they're guiding for Centrica. They say, if you continue to invest in ratable regulated contracted assets, we do expect that those metrics will be further loosened.

Now we haven't got that yet, and we've got some adjustments we've got to make through the Grain LNG deal, for example, but we're definitely going in the right direction in terms of credit metrics. And as you look through that period to 2028 and 2030, the proportion of cash flows, as Chris just laid out, going from 45% regulated up to 70% should help the metrics in a good way.

Assumptions, we don't do anything too clever. We just look at forward curves in terms of commodity prices, gas prices, power prices. Gas prices will have a very limited effect on the group by the time you get to the end of this decade. And for Rough and those numbers, we're basically assuming 0 given the uncertainty there. Size will be will be on a merchant basis. But of course, as we've outlined, there are discussions of potentially getting a CfD for that asset but that would probably be a longer time frame than the one that you're looking at. And if we continue with the nuclear reactors, we're just using for the 4 AGRs forward power prices. So that's how the model works.

Ahmed, to Mark, then go to Jenny and then go to Dominic.

Ahmed from Jefferies. Chris, I wanted to start with your comments around the pipeline for future investments when you referenced pausing the buyback. Is that a topic that we are going to see material clarity over the course of this year? And I just want to -- obviously, we understand sort of the Rough discussion that you referenced earlier but what else is in that pipeline. So interested to sort of get more on it.

I also wanted to ask you about sort of the nuclear life extension. So you sort of referenced size will be. But is there an opportunity to get meaningful nuclear life extensions on the rest of the fleet as well? And is that sort of reflected in the doubling of the EPS by 2030? Or is that sort of just based on as you sort of see things today?

And then maybe a question for Russell. Russell, I'm trying to just sort of understand a little bit better your guidance for 2026 and where that may differ from consensus. So if I add the various divisional data points that you have given us on EBITDA and then adjust for consolidation for sort of last year, it feels like almost GBP 1.4 billion group EBITDA, which is not very dissimilar from where consensus is. So is that sort of a fair interpretation. So -- and then it just seems to me sort of the big difference really versus where consensus expectations is on the interest cost. Again, please tell me if you disagree. And I'm just trying to understand why is the interest cost that variation, if you can give us some color on that. Bill...

Okay. There's quite a lot in there. So I would hope we get material clarity through this year. So the government's gas consultation closed yesterday. We made a submission under that. I thought that was -- I was really pleased to see it. I wish it come out a bit earlier but very pleased to see how it was written, and it certainly recognized the importance of gas storage as did NESO recent report. And as the U.K.'s largest gas storage facility, I think Rough is very well placed. So I feel more confident about Rough but I'm also very clear eyed about it. So either we get something that makes sense for us to unlock the GBP 2 billion, create over just under 5,000 jobs in the construction phase or we don't. This is why we keep a huge pipeline of opportunities so that -- and there have been things that we've had in the pipeline that we've walked away from days before signing. And we can do that because we know we've got other stuff there.

So Rough would be one, I would hope. We have been discussing more about X-energy. So the government's recent publication of how they'll support small and advanced modular reactors is asking for submissions by the -- or sorry, starting on the 4th of March. Clay Sell, the Chief Executive of X-energy and I were in seeing government last week talking about this. And we expect to submit something hopefully on the 4 but sometime around then. And what that will do is lay out what we would be looking for to advance probably what is maybe a GBP 10 billion investment or so GBP 9 billion or GBP 10 billion for Hartlepool -- for 1 gigawatt in Hartlepool. But what it will lay out is we actually see this as being a GBP 50 billion or GBP 60 billion program. So about 5 or 6 gigawatts of these reactors across sites in the U.K.

And again, a lot of these things are kind of binary because you either get the support framework you're looking for or you don't. But the government are super keen on nuclear. There's cross-party consensus on that between the 2 main parties because size we'll see was started by the previous government finished by this one. So it's an area where they all seem to agree. We think X-energy is some of the best technology out there. We're still looking at Rolls-Royce SMR technology as well, and we see a huge opportunity. So that's something that we could see now.

I don't think you're not going to see massive CapEx on that in 2026 because you've probably got several hundred million pounds of pre-FID expenditure on that to make sure that the sites are right. But I hope we'd get some acceleration there. Morecambe Net zero is progressing quite well also. And so we see -- we saw the National Wealth Fund coming in to take a proportion of the costs in the feasibility study for the pipeline from the Peak district cement producers over to the West Coast. I would [indiscernible] East Irish but the West Coast of the U.K. and it specifically recognized the role of Morecambe.

So those are opportunities that we see quite substantial upside. And hopefully, we get some clarity. We expect to take final investment decision on the [ Cashleen peak Galway ] in Ireland. That's probably what 340 megs. So that's probably EUR 400 million to EUR 500 million, I think. We're looking at a slightly lower number but I think you're looking at over GBP 1 million a megawatt, I think, for construction. So that's probably -- I would estimate I don't know if Dave listened if he is, I still expect a low price but I would estimate about EUR 500 million on that I'd hope to take investment decision this year.

Again, if we get to the point where we say the numbers don't add up, we wouldn't do it. So there's quite a lot in there. There's also some stuff we're looking at. We have been very open that we're looking both at organic and inorganic options. The inorganic options are more likely to have more of a skew towards contracted and some merchant exposure a bit like Isle of Grain. And the reason for that is we don't have the cost of capital to compete with others to buy existing regulated asset-based businesses. That's why we're creating them. That's why we help to create Sizewell C. We want to create that in Rough. We want to create that in Morecambe because we just -- it wouldn't make sense for us to compete against people with a cost of capital of 200 or 300 bps below others. So we hope we'd get something there.

On the nuclear extensions, to be super clear, the GPB 1.7 billion of EBITDA was GBP 1.6 billion. the difference between those 2 numbers is we expect extensions. So 2 of the plants -- 2 of the advanced gas cold reactors are due to go out in at the end of March, I think, '28. We expect those to be extended. If they're not extended, the guidance is GPB 1.6 billion. So there's just under GBP 100 million in there. The other 2 are due to go to service, I think, in March 2030. And so there's probably 10% of the GBP 2 billion EBITDA, which relates to having the 4 advanced gas cold reactors working all through 2030. So it's not purely dependent upon that. The numbers are in there.

Now I don't think these things will be going by 2040. I don't even think they'll be going by 2035. I think we will -- we have to watch the degradation in piping in the boiler work and in the graphite core. And I think we will get a series of 1- or 2-year extensions. But at some point, it will be a case we'll say we have to shut these things down because the nuclear, they have to be safe. So I'm increasingly confident we can get them going to 2030. Hartlepool has been out for quite a while, which is frustrating. But effectively, that's less wear and tear, so you end up on to the end. So I think we'll get those extensions. I think I said before, if we were offered the chance to sign up just now to these things running until and shut down in 2035, I'd sign on the dotted line because I don't think they've got much life beyond that.

Russell, 2026 guidance.

Let me talk everybody through that. So it was on the slide, but let me just go into a little bit more detail. So retail, previously, we had guidance ranges for the individual businesses. We've simplified that and tidied that up. So a range of GBP 500 million to GBP 800 million for all those businesses. You can choose your midpoint maybe as a way to get started there. But I think as we sit today, we're quite comfortable with how retail is looking for the year. Optimisation, I was clear about that in the speech, below the GBP 300 million to GBP 400 million range, so GBP 250 million as we sit today for that business. Infrastructure, again, a little bit dependent on prices, although we've hedged a lot of the nuclear production and the Spirit production this year. So we've guided GBP 500 million to GBP 650 million. Some of that's also dependent when the Spirit Energy second divestment closes, we're thinking around midyear. So perhaps you could take the midpoint of both of those.

You mentioned you'll use the console adjustment that we had this year. I think that's a good proxy. So I would pencil that in, that's fine. And then there was the interest expense where we noticed that some people modeling Centrica just hadn't quite got that correct. So we wanted to just flesh that out today. So GBP 100 million cost for 2026 is our current expectation. Let me just give you the math behind that because it's quite important. So Centrica, of course, has some debt from quite a few years ago at relatively high interest rates and a large cash balance, which is all floating. And what's happening is as interest rates are going down and half of your debt stack is fixed, the amplification on the reduction in your interest is more pronounced.

So just for example, the rate that we paid on the bonds in '24 was just over 7%, reduced to 6.6% in '25. But on the cash, a steeper drop because it's all floating from [ 5.1 ] to [ 4.36. ] So you've got both higher fixed rate debt and it's not all floating. So that's part of the dynamic. The other thing you have to take into account is there's a difference between P&L interest charge and cash paid on interest. That's things like decommissioning and other things that move through the P&L but not through the cash flow statement. Let's call that around GBP 40 million, GBP 50 million, which you probably want to adjust as well. So the IR team will be very happy to walk you through the intricacies of our debt stack but I think that's probably the best explanation I can give you from here.

With Mark, have Jenny and then Dominic.

Mark Freshney from UBS. I have 3 questions. Firstly, on the LNG hedge position, which I think is 100% out until 2028, is that to use your parlance written in black ink or red ink?

Just secondly, regarding the Rough storage facility, which you now expect to break even. Is that all because you're extracting the cushion gas?

And I guess the third question is more philosophical about the efficiency plans. I mean businesses continually need to do efficiency plans and the ones done by your predecessor and your predecessor before that, the benefits seem to go back to customers.

And when I look at -- Chris, when you mentioned your transformation plan, I think it was 6 months ago, and you said there would be upside to the GBP 1.6 billion or the range, GBP 1.3 billion to GBP 1.9 billion. Here today, we find that the only upside is the GBP 100 million from nuclear life extensions. So should we be conceptualizing the efficiency plan as business as usual and something that protects existing efficiencies or the existing businesses and profitability? Or will this be the one plan, apart from the one you did a few years ago that did show through but is this going to be one that does actually bring shareholders any benefit?

Let me take the last one first. I hope so. So the GBP 100 million benefit in 2025, but we booked the costs in core earnings. So most companies. And what we used to do, when I joined, I was talking to the Chairman this morning, I think we've only 2 left in the board from that point. When I joined, we had this massive cost efficiency program, and we were spending hundreds of millions of pounds a year in the middle column. And everybody says what's in the middle columns, please. [ I think we've let ] the cash out of the door.

And actually, I would argue rather than that going back to customers, our costs didn't actually go down, they went up. And so we had lots of -- I wouldn't say [indiscernible], but we had lots of ways of explaining why we've done a really great job of taking out cost, but we put cost back in. So with the first presentation I did as CEO was to show that we've taken out 15,000 people and the wage bill have gone up. So I don't care how many people work for us. I care what we pay. And so I actually don't think that delivered much in the way of benefit. And I had to present every 6 months somewhat convoluted story about cost benefits and OpEx.

But I just -- I think we're kidding ourselves on. Now looking to say, I don't know, our OpEx is GBP 65 million lower in '25 or thereabouts than it was in '24. Now the reason that you'll see some going back, if you take, for example, energy, I'm probably going to get kick for saying this number, but we would anticipate for that project, the first project for a gigawatt of advanced modular reactors, the pre-FID spend will probably be about GBP 600 million. You can't capitalize that and that's expense.

Now we wouldn't expect to pick up all GBP 600 million. But that's why when Russell said, we expect -- we expect to keep costs flat over 5 years, offsetting inflation, but also offsetting the fact that we expect to have a couple of hundred million of growth-related expense. Some of that will be as we go in more to building some things ourselves, you've got your pre-FID spend. You've got your front-end engineering and design, civil engineering works, all of that kind of stuff. I think you should be able to capitalize that on a successful project investment decision and don't set the accounting standards.

So you'll see some of that in there. We would expect to spend more. Again, only if the value is going to be, but we're going to have to be slightly more speculative, I think, in some of that. So I think the efficiency program will deliver. Rough storage is absolutely because we're taking out the gas. We're not injecting. However, we reserve the right. Cassim's team worked very closely with Martin Scargill's team. If today, for example, we see the chance to inject at 10p and sell at 50p, we can inject. We can change the flow in rough 3 times a day. The nominations, you make 3 different nominations, I think.

But our modeling is simply that we're going to take the indigenous gas out. And at some point, the pressure drops to such an extent that you can't get any more. And then on the LNG hedge, I would just say nice try, that would be commercially sensitive. I would say that we expect to -- I think, to be moderately flat, but it's not so much of a hedge difference and then it's all flat. There's still work with the traders. The traders are very, very busy it seems. I don't know, Russell, if you want to give any more from that LNG.

Just to remind everybody that the LNG business is much broader than just the Sabine contract into the U.K., which is where it all started. So 25 cargoes a year from Sabine hedged, 250 cargoes traded last year. So the LNG business is much broader than that one contract. And our traders have demonstrated over the past couple of years how they're able to get into positions in a really creative way to create value. So I'd take that into consideration as well.

Pavan Mahbubani from JPMorgan. I'll ask you 2 questions, please. Firstly, Chris, I want to follow up on Mark's question on the transformation program and the retention of those benefits. So if we exclude the pre-FID expenditure and everything else, how are you comfortable that you can retain any proportion or a good proportion of that relative to your competition? I guess the question I'm asking is what's different about Centrica versus what some of your peers will be doing in the businesses where you're driving these efficiencies?

And then the second question I have is, can you unpack a bit more the drivers of the lower optimization trading profits this year. And my question is, how do you expect those factors to evolve, i.e., when we're thinking about 2027, 2028? Should we assume you're back to the midpoint? Or is it a gradual ramp-up based on market conditions as you see them today?

Let me take the first one and maybe Russell can take the second one. So you're talking about in the retail business effectively. So if you look -- most of our competitors are losing money in the retail business. And Russell mentioned about unsustainable pricing that we're seeing. We're just not going to play that game. I've always been dubious from being very open of a value over volume explanation when it happens after the fact.

And Gary who runs B2C retail, and Dan who run B2B, we were quite clear when we spoke at the start of the year saying, if we think that it's value over volume, we say at the start of the year. So it's not an explanation for losing customers. And I think if we end the year with flat customer numbers, I'd be delighted. I think customer numbers probably will be a bit down because we're not going to chase unsustainable pricing.

But in the regulated -- in the price cap part of the business, what you really want to do, and it sounds very uninspiring is to be better than average. And so if we run better cost saving programs than our competitors, we put them under more pressure. If they're making losses, they're under even more pressure, and you cannot resist gravity in perpetuity.

So if we look at our biggest competitor, Octopus, I think their last account showed that they doubled their OpEx and they doubled their headcount. And we've always thought that when you get to a point where you have a broad range of customers in the B2C retail book, your costs are going to go up because some customers are dead easy to serve and some customers are slightly more difficult to serve. We have always had a very broad range of customers. We value every one of them.

So we have efficiencies. We know how to deal with all the range of customers. We have efficiencies that we can put in place. Some of these companies are learning how to deal with customers with more complex needs, and you see that their costs are growing. Our cost to serve is lower than Octopus' cost to serve today. We already have a cost advantage. The cost advantage that is portrayed through a different system, the numbers don't -- you can see this in the consolidated segmental statement, the numbers don't make that out. So we have a cost advantage today.

Now is it possible that we put through lots of cost savings and the regulator absorbs that into the price gap? It's entirely possible. But by doing so, they put other people out of business. And if they do that, then it's an uninvestable market, they want an investable market. We pick up other customers. But at some point, you have -- this market has to have enough profit in order to attract the investment that's required.

We're not perfect and we've got loads of opportunity. It's funny, every year we make -- like our customer service, our customer satisfaction numbers, they're as high as they've ever been. But the opportunities I see today are more than I saw 5 or 6 years ago when it was pretty low. So like every time you improve, you just see more opportunities. And I think that's what great companies do. You just continue to improve. So if you're behind somebody, you catch them up more quickly. If you're ahead of them, you just increase the gap.

And so we're going to continue to invest in that. We're going to continue to invest in customer service. We're going to continue to invest in delivering efficiencies. And I'm as confident as I can because not only will we deliver the benefits and retain some of that, but that we will deliver the GBP 1.7 billion and the GBP 2 billion of EBITDA in 2028 and 2030. It's going to be difficult. It's going to be hard work, but it's entirely possible.

