Greencoat UK Wind PLC Aktie

Good afternoon, and welcome to the Greencoat UK Wind PLC Full Year Results Investor Presentation. [ First, a recorded meeting ] [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. [ After, the company will ] review questions submitted today and publish responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll.

I'd now like to hand you over to the team at Greencoat UK Wind. Good afternoon.

Thank you, Paul. Welcome to this webinar. Bit of housekeeping first. We'll probably run the presentation for about 20 or 25 minutes, and we'll hand back to Paul. And then we'll allow some time for Q&A, which I think John will oversee. There is also a pretty lengthy disclaimer in this presentation, which we encourage you to read in your own time. We won't start by reading it out now.

So first of all, we wanted to just give a bit of backdrop and an introduction to UK Wind's business model. The clue is somewhat in the name. We invest in U.K. wind farms. We are the largest listed U.K. renewable investment trust. In terms of the amount of wind that we own, we're the largest nonutility owner of wind farms in the U.K., owning about 6% of all U.K. wind farms, and that generates around 2% of the U.K.'s electricity every year.

For reference, that powers around 2,000 homes and in 2025, avoided the emission of 2.2 million tonnes of CO2. We've been going for 13 years with our relatively simple model, an annual dividend that increases in line with inflation as well as reinvestment in the business. And you can see here in the chart, it just shows what a simple business we have and how it works.

So we own interests in 49 different wind farms in the U.K. Over time, they've generated 34.4 terawatt hours. So what on earth does that mean? Just for reference, that's roughly 12% of the average U.K. annual demand for electricity. That renewable energy turns into cash, and that's after paying all of the operating costs for our wind farms, paying landowners, paying to maintain turbines and so on and so forth. That, over our operating history, has given us GBP 2.4 million -- GBP 2.4 billion of cash that we can choose to do something with. And GBP 1.4 billion of that, which is -- was a staggering number to read out, has gone out to our investors in dividend form with 12 consecutive years of growing the dividend in line with RPI or better.

And crucially, the distinct thing about our business is that we've reinvested the additional money, GBP 1 billion, back into new wind farms to keep the business model going. We've always demonstrated sector leadership, having created the sector through IPO in 2013. Obviously, it's been a challenging time in recent years for renewable energy investment trust, but we've been at the forefront of addressing those challenges, firstly, by being the first to launch a material share buyback program by leading a material number of disposals of our shares. And we are the first and only company in the sector to change the way that the investment managers pay fees. Those fees are now paid on the lower of market capitalization and net asset value. Nobody else has matched that. So we're fully aligned with the shareholder experience. If the share price is down, so is the revenue that we have.

It's a point that's worth emphasizing because as an investment trust, we are the managers, but the Board controls the company. And we have a highly experienced Board and highly active that's equipped with strong expertise across all of the relevant domains to run UK Wind. And that is a really important feature of this business, is the strength of this Board, the alignment of us as a manager and our commitment to do the right thing for shareholders over the long term.

So now just to give you some context to the results. The broader backdrop for the renewables market in the U.K. is positive. You may have seen the government's most recent auction round called Allocation Round 7, or AR7 for short, has procured record-breaking capacity for new renewable energy deployment of around 15 gigawatts. That's to state the demand for electrons that's coming. So we estimate that by 2040, we'll need about 50% more electrons than we need today. It could be as much as 100%.

Renewables are the quickest way to get there. There are other options, but they tend to take longer and cost more. And we'll address that later in the presentation. That contrasts somewhat with the renewable investment trust background, which has been a bit more challenging with falling NAVs across the sector, which we'll address in a second, and below budget performance. It remains clear to us that this is a sector that is too large. It grew substantially during the years where money was cheap, and we think there is space for it to rationalize down to fewer companies that are larger. And we think that will be beneficial for us in terms of rerating as the founder of the sector and the largest company in it.

So against that backdrop, we've been very active. In this presentation, we will cover how we have generated capital to use over 2025 and what we've used it for, buying shares back, reducing debt and so on.

So we'll now look forward at the results for 2025, which we published last week. Steve will take you through those, and then I'll return to talk through the broader renewables market and our capital allocation priorities going forward.

Thanks, Matt. So yes, I'll take you through the financial operational performance during 2025. So if we look at the financial highlights, what you can see here is a very strong and robust GBP 291 million of net cash generation. So that's the cash that this business has generated after paying all the costs that it needs to operate the business itself. That is the cash, therefore, that is available to allocate to shareholders. We had a dividend cover last year of 1.3x, and that's despite the fact that during 2025, we had some of the lowest wind speeds in the whole of this century, had a bearish impact on our generation, which led us to be about 8.5% below budget, but yet we still had our dividend covered quite healthily.

A couple of other points worth highlighting here. So you can see at the top, we've published our EBITDA numbers. That would allow you to compare us against some of our broader peers in and outside the investment trust sector. And I think you'll see that, that would put us at a pretty good valuation compared to others. And then in terms of our returns of 11% portfolio IRR at our net asset value, if we just focus in on the yield itself, it's almost 8% on NAV and close to 11% on share price, which we think provides a very compelling opportunity for investors, especially when you look at our very high structural dividend cover.

Moving on to net cash generation in a bit more detail. So as I said before, GBP 291 million of cash generated in 2025. That's grown from last year. One of the reasons for that growth is there's a strong CPI linkage in our cash flows, which helps the growth of the business year-to-year. In terms of some of the other points that's worth highlighting here, I think you can see, and Matt has already mentioned it in terms of the fee structure that gets paid to the investment manager, there was a GBP 6 million saving to the business in 2025 following our market-leading change in investment manager fee structuring. That's a cash saving. On a P&L basis, it would actually have been higher, about GBP 10.5 million. And going forward, the ongoing charges ratio, so that's the cost that you pay for us to manage your business, will fall to about 70 basis points over the coming year if the discount to NAV remains consistent. Again, we think that's market leading and a very compelling opportunity for investors.

So in terms of dividend cover itself, so this is the amount of times we can pay the dividend from the net cash generation. As I've mentioned before, it's 1.3x despite the difficult circumstances of 2025. And as you can see, in 2025, we paid a dividend of over GBP 227 million to our shareholders.

You can also see here some of the aspects of capital allocation. We've had a busy year allocating capital and doing the right things for shareholders. So we made GBP 181 million worth of disposals. That's selling assets at the net asset value, helping prove that, that fair value or net asset value is robust and realistic. We spent GBP 109 million buying back our own shares at a discount to NAV. That's been about 95 million shares and added some value to the business. And finally, we've reduced the amount of debt that the company has by GBP 168 million as well. All things, we hope, that are adding value to the shareholders on an ongoing basis.

So moving on to the next slide, just a couple of quick points on here. So this is -- 2025 is the 12th consecutive year of paying an inflation-related dividend at or above RPI. We're very proud of that, puts us in a handful of FTSE 250 companies who've managed to achieve that fact. And we've announced the dividend target for 2026 at 10.7p, a 3.4% increase on 2025's dividend. Historically, our dividend has been covered at 1.7x, and going forward, we're forecasting 1.8x over the next 5 years. And obviously, that 0.8 gives us significant amount of capital over the coming years to allocate in the best interest of shareholders. That will be around about GBP 1 billion.

Moving on to net asset value itself. We've talked a little bit -- looking left to right, talked a little bit around the difficult year we've had in 2025. So we were forecasting at the beginning of 2025 a 1.8x dividend cover. It ended up being 1.3, as I've already said. About 0.2 of that differential is due to below budget generation. About 0.2 has been also due to power prices falling during the year, principally as a cause of fall in the price of gas, which up until beginning of this week has been largely a normalization post the war in Ukraine. We'll come on to power prices in a bit more detail in the next slide. And 0.1 is a variety of other factors as well.

What I think is also worth pointing out here is some of the government impacts as well, which we can talk about in more detail later on, about 3p per share reduction as a result of some smaller government interventions, specifically around the renewables obligation moving from RPI inflation to CPI inflation.