So I think we'll be able to retain some of that. But if we don't and the regulator takes it all, that still for us competitively is not a bad position. It might mean we make a little bit less, but the market has got to be normal. And the 2.4% margin today that we've got, which is causing a lot of financial distress. There's 5 companies now, I believe, that don't meet Ofgem's own financial resilience rules. So it's getting worse. That means they're eating into capital that they've got in order to stay in the business. That's not sustainable.

What we could have done was -- and I've always said this, we could have sat for 4 or 5 years and said, you know what, the market is going to come back to us, but we haven't. We have invested heavily in improving our customer service over the last 4, 5 years, but I still believe the market is going to come back to us. But we're going to continue to invest constantly. We're not going to sit and wait. Cassim often talks about complacency being a word that where we're not complacent at all.

So we'll keep pushing. We're going to deliver these efficiencies. Maybe we're going to deliver more. If the regulator takes them, that's fine for us. We're always looking for something whereby whether you're left or right, you win. And whether the regulator allows us to keep them or whether the regulator takes them back in the long term, that's not bad for us in this market. But I do think we have to keep it, the proof is going to be where the OpEx is.

And I think that we thought long and hard about this. I didn't like when I was CFO putting restructuring costs through exceptional items because the organization thinks it's free money. And so whilst it's slightly painful, we would otherwise be talking about 13p EPS, and we'll be talking about we're going to invest even more in 2026 in transformation. But we want to make sure that everyone understands that when you spend GBP 1 of transformation, you have to get more than GBP 1 benefit. Otherwise, let's not spend the GBP 1.

So -- but we'll separately identify that, I think, each time we do the results, but they'll be in the core results. Lower optimization. When is it going to change? When is the market going to change? What date?

So the disappointment in the second half of the year and where we thought we might have ended up in Centrica Energy versus what I told you at the midyear. I mean, if you sort of stand back, I mean, commodity markets, as we know, are inherently volatile, and we saw that through the energy crisis and a sort of different type of volatility and movements in the past couple of years. And so you had that exceptional dislocations in '22, '23. And then you moved into a period of elevated geopolitical concerns, risk, high volatility, but hard to read volatility.

And then at the end of 2025, we did see the beginning of a broad-based normalization across the global gas hubs, but it didn't really go back to where it was before. And so that meant that in the second half of the year, our gas and power trading business continued to face challenging conditions, and we didn't see an improvement perhaps we thought we might have. What -- just to remind you of the sort of core of that business, when we see seasonal and locational spreads, our core strategy, our fundamental-based strategies are to take gas storage positions, power positions, interconnects and all the rest. And then through analysis of supply and demand put positions on.

And although there was an improvement in the second half of the year, there were a couple of factors that made it more challenging. The level of the summer/winter spreads was still too risky. The margins were not quite there. So we didn't put that much risk capital to work. And also the movement back into more normal market conditions happened really quite deep into the injection season. So Centrica had not taken as much capacity and therefore, has less optionality as moved through the current period. So that just meant that we've got a bit of a -- we're starting in the backfill a little bit for 2026, hence, the main reason for moving the guidance down for this year.

And you've seen in recent days, there continues to be regulatory news flow changes in the market that just make it more difficult for us to step in at the moment. But does that mean that we feel that there's a change to our longer-term outlook for that business? Absolutely not. We've got a great team. We trade across 28 countries in Europe. The gas and power markets, when they do stabilize, we'll have -- we will be there with the risk capital ready to get back to work.

Our renewable route-to-market business continues to grow, now at 19 gigawatts under management. That's got a stable cash flow base to some extent in the contracts we write and optionality around that. LNG, we've just discussed a lot of optionality there. We're growing our business in gas and power trading into the U.S. We now have an office there. We're beginning to trade both physically as well as on the exchange. That helps us underpin our natural gas supply into Sabine, but it also gives us more optionality as well.

And if you take all of that together and a broad assumption that markets will normalize, we're comfortable we'll get that business back into the GBP 300 million to GBP 400 million worth of EBITDA that we've seen before.

Jenny, let's go for you.

Jenny Ping from Citi. A couple of interrelated questions, please. Just firstly, I was very intrigued to see your slide on CCGT. And obviously, you guys have been linked to potential merchant capacity and interested in your comments around the cost of capital. So when we look into the 2030 numbers in terms of that predictable earnings stream that you talk to, how do you plan to deal with this merchant capacity if you were to go down that route, especially in the context of some of the changes in the commodity markets we've seen recently, the Italian decree, the merit order comments from the European Commission and a more headroom coming through in the capacity auctions. So I would be interested in that as a first.

And then secondly, just on, I guess, affordability and bad debt. Obviously, bad debt continues to go up. You commented that the expectation is to see that to be recovered. What I can see is the government is only talking about 10% of the overall GBP 5 billion as a first tranche. What gives you that confidence to see some of your bad debt on your balance sheet to be recovered and that continues to go up?

Look, on the CCGTs, the -- so we've always been clear that we look at regulated and contracted. And so how I think the market is going to evolve. And if you -- and the government will see this, Chris Stark, who's the -- he's got a great job title like he is head Emission Control or something for Clean Power. And Chris will tell you this that he expects we'll have to rebuild the entire U.K. CCGT fleet.

But we're going to have far more renewables. And so ultimately, CCGTs, which might provide baseload just now will provide backup generation going forward. So CCGTs will just be like [ Picos ]. And so what you're going to have to have -- the way the market has to evolve in order for this to happen is you have to get capacity market payments, which are attractive enough for you to keep the asset open. And it will have to cover basic maintenance, et cetera, and a return on capital. And then you'll get the positive spark spread when you have to run. And if you have to run in the spark spreads negative, you won't run. Because you need electricity, at the point you need to run, the spark spread has to be positive.

So it's -- like if you take it from a macro level, if the rent doesn't exist for CCGTs, CCGTs won't be there. So when we look and say, I don't think -- you might get to like RAB models, I'm not -- I don't think so. I think it will be more the capacity markets kind of tried and tested people feel quite comfortable. And I've been quite open, like I would love if we had a bigger position in thermal power generation because I think that what will happen is that you'll see this morph into more capacity market contracts. But we're finding in the [ RHP ] because things always go wrong when you do a project, always.

There's no -- very few -- I think Heathrow Terminal 5 is the last big project I saw that actually went incredibly well. Everything goes wrong, is late it cost too much money. And so the build-out of renewables, which is very, very ambitious, will not happen in the time frame that we think. It would have happened, but not necessarily bang on budget, bang on schedule. So the gas-fired generation, you've got will have to run. So you have the capacity market payments and you have the positive spark spread.

And it's really quite typical of the asset classes that we're looking for in Centrica, which is something that makes sense in the base case and you make a [indiscernible] and has a skew to the upside because the downside in these assets will be if your maintenance isn't good and you get called in a whole new world. We know how to run CCGTs. We're pretty good at it. We've got a big one in Whitegate in Ireland. And so we know how to do that.

So the downside is in your own hands and the upside is probably going to come from the market. Those are exactly the kind of assets that we would look for, but they're not regulated, but they are heavily contracted. If you look at [ Island ] Green, it's mainly contracted rather than regulated. Now, why did we feel that we had a unique bidding position in that? Well, we know that asset because of 1/4 of the capacity. But our capacity is up in 2029.

And so we know today, so Cassim's team figured out what we would bid in 2029 for that capacity. And so when you look at it on a stand-alone basis, that sets a floor because we will either bid and get that capacity and we know the return on the asset or we'll bid and we won't get the capacity. And the only reason we won't is because somebody bid more. So we're always looking to see how do we establish the floor. And we will have quite a high risk tolerance, I am always looking at the floor, how solid is the floor and then how can you build on top of that.

So for CCGTs, I would love to be there. The trick is to be in the right place in the meta order. You then touch on what happened in Italy about the carbon pricing. Unless you had a rock solid -- so it's quite clear there's going to be some movement in terms of whether -- where carbon pricing is going to go. So unless you have something that's rock solid, irrevocable in terms of spending money and lots of carbon capture, you're probably not doing that at the moment. And the news from Italy the other day probably undermines that.

But we are not looking at that just now. So if we were to look at a power station with CCUS carbon capture utilization and storage, we'd have to make sure that, that was irrevocable, that, that was absolutely cast iron. Russell will be looking at. Raj, our General Counsel, will be looking at that. And if it wasn't, we probably wouldn't do that because that is too much of a risk.

And some people will have woken up on Tuesday morning to the news from Italy, they can ship our business models under threat. We will never be in that position. We're always looking to see how do we spread the risk, how do we garden the downside? How do we make sure the contracts are with the right counterparts? How do we make sure that the regulation is absolutely cast iron? So you can look and then say, well, what if the future government changed the law. Well, the government has changed the law and undermine contract rights, then countries become uninvestable. That's what you see in some developing countries. I don't think the U.K. will get to that point because if it did, the capital outflow would be absolutely huge.

So some of the stuff we look at a very detailed micro level, how tight is our contract and some of the stuff is at a very high-level macro level, which is, okay, if the worst happens, what does that mean for the country? Because we're kind of tied into -- we need things that are good for the country, we take a view as to whether something is likely or not. But it's also why we look, for example, at spreading our geographic risk. I think we've fixed our operations we started to invest, but we look and say, well, there's more that we can do.

The office in the U.S. is one thing I would expect us to enter 1 or 2 new countries outside Europe in the trading business this year. And we're in very small positions in Belgium and in Sweden, but I'd be quite happy to grow into -- and I don't think in 5 years, we're going to be in 20 countries. I don't think that we're going to physically be in 2 or 3 or 4 countries. I think you're going to have something that's less than 10 but more than 5. I mean that also helps you with the risk.

Yes. Bad debt, you want me to -- I mean, I'm happy to have a go and get it wrong. I think at the high level in the bad debt, bad debts are recovered through the price cap. That's why I think people don't appreciate how regulated the earnings are in British Gas Residential energy. So you recover it through the price cap. If you're better than average, it's a profit center. And if you're worse than average, it's a cost center. And debts are -- I think they've gone up fourfold or something.

So the debt on our balance sheet at GBP 1.2 billion or so. It's absolutely huge. The thing I worry about more is that means that there's a bunch of people that can't pay. So something's got to happen in order to fix that, but the regulator has got to come up with the right answer. So we call for a social tariff, we've been calling for that for quite some time. We can't differentiate between those who choose not to pay and those who really can't pay. We wish we could. And if we get social tariff, then those who can't pay will be treated as compassionate.

And at the extreme of social tariff would mean some people will get energy for free. Those of us that can afford to pay more will see prices go up, and that's right. And those that can't afford at all could ultimately see free energy. And those who choose not to pay, well, then you'll be able to take action against them. And because at the moment, because of the way that the price cap works and the cost being socialized, those who simply choose not to pay have been subsidized by those who do pay, and that's wrong because there's a lot of very poor people that are paying their energy bills. They shouldn't be subsidizing people that can afford to pay.

So it's high, it's a concern. It's a working capital issue. This is why we campaign for financial resilience because we've got the working capital. We've got a very good CFO who manages the balance sheet to make sure that when Gary's business needs a flow GBP 100 million, GBP 200 million, GBP 300 million, GBP 400 million, GBP 500 million working capital, we have the cash, we have the liquidity. We campaign for financial resilience because those companies that run a very, very tight in the balance sheet, I don't know how they're coping with this at the moment. And we don't think that systemic risk should be left with consumers, which it is just now because if they go under, consumers ultimately pay the cost. Did I get my numbers right or wrong?

So actually, you're broadly correct. So it's actually GBP 1.9 billion worth of net debt on the balance sheet including both billed and unbilled. So that's a challenge. And if you look at Note 16 in the accounts we published this morning, what you'll see is that's predominantly in that greater than 360-day category. So that's the same trend that British Gas is seeing as the rest of the industry is seeing.

Our bad debt charge as a percentage of revenue went from 2.3% to 2.8% in the year. So about a GBP 40 million increased charge. So it's a weigh on the P&L. But as Chris says over time, we're expecting to get a recovery for that. But it's that all the debt that's the real challenge.

It's Dominic Nash from Barclays. A couple of questions from me, please. The first one, I think it is to you, Russell. I think you mentioned before that you previously published a waterfall chart. And on the waterfall chart, you came up with your EBITDAs, your CapEx, your requirements.

And then you also said that you had a net debt EBITDA sort of target or goal of between 0 and 1x, I think it was for one sort of like a limit and one sort of like a target, I think. But on our numbers, I think that gets you about GBP 1 billion of sort of headroom which I think quite a few of us in this room probably earmarked as buyback rather than anything else.

Can I just confirm that, that sort of headroom still remains and it's basically just now either going to be option on CapEx and less likely to be buyback, but whether the headroom is still about the GBP 1 billion.

And the second question is to you, Chris. Actually, it's kind of half following up from Jenny's one on gas. Sort of double one here is that the government clearly has a policy to decarbonize completely.

And you are bringing up the doubling of CCGT output and so one of my first question is why are you doing that when you can't build this side of 2031 and you don't have any CCGTs.

So what are you sort of message are you trying to tell us about that? And secondly, clearly, under the current government, I think there is no doubling of gas expected. And in fact, gases continue to go down. So do you have like a road map to whether or not we could see the gas strategy change this side of 2029?

Or do we think we're going to need a sort of change in government before we end up with a more sort of gas as a transition fuel sort of narrative?

Good question. Let me take the one on gas. So the numbers that we showed were from Aurora. So they're external numbers. So that's not our internal forecast. That's an Aurora forecast. And the doubling of CCGT is in the mix rather than our position. I think it depends on what you think is going to be the builder.

But the more intermittent electricity we've got, the more gas-fired generation we're going to need. And then the question comes in terms of how much economic growth do you think there's going to be, how much increase in electricity demand do you think there's going to be.

Now there's a huge notional increase in demand from data centers. I think when you look at the physical requirements of building, everyone talks about a gigawatt data center. I think that's half a square mile.

Apparently, it's $5 billion worth of chips in the plant. We would build the power station for $1.5 billion or so, and you might build it co-located and not connected to the network. It takes you 5 years to get a turbine. So you say that to 2030.

How do you do all of this kind of stuff? The numbers we've seen in the -- I think in the -- by 2040. So there's a whole bunch of stuff in there that Aurora might have got right, might have got wrong. My belief is that we will see growth in electricity demand. We will see economic growth in the U.K., and we will see growth in CCGT as a share.

Now we've got a big biomass plant in the U.K. Will biomass survive or not because we've been talking about biomass BECCS with carbon capture and storage. So you might see a change in that mix. So gas might replace because the lower emissions from gas than there is from biomass, whether you buy the argument that it's renewable and biomass is a political question, I don't want to get into, but you could see a change there.

That's about 3 gigs or something that's on the system just now it's about 8% of U.K. demand. Obviously, you'll see the reduction in the -- by 2040, to the 4th advanced gas coal reactors will be off as 4.8 gigs. Hinkley C should be on. Size will see definitely won't be on by that point -- sorry, definitely, I'd be amazed if it was on by that point. I'd be delighted, but I would be amazed, I think roughly around there.

So there's a whole bunch of assumptions. What we know is the assumptions will be wrong, but you will need more gas-fired generation. The question about how much electricity will be generated, I think that's open to debate because we don't know what the weather patterns are going to be like in 2040. But we can't take the risk that intermittency increases because weather patterns become more changeable.

So you're going to have to have the capacity, which is why you're going to have to have the capacity market payments, which is why they're an asset class that we like. Whether they will generate 300 days a year or 3 days a year, I have no idea. But I like the course for 3 days a year. We're capital goes to 300, then we're making a lot more money and bringing down costs for customers.

So there's a long time between now and 2040. But I think the current government recognizes gas as a transition fuel. I think the question on some gas -- I was in Qatar in November and one of the senior Qatari Energy Ministry people said that they don't think gas is a transition fuel. They think it's a destination fuel, and they said, can you deliver that message in the U.K.? I'd rather not get involved in that stuff that's for you guys to deliver.

But I think what that signified is they no longer see like blind decarbonization as being an issue. And therefore, they've probably got more discipline in terms of how they're going to get their gas out of the ground. And I think we're seeing a lot of pragmatism in the U.K. as well. I think if you look at that gas consultation, that's not the consultation of somebody who's pursuing blind decarbonization.

It was a very measured, very sensible consultation. NISO who come out recognizing for gas storage as a government body now. And so I think we're seeing a lot more pragmatism.

And what we're trying to do is to just steer away from all of the kind of politics and all the headlines and stuff about net zero. The reality is what we're trying to do is to decarbonize, have secure energy and have it that's affordable. And we think CCGTs are going to be right in there.

I would love to have more CCGTs, but only at the right price. If somebody else has a lower cost of capital and they'll pay more, then fine. I think at the moment, people are struggling to value these asset classes. I don't think they're attracting -- like you've got a really low cost of capital, you want to buy a network or you want to buy -- you want to be in the CFD or wind or something that's where the lower cost of capital is going. If that allows us a chance to get in and build a CCGT position, I would be delighted.

Great. And then just moving on to the waterfall chart from last year on the financial framework for the coming years to come. So no change to the expectations of the overall framework. And just to remind everybody because we don't have it on the screen today, what we were looking at there was the evolution of the balance sheet where on one hand, you had the completion of the GBP 4 billion investment program. You had the continued progressive dividend.

You had the other liabilities, pensions decommissioning. But you also had alongside the cash generation from our existing assets and our new assets. And we sort of pushed that all forward to the end of 2028.

And what we could show by then is that we would be able to move the balance sheet up to approximately a 1x net debt-to-EBITDA level. We would have a bit of a buffer and reserve just because of the volatility of the business. And over time, we would expect that some additional financial flexibility could come to bear.

And that's right, that was about GBP 1 billion. And I think roughly ups and downs, that's probably the same proxy that I would look at today. But it's not there today because, of course, what we've got to do at the moment is move through the next couple of years, continue to generate from our existing assets.

We've only spent GBP 2 billion of the GBP 4 billion of the capital program. So that needs to come out of the balance sheet into new assets. And we paused the buyback because we think there's more value at the moment for us to continue that investment program and then make sure we've got a really strong set of cash flows in the future, which gives us much more optionality and whether it's buybacks or other sources or use of capital.

We've got to add that back to the AGM. I'm conscious people's time come through if there's any questions online. The one thing I would say is that there's -- I always -- when I was a CFO, I always used to run a slightly what people call a slightly flatter or conservative balance sheet.

It seems like there's always a point in the cycle where you think thank God, we've got a balance sheet like that, either because you go into a bit of a downturn and you need to float working capital or because your competitors are highly leveraged and you get the chance to pick assets up at a low price. So there is a benefit in us having a slightly more conservative approach to our balance sheet.

But hopefully, people see the fact that we've bought back over 1/4 of the company over the last 3 and a bit years. They see that we're super committed. I mean we know who we work for. We work for the shareholders. We get excess capital, we give it back.

But we think it's in shareholders' interest for us to have the optionality to act and to pick up assets or to not worry because you find out, for example, that Ofgem's next quarter's bad debt recovery charge is not as high as you would like.

There are some of our competitors who I think it's an existential issue for them as to what the next price cap, but it's not existential for us at all in the short term. Harry and Ajay then we'll go to Fraser. And I'm just conscious of everybody's time and over kind of drag.

Yes. I'll make a quick I appreciate we've gone through a lot of stuff already. It's Harry from BNPP Exane. So hasn't been asked yet. The buyback, what's your threshold for reintroducing it? I guess in the past, you've been willing to be quite flexible. Last time that your shares fell a little bit after pausing buybacks, you resume them in quick order.

Is there a share price threshold below which you'd be interested in restarting buybacks? Is there an opportunity cost threshold? What would cause you to resume the buyback? I guess another observation is that your opportunity cost on cash, right?

Because your cash treasury rates have gone down, you have less to lose in terms of interest income if you spend it on buybacks instead. So that's the first one. And then the other one is on the capacity payments. I wholeheartedly agree with you on capacity payments. I think this is something that everyone's -- not everyone, but a lot of people are missing right now.

I think gas is going to become a regulated asset in Europe, and there are still countries which don't have capacity markets, which are going to need them. Would you look in Europe for orphaned gas plants? Look at the Netherlands, for instance, where there's no capacity payment, there's no spark spreads, but those plants could become very profitable if you did get a capacity payment.

You've expanded internationally with your trading business. So why not become an aggregator for orphan CCGTs in Europe and then clean up when capacity payments massively rise at the end of the decade? Loaded question.

Yes, you're not selling CCGTs in the Netherlands, are you by any chance, no?

Sadly not.

Look, I think that -- I mean, Russell and I both used to work for the same Dutch company or company that was Dutch at the time, I think Russell spent quite a number of years living the. I like the Netherlands as a place to do business. However, there was quite a big court case in the Netherlands about decarbonization targets. So maybe there's some assets there for a reason.

But the Netherlands will be exactly the kind of market that we would quite like it's good rule of law, et cetera. And if there's value there, and we know the market and Cassim's team know the market well, then why not. But we are -- we don't look and say that's the kind of place we want to go. We want to create value. And if you take, for example, the market, we say, well, there's no capacity market at the moment. There's no spark spread there.

That's a bit more of a punt, I think, than saying, okay, we can see a market where there is a capacity market already. There's a good liquid market. We can see the assets. There's less of a punt in that. And I -- our whole thing and whatever it is, whether it's technology, whether it's in buying assets, is not to take the risk of being the first mover, but being able to move when somebody establishes something is possible, being able to move quicker than the competition. And something has even been able to move quicker than the first mover in taking advantage of that.

So don't hold your breath for us to be coming back and talking Dutch when we're there. But I'd love to build our position there. Look, buyback, you know why we're not going to give you an answer.

I think our share price today is undervalued not because it's down. I think it was undervalued when we started the date or when we closed yesterday. But we'll always look at where the value is. And we're delighted to have bought back, I don't know, well over 1 billion shares at [ GBP .30. ] [indiscernible] whatever the number is, and created quite a bit of value there in the capital appreciation, but also in terms of the dividend stream that we would otherwise have been paying.

The first point we look at a buyback is to say, do we have surplus capital that we're not confident that we can deploy? Or do we have I don't know the right word, but unexpected gain. So I can't remember when it was, there was a couple of years ago where we upped the buyback by GBP 500 million at the last part of the year.

That's because our performance in trading was beyond anything that we expected. And we looked and said, okay, we've got a bunch of ideas. We've got a bunch of capital, but we really didn't expect that. It must have been in 2023 or something. And so we just stuck that into the buyback. So if we have surplus capital, then we'll look in there. And I think of it first and foremost as being a way, an efficient way to return capital to shareholders.

It's not to say we ignore the share price. But I think if we had surplus capital, and I went to the Chairman and said, I think our share price is a bit overvalued. Like if I was the Chairman, I think I might need a different Chief Executive. Because if I look into the share price is overvalued, like on a structural basis, that means that I run out of ideas.

And so I think that -- I think we're materially undervalued today based on what I can see. But I also think that the capital we've got on the balance sheet today can be invested to create more value for shareholders by delivering that value than it will be by buying back shares. If a number of these things that we've spoken about don't materialize, then the capital we've got the balance sheet today, we might not have as many ideas.

Therefore, we might say, you know what we're going to return some of that to the shareholders. But what we're not going to do on a daily basis to take a view on the price. And I'm not going to tell you where I think the trigger price is. I will tell you, I think we're undervalued today.

Excellent.

Ajay, you don't have another 4 questions, do you?

Ajay at Goldman Sachs. So it was more just thinking about those nuclear sites. And it's a little bit far along the line, but at some point, there is a point where these assets close. And I just wondered what the development options are outside of being nuclear stations.

And I know you've got the SMR opportunity, but you have connection, it's secure. There's a lot of opportunity for repurposing in some way, and that was very much a debate over the last quarter. So yes, anything you could give us there would be helpful.

So the first -- it's no coincidence that the first anticipated deployment of AMR technology is at Hartlepool, where we've got a 1.2 gigawatt power station at the moment is due to close in 2028. I think it will go into the early 2030s.

So you've got a good connection, you've got highly skilled workforce. And therefore, you've got the conditions to build a power station. I think if you look at nuclear, the energy stuff we're looking at is 80-megawatt reactors. They're quite small, you can deploy them.

Really, their optimal deployment is now 4 pads, so a pad of 420 gig -- 320 meg, sorry. And so theoretically, you could put them anywhere. The reality is I think that you find -- I think the U.K. is quite neutral on nuclear.

And I think if you live in a community that has nuclear power and like if you live in nearshore where Hunterson is, they would love, I think, nuclear power stations down there because they've been there for 50 years. They know it's safe, well-paid jobs, et cetera. But I think if you go to a greenfield site and say, you know what, I'm going to build a nuclear power station here, you're probably going to have some problems with the local communities.

And so I think the natural use for existing nuclear sites is to deploy nuclear technology. But if you can, then -- so the question is, could you build a CCGT at Hartlepool and use a 1.2 gig connection? Absolutely. You just have to make sure that -- because there's a lot of work that goes -- I mean, when you get to the point of decommission nuclear power station, like Hunterson is still taken on apprentices. There are people that will work for their entire working life on decommissioning that power station. So you just got to make sure you've got enough room enough land around it. But yes, these are valuable connections.

Existing grid connections in the system when you've got a number of years of, they're certainly valuable. The question when you come and look at the project management is what's in the critical path. So if you can't get a turbine for 5 years, you kind of have to order things in advance, but they certainly have value, 100%.

And this one was just for Russell. So sort of expanding on Dominic's point. The EUR 1 billion of headroom that we were talking about by '28. So if you have a target of GBP 2 billion by 2030, and we're expecting the mix of the business to improve and 1x was the number at 2028. then could we be talking an additional GBP 1 billion, GBP 1.5 billion by 2030 of extra headroom?

Just thinking how we should be thinking about that risk profile and how it affects those numbers.

So I think that for now, we stick to the waterfall chart I gave you last year for the journey to 2028. But rest assured, Chris is pushing us all hard to do better than that. And if that happens, there'll be more flexibility all around for everything that's on that chart. 2030, a combination of the transformation program, the continued growth of the assets that we're investing in as well as new investments that might come through at that time.

Of course, it's going to give us more flexibility, and that can either be for new investments or greater returns. So that's one of the reasons today we wanted to give everybody comfort that there's a journey beyond 2028, and that's a positive journey.

Fraser, any questions online?

Yes. We've got a few. I will -- there's a couple we won't get to. So the IR team will come back on those ones. But if we can start, I'll combine a couple of different questions on retail. So we've seen retail customers growing over the course of the last few years, but then down in the second half of the year.

You made some comments about the strategy there. Could you just elaborate on what the go-forward strategy is around the retail, particularly energy supply customer base? Are we trying to grow customer numbers shrink customer numbers? What's the story there?

And then the second piece is just around the sort of economics of different tariffs, probably a question for Russell. What assumptions do we have around the share of regulated retail tariffs versus fixed rate? And how do the economics compare there?

And then the increasing demand from B2B customers, the growth in the B2B business, what are the underlying drivers there? And how does that impact unit margins?

So look, customer numbers, it's clear the strategy is to maximize the value from that business. We pulled back on some of the customer acquisition costs or activity last year. And in part, that was because we didn't see the value. And we have reduced our spend at the moment we're not going to chase per business. So the strategy customer numbers used to be a great proxy for value. I'm not sure that as good a proxy now.

And so we're just taking a pause and looking with our new customer lifetime value model, how do we determine how active we want to be in the market. We're not going to chase numbers so we can see we grew customers. I wanted us to show that we could grow customers in all of our businesses before we said, okay, now we're going to maximize the value because if we hadn't, I think there would have been a credibility issue.

It would have looked like we were saying, you know what, we can't grow customer numbers. Therefore, we're going to pretend we've got a different strategy. So it's all about maximizing the value. Russell obviously answered the economics in the tariff.

And the B2B growth, I think that's something that maybe a little bit underappreciated. [ Matt Wood, ] who runs that business is sitting in the front row just now. When I joined the company, that was a GBP 2 billion revenue business with GBP 40 million of profit. It's now a GBP 4 billion revenue business, GBP 100 million of profit.

The growth in that has been quite substantial. And we think that we can continue to do our position. And we take -- again, that's where we take value over volume. because we did large I&C customers. The margin on large I&C customers can be 1% of the gross margin. You don't need to do much to lose your gross margin and end up losing costs.

We don't really do large I&C customers anymore. We do smaller customers where the margin is higher. There are the odd I&C customers that have actually done through Cassim's business because if you're a large I&C customer and energy is 10%, 20%, 30%, 40% of your cost base, you are very sophisticated when you're buying. And so if they want to buy from us, then they'll deal with our energy traders who are also quite sophisticated.

That's not say not sophisticated. But if you're dealing with somebody calling up from the local corner shop or somebody calling up that spending -- we had a contract in Ireland with an aluminum smelter. They were spending EUR 350 million a year on electricity. And I think our gross margin was less than EUR 1 million, and we just stopped it. It just made no sense for us to take that risk.

And so on the B2B side, we are -- we have been pursuing value over volume, and that has doubled the revenue and doubled the profit or more than doubled the profit. And that's similar to what we're going to do, I think, in the B2C space.

But we would expect to see continued growth there, but we're not going to grow in -- we're not going to go after the revenue we're going after -- we will see turnover for vanity and profit for sanity, I would follow that logic. Russell, what we do in fixed price tariffs?

Yes. So just -- I mean, when we were in the energy crisis a few years ago, nearly all of our customers in the retail supply book in the U.K. were on the standard variable tariff. The dynamic has changed as we expected in the past couple of years. So we were 25% on fixed rate tariffs in 2024. That moved to 32% in 2025. So that does have a dampening effect somewhat on margins.

We'd included that in our guidance and our expectations for the business. It's a competitive business. And as Chris said, we will not be chasing unprofitable tariffs or customers.

Any last questions? I'm just conscious that it's 10 past 11.

I think...

Questions have not been asked already.

There's a question around -- well, 2 questions. One around guidance for 2026. 2025 consensus came down to an extent through the course of the year. 2026 guidance is -- we've obviously pointed out a couple of areas where people need to adjust. What confidence can we give that the numbers are not going to drop further through the course of this year, particularly around the optimization outlook, what gives us confidence in 250 million versus about 200 million last year.

Well, look, we give guidance on what's in front of our face and the analysis we can do today. Centrica Energy, we can see the positions we have. We can see the capital we've got placed and we can look at the markets.

And I think that 250 number is a good guidance for today, and that's the same as the rest of the businesses. There could be some volatility in the infrastructure businesses or in the retail businesses. That's why we have ranges.

But I think the Slide 14 that I gave you today, I think, is a good proxy for 2026 as far as I can see it.

And like every good sell-side analyst, I will -- I'll try to squeeze in a third one, which is -- taking my inspiration. Performance in services was very strong during the year. Can we elaborate on the progress that's been made and what gives us confidence in getting that business back into kind of teens, low teens EBIT multiples margins?

Yes. Look, so I think a lot of it as we described about boiler service, boiler installation, for example, is looking at our processes and saying what is it that's working, what do we need? So example, in boilers, we had a rule if you had a boiler that was installed that required -- that was above the ground floor, we put a scaffold up.

Now you got a Sky TV dish installed, very rarely did put a scaffold up. We put a ladder up, but they drill a hole in your wall and attach ladder to the wall so it' still safe. If you say you can't drill a hole the wall, you can't have a satellite dish. And so we were putting up scaffold, which is expensive.

We were then leaving it up, which I thought was a security risk rather than putting a ladder up. So we changed that. We will put up scaffold where we have to, but it's not a hard and fast rule. And it's these really small things. Gary has got the team looking at this, and we've got some internal people that are probably the bane of Gary's life because they're fiddling about trying to find all these different things. And these things all make a big difference.

We're looking more at things like, for example, if you think about our installations team, we do boilers. We do heat pumps, they are the biggest installer heat pumps in the U.K. But we do rewires. Now many people would think I need a house rewire, I'm going to call British Gas. They probably don't.