So in terms of power prices, you'll see on this slide on the top left-hand side here, our power price forecast. This is the annual price that we can see in each of these years. Obviously, there's a lot of volatility in power pricing intra-day, intra-month. As we've seen with the unfortunate events over the weekend, there's been a spike in power prices this week.

How we actually forecast our power prices, what we do for the first couple of years is that we take the futures market's pricing that people are actually buying and selling power for in the market. So it's the most accurate reflection of the power price at any one time. And then after that, we use an expert consultant who builds up the whole generation stack, so what type of nuclear, wind, solar, gas is on the system, and it matches up to the demand in the system as well. And we think there's a very strong case for demand growth in the U.K., principally from the increased use of artificial intelligence, which leads to massive build-out in data centers.

You can look across the island at the moment, where about 24% of their electricity demand over the course of the year comes from data centers alone. That's from around about 0 only 4, 5 years ago. And we also see increasing demand from electrification of heat and transport, too. We think that gives some significant upside opportunities there in terms of power prices.

So over the last 12 months, we've reduced our power price forecast. Between now and the end of the decade, it's about 10% lower, and in the 2030s, it's about 5% lower. As I said, that's mainly due to a fall in gas or a normalization of gas prices post the highs from -- following Russia's invasion of Ukraine. We've actually seen that reverse a little bit in the very recent times given what's going on in the Middle East. And that shows you that having some judicious exposure to power prices can reap its benefits.

And notwithstanding that, we're very active in terms of our way of managing power price risk. About 60% of our cash flows over the next 5 years are fixed and the vast majority of that is linked to CPI as well, so inflation linked. We think that's a strong feature of the business. And we also have the ability to improve on that either through ways of hedging power physically or financially, so we're going out and adding fixed prices in terms of the way that we sell our power. There's also insurance products available as well, again, to help manage that power price exposure where it's in the best interests of shareholders.

Now again, the dividend is a core part of our proposition, and we've set out here, on the bottom left-hand side, some sensitivities to what the dividend cover would look like at some pretty bearish power price scenarios. And I think you can see that even after paying an inflated dividend over the next 5 years, we can still cover our dividend comfortably even down to low power prices such as GBP 30 per megawatt hour.

So moving on to wind resource. I mentioned 2025 was a difficult year, especially during that first part where we were under budget for 5 of the first 6 months. That's principally because wind speeds were abnormally low, some of the lowest wind speeds this century. There's been a big normalization in the second half of last year, which has continued into this year as well. And we're now above budget for the beginning of this year, plus some positive tailwinds from cash being generated towards the end of the next year and received in our bank accounts in January and February this year.

An important part of managing real assets like this is making sure that the assets are available to generate when the wind blows. Pleased to say that last year, we were on target in terms of our availability assumptions. And so therefore, when the wind was blowing, we were available to capture it as well, maximizing the revenue for our shareholders.

Just a couple of words on balance sheet. So we have a mix of different debt products. Majority of it is term loans at the holdco. We also have some debt, which gets repaid annually as well associated with one of our projects. We think this is an interesting debt structure because it allows us to decide how to allocate our capital because we don't have to necessarily repay it all every single 6-month period or yearly period. We think that gives us the flexibility to use what cash we've got in the best interest of our shareholders in the long term.

So that wraps up the conversation around 2025 performance. I'll hand back to Matt now to talk about the renewables market and further strategic capital allocation priorities for the business.

Thanks, Steve. So I mentioned at the beginning that we wanted to give a bit of broader context for renewable energy and the U.K. electricity system. So the first thing to note, as I said earlier, is that all forecasts are unified and seeing a significant increase in the amount of demand for electricity out through 2040 between 50% to 100%, depending on which forecast you take and depending on which range and the same forecast you look at.

All demand for electrons is obviously good for us. We generate electricity. We sell it. And increasingly, a lot of that demand is smart demand, so it's price responsive. So think of an electric vehicle. If you have a smart cable and you have a half hourly meter, you're able to charge your car in the cheapest half hours for you. And frankly, I don't mind when my car is charged as long as by 7:00 in the morning, it's charged to 80%.