So there's some more marketing for us to do to tell people, we've got a bunch of electricians that are doing rewires, rewire a reasonable size house is best part of [ 10,000 ] or something. So there's a lot of -- there's -- when we tell people what we do, we get -- the demand is there because our competition is somebody in a white van. And some of these people are absolutely brilliant, but everyone's got a story about like a bad builder or a bad contractor or something. You know where we are.

You don't have to worry about whether you're going to be able to find us. You know where British Gas is. So the opportunity is huge. I mean I think the growth opportunity for us in this business is absolutely gigantic. We wanted, however, to get our operations in the right place.

We were letting our customers down. And the reschedule rate has gone down massively like 20-odd percent a few years ago, it's 4% now, and we're meeting the customer promise. 80% of customers that call us by 11:00 on the -- you call it by 11:00 with no heating or no hot water will be there same day. So 80% of our customers we're meeting that for.

Now what we did when we brought it in was we said you don't have to be a British Gas contract customer. You just have to call us. So it was an operational-led decision. Now it's kind of more commercial because if you don't have to be a British gas customer, but we'll go out the same day, well, why would you be a British Gas customer? So those customers that are contracted with us will get preference.

Those customers have got subscription, I think I don't know, Gary, 100,000 subscriptions or something now or more, they will get preference. So we've got the operational discipline. We've got the operational performance. We've got the brand. We've now got more commercial now.

And this is, we announced last week, 500 new apprenticeships. The question I'm looking at is to say, well, we've got a few hundred electricians, do we just go out and hire a few thousand electricians on spec? Probably a bit too much, but it's certainly not that we just hire another 5 or 10 or 15.

And again, this is where -- going back to the question on how much of the cost savings will come into the -- we'll go to the shareholders. There will be things that we have to lay out cost in advance. And it might be this to, we're going to go and hire 500, 600, 700 electricians because we know the demand is there, but the demand is not going to come on day 1. We're going to have to do the marketing.

We've got to spend more on the marketing. So I'm very confident about that business because the operations are now very strong, and there's a very good Chief Operating Officer in there, and she's making improvements every single day. I mean you were with the team yesterday in Calvert. I think Gary, you're seeing some of the making improvements every single day. So we know the demand is there. We've just not been able to satisfy it.

Now we can satisfy it, and we just got to see some more money in there. So I'm very confident that we'll see growth. I'm very confident I can say as we close off because I'm assuming you don't have any more questions and you as your sell-side analyst persona on. But very confident in our ability to deliver what we said we're going to deliver in 2020, what we said we're going to deliver in 2030.

If you look at what we were doing, we said a while ago, we're going to sell out of the North Sea, and we're going to put that money into electricity assets. We just sold the last North Sea asset. So we do what we say we're going to do. We are investing in contracted and regulated assets. I think some people probably at some point, thought the Sizewell C thing is never going to happen. I thought that on occasion as well, some things in the meetings. But it took us probably the best part of 3 years. We've now got, I think, a phenomenal investment opportunity.

We have earnings in 2025 relating to Sizewell C much be putting GBP 400 million, GBP 450 million or something in November?

GBP 380 million.

GBP 380 million that means we didn't disclose that number. I'm in trouble now. But the best part of GBP 400 million could in there. And we're making a return on that. That will be -- we'll get a full year return in 2026. Some of these investment opportunities are huge. We've worked very hard with the government, and we saw the consultation on gas come out, which you could argue has got parts of it written with rough in mind.

And so some of the stuff that we've got does take years to develop and some of it is binary. The government says, yes, the government says, no you get planning permission, you don't. You get a regulatory model or you don't. That's why the discipline is so important for us, but it has to come with patience on our side so that we don't do anything that. But what we lay out, the GBP 1.7 billion in 2028 the GBP 2 billion in 2030, the fact we think we're going to double our EPS or better by 2030 is something that we are confident and it's not easy.

And we've got a leadership team here and a lot of our colleagues who I think are both invigorated by it and sometimes exhausted by it because it's hard work. It's hard work every single day. But we absolutely have the opportunities.

We've got the people, we've got the market positions. We've got the brands. We've got the finances, we've got the balance sheet, and we've got confidence. So sorry for keeping you because that's been -- mind the old centric of things but we would present and previously we present for about 15 minutes and you only get about half an hour for questions the other way around. So thank you very much for coming, and we'll see you again in July when we present our first half results. Thank you.

Thank you very much for joining. It's great to be here again today. And it's only 2 days since our last meeting for some of you. So I'm sure you're delighted to see a lot of us this week as usual. I'm joined on the stage by our CFO, Russell O'Brien. The leadership team is in the front row, and we've got our Chairman here as well, Kevin O'Byrne.

The work we've done to improve our operations and pivot our infrastructure portfolio mean that our business is becoming more balanced and more resilient. And you can see that coming through in these results. We are increasingly able to offer our customers the solutions that will keep energy reliable, sustainable and affordable through the energy transition. We can look to the future with confidence.

The external conditions have been challenging so far this year, and our results reflect that with earnings of 7p per share. Weather has cost us about GBP 50 million in the first half. Whilst we can't control the weather, we've been able to use technology and data to improve our response.

We have developed new models for predicting demand, which resulted in better performance during the recent exceptionally warm weather than it would otherwise have been, and we've moved away from full seasonal nonhedging. This mitigated the weather impact by tens of millions of pounds. And although Centrica Energy has faced headwinds in gas and power trading, we were prudent about the way we traded in the first half, we were disciplined. We took risk capital off and we sat, and we watched the market.

But we're not alone in seeing these external trends, but we're also not complacent. We remain focused on creating value. And the way that we're managing the business means there's no change to our outlook for this year or beyond. In fact, we're increasingly confident that we can deliver in the top half of our EBITDA range by 2028. And personally, I'll be very disappointed if we don't do much, much better than that.

We remain in good shape to deliver growth, with our balance sheet in a very, very strong position. And that means we can also continue to recognize our owners, our shareholders through the ongoing buyback program and our intended 5.5p dividend this year.

The energy transition continues to present massive opportunities for Centrica, opportunities to keep energy secure and affordable for customers while supporting the journey to net zero. We remain disciplined and pragmatic as we pursue these opportunities with the terms at the heart of everything that we do. And we're focused on our three strategic value drivers: number one, driving operational improvements across the group; number two, more commercial innovation; and number three, investing for value.

And we've made progress across the board, but there's still much, much more that we can do, particularly on the commercial side and most notably in Services & Solutions. Profitability is growing. It's great to see, but we need to get customer numbers moving in the right direction. And we can further simplify how we do things.

The good news is that the steps we've taken over the past few years, moving our data to the cloud, beefing up our capabilities; means that we can embrace the latest advances in AI and technology. There is a huge amount of value here for us, both in the top line and in our cost base. And that's why we're accelerating our transformation plans, and I'll expand on that later.

So when we launched our strategy in 2023, we laid out how we would position Centrica to benefit from the energy transition. Disciplined investment to grow our infrastructure business is a key part of this strategy with a clear target to increase our share of stable, regulated earnings. And we've taken a significant step forward in that with Sizewell C. We're delighted to be a part of this project alongside the U.K. government, EDF, La Caisse and Amber. We could not have better partners to [ push ] this development forward at pace.

And once built, Sizewell C will provide vital energy security for the U.K., generating affordable zero carbon baseload power for decades to come, creating 10,000 highly skilled jobs and 1,500 apprenticeships.

Now developing nuclear plants is not easy. The government deserves huge credit for recognizing the need for this investment. And I'd like to reiterate my thanks to the U.K. government, to the Chancellor, Rachel Reeves, and our team at the Treasury and to the Secretary of State for Energy Security and Net Zero, Ed Miliband and his team by creating a stable long-term regulatory framework. They've addressed the key barriers to attracting private capital, allowing us to invest with confidence and delivering clear benefits for the country at the same time.

Now we've set a high bar to commit our capital. The structure we've agreed delivered attractive returns, and it meets the requirements we laid out, phased investment, no preproductive capital and protection against delays and cost overruns.

We've also secured valuable future options to potentially increase our stake and to provide route-to-market services. It's a long-term investment. It's backed by regulation, and this will make us far more predictable. We're doing what we said we'd do, and we've got more fantastic opportunities under review to deploy capital. That remains our focus, subject, of course, to delivering value. And as I've said before, we will be very disciplined.

We like nuclear. It's the only truly reliable and sustainable source of energy. It's the backbone of the energy transition. And aside from Sizewell, we continue to study the case for even further life extensions at our 4 advanced gas-cooled reactors. Now any extension are pure -- it would be a pure value upside. There is limited or no additional investment required.

Elsewhere, the meter asset provider continues to perform better than we expected. The team has done a fantastic job growing a business from scratch. It shows what we can do when we bring the right people together with the right focus. And as of last week, we've got over 1 million meters in the wall, and we expect to take that to 1.5 million meters by the end of this year.

Our EBITDA target is well underpinned, and we're starting to think about broader commercial opportunities, exploring how we can grow this fantastic business even faster. In Ireland, we've got -- we now expect the commissioning of our 2 gas peakers around the end of this year. We're working really hard to get the plants up and running, and the case for reliable backup generation continues to grow.

And that's why we're pleased to be building a third peaker in Galway, and that will take us to 1 gigawatt of capacity in Ireland by 2030, which is 20% of Ireland's current electricity demand, with returns underpinned by long-term capacity market contracts at all 4 Irish gas power stations.

Our long-term pipeline remains strong, and we continue to review a broad range of opportunities. And at the same time, we've accelerated value by selling most of our share in the Cygnus gas field, and that continues our move away from gas production, and it increases our focus in Spirit Energy and the really exciting carbon storage opportunity at Morecambe Net Zero.

If you look at Rough, we welcome the government's recently announced consultation on gas storage, and this will consider possible regulatory frameworks to unlock investment. Rough is a vital strategic asset for this country, but we've been clear that a loss of up to GBP 100 million this year is not sustainable.

And we continue to produce the remaining gas just now, and we're ready to develop Rough as soon as we get the right framework in place. This will be another long-term project, delivering energy security for the country and value for our shareholders.

Now we remain hopeful, but we can't keep this option open indefinitely. Without a positive outcome from consultation, the consultation is due to start in the autumn, it's hard to see Rough operating beyond the end of this winter. So we will be urging the government to move at speed.

And that's enough from me. Russell is going to take you through the numbers, and then I'll come back and talk to you about the strategy later.

Thanks, Chris, and good morning, everyone. Before I dive into the numbers, I just want to echo Chris' sentiment that we continue to see good progress across the group. We've delivered strong operating metrics, and we remain focused on further improvements as we move forward.

So for the first half, adjusted EBITDA was GBP 900 million, translating into earnings per share of 7p. Whilst resilient overall, certain elements of the first half have been challenging, and our financial results reflect that. We generated free cash flow of almost GBP 250 million, which includes CapEx of GBP 244 million. And our adjusted net cash closed at GBP 2.5 billion after returning GBP 0.5 billion to our shareholders through the share buyback and dividends.

We've declared a dividend of 1.83p per share for the half. That's 22% year-on-year up, consistent with our intention to pay 5.5p per share for the full year. And at the end of June, we had about GBP 450 million remaining on our GBP 2 billion buyback.

Group operating profit was GBP 549 million, a softer result compared to last year. And let me take you through the key elements of that. Retail and Optimization delivered GBP 354 million of operating profit for the half. Within that, our profits in Retail grew, a good result, given that backdrop.

Services & Solutions saw an improved result of GBP 42 million, stronger operational performance, supported by top line growth of 4% and margins grew. There is still much more to come in Services, and we are building momentum. We remain confident we will hit our guidance range next year.

Now despite the warmer-than-normal weather that Chris mentioned, British Gas Energy delivered GBP 179 million of operating profit, a year-on-year increase driven by a strong performance in small business. Centrica Energy was impacted by unusual market conditions with operating profit of GBP 65 million. Infrastructure output was broadly flat against last year, although profits were lower due to falling commodity prices, and that's partially offset by the hedging we do.

We also saw a loss at Rough of GBP 26 million, principally driven by the high fixed cost base and lower gas price spreads, although we were able to accelerate delivery of some of the revenue and release working capital.

So let me unpack a couple of the important dynamics behind the results. Weather is our single biggest risk, and there is very limited scope to hedge it out. A cold start to the year meant we were about GBP 50 million ahead of -- by the end of February. But from March, that reversed. So unseasonably warm temperatures meant volumes were 12% lower than normal through to June. So that cost us overall GBP 100 million. So overall, net-net, it was a GBP 50 million headwind from weather.

And as is always the case with this business, there are timing differences between periods on revenues and costs, which influence the results. And we saw that this half, including a GBP 40 million benefit from the final reconciliation of the energy price guarantee scheme and the headwind from the shape of the commodity curves.

In Centrica Energy, our LNG and renewable route-to-market businesses are performing well, but results were softer because of two important trends impacting gas and power trading.

First, gas storage economics have been impacted by mandatory volume targets in Europe. That was a key driver of inverted summer/winter spreads, which significantly reduced the opportunities we saw to secure capacity this year. But the result is that European gas and storage currently lower than average, the risk to energy security is higher due to these measures.

Secondly, we generate profit by optimizing based on market fundamentals and our diversified range of physical positions. And so far this year, volatility has been driven by geopolitics, tariff news flows, [ sound ] bites. The market saw short-cycle volatility driven by speculative capital disrupting the fundamental physical trades we focus on.

And as a result of these trends, we remain very disciplined and deployed far less capital in storage and elsewhere than we normally would.

Now we are beginning to see more rational behavior returning to the European gas markets. Fundamentals are reasserting themselves, storage targets have been eased, and more opportunities are emerging. And that gives us more confidence heading into the second half.

Our LNG and renewable route-to-market businesses are performing well. And of course, we're not standing still either. We're continuing to grow our capabilities, including the recent opening of our first Centric Energy office in the U.S. So we see a path to the low end of our GBP 250 million to GBP 350 million guidance range this year, albeit that requires a further normalization in the markets to get there.

Moving on to cash flow, including EBITDA and dividends received from our nuclear business, we generated over GBP 800 million. We paid cash tax of GBP 200 million. The net working capital movement was almost GBP 100 million out, but that masks a couple of offsetting movements in British Gas Energy and Rough, highlighting again the value of the balanced diversified portfolio.

Disciplined investment to grow our sustainable earnings is a key part of the strategy, and delivering attractive returns remains much more important to us than investing quickly. We all welcome the progress we've made this year in the MAP and more recently on Sizewell C. So first-half investment included GBP 100 million in the MAP, and we expect CapEx to ramp up in the second half, including the initial spend on Sizewell C.

We also continue to invest in technology, supporting the improvements we've already delivered across the operations; and the next phase of transformation, which will make Centrica a much leaner, more agile company. All of this led to free cash flow of GBP 244 million for the period.

Our balance sheet remains strong even after accounting for pension and decommissioning liabilities. And following completion of our Cygnus disposal, decommissioning will fall by around GBP 100 million.

You'll recall, we reached agreement on our triennial review with the pension trustees in February. The assumptions used in that review are now reflected in the IAS 19 accounting valuation, which led to a rise in the deficit in the period. There's no change to our technical provisions or deficit funding plans.

There is no change to the guidance we gave in our trading statement in May. And due to the factors I just discussed, we expect residential energy and Centric Energy to come in towards the lower end of their profit ranges.

Services & Solutions is expected to deliver a further improvement on last year's results, and we expect to be in the range next year. We're still comfortable with the range we laid out for Infrastructure. And within that, we continue to expect a loss of up to GBP 100 million at Rough and of course, as normal, group profitability is expected to be weighted to the first half.

So to summarize, our performance in the first half was softer than we would have liked, but it has no impact on our ability to create long-term value. We've retained the guidance for the year and are focusing on significant opportunities across revenue and cost to maximize long-term earnings.

Our balance sheet remains extremely strong, and our investment-grade credit rating is well underpinned. And with the announcement of our investment in Sizewell C earlier this week, almost 2/3 of our investment program is now committed, delivering attractive returns.

And as our share of regulated earnings grows, we look forward to creating more balance sheet flexibility over time. And we are doing all of that while returning capital to shareholders, progressing the dividend and buying back shares consistently since 2022.

Thanks for your time. Let me hand back to Chris.

Okay. Thanks, Russell. The situation that we faced 5 years ago was critical. We knew we needed to change, and I think that's exactly what we did. Our business today is far stronger as a result. We've got better relationships with our colleagues, better relationships with our customers. We've got a more focused portfolio, we've got a balance sheet that supports our ambitions rather than restricting them.

But the best companies are constantly improving, and that's why we're looking at the next phase of transformation for Centrica. There are hundreds of millions of pounds of value at play, and I'm confident that we will secure every last penny.

You can see the progress in our Energy Supply business, hard work over many years has transformed the operational foundations. We recently completed the migration of our U.K. residential customers to the Ignition platform, and moving 1/4 of the U.K.'s households makes it the largest utility platform migration globally. And we did that without any external help. Our team has done an incredible job.

Ignition is a key part of our strategy, unlocking commercial flexibility and innovation, deeper customer insights and helping us lower our cost to serve. It's a key reason that we grew our customer base in the first half, helping us retain our existing customers and attract new customers. And that success gives us the confidence to accelerate the rollout of the [ Bord Gáis ] migration we will start soon. We've now got 40% of our U.K. SME customers in Ignition as well.

Now in the past, we served all types of business customers, including very large industrial and commercial users, who have sophisticated and often complex needs. And we found these customers generated very low margins for the risks involved. So in 2022, we changed our focus, targeting smaller businesses, prioritizing value over volume.

At the same time, we've been selling more through the Ignition platform. We've been using data to optimize pricing, delivering a better experience for customers and better returns for our business.

The impact, as you can see, has been significant. Margins have almost doubled from where they were 5 years ago. We've added almost 100,000 new customer sites, including 11,000 in the first half of this year alone. The foundations are stronger. The commercial strategy is working, and we've got further growth opportunities there.

If you look at services, profitability in Services has improved again in the first half. Better operational performance is now well embedded. Margins are growing. But the market continues to change around us. Consumers are moving away from protection products, and we're still losing customers. So we've had to think differently, fundamentally rethinking our go-to-market strategy. We started focusing on our on-demand offer a couple of years ago to make the most of the shift towards self-insurance.

Now this continues to grow and is supported by more intelligent customer targeting and more dynamic pricing. I think we can still be much more commercial with our pricing. But we have created a gateway to bring in new customers, allowing us to demonstrate the value and peace of mind that we can provide.

We're also building a portfolio, as you can see, of warranty partnerships with leading OEMs. We offer nationwide scale and an expert workforce. We address key constraints for our customers. And for Centrica, we increase [ engineer ] utilization, we improve profitability. We've already signed up several leading manufacturers that are more to come.

Services can deliver those solutions independently, but the real value emerges when we connect our capabilities. Every boiler, every heat pump installation opens the door to other offerings, energy tariff, high thermostat, EV charger and membership. And our membership scheme gives us a customer insight and marketing channel to offer more of these integrated propositions, focusing on cross-selling opportunities, generating recurring revenue and building customer loyalty.

So we're showing progress. But as you know and as my colleagues know, I'm always rather impatient for more. And the world is changing. Leaps forward in technology and AI are fueling huge growth in electricity demand. Complexity and intermittency is increasing. And as a result, so is demand for reliable, sustainable energy, just like that, which will come from Sizewell C. It is a fantastic time to be an energy supplier. It's a great opportunity to deliver excellence for our customers.

We have to be ready. Now how are we going to do that? Firstly, we'll harness the full power of technology. Despite huge improvements in service quality, much of it driven by investing in our technology. Last year, we still had more than 18 million customer contacts in British Gas Energy alone. Now we've not made our processes easy enough. That creates unhappy customers that creates unnecessary contact. Our home move process is a good example of that.

But we've recognized the problem. We've identified the pain points and we've streamlined the system for our colleagues, ensuring that they can deliver for our customers. We're now working to almost completely automate that process, making it as simple as possible for our customers to change their address without wasting any time at all on the phone. And that's just one example of incremental steps to improve our customer experience and to reduce incoming contact.

By doing that, when our customers do need to contact us, we can handle the questions much more efficiently. And we think we're ahead of the pack adopting leading-edge technology here, and it's delivering significant benefits already. We've got fewer incoming contacts, we've got quicker resolution, we've got more satisfied customers. And ultimately, that gives you better customer retention, an improvement in cost and improvement in revenue.

Secondly, we're accelerating commercial innovation. We're incentivizing our leaders to deliver the best outcome for the group rather than for the individual business, breaking down the barriers to delivering the coordinated products and services our customers want that only we can provide.

And finally, we're creating an even simple Centrica. We have made great strides in efficiency, but we can't be complacent. What was efficient a few years ago is mediocre today, and soon, it will be lagging behind. I want us to be more focused to remove bureaucracy to promote faster decision-making to spend more of our time delivering for our customers. I think we've got the potential to fundamentally [ rebase ] our cost base here, which will make us much more competitive.

And I've given a clear message to the business that this is about delivering a step-change in performance. We're not good to tinker around the edges. And that's why I'm confident that we can both narrow the 2028 EBITDA guidance range and deliver above the GBP 1.6 million -- GBP 1.6 billion, sorry, midpoint. But my ambition is far, far higher than that.

So to recap, despite external headwinds in the first half, the team did the right things, and our underlying operations are performing well. The outlook for this year is unchanged. And we're staying focused on creating long-term value, taking a major step forward to Sizewell C alongside strong progress elsewhere. This underpins our longer-term trajectory, and the transformation program means we can do much, much better.

I'm really proud of the progress that we've made, and the teams across Centrica deserve huge credit for that, led by the leadership team here. But I'm even more excited by what's to come. We've got incredibly strong foundations, and we remain laser focused on delivering.

So that's enough for me. Thank you very much for listening Russell, the leadership team and maybe even our Chairman. And I will be delighted to take any questions that you've got.

We can, but the microphone is off. So those online won't be able to -- keep going.

Two questions. Firstly on Rough, can you please be explicit about closure? Is it fair to say that the government [indiscernible] against that and that there's a future for storage shut down [indiscernible] financials and what they might look like surrounding that?

Secondly, Russell, just on [indiscernible] residential, you're still guiding to the bottom of that 150 to 250 range. Yes, you had a [indiscernible] but you had a GBP 40 million onetime credit from the closeout. So why is it still at the bottom of the range that?

And then I guess just regarding the GBP 1.5 billion and the opportunities within that other than Rough, can you give us a flavor for what you're looking at? Is it more FlexGen? Will it be an acquisition of another generation asset? What is it that fits within your portfolio?

Perfect. Let me take the last and the first and then Russell will do the wizardry with the numbers on British Gas Residential.

Look, we don't want to be any more specific on Rough. We've been very clear that we're not going to sustain losses on this. We'll see how the consultation goes. But you could also see a return to normality in the market, which I don't think is going to happen, which would -- which means that they could operate as a merchant business.

But if we don't have a positive outcome from the consultation, then it's hard to see that Rough will be open beyond the end of this coming winter. So that takes you a little bit into the first half of next year. But we don't have unlimited patience on this.

But there's been very positive statements from the Secretary of State at the Energy Security Summit in April about gas storage. The Chancellor, when she did the comprehensive spending review, specifically mentioned -- I can't remember what -- [ I'll ] paraphrase a side there something about the stupid decision of the last government to close Rough. And so I'm encouraged by what I see and then also the announcement of the consultation.

So I think there's positive news there, but the government has got to make sure that they get what they consider to be value for money. We'll see. They did obviously very well. I think the Sizewell C. So I'm hoping they'll do very well with Rough as well.

In terms of the remaining investment program, there are a bunch of things we're looking at. I like FlexGen, I like regulated assets. We are looking at opportunities to expand the meter asset provider as well.

So as you know, we're agnostic in technology in this. And there's a number of things that we're looking at, but it will be within the bounds of what we laid out before, which is the returns will be good. Ideally, they will be contracted or regulated returns, and it will be more in the electricity space than any of the gas production space or anything.

The other thing we've got is working net zero. And we were encouraged by the announcement by the National Wealth Fund of an investment in the front-end engineering and design for the pipeline from the peak cluster.

And the reason we're really encouraged is because, firstly, that's -- those are the customers who signed up to put carbon into Morecambe. But it was the fact that the National Wealth Fund and the government announcement specifically mentioned the carbon would be stored in Morecambe. And so we feel there's quite some momentum there.

So you've got a whole bunch of things, Rough will be a GBP 2 billion development over a number of years. Morecambe net zero, it's a bit earlier in the engineering stage. So the range, which I find incredibly frustrating from engineers, is between GBP 2 billion and GBP 4 billion, which is quite a substantial range. But you're probably looking at investment there 2030 and beyond. So it's probably outside the window to 2028. But there's a huge amount of opportunities.

But what we're always very keen to do is to make sure that we have way more opportunities than we have capital, for two reasons. One is it means that you can be selective with your opportunities. The second thing is we're delighted with Sizewell C. But if Sizewell C hadn't happened, it wouldn't have been catastrophic for us because we've got other ideas in there. So we will always look to have far more ideas.

And once we complete the program, we'll then turn our mind to recycling capital. So if we can get an idea that gives us a better return than something we've got, we'll sell what we've got and we'll buy more. So lots of ideas.

Russell, British Gas Residential, are you holding out? And Mark, I think that was the question.

No, I'm not holding out. We're trying to give a balanced outlook. But -- so a couple of things on the residential energy business. The total result there, as reported, was GBP 179 million. But within that, it was GBP 133 million for residential energy and GBP 46 million for small business.

And the small business number actually was up from GBP 3 million last year. So that had a big improvement. The residential energy business was actually slightly softer half-on-half. I discussed the sort of moving parts in there, the weather, a few one-offs. We've got GBP 13 billion worth a year of revenue and costs. So sometimes they don't always match in the same place.

But your question was really about the second half of the year and why we're guiding to the bottom of the range. First main reason, there's just less colder months in the second half of the year. So seasonality drives the vast majority of that. We've got a little bit of a headwind continuing with the shape of the commodity curve just because of the way that's got priced in. And I think if you take all of that together, I'm thinking bottom half of the range is still the way to go.

[Operator Instructions]

It's Dominic Nash from Barclays. So I was is going to go two, but if Mark is going three and...

Please, don't go with four.

So well, I'm sure I can have sub parts. The first one, sort of a top-level question really on Rima. Clearly, you must be pleased that the zonal power pricing has been dropped. But is Rima now basically a dam scrip and should -- are there any concerns over what's left in it or reformed national pricing, the impacts of that on your company?

Secondly, is your ambition in Sizewell C the end of new nuclear? And can you just remind me again, what's your view on potentially sort of getting involved with SMRs or other sort of the larger ones?

And finally, just a quick one on Centrica Energy. I think there's a slight change in your guidance here, if I'm not mistaken, which was before it was at the bottom end of the range. Now it's at the bottom of the range, caveated to a normalization of market. Could you just give us sort of what we need to look out for what our key KPIs are to know what normalization is? And if it doesn't normalize and it is what we currently see, what would be the number materializing for the full year?

Thanks, I'll take the first two and then Russell to take the Centrica Energy one.

Sizewell C, is it the end of new nuclear? No, it's not. So we don't think it with the Sizewell C and therefore, we're happy. We've looked at some of the SMRs. We've spoken Rolls-Royce about their technology. We looked at X-energy and advanced modular reactor business in the U.S., and we're talking to people who understand what's going on in the technology.

We have a competitive advantage because I don't think SMRs are the solution to distributed energy. I don't think we'll see SMRs appearing all over the country because unless you've got a nuclear power station close to you, you're probably not going to be too keen to have one built near you. So those that have them close to them, they know that they're safe and they know that they bring really good well-paid jobs.

And so we, along with EDF own most of the sites that would be suitable for the deployment of future nuclear technology. And so I think we're in quite a strong position there. So we'd be very happy to look at it, but you've got to -- if you're going to deploy first of a kind, then there has to be some risk here and there.

You're not going to find that we're going to come out and say surprise, we're going to put the first Rolls-Royce small module reactor and we're going to do on a merchant basis, and we're going to keep our fingers crossed that everything is okay. So it would have to be some kind of partnership with the government in terms of risk sharing there, but we would be interested.

But I think what you'll find is I think you'll find -- I think Rolls-Royce is a 470 [ MW ] reactor. I think you'll find 3, 4, 5, 6 of these in the one site rather than lots of them dotted around the country.

On Rima, we were delighted that zonal pricing was dropped. Lots of people were against it because they thought it would harm the investment. We were actually against it because we thought it was daft for customers. And we think that the future energy market requires customer engagement.

And if you've got an energy price, it changes every 30 minutes just now, it could change every 5 minutes. And if you've got 9 zone -- you got 12 local distribution zones, you get 9 pricing zones. It become a complete another nightmare. But I also thought that the benefits were quite theoretical. So we're delighted with how that's going.

But look, in terms of Rima, I think we're going to learn over the next 2, 3, 4, 5 years as we try and deploy more flexible tariffs. We're going to learn what we need to do. So I don't think we know right now what the electricity market has to look like going forward.

So I wouldn't say it was a dam scrip, but I think we're going to have to learn. And therefore, the regulators are going to have to be quicker and the government is going to have to be quicker in terms of how we change things. This is going to be an iterative process, I think. And that will require a complete fundamental reset of how we do things.

We won't have 12 months for a consultation, 12 months for a response and then 12 months for an implementation. I think we're going to have to be far better at implementing change. So that will probably require some different kind of framework. But zonal pricing, we're comfortable that, that's been dropped. I think it's in the best interest of the customer.

On Centric Energy and where we expect that to go. we would just sort of step back first and just remind everybody, there's 3 business units there. So there's the LNG business. the renewable route-to-market and then the gas and power trading. LNG had a solid first half. We think it's going to be solid in the second half. Route-to-market actually gigawatts under management grew in the first half. So that's going in the right direction.

So it's really gas and power trading that we're talking about. And the things that we're looking at in the first half that drove some of the results, so it was the gas storage economics of these mandatory volume targets that inverted the spreads. the volatility, the news flows that was challenging.

But the third thing was there was no liquidity in the market, so people weren't trading. A lot of market participants got quite badly burned and stepped away from the market. And we're very happy with Cassim and his team. They didn't chase the market, they stepped back. We took risk capital off, and we ended up with a softer, but not a terribly bad position.

So as you look forward then, it's really dependent on the market conditions in gas and power trading. So what are we looking for in terms of normalization and what we're seeing that's giving us a bit more confidence. So more rational behavior is returning to the market. So there is more liquidity, there's more people trading, there's more people on the screen to connect with.

And that liquidity allows us to then step in behind that with taking positions, physical positions as well as options to support the trajectory going forward. And of course, storage spreads have returned to positive levels. So that's -- there's margin available for people to take. Just in the past couple of months, we've increased our gas storage capacity under management by 30%. So we're stepping back into the market. And so we'll continue that trend.

You've got to remember that the -- most of the money you make in this gas and power trading business is over the winter season anyway. So we've got a bit of the year to go. And in the past, we've seen different market dynamics, and we'll wait and see how that plays out. But that's the things that we're looking at. And then just to reinforce, that's not the only games we're playing, trying to grow elsewhere. And of course, trading already started in the U.S. as a diversification.

We'll go to Jenny and then we go to Ahmed and come back to you.

Jenny Ping from Citi. Three questions also, please. Firstly, Chris, can I just confirm something you've said in your last couple of lines of your closing remarks talking about narrowing the range to GBP 1.6 billion in terms of EBITDA guidance? So we're really no longer looking at GBP 1.3 billion to GBP 1.9 billion and now is GBP 1.6 billion to GBP 1.9 billion. Can I just check that as the first point?

And then secondly, Miliband talked to the prospect of a MAP -- sorry, a meter consultation or further announcement around the meter rollout in the coming weeks in the recent [ DESNZ ] session he hosted earlier this week. Can you just talk a little bit of what you're expecting from that announcement?

And then thirdly, another policy-related question. I mean the U.K. government seems to want to get quite close to the EU with linking of [ ETS ], et cetera. Is there a risk that there's a full integration of the energy market that takes place? And if so, what does that mean in terms of the price cap that we currently have in the Retail business?