That is even further constructive for intermittent generators like us. We don't choose when to dispatch the wind, it's windy or not. We generate the electrons anyway. So having an underpinning for demand when there might not otherwise be a lot of demand on the system is really helpful for intermittent generators. So we see that from electric vehicles. You mentioned heat pumps earlier, so both creating heat and creating cold. Data centers are also becoming increasingly adaptive in how they use power. So all of these factors are good if you're selling electricity and very good if you are selling intermittent electricity.

So we expect the demand for electrons to be there. It's simply a question of how much they will be. The question that naturally arises, well, where will the electrons come from if we accept that we need them. There's no need to look at the sort of the charts in the bars here. The most important thing is that renewables, why are they going to be the winners who provide the new electric capacity that we need over time.

Well, first of all, speed. Renewables are actually relatively quick to deploy. Once they're consented and have all the permits in place and successfully get through an auction like this that gives a route to market or a fixed price for a period of time, they're relatively quick to deploy. Onshore wind could take 12 to 18 months to build. Solar, perhaps half of that depending on the size of the site. Offshore wind naturally takes a little bit longer to build given the complexity.

And it's interesting, just to contrast that against the other sources of potential new electrons in the U.K. Nuclear, I definitely think has a role to play. But you look at the time horizon from awarding Hinkley Point a contract, so a route to market that I mentioned earlier, that was 2013. So then 2030, when [ that produces ] first electron. That will obviously be quicker for newer plants, other plants that are being built along the same design that isn't instantaneous. The same is true around creating new gas capacity in the U.K. There's a peak in global demand for gas turbines, so there's roughly a 5-year waste at moment. So for now, renewables are relatively quick to deploy. They're also secure. Once you've built it, it's there. It generates electricity. You don't have to worry about what's happening in Qatar per se.

Cost is another feature, and we set out here the prices that the auction participants have been awarded here. They're all materially lower than the government's cost expectation of what one would need to build a new gas plant. The government estimates that at about GBP 150 a megawatt hour, whereas the cheapest solar is about GBP 65 a megawatt hour.

So I think fundamentally, if we look at the backdrop for the market for renewables, it's constructive and positive. It's supported by the government with this allocation round. And there'll certainly be a lot more capacity for people like us to invest in going forward. So we've seen there's a need for significant investment. We see lots of opportunities, and we wanted to just contextualize that with how we've been allocating capital this past year, 2025, what we expect to do in '26 and beyond.

So capital allocation is just a fancy term for where you get the money from and what you do with it, right? So we've shown here, we generate, as we said before, excess net cash every year. We can sell assets if we choose to. We've sold GBP 222 million worth of assets in the last 14 months, all at the prevailing fair valuation of those assets. And in 2025, we used the money that we generated either through disposals or organically through our portfolio to, as Steve said, satisfy a dividend of GBP 227 million being its fourth consecutive year of increasing at RPI, better.

We also repaid or distributed a significant amount of debt, GBP 168 million, and spent GBP 109 million buying our shares back. That, of course, is quite a big demonstration of the board of managers' commitment and activity over 2025. It seems perhaps, thus far, unrewarded in terms of share price performance. So there is a need to do more.

So let's look ahead at what we expect to do over 2026 and beyond. So again, we've shown this in a sources and uses kind of way. On the left-hand side, where will the money come from? Well, our central case for net cash generation this year is GBP 380 million. We put a range there because there is variability in power prices [indiscernible]. We have a bit of excess cash on balance sheet as well, and we could well pursue further disposals to give us more capital to allocate.

Where is that going to go this year? So we've committed to a dividend that now increases in line with CPI. It's a very clear signal for investors. We have a 12-year track record of paying a dividend that's increased in line with RPI or better. Going forward, that will be CPI. As I said, it's a clear unequivocal commitment. It's not the word progressive, which could mean that the dividend doesn't go up at all. And that's always been a strong hallmark of UK Wind's capital allocation priorities. We also expect that, that dividend should be well covered in the next 5 years, and we'll look at that in a second.