Well, so not on the range, I think we can shave the bottom off now. I think 1.6 to 1.9, I have to watch because Russell within reach and he's got quite a hard punch. So if I was to say, yes, that wouldn't be right. I'd get a punch in the face.

The reality is we don't know, but we think that what we see in terms of the opportunities is that we can firm up that range. And I'm quite clear that if we only hit 1.6, I'd be quite disappointed, but rather than we're not ready at the moment to see what new range is.

I think Ed was at the select committee when he mentioned about meter consultation. I don't know what he's planning, to be honest. I saw him Tuesday, [ he was ] talking about size. Well, he's pretty busy at the moment. So he's very engaged. I don't know, but what I hope we're going to talk about is compulsory installation of smart meters.

And maybe a smarter thing, I mean unless everybody has a smart meter, it's kind of difficult for electricity. But then you can look and say smart meters for gas, do they actually give you anything? Probably not. They save you meter readers, but there's no -- you're not going to interact with the gas market in the way that you interact with the electricity market.

So it's just a guess, but I would think if you really wanted this to go properly, you might drop the gas smart meter requirement because it just gives us an allowance to have meter readers and you might make smart meter deployment compulsory.

And if you want to go one step further, what I've spoken to government before about is rather than have each supplier responsible for installing a smart meter in the customer, why don't you just carve the country up, give us -- let's go street by street?

So our engineers go to #4 as a customer, they go to #17, and they go to #42. But if the engineer could just go door to door, then you get a quicker and a cheaper smart meter rollout. And obviously, we'd be delighted with that, given that we have the smart meter asset provision business. So we are even more interested.

And then look, the [ road ] integration with the EU, is it a risk to the price cap? I'm not sure how I would see that necessarily following, unless you had a full harmonization and you didn't have, for example, NBP and TTF prices. If you had a full harmonization of prices across Europe, you still have the price cap. You just set it by reference to price that was less local.

So harmonization, I'm sure there'll be some risks, there'll be some opportunities. Certainly, I think we prefer the Emission Trading Scheme to be more harmonized than you've got green certificates, et cetera. That would make our life easier administratively.

And Cassim and the team are brilliant to find an opportunity. So if we stay deconsolidated, it will be fine. And if we harmonize, it will be fine as well. There might just be different opportunities. But I don't see it as being a major risk of a threat.

Excellent. Ahmed?

Ahmed Farman, Jefferies. Chris, you talked about potential extension to existing nuclear power plants. I just wanted to ask if you could talk a little bit more about it. Is that something that we could see visibility this year? Is that something for 2026? What are the potential lifetime extension scenarios? Super helpful to sort of understand that better.

I also wanted to ask you if you could talk a little bit about the sort of the residential supply business. What trends are you seeing in bad debts in terms of customer payment behavior? Is there anything significant to call out there for the first half?

Thank you. Let me take the first one and Russell will talk about the bad debts.

Extension -- I'm looking at Dave -- perfect. So I mean, do you want to take, Dave? Dave Kirwan is the CEO of Power business. And Dave, I mean I'm hopeful we can see something this year, but I don't know, Dave, if you want to...

Sure. I mean the news on the AGR lifetimes that we shared late last year extended [ Haitian ], Hartlepool, Torness, according to those remit notices. The indications at the time was they're on watch. The AGR lifetime mechanisms are well understood. The EDF team continued their diligence and the preparation for safety case. So prospects for additional lifetimes is a watch with no new news.

But in terms of any changes since the last remit notice, nothing untoward. So no negatives. And obviously, we'll await outcomes of more diligence before any further notice is issued. So it's a little bit of as you were, but nothing untoward since with the operation of the fleet.

I was cagey with man. That's even better, you see.

I'm cagier than my boss.

So what's happening in bad debt? So total charge for the first half year was GBP 231 million. If you drill down into that, GBP 159 million was in the residential energy business in the U.K.

As a percentage of revenue, bad debts remained flat, about 3% of revenue. So revenues are down, the actual charge came down. That's -- the improvement in the bad debt picture is probably -- it's not going as quickly as we thought as we come out of the energy crisis. So many of our customers are still having challenges to pay the bills, and we're tracking that. So not material moves, but maybe the trend is not going down as quickly as possible.

The important thing to remember, though, of course, in the residential business, the bad debt charge eventually gets covered by the price cap as an allowance. And so there's a phasing over time on that, but you get recovery there. That's the main message in bad debt.

I think -- I mean the thing I'd add, we hope to see the regulator taking some steps on this because if you look at the overall bad debt provision level just now, it's about 3x what it was a few years ago. And we can't continue with something whereby we can't tell who can't pay and who won't pay and the regulator not do much about it.

So there really is something there. The people that don't pay are being subsidized by the people who do pay. And every time you add something to the don't-pay list, it becomes more painful for people.

So I think we need to see a step-change here from the regulator in figuring out what to do. We don't cut people off. Prepayment meters are not particularly popular. And so the Chairman and I met with the regulator recently, and they're concerned about it. But the solution has to be in their hands and can't be -- if somebody refuses to pay, we're very limited in what we can do under the regulation. So this is a regulatory problem that needs to be fixed.

Harry?

Thank you. Hopefully, that's working. So it's Harry Wyburd from BNP. So two from me, please. The first, can I come back to your GBP 1.3 billion to GBP 1.9 billion 2028 EBITDA range? So if I've understood correctly, the reason you're more excited about that is that you see more efficiency potential in the business. So is that fair?

And what has led to that kind of epiphany? Because I think you've talked about a bit more today than you have done previously. Is it AI? Is it better achievements on your efficiency so far? And is there any way you could quantify for us what kind of metric you would target financially or otherwise on an efficiency program if you were to launch a more formal one in 6 months' time?

And then secondly, on the balance sheet deployment, I guess one of your challenges is you're dependent on a lot of government decisions, right? And that was one of the issues with Sizewell C. It took a little longer to come than all of us might have hoped.

But how long would you wait for -- I mean, we've covered Rough, but how long would you wait for Morecambe? And is there any bar that if that bar was cleared, you would do something instead of them, so you'd move faster? So if you saw a fantastic acquisition, would you go for that in the next 9 months and say, we'll leave Morecambe for another day?

And then maybe a final addition to that, getting a high single-digit real return on Sizewell C, it's a lot better than we can get in index-linked bonds or premium bonds that anyone in this room can get. So why not put more in that? And would you wait around to put more into Sizewell C, which from my perspective, would be a fantastic deal? I wish I could, but I have to invest in your shares first and I'm not allowed to.

So look, Sizewell C, it's brilliant when you make an investment and somebody says, "why did you not take more?" We have the right of first offer on any future government sell-down along with Amber and La Caisse in proportion to our ownership.

Could we be interested? Definitely. But it just depends on what else we got. And the question is, could we have done 20% rather than 15%? We could have, but we could also done 10%. So we're looking for a balance.

Would we consider an acquisition? We are considering acquisition opportunities right now. And we're not -- but what we're not going to do is we're not going to sit and wait and keep our fingers crossed that something is going to happen. But we're also not going to back -- Russell got a face which you'd quite like, which is it's not going to be the first cab off the bank that we'll go for.

Sizewell C took longer than any of us would have liked, but part of that was us shaping the investment with the government. So it wasn't just that we were like pushing and saying like let's get it sorted. We were pushing very hard to get the right terms. And if the terms hadn't been right, we wouldn't have invested. And so I'd far rather be patient and wait and get the right terms. But we weren't just working on that. We've been working on other things at the same time. So we'll always do that, and we'll push.

Morecambe, there's a chance that Morecambe might be quicker than Rough. And the reason for that is that you've already got an existing commitment of GBP 20 billion over 20 years to carbon capture and storage, you've got an existing approval process. And so Track 1 track -- we didn't apply in Track 1 for Morecambe, applied in Track 2. But we're a bit late to the game, so we would have been amazed if we got it, but we thought it was worthwhile applying.

But we think we're very, very well positioned for Track 3 when that comes out. And so Morecambe is about getting approval for an existing field in an existing framework. Rough's about applying an existing framework to something slightly different. So it's entirely possible that Morecambe approval could be in a slightly shorter term.

And Morecambe, remember, is 2 reservoirs. So we could actually commence CO2 storage in Morecambe while still producing gas. So you've got North Morecambe and South Morecambe, they're rather imaginatively named. But I'm quite enthusiastic.

But I would rather sit -- like I'd rather in February sit -- my first preference we'd be sitting, talking about great investments, but the second preference would be that we're sitting and saying, look, I know we still with too much cash in the balance sheet, but we're working things through.

What I don't want to do is to get to 2028, so this is great, we've invested $4 billion or $5 billion, whatever the number is, and then spend the next 5 years regretting. I probably wouldn't get 5 years, Kevin would probably fire me. So I'd rather take time and make the right investment. So we'll be very patient and very disciplined, but also very challenging with the counterparts.

And then look, on the efficiency metrics, so we see opportunity both for revenue and for cost. The metric I would look in cost, I think, is always where are your costs, so where is your OpEx and where is your cost of goods sold? And are they lower or higher? I don't like to get into all of this c*** about let's throw your waterfall, which will explain to you why the cost would have been lower if these five things didn't happen. So the way that we would measure is if our OpEx is lower.

And then I think we've got efficiencies probably also in cost of sales. But the revenue opportunities might be just as interesting. And so if you look, for example, we've got 7.5 million residential energy customers and 2.8 million, I think, contract customers in Services. We don't know why we've got 7.5 million customers in services because even if they don't buy contracts, like boilers still break down, heat pumps break down, people need their electrics fixed.

And so I think there's as much in the revenue line. I would expect that we will be able to give far more clarity in February about what targets would be on the cost side and how you would measure that.

Okay. And in terms of what's changed, is there something that's changed since AI? Is it -- so AI sort of changed versus 6 months ago when you work with...

One of our colleagues remain nameless. I was talking to them, I don't know if it 3 hours after we signed the Sizewell C thing, and I was [ manned ] about something that they said, can you not just take the day to be happy about Sizewell C.? So like I'm always impatient. And I'm always looking for more, and it drives a number of my colleagues nuts.

So there's an element -- we can see more opportunity. We can see our operational performance is very, very strong. And something you just have to step back and look and say, okay, what can we do things differently? And the developments in technology are helping us to think about that.

But there's also just something about it doesn't -- like I think if you ever come into the office and you think that's it, we're done, we're really good, I think you should leave because you're never done. The opportunity is always there.

So I think the day I come in, I think this is it, I'm going to sit back and smoke a cigar, that's the day that the Chairman will come in and I'll go to the Chair and say, look, it's time for somebody else to come in, who that's got fresh ideas. So just a constant evolution.

Pavan?

Pavan Mahbubani from JPMorgan. Chris, you mentioned there was a commercial opportunity in the meter asset program. And I was wondering if you could elaborate a bit more on where you see those opportunities and how those could materialize.

And then on the transformation program, you've given a good bit of detail. Do you think that, that will require incremental CapEx? And does that feed into some of the uncommitted that's left to spend by 2028 within the budget?

And then I have a couple of questions on Spirit. Russell, if you can help with the phasing of profitability in Spirit between H1 and H2 and help us in terms of how we should think about that, particularly with the disposal of the Cygnus?

And finally, in your release this morning, there was an impairment in Spirit because of an assumed, I guess, earlier closure or shorter economic life. Can you give a bit more detail on what your expectations are now versus what they were before?

Those two half Spirit questions are clearly for Russell. I don't think I'd say -- remember an impairment, it depends on what you -- because these fields got a very short time horizon, you've got a liquid curve. So that could change every 6 months. You just have to take the observable prices.

The commercial opportunities in the MAP, I think that we have the opportunity to do that for other people. I also think that -- so the MAP business in and of itself is a brilliant business. And Dan and Gareth, who runs the business, have done an incredible job in setting it up.

But what it gives us is the opportunity to own, track and finance small assets. And we install best part of 100,000 boilers a year, probably about 5,000 heat pumps. So the biggest installer of heat pumps and boilers, 20,000 EV chargers, whatever the number is. So if we're able to own and track and finance the smart meter, well, we could extend that potentially to boilers, heat pumps, EV chargers.

We're not ready yet to start to do that. But that's always been in my mind in terms of why -- I'd like to go into the smart meter business because if we do that, none of our competitors can do it, they don't have the balance sheet. And then Russell and the team will make sure that if we do embark on that, we have the ability, as we do with the MAP, to turn up and turn down the investment, so we see a better investment elsewhere, we bring in some third-party capital.

So that's -- I think there's opportunities for other energy suppliers. There might be opportunities even in other countries that people will go through a smart rollout, but there's a lot of opportunity in our existing customer base just now and to differentiate ourselves commercially.

Transformation, I wouldn't expect them to be major additional CapEx. But there will definitely be implementation costs, and that would mostly be OpEx. The technology costs will be mostly OpEx as you go through Software-as-a-Service. And as we lay out what we'll -- what we expect to achieve, we'll also lay out what it will cost.

What we won't do is go back to what we used to do years ago when I was the CFO, I have to say I inherited the practice, is to separately identify in the middle column, all the transformation costs because we used to spend hundreds of millions a year on taking costs out. We maybe spent GBP 400 million, taking out GBP 200 million of costs, and we felt very good about this part of the financials.

And this we won't separate it out, but we will -- we won't put in a different column, but we will tell people how much it costs because there will have to be investment. We can't deliver material cost synergies or revenue synergies without investing money. So we'll do that in February.

Good Spirit. So just to give you a couple of numbers, so of course, GBP 150 million of AOP for the first half of this year, that's down from [ 245 ] last year. So what you're seeing just generally across all the infrastructure businesses is reduced income. A lot of that was hedged, but -- and that will continue. The curves are in that dynamic.

I think volumes, we expect to be roughly flat half 1, half 2. And there's sort of hedge price we've got for half 2, is about 111p per therm. So most of that's already in the bag. Now we've got this divestment of Cygnus. So most of Cygnus goes. It's an asset held for sale at the moment. We will book the revenue. We'll book the earnings right through to the close date, and then that will get unwound.

I think overall, we're still okay with the guidance range for Spirit and the nuclear assets of 250 to 400. And then that implies full-year production of Spirit between [ 695 ] and [ 720 ]. So nothing really changed there. It would just be the phasing of the curve that will dictate most of it.

And then on Morecambe, I think Chris answered most of the question. So it's -- that liquid period that has come down in the first 6 months of this year, what you do is you do an economic end of life for those facilities. And for Spirit, we were previously more towards the end of the decade, that's come back down to sort of '27 sort of time, maybe '28, but we'll keep watching it. We'll be driving efficiencies.

And of course, the game plan for Morecambe is to try and make sure that we extend that asset as long as possible so that it sinks into the future development opportunities.

Yes. Remember, a few years ago, Morecambe was due to close in 2021. So we'll continue to eke out and see if it's tend to go on. The question -- and then Fraser, I don't know if we've got any online.

Charles Swabey, HSBC. Two questions for me. First is on British Gas Energy. When we think about the warmer weather we saw this year, could you remind us on your assumptions? Are they -- when you're guiding, is it based on historical averages? Or are we assuming a structurally warmer weather patterns? That's the first question.

And the second one is on Centrica Storage and following on the comments about spreads improving. Depending on how that evolves in the second half of the year, could you see a situation where you get closer to the GBP 50 million rather than the GBP 100 million loss?

I think the second one should come from Russell, but I would say I would be extremely doubtful. I'm looking at Cassim sitting here. Cassim doesn't look particularly hopeful of trimming GBP 50 million off the losses.

Look, in British Gas Energy, we don't assume the historic weather. We assume that we've got -- that we do see warming, but also that we see more volatility in the weather. And that's why developing a different way to hedge the weather, basically you look at the seasonal norm demand, you make adjustments for how climate change is occurring and about the extremes that we see.

But remember, we were GBP 50 million -- when we sat here in February or whatever it was in February, we were delighted with GBP 50 million up. We thought we were having a party in now. We're GBP 50 million down 5 months later, so GBP 100 million reverse. So had we not changed the way that we hedged and forecast on the weather, that GBP 50 million would have been well over GBP 100 million, in my view. So we do adjust that as we go forward. We always learn from experience there.

But Russell, what do you think what's the chance of the 50?