Our immediate priority will be to reduce gearing in the business. That isn't because we have an inherent problem with the amount of gearing that we have. On the contrary, the banks who lend to us would be happy to lend us more money. We view that as giving us optionality for the future. And this year, we expect to make a disciplined return to reinvesting. That is something that UK Wind has done a lot over its time at the beginning. You'll recall, I mentioned that UK Wind has generated -- organically invested GBP 1 billion back in this business over time. This year, I think, that will be characterized by relatively low cost but high optionality investments that already exist inside our portfolio.

Looking beyond 2026 and the landscape forward. We've set out here the excess cash that we expect to generate and have our ability to use over the next 5 years. We've shown EBITDA. We've shown net cash generation and GBP 1.2 billion in CPI-linked dividends for the next 5 years. And that leaves us on a sensitized range between GBP 800 million and GBP 1.2 billion to allocate.

As we said before, in its past, UK Wind has successfully reinvested in its portfolio, and we thought it worth illustrating the power of reinvestment. So if you were to look at the chart on this page, when you invest in finite life assets -- and we think our wind farms will last for 30 years -- obviously, if you don't replace them, they get older every year and so on and so on and so on until, at the end, they have no value. We think there probably will be a residual value for our wind farms at the end of 30 years, but we don't price that into our net asset value.

But over time, you can see, if a portfolio that is an average 9 years old gets older, then the cash flow that comes off of it -- and this is the free cash flow available to us to do something with. That's the green stack here -- it's going to reduce over time. Naturally, it would. These are depreciating assets. But over time, UK Wind hasn't had that experience because it's reinvested in the business, and this green chart just shows what happens if you don't generate any excess cash beyond your dividend; and if you did generate cash, you don't do anything with it.

Well, if you reinvest it with discipline as we have historically, you get to grow the cash flow that's available to investors over time. That's why the blue stack on top grows over time. And that gives us yet further free cash flow beyond our dividend to reinvest back in the business and maintain UK Wind's status as a permanent capital vehicle.

So just to summarize before we hand back to Paul and then John for Q&A. Management and the Board recognize that it's been a challenging year, but we do see some of the signs of rationalization in the sector that we think will favor fewer larger products, ourselves included in that. We continue to be active. We've shown you the activities we've been up to in 2025 and our plans going forward. And there is a market opportunity here and cash flow available to us to invest in that opportunity. So in many respects, with the return to disciplined reinvestment, the future can be quite positive for UK Wind PLC.

Going to hand back to Paul now and then John for Q&A.

[Operator Instructions] Just like to remind you that recording of this presentation along with a copy of the slides and the published Q&A can be accessed via your investor dashboard. We've received a number of questions, both pre-submitted and throughout today's meeting from investors, so thank you very much for that. John, if I may just hand over to you just to read out the questions where appropriate to do so, and I'll pick up from you then.

Thank you, Paul, and thank you, everyone, for your questions. We've got quite a few. And I'm not -- because they've come in quite quickly here, I'm not necessarily going to be able to group them all together, so we may jump around a little bit. But let's start with this one. The company's in [ commented ] expert miscalculation in wind speeds has led to a decline in net asset value over recent years. Given the turbine workload has been lower than expected, should the estimated -- should this see an estimated gain to NAV through increased plant longevity?

Thank you, John. So I wouldn't characterize our estimations of wind speed as miscalculations, if you like. Wind is a volatile resource on an intra-year basis. Standard deviation of energy output from wind speed over 1 year is around 10%, but over 30 years, it's around 2%. So one should expect properly calculated wind speed estimates looking forward to have some variability.

And indeed, if one looks back to 1996, which is when data was harmonized in the U.K., it is characterized by 3- to 5-year periods of over and underperformance in terms of wind. So we and the Board are very confident that the process that we went through at the end of 2024 to realign our budgets going forward for the long term was the right process done with a third party and scrutinized by the Board. And we have, as Steve said, seen somewhat of a normalization of wind in the last half of last year and are on budget to date.