That's not very likely. So just to remind you sort of -- you give us sort of close to GBP 100 million cost base there. We do have some hedges this year from previous years that we're working through, that gave a bit of support in the first half. We've been taking out some of the indigenous production.

So there's currently 16 Bcf in Rough as we sit today. Of that, 13 Bcf is the indigenous or the cushion gas. That was 14 at the beginning of the year. So we've taken out 1 Bcf of that cushion gas. We will continue to do some of that in the second half of the year that might support revenue a little bit. But I'm still very comfortable towards the top end of the 50 to 100.

Fraser, we got some online questions.

Yes.

Are these really online questions? Are these your questions?

They're certainly not my questions. Yes, the first one is from Ajay Patel at Goldman Sachs on gas storage. Can you please detail the path for gas storage? If no support is given, how much cushion gas can you extract? And what would be the cost of closure? Would you be interested in an interim measure, where you're paid an annuity to keep the facility open? And what could that look like?

Excellent. So Russell just mentioned about the gas that we take out. The cost of closure is about GBP 300 million. That's a decommissioning cost provision. And if AG is offering an annuity, I'd be delighted to take a bit.

But you see this point, we have spoken to the government to say, look, do you want to open, for example, for this winter? And the discussions are that we won't inject subsidized gas this winter, but that does remain an opportunity. But you've got OpEx in that business of about GBP 80 million. And you've got to have a spread between your summer, winter gas price in order to cover the OpEx and then to make a bit of a profit as well.

So we would absolutely be -- but we're not in the business of holding gun to anybody's head. We've had very constructive conversations with the government. They know the position. I think they would like to keep it open, but they've got to make sure that it passes the value for money to us. So we'll see.

The next one is from Pierre-Alexandre Ramondenc from AlphaValue. Following the divestment of your stake in Cygnus and your ambition to transition towards net zero operations, what's the rationale for retaining Spirit Energy? Could a full disposal be considered? Or is the business too integrated with your other operations? Any clarity would be appreciated.

So a full disposal of anything we've got can be considered. So we don't have anything that is so fully integrated that we can dispose. That applies across the group. Spirit, after the disposal of 46% and 46.25%, I think it was percent of Cygnus, has got 15% of Cygnus. It's got the Greater Markham area and it's got Morecambe, and it's got a bunch of decommissioning.

And so if we were to dispose off Spirit, we'd be trusting that somebody who would take Spirit, would fund, pay for all the decommissioning rather than it's happened not that long ago, we take the money and run away. And so we'd have to have control over the decommissioning.

We wouldn't want to sell Morecambe because we see that as a big opportunity. Greater Markham and Cygnus, the 2 remaining gas-producing fuels, Morecambe, for the right price, I would sell. And we sold -- the price that we got for our 46.25% stake in Cygnus was twice our hold value. So it was a value decision. And we'd do the same for the remaining part of Cygnus and for the Greater Markham area.

But I'd like to keep Spirit. I'd like -- Spirit was at GBP 1.3 billion or something in the decommissioning liabilities. That would be an awful lot of trust you would place on somebody. So we will execute the decommissioning, and we will hopefully convert Morecambe into the U.K.'s largest and maybe even the world's largest carbon storage facility, which over a 40-year life, will take 25 megatons of carbon every year.

So if we take 1 gigatonne of carbon, to put that into context, the U.K. wants to get to the point of storing just over 100 mega tonnes a year. So this would take 25% of the U.K.'s planned storage. So it's a huge opportunity.

Thank you. And then final question as it stands, although classically three-parter from Bartek Kubicki at Bernstein. Part one, could you confirm the trend of households moving away from regulated tariffs to fixed tariffs? What does that mean for margins and competitive pressure? Would it also mean lower protection against extraordinary costs such as higher bad debts as there will be less and less people on regulated tariffs? And I'll maybe pause there and let you answer that one first.

Russel, that one's for you.

Yes. So we are seeing a trend of people moving away from the price cap on to fixed rate tariffs that's going probably in the 25% to 30% sort of range now. We're seeing more churn. We're seeing more people moving [ towards ] suppliers. And for what we have to do is make sure that we're competitive in that space. We're trying to make sure we've got profitable tariffs out there that keep our customers for longer.

So where that trend goes is hard to tell. But certainly, we're seeing a movement up in switching and movements to fixed rate tariffs over the past year as we come out of the crisis. So that's the main part of it.

Second part, what triggered the depreciation -- sorry, excuse me, the depletion of liquidity on markets in the first half of 2025? And what needs to happen for liquidity to come back?

Look, I think we've mentioned earlier on that it was, I think, geopolitical-driven volatility, something driven by comments from individuals, heads of state and the like, and you can't call that. So we sat on our hands a little bit. We took risk capital off other, people did as well. So just fewer people in the market. It's just a reaction to the events.

So we saw that level of volatility, and it was fundamentally driven. If you'd have seen an increase in liquidity, more people would have been in the market.

Thank you. Third and final bit. Are earnings from route-to-market increasingly linear with the higher level of capacities contracted?

I wouldn't say they're increasingly linear, but the route-to-market services have always had a good substantive base of contracted revenues. And if you go back to the teach-in we did last December, you can see we unpick that a little bit in terms of the type of contracts, the type of PPAs that we write for customers across Europe. So I'd say, that's broadly the same, but still a very important part of the earnings mix for that business.

Fantastic. That's everything we have on the webcast.

One question, the last question if people can get. I know it's a busy day for people.

Martin from Citibank. Just a real quick question on the dual-run IT costs. I think you said it's GBP 9 per customer in the first half this year. You've moved over on 100% on Ignition platform now. Does that all come off? Is it as simple as just taking that and having the cost savings there? Or how should we think about it?

I mean, remember, so we had a monolithic SAP platform called ECC6, which was designed for utilities. So with all the energy customers on there, but we also put our services customers on there. It wasn't designed for that, but we thought that was efficient. So they are still on that. So the system won't close until, I think, the end of next year. End of 2026 is the aim, I think, for the ECC6. I see our Chief Technology Officer nodding there.

So we still have those costs in there, but that will be turned off at the end of 2026. But Russell, I don't know if there's anything to add on the dual run in the energy business.

No, that's -- so total cost per customer was GBP 97. That's up slightly from the end of last year of that GBP 9 dual-running costs. So yes, you've answered it.

Yes. Excellent. Well, with that, thank you very much for your time. Thanks for your patience, and thanks for -- obviously, for those of you that attended on Tuesday as well at very, very short notice. So it's been a very busy week. We're happy with the operational performance. There's a lot more to go for commercial. We look forward to updating you on our results for the full year in February and also on our transformation program and what you can expect from that as we go forward. So thanks very much.

Ladies and gentlemen, welcome to the Centrica Investor Q&A call. I'm Sergen, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions]

The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to turn over to Chris O'Shea, Group CEO. Please go ahead.

Perfect. Thank you very much, thanks, everyone, for joining us today. I do hope you've had a chance to watch the presentation and to go through the materials. We're going to open a Q&A session. As usual, I'm joined by our CFO, Russell O'Brien. We've also got 2 other colleagues with us to help answer your questions.

Firstly, we've got Dr. Dave Kirwan, who leads our Power business. Dave represents us on the existing nuclear assets Board and will do the same on the Sizewell C Board. Dave spent his entire career, almost his entire career building power stations around the world, including Whitegate in Ireland. He brings super valuable experience and perspective both to Centrica and Sizewell and Dave has been running Bord Gáis for the past few years and ran British Gas before that.

We've also got Dr. Raj Roy with us, our General Counsel. Raj has been absolutely instrumental in structuring the regulatory framework and our discussions with the government, with Ofgem and with other stakeholders. So with that, what we'll do is we'll open it up and we'll take your questions on this. So I can pass over to the operator now to hear where we'll get the first question from.

Yes. We have the first question coming from the line of Pavan Mahbubani from JPMorgan.

I just have one. And congratulations on securing this long-awaited deal. My one question is a help, please, between the bridge of the GBP 1.3 billion of equity CapEx you're going to be investing and the GBP 3 billion of RAB that you say you'll have on commissioning. So is my understanding right that the RAB growth comes from the inflation accretion not only to the equity, but to the debt. Or if there's something else I'm missing, that bridge from the GBP 1.3 billion to the GBP 3 billion would be very helpful.

Thanks very much. That sounds very much like a question for Russell. I think there's a bit of inflation in there on the equity, but there's also a return on your investment, some of which gets paid out in cash, about GBP 800 million gets paid out in cash precommercial operations. So we'll put in GBP 1.3 billion, we'll get GBP 800 million out.

So we'll have a net investment of GBP 500 million. But that's -- the GBP 800 million we get out is not all of the return. There's also some return that's rolled up, which will help build the RAB. But with that, Russell, you'll know the exact answer to that question. If I got it wrong, don't hesitate to correct me.

No, you got it right there, Chris. So just look at the returns we're getting, so 10.8% real through this period. So if you add on inflation around about 13%. We take 6% of that in cash every year. So there's about 7% left. So if you simply just compound GBP 1.3 billion by 7% over that entire period, you get to approximately GBP 3 billion worth of RAB. That's how the numbers work.

The next question comes the line of Harry Wyburd from BNPP Exane.

To start with the apology, I didn't get a chance to watch the presentation or listen to the presentation this morning, but I have read the slides. So I'm sorry if these are stupid questions as a preamble. But hopefully, they're not. The first one is I just wanted to home in on the worst possible case. So if we assumed -- and this is obviously very glass half empty, but if we assume there's going to be a very big cost overrun and a very big delay, what is your high-level view of what ROE you would end up earning here in regulatory terms?

So I believe you get up to 100 bps IWACC reduction if the project is more than 4 years late. And then as I understand it, you would only recognize half of any excess investment over the LRT in the RAB. So my rough math, which I'm sure aren't perfectly correct to 10 decimal places where that you'd be looking at an ROE -- a real ROE in the region of around 7% to 7.5% in the scenario where you were more than 4 years late and you were way over budget, so above the HRT, where obviously you're sort of capped off.

So first question is, could you confirm that my maths are roughly right there or correct me? And then the second one is on the interaction with your cash. So noted that you're going to recognize the income on the shareholder loan you provided the project within EBITDA. So that's understood and it's GBP 50 million all in by 2028. But I just want to understand, as you sort of free up cash to invest and put into that shareholder loan, how is this going to work with your interest cost? Because at the moment, you're not earning any net interest income or not any earning any material net interest income on your net cash balance. So you're going to have to basically sort of break some swaps on your net debt position to free up money to invest here? Basically, what I'm getting at is, is the GBP 50 million you put in EBITDA going to be outweighed by additional interest costs on your finance expenses line? I hope I've made that as clear as I can.

So Harry, I'll have a go at it at a high level and Russell will give you the detail. But when we talk about the shareholder loans, our investment is capped at GBP 1.3 billion in equity. Now some of that, the way it's structured goes in as a loan. So we're not putting GBP 1.3 billion of equity and contributing to the project financing. That's all part of the GBP 1.3 billion. It's just some of that structured as a loan. I don't think we're going to have to break any swaps. We've got plenty of money sitting, but Russell can confirm that.

The worst case, so as you know, there's a lower -- so the estimate from Sizewell C is GBP 38 billion of construction costs. The lower regulatory threshold is GBP 40 billion and the higher regulatory threshold is GBP 47 billion. And so if we construct it for less than GBP 40 billion, half of the saving between the cost and the GBP 40 billion is added to the RAB, regulated asset base.

If we're between GBP 40 billion and GBP 47 billion, only half of what we spend is added to the RAB. So for every pound we spend, we get 50p added. So there's an incentive to outperform and there's a disincentive to underperform. Beyond GBP 47 billion, that's all for the government. We have the option to invest, but we don't have the obligation to invest. Now in terms of the -- what our return would be at that HRT, Russell will take you through. I think you're a bit on the light side, but Russell will be able to confirm what that is -- sorry, roughly what that is rather than give you the exact number.

Yes. No, happy to do so. So what we've explained today is that the IRR for our investment at the LRT schedule, and that's the GBP 40.5 billion that Chris just outlined is about 12%. And then the HRT, which is a very unlikely scenario and a GBP 47.7 billion spend that drops to about 10%.

Most of the reduction in the IRR is because only 50% of the CapEx is getting added to the RAB. There is an additional penalty, as you highlighted, which is the reduction in the IWACC during some of the prolonged periods. So a 50 basis point reduction from January, 42 to 43, so the first 2 years, and it's 100 basis points thereafter.

So if you take that 100 basis points reduction and turn that from an IWACC into a cost of equity, that would reduce the 10.8% to 7.9%. But if you just stand back from it, the reason that the return impact for a delay or cost overrun is more limited than you might expect is that the RAB that you've built up to that point is held firm. And so the reduction in the IWACC only impacts returns on investment thereafter.

Okay. That's important, right? So the IWACC reduction is only on the excess. So the math that I did, I was applying it to the entire RAB. So it's going to, okay, fine to be higher than 7%. We can take the detailed math offline. right. And then sorry, Tim.

On the cash side of things, of course, the group is in a very liquid position and expects to have a strong balance sheet right through this investment period. So no, we just will be using normal treasury funds to get that. Of course, you lose interest on deposit returns and you replace that both with the cash yield for the investment, but you're also behind the scenes getting a 10.8% on your money as you go through it.

Yes. Okay. So probably a simple way to ask the question is if we think of the GBP 50 million of EBITDA that you guided by 2028, we should assume some payback of that and we have slightly higher interest cost. So the accretion to pretax profit would be slightly lower than GBP 50 million. But obviously, as you point out, that's not the whole return because you're also rolling up into the RAB, which gets you to your GBP 3 billion, right?

That's correct. The other delta to your math is the fact that the return that we're getting from Sizewell C right through this whole period is treated as equity. So it will not be taxed on receipt from Centrica, whereas, of course, interest would be taxed. So that's another benefit.

The next question comes from the line of Dominic Nash from Barclays.

Yes. A couple of questions for me. One on what's the implied PPA price for electricity at, say, GBP 38 billion cost. I can't see that anywhere. I'm intrigued to see what we're sort of coming in at. And secondly, can I just go back to the unlikely glass half empty case of a cost overrun. If you did hit the higher level with the GBP 7 billion overrun, can I just confirm that the math -- I get quite a higher number than that, which is if you're GBP 7 billion overrun, that's GBP 3.5 billion that shareholders have to bear. And if you divide that by the construction time, you're around about GBP 300 million a year of cost. And if you look at your average equity through the build at that sort of 35% level, you'll probably be about GBP 7 billion of equity building up to sort of that at the end of '30. So I'm getting more sort of 400 to 500 bps of RoRE downside case in the unlikely glass half empty scenario. So I just wanted to confirm whether that's kind of the downside case sort of capped, if you know what I mean?

I think the second question is definitely one for Russell. But I think obviously, in the excess, you'd expect to fund that not just with equity, that would be equity and debt that would go into the excess case. On the PPA price, I suppose there's no implied PPA price really because what -- the way this is going to be funded is going to be a levy and consumer bill. So to the extent -- so we've got the right to lift our 15% of electrons and we've got an agreement in principle to lift more than that.

And it's in everyone's interest to get the best possible power price because whatever price -- if we get a price that gives a profit which is higher than the RAB return to investors, then that will come off consumer bills. And so it's not that there's an implied price in there. I think the idea is to take the market as far as I know, but just ask Russell and Raj, maybe to confirm that and then Russell to tell you why the 500 bps reduction is definitely not the right number because we've got double-digit return even at the HRT case.

Yes, I think you're right on the offtake. And just to reconfirm, there's 2 parts of that for Centrica. One, we will take about 4 terawatt hours a year of our own electrons from the plant under a power purchase agreement, and that will be effectively linked to the market price which will be linked itself into the Ofgem regulatory framework where we're incentivized to try and make that price. And then we will also be helping Sizewell C generally from a route-to-market perspective by helping additional electrons to get to market. So that's the structure of the offtake and of course, no pricing for that. That will depend on the market price when we get there.

Dominic, on the reductions, I think it's effectively the same point I was making before that the returns accrue right through the period at that 10.8% until you get 2 years after the LRT timetable where there's a 50% reduction and then 100 basis points thereafter. But that's only applied to the returns in that period thereafter. It doesn't go back into the existing RAB that you've got or the returns.