To get to the nub of your question, yes, if you have less workload through your turbines than anticipated, then, generally speaking, that equipment will probably last longer. But that isn't the only factor in asset longevity. One has to make sure one has planning permission to operate for more than the 30 years that we expect and also land rights. But those last 2 are the sort of things that Steve and I work on securing for the future of the portfolio. But less physical load through the turbines does mean that their status and maintenance and equipment duration should be longer.

Yes, I think that's right. And the only probably other thing to add is you could potentially run your turbines a bit harder as well. So when it is windy, you can let them run a tiny bit harder to get some more energy out of the wind as well. And that's something that we're continually looking to do in order to enhance the portfolio day to day, either through software and/or hardware updates in order to extract as much energy and therefore, revenue out of the wind as we possibly can.

Okay. Thank you. Next question here is from [ Alex C. ] on disposals. It's good to see disposals at or near NAV, especially when the shares are trading at a discount to NAV. It would be helpful to understand if these disposals are representative of the portfolio or somewhat unique or cherrypicked.

Thanks, John. Yes. So as we said, we've disposed of interest in a number of our assets over the past 14 months at NAV to deliver GBP 222 million of gross sale proceeds. How do we select those assets? Well, I characterize the onshore wind farms that we sold as, in effect, middle of the road for our portfolio. And the way that we sold them was through bilateral process rather than launching a broader sort of auction process. We felt that was the best way to give certainty to delivery, and we divested to partners that are known to our business before that many of us have worked with, where you're pretty clear that you're going to have a meeting of minds and that you'll get to the level of pricing that you want.

So the onshore wind farms that we sold were middle of the road in our portfolio. The offshore wind farm that we sold an interest in is our largest single asset, and we felt that it was sensible to deconcentrate the business in that asset. That is the only asset, by the way, that has debt downstairs in it, so SPV level debt. So by selling an interest in that asset, you automatically degear the business a little as well. So that was why we were attracted to partial sale of that asset.

Okay. Thank you. We've had a few questions on batteries, but I'll go with this one from [ David D ]. Does the reduction in battery costs offer an opportunity for adding storage near turbine sites?

I think at present is more of an opportunity for solar sites in my opinion. So colocation of solar and battery has a lot more synergy than wind and battery in our minds. So certainly, you have a very predictable daytime peak. You would have seen that yesterday, somewhere between 11 and 1, 10 to 12 in the summer. And that suits the characteristics of a battery in terms of charge and discharge.

The challenge with wind is really in terms of sizing. So wind, it tends to be windy for 24, 48 or 72 hours at a time. So the magnitude of battery that one would need to capture any meaningful energy from a wind farm when it's windy, which, of course, is typically the time when power prices go down a bit, is so big that you wouldn't be using it. If you did size it to suck down a lot of that power, then the other 90% of the time, you'd have to use it in the arbitrage market, which is, generally speaking, how batteries make money.

So we don't really see the appeal of wind and batteries on a colocation basis at present, but the question points out likely that the cost of battery CapEx is falling. So that's one that we will stay close to. On a stand-alone basis, for us, batteries, when one looks at the risk return of a purely merchant battery model versus the fixed cash flows that are available from investing in wind farms, the return premium isn't really there at the moment. But as batteries get cheaper, it's something that we'll think about and look at.

Thank you. Next question from [ Sam ] talks about capture discount, so the price we achieve on our electricity sales versus the baseload price. That was 13% last year. Should we expect that to widen further over the next decade?

Yes. Good question. Thanks, [ Sam ]. So the way that we forecast capture rates actually does show an increase in that capture rate over the next few years. It's obviously a difference between the balance of the demand at any one time versus the generation from intermittent resources. And we think that is going to increase over the next few years. So that's in our production forecast. It's in our net asset value. So it's fairly represented in our balance sheet, and we're comfortable with that position.

There is some uncertainty on there. If the build-out of wind is faster than demand, then capture rates could go up but also vice versa. If demand starts to accelerate like we've seen in other markets, especially around data centers, we've also seen that.

The other thing that I think we're going to see over the next few years in terms of the electricity market is a real change in terms of the dynamic use of power. And I think things like Matt mentioned earlier on in terms of heating and cooling, air is a very good way of storing energy, be that in the form of cold or in the form of heat. Electric vehicles are another great way of storing energy as are batteries more generally.

So I think you'll see a lot more dynamic usage of power, especially when power starts to become a bit lower, which will end up increasing or decreasing depending which way you're looking at the capture rates that we see and therefore, maximizing revenues for a company like UK Wind.

So this is a follow-up question or a somewhat linked question from [ Sandy ]. Can you help me understand why in the context of rising forecast demand, perhaps more dynamic demand? Is it that we expect power prices to fall over the forecast period? Is it because -- is it that supply is forecast to exceed the forecast power consumption increase?

It's fundamentally because renewables are cheaper than other forms of generation that are on the grid now. And you can see that in the Allocation Round 7 results. If you look at the gas price that the government are forecasting, it's around GBP 150 a megawatt hour. Offshore wind is coming in at GBP 90 per megawatt hour. So the more renewables you push on to the system, the cheaper the overall system becomes.

Then, it becomes that balance between demand and supply, we've just been talking about there. So that's why we're forecasting and so most forecast is a reduction in electricity price over the next 5 or 6 years because more and more renewables are coming on to the market, dampening the price of renewables, which ultimately is what consumers see in their bills when it comes to paying that every month.

Moving on to a separate topic. So if the continuation vote were not to pass at the AGM, which is scheduled for May, is it a -- is the NAV, sorry, a reasonable assumption of the value of the assets that could be sold in the current market? And how long would it take to sell 49 assets?

Yes, that's what net asset value is. It is the fair valuation of the business as we see it and as our auditors validate, as our Board validates.

How long would it take to sell that number of assets? I think it's always challenging to tell until we start a process. And I think a decent proxy will be another fund in the sector that is presently undergoing a sale process. So I think you'll learn and see quite a lot from that.

It's like anything, I mean, the way that assets sell in this market, there's a price duration curve. If you wanted to sell all of the assets tomorrow, I'm sure we would get a price, but it would be NAV. If you took a 6-, 12-month strategic approach and found the right kind of capital to come in and buy the assets, then I think you could achieve NAV over that time period. So it would take time for sure. But that is the point in asset value. That's what it is meant to represent.

Okay. Thank you. A question from [ Vasco ] on the current spike or recent spike in oil and gas prices. Is there a corresponding expected increase in electricity prices? And are you expecting this to increase profitability?

So yes, good question, and thank you. Yes, there has been an increase in electricity prices in the U.K. following what happened on Saturday and what's been unraveling in the Middle East since prices have increased by anywhere between GBP 10 and GBP 20 per megawatt hour over the next couple of years. We haven't seen pricing beyond that duration move substantially. But over the coming 12 to 24 months, pricing has increased and UK Wind has some exposure to that. Some of that, we've actually hedged away this year and settled some fixed price contracts, and some of that will be exposed to going forward in terms of taking advantage of those higher prices that we're seeing at the moment given the unfortunate situation there.

I think it's really, Steve, as you mentioned, it's a function of how long this conflict lasts. It's the marginal units of gas coming from Qatar that is going to drive price differentials in Europe and in the U.K. At present, we're not seeing that really have a significant impact on power prices a couple of years ahead. But for this year, as Steve mentioned, at present, power prices have increased appreciably. Such is the nature of volatility in the sector that, of course, it could all end with one tweet. So we have to be measured when thinking about that.

But it's -- part of our job is to manage that exposure to power prices and be able to take those quick reactions in order to secure upside where we can increase probability.

A slightly linked question here. So how will wind power be priced when the connection to gas prices is broken, assuming that is something that we can do eventually?

It's a really good question, actually, and it's one that the government, in some degree, is grappling with through its review of electricity market arrangements at least at the beginning of the genesis of that process. So if you think about it, where every unit on the system has a relatively low marginal cost, the marginal cost isn't 0. We, of course, pay operating costs on a pounds per megawatt hour generated basis. So whilst we don't have to pay for a resource, you do have to pay for maintenance. It's clearly unsustainable if the commodity that you produce is only ever dispatched at your cost of production.

So the way that we see this working in the future is by having, if you like, a voluntary CfD system that's sometimes referred to as Pot-Zero, you can read about it online, where, in effect, generators who are fully merchant or where there's no linkage to gas price and the selling power in the market can bid into a mechanism to secure a price for a long period of time that gives both them certainty as to what they will receive going forward and that it's worth continuing to maintain the assets we have and also give consumers and government price visibility for a decent period of time. Now that's yet to emerge. And I think we're quite some way away from the scenario that you described, but it's a really thoughtful question.

Okay. Moving on to some other areas and just to prove that we're not softballing all the questions. If the share price is such good value, why aren't we seeing it supported by highly paid directors buying shares?

It's a completely fair question. I can't speak to the directors' personal circumstances, but that is often a question that is raised at our AGM, which investors are welcome to attend in May this year. I think the point speaks more broadly to alignment. There's a couple of things there that are important.

I mentioned that we are the only manager in the sector who's paid solely on the lower of market cap and NAV rather than NAV. That means our fees are a lot lower than they used to be. That's fine. It's the right thing to do for shareholders. It also means that we're fully aligned to improve the situation for shareholders.

Another point to note is that management are paid a significant amount of the management fee and shares at any given moment. Our employer, Schroders Greencoat LLP holds around 6 million shares. I personally hold a large number of shares, and some of my compensation has been turned into shares for UK Wind. So I think there's no lack of alignment around the table for manager or Board in terms of addressing the situation that we find ourselves in.

Similar question on performance. My investment since the 2021 share offering is sitting at a capital loss of 28.4% and both the NAV per share and the share price are falling significantly. What is causing these deteriorations? And what are you doing about it?

It's a very fair question, and my own personal investment journey is almost exactly the same. I think I bought my shares in 2022 actually. So there's a number of things here. We've addressed that power prices have been falling. Power prices rise. Power prices fall. They rose appreciably in 2022 and '23, and that was highly beneficial to the fund. Since then, they have fallen. And that, as the person who asked the question pointed out, has led to NAV falling. It's also corresponded with 2 years, and this does happen, of relatively low wind speed generation.

The broader context is that the renewable energy investment trust sector, in my opinion, grew too big when money was cheap. So all the way through to the end of perhaps '21, money was very cheap. There were lots of products in the sector. And much of that expansion was supported by investors that were seeking income, certain types of institutional investor who, post the Liz Truss budget, have other areas where they can get income.

That means you have a lot of sellers. You have more sellers. I mean they're always the same number of sellers and buyers, right, otherwise shares [ would be clear ]. But the point is if you have more selling sentiment than buying, then that drives discounts down. We find that our share price is the largest vehicle in the sector and having done the most significant buyback in the sector has been perhaps a bit of a [ -- been used as ] liquidity for others.

And I think you also need that situation to resolve itself with fewer larger companies in the sector for a return to health as well as working hard to deliver on that metrics and cash generation, which is what Steve and I focus on every day. Those to me are the 2 parts to correction in this sector. I understand how you feel about your personal investment journey. We're entirely aligned to make things better for the business.

So following on from something you mentioned there around the supply and demand in the sector. So the question is you mentioned the need for consolidation. What are the drivers for this? Is it synergies, mergers across different technologies, diversification, other factors?

I think it's a combination of things. I mean it's consolidation itself, as Matt outlined, won't necessarily be the answer. We think the sector needs to shrink. So putting together different funds and not shrinking the sector without there being some type of material hand back of capital to shareholders probably won't work. So I think that you've got to look at it in the round in that way.

In terms of the other factors that would make a theoretical