And so that's why if you take the, let's say, the 100 basis point reduction after year 2, which reduces the overall WACC from 6.7% to 5.7%, if you back calculate it, that's a 285 basis point reduction in the equity return in that period. But again, if you then compound that and discount that back, that doesn't actually impact the overall returns, which we're working at that point.

Sorry, I'm laboring the point here. So that's the 100 bps reduction is just for timing delay, not cost overrun delay. Is that correct?

That's correct. So there's 2 separate things. There's a timing part of the regulatory framework and there's a cost part of the regulatory framework. So the timing part is based on the commercial operations date of January 2040. And then it's 2 years after that is a grace period. Then after that, the reductions kick in.

That's quite separate from the cost part of it, which is the LRT costs of GBP 40.5 billion and HRT of 47.7 billion. So there are separate mechanisms there. And just to remind you that the penalty mechanism between LRT and HRT is only 50% of the CapEx you put in is added to RAB. That's the most material part of the IRR reduction between that period, it's the RAB not getting the full CapEx on it.

Yes. Okay. So the maximum exposure is GBP 3.5 billion of RAB, so it's about 8% of RAB...

[Operator Instructions] We have the next question coming from the line of Jenny Ping from Citi.

So 2 questions, please. Firstly, just sort of absorbing all of this and thinking slightly beyond the nuclear transaction as we stand today, what sort of conversations have you had with your rating agencies on the fact that you've got -- now got a real -- another regulated investment under your belt. What's been discussed in terms of the FFO debt threshold and the credit rating as we go forward. So that's question number one.

And then secondly, if I look at your investment in terms of the GBP 1.3 billion, but netting of the cash yield that you'll be getting, which on the back of all of that is only GBP 500 million. And obviously, Centrica in itself is producing -- throwing out cash in the interim. Can you just update us on what your latest thinking is, again, slightly beyond the nuclear transaction announced today as to how we should be thinking about additional use of cash that's churning off the business?

Yes. Thanks. I mean the first question, Jenny, I leave it to Russell. I mean the second one, obviously, we've got the results in 2 days. So we probably don't want to go beyond talking about Sizewell today. But what I would say is it's a great problem to have a question, what we're going to do with the cash. I mean we are committed to completing our GBP 2 billion share buyback program, which we expect to do around the end of the year. And we've got a very healthy investment pipeline.

And as you can see from today, I mean, we've been working on this for years. And we've really -- Raj and Dave and Russell and others have really helped to shape this and turn it into an investable proposition. And so we are patient, but we are determined. And so we've got lots of good investment opportunities. So I don't worry about what we would do with extra cash because we've got so many wonderful ideas.

But as you can see today, what we won't do is to invest in something because we think it's ideologically the right thing or because we've made some previous commitment. We're laser-focused on value, but I'm confident we've got enough things in the hopper that we can use cash to invest and to grow the business and to grow value for shareholders. But it's a great question because I keep asking this to Russell, which is when are we going to have a change in our rating metrics. So Russell, I didn't pay you anything to ask this question, but over to you.

This is a bit of deja vu, Chris. You asked me all the time. But -- so Jenny, thanks for the question. And of course, you should take comfort the fact that we have good relationships with the rating agencies. We engage with them regularly, and we keep them up to date with the various things that we're working on in the portfolio.

They will see this investment favorably. It's bringing ratable cash flows into the portfolio for a very long period of time. If you look back at the last rating reports from both S&P and Moody's, actually, you can see that they are pointing to when we get more material regulated cash flows or contracted cash flows into the portfolio, that will be seen positively.

As we sit today, of course, we're building up the MAP cash flows. We're bringing the Peakers in Ireland on at the end of the year, and we'll be bringing income from Sizewell from next year. It will take probably a bit of time for them to get to be more material to make a fundamental change to the rating, but we're definitely going in the right direction.

The next question comes from the line of Bartek Kubicki from Bernstein.

Three questions related just to the project. First of all, regarding the funding of the debt portion of the RAB whereas the allowed cost of debt, which is -- I think, 5% or 4.2%. How sure you are that this will be aligned with the actual cost of debt? Meaning what if the actual cost of debt is higher than the allowed, who will actually pay for the difference between that? That's the first one.

Second of all, your GBP 1.3 billion investment -- equity investment is up to the HRT level. But if -- what will be your equity investment if you hit the LRT level, GBP 1.3 billion as well. And if this is the case, then consequently, the difference between the low and the high, who will pay for this? I mean, who will carry the funding part of that?

And the third point is just to reconcile on the shareholder loan. So you will be getting 6% cash return from the investment, while the loan pays 9% coupon. So consequently, there will be a difference. So this difference will accrue to the shareholder loan, right? This is the correct way of thinking about this.

Bartek, thank you very much for that. On the debt portion, we were -- we had an event this morning with the Chancellor and the Secretary of State and also the Chief Executive of the National Wealth Fund, Mr. John Flint. They are the debt provider to this. So John was saying this is his biggest single debt provision he's doing. So the government are intended to provide almost all of the debt into that. So I think we've got a little bit more certainty on the cost. But with that, I think the other 2 questions are clearly for us, what the GBP 1.3 billion, what would it be at the LRT rather than the HRT and the question on the debt.

Yes. So good questions. Just to finalize on the debt funding, if the interest rates change during that period, the allowed revenue will change. So it's a pass-through of interest costs. We will not be exposed in our return to whatever the interest rate costs are in that period.

Your second question was on the GBP 1.3 billion investment and whether that would change between LRT and HRT. And the reality is we will be spending GBP 1.3 billion in either case. And the reason for that is that a lot of the investment is front-end loaded. So we'll be spending about -- investing about GBP 500 million to 2028. It will ramp up into the early 2030s.

But at that point in time, of course, the RAB is a lot bigger and the allowed revenue retained in the business is greater. So that's helping to fund the project itself. And of course, the project can regear through time up to 65% to get additional funds available. So that means that in either of those scenarios, our amount of investment would be GBP 1.3 billion.

And then on your final question about the accounting. So just to recap for everybody, there's a shareholder loan structure that's been put in place. It's got a 9% headline rate. That will be the rate that will be booked into our accounts, 6% paid in cash. The difference, the 3% is retained alongside all of the rest of the additional revenue that we get as part of allowed return, and that will be reinvested in the asset and therefore, growing the RAB. So that's the dynamic of how that works.

The repayment of the loans, there's a 6% cash yield cap right up to the commercial operations date. That cap is removed at that point in time, and that will allow the payment in kind interest cash flows to come back to us in an accelerated fashion at that point in time.

Russell, thank you very much.

May I just add something to this one. So if CapEx is above LRT, who will fund the difference if you are going to put GBP 1.3 billion in either case?

Yes, that will be funded by...

Who is committed to put the equity?

Yes. So very simply, all the way to HRT, the project will either be funded by the equity participants or debt or the additional allowed revenue that's kept in the venture through that period. So we will not be having to put in our estimates any more capital in above the GBP 1.3 billion in that period. Above HRT, then that's separate, as Chris has just outlined, where either the equity participants decide to invest more or the government steps in. That's how the dynamic works.

[Operator Instructions] We have webcast submitted questions. Fraser, could you please read them out?

Yes. Thank you. We have one question from Mark Freshney at UBS on the webcast. Are you able to talk about upfront cash that you will be required to put into the project in the current year? Presumably, it will be higher than the annual payments through to the mid- to late 2030s to pay the government back for costs to date.

Russell, I think that's definitely one for you. Thanks for the question, Mark. I think that's for you, Russell.

Yes, I got that one. So indeed, of course, there's been investment already in Sizewell. And when we get to revenue commencement, which will be at the end of this year, we'll reset the capital base. New equity will go in, it will be refinanced. And we expect approximately, Mark, between GBP 200 million to GBP 250 million of CapEx at that point in time.

The timing of revenue commencement is to be determined by the government, but we do expect that later this year. That CapEx number might change. It might need to be rephased, but that's what we expect. So that means that we do have a larger initial investment and then it will be more phased as you go through the years thereafter.

Thanks, Russell. We have one last question from the webcast from Tancrède Fulop of Morningstar. You said that you will help to bring electrons to the market on top of the 4 terawatt hours of your share. Will this boost the earnings of Centrica Energy?

So we would expect Centrica Energy to be able to deliver a better price for the electrons for Sizewell C. So first and foremost, save money for U.K. energy consumer, but we would also expect Centrica Energy to make a return on those sales as well. So whether would you say boost, I would say we would expect it to be profitable activity for Centrica Energy, yes.

Thanks, Chris. That is all the webcast questions we have. Sergen, can I pass back to you, please?

Yes, of course. We have the next question from the line of Harrison Williams from Morgan Stanley.

So 2 from me. Firstly, can you -- I mean, the return you've got is obviously pretty attractive at the headline rate. I mean, can you talk about how you settled on a 15% stake and why you did not look to go beyond this given with the cash yield you're getting, the overall cash commitment is not excessively large.

And in relation to that, I mean, you've mentioned you've got first right of refusal on a pro rata basis if the government starts to sell down. Have there been any discussions on when that could start to be considered? So that's the first question.

And then the second, hopefully, a slightly broader question to your nuclear assets. I mean, what are the latest thinking around potential further lifetime extensions for some of the assets that are due to be retired by the end of this decade? I know you've already completed a few in the last 2 years, but wondering on the further scope there.

Yes. So great question. It's always nice when you make an investment and somebody says, why did you not invest more? That shows the underlying quality of the investment. It's always a balance and it's a judgment call. So could we have gotten higher? We absolutely could have, but we've got lots of other ideas as well. So we felt for now the 15% was the right stake. We do have a right of first offer along with the other existing shareholders should the government decide to sell down its stake. So we could increase the stake in the future, really does depend on what the returns would be like then and what other things we'd have on our portfolio.

But what we want to make sure is that we balance risk. And whilst this is a very good, regulated asset return model, we don't want to have too much in a single asset risk. So the 15%, I suppose is as good as any other number, but we felt comfortable putting that investment in and we felt that it gives a sizable stake, it gives us a seat in the Board. It gives us blocking rights on key strategic decisions. So we felt the governance, the financial investment and the risk and gave us a good situation with that.

With the extension of the other -- the existing nuclear, there's not much more for us to say on that other than we've been quite clear that we will run these things as well as we can with our partner EDF. And to the extent it's possible to do so safely and economically, we will continue to extend the life. So we've got a good track record on that. And hopefully, we'll have more to say going forward. We don't really have anything that we can add on.

We have a follow-up question coming from the line of Harry Wyburd from BNPP Exane.

I'd be glad to say it's a bit more simple than my earlier ones. But just very high level, you're guiding to at least a 10% IRR in the HRT scenario. Does that also assume a late commissioning? And if not, and it was commissioned more than 4 years late, what would -- and you got the lower IWACC and the ROE dilution, what would the cash IRR reduce to in that scenario?

So I mean, I think, obviously, if you go beyond the HRT case, we would be assuming that not only would we have overspent, we would also have slipped the schedule as well. So I think that number that Russell spoke about earlier encompasses both the delay and the cost. But Russell, can you confirm that?

Yes. For modeling purposes, what we've assumed in the HRT case is that a commercial operations date of the end of 2043. So that's approximately 4 years after the LRT case. So we're phasing both the CapEx and the schedule.

But I would say that due to the dynamics I explained to you earlier, even if you go beyond the HRT case costs and schedule, the impact on the overall IRR is relatively limited as you go forward. It's mainly the reduction in the capital contribution to the RAB. So it's a fairly modest impact and it would take a very large CapEx increase or a very prolongated delay to move it materially lower than the number I've given you today.

Yes. Okay. That's very good. So basically, the bottom line really is that you're going to earn a 10% cash IRR even in a really worst-case scenario, which I think is a pretty important take.

We have a follow-up question coming from the line of Dominic Nash from Barclays.

Yes, apologies for this one. Can I just confirm that your regulatory setup at the moment is just for construction and commissioning. And when you come up with your IRR calculations, is that the point of commissioning? Is that for the potential life of the asset? And what happens or when will we start to understand the returns that you'll get upon sort of full commissioning of the plant?

So this is one, I'll ask Raj to touch on this. Essentially, the returns that we've got cover the construction, the commissioning and a bit after the commissioning. So I think the first 5 years -- first 3 years of the production. But I think as Raj will confirm, and we therefore, don't know what the return will be thereafter.

However, there's 2 things to note. One is we've got a well-established regulatory framework. And we've been quite critical of Ofgem in the past in certain things, but they actually do quite a good job on the regulation of the infrastructure. But specifically, there's recognition in the agreement that a single plant nuclear power station carries more risk than a dispersed network and therefore, the expectation is you should carry a higher return.

But Raj, could you -- you spent a lot of time -- and I mean it's a lot of your background in this area, but you spent a lot of time on this. Could you just confirm what the position is, please?

Thank you, Chris. Look, that's right, fundamentally. So we've got clarity during the construction phase. In the operations phase, we've actually got the benefit of Ofgem's guidance. That is quite an unusual step in that we are looking at an asset that's being regulated for 50-plus years. They're not usually in the habit of publishing guidance like that, they have done.

In that document, they clearly recognize that a nuclear asset does have unique characteristics that will need to be reflected in the returns. They will start with ex anti regulation of networks as their baseline, but they will then adjust for the unique characteristics of a nuclear asset. They also in their guidance provide clear examples of where they provide for uplifts for specific adjustments that are needed for certain assets. So they talk about interconnectors and hydro transmission. And so from that, we derive a degree of comfort and place weight on the fact that we see returns that will reflect the higher risk and the unique characteristics of a nuclear asset over the lifetime.

We have a final question coming from the line of Ahmed Farman from Jefferies.

I have 2 clarification questions as I try to sort of understand this a little bit better. Can I just ask on the LRT. So in the LRT scenario, as I understand it, you're guiding to at least 12% project IRR, but it already assumes an end 2039 commissioning versus sort of the mid-2030s, which is sort of shown as like the Sizewell C management estimate.

How -- what's the impact of that sort of assumption? Is the IRR sensitive to that or not at all? And then also just my second question, just in terms of thinking about the near-term earnings and cash that comes through Centrica plc. Is there like -- I mean, assuming there is already an existing sort of asset and investment that already sits within Sizewell C. Does that -- do we need to take that into account? Or should we just sort of simply think about as you spend CapEx, that's going to drive the cash and the earnings accretion for Centrica?

Thank you very much. Russell, I think those are probably both questions for you.

Yes, I got them. Thank you. So to keep things simple today, in terms of the IRRs that we've produced, I've just shown you the numbers of the LRT schedule and the HRT schedule. And in terms of dates for both, we're assuming for LRT the beginning of 2040 or the end of 2039 in the LRT case. You're right that the Sizewell C company is aiming for an outcome which is faster than that and at a lower cost. And of course, mathematically, that would improve our returns because you are incentivized 50% of the CapEx savings below LRT are added to the RAB. So that would boost our returns. We're not giving guidance today on that specific number.

In terms of accounting, though, you wouldn't -- because we don't yet have RAB accounting, this will be an equity accounted associate. So what you'll be seeing on the balance sheet will be the injections that we put into Sizewell C through either the loan or the CapEx in each year and the return will be coming back on the loan as just described. You will not be seeing on Centrica's accounts, for example, the RAB or any of the other amounts. And as I explained earlier, on day 1, we will step into the existing capital structure, and that will probably be around GBP 200 million to GBP 250 million Centrica share to get that going.

I think that is all of our questions done. So look, just to say thank you very much, everyone, for joining us at such short notice. And just to recap, this is, I think, a super investment. I think it's good for the country. I think it's good for the company. It's good for all stakeholders. And it's aligned with our strategy of increasing our exposure to regulated and contracted cash flows with what I'm sure you'll agree is a very, very healthy return. So there's a lot to like about that.

Now what we do is we turn our mind to delivering this well ahead of schedule and well under budget and look to give our customers the green electrons that they're looking for. So there's a lot to like about this project. Look forward to talking to you all in 2 days when we give you our first half results. So thanks very much, everyone.

Ladies and gentlemen, the conference is now over. You may now disconnect your lines. Goodbye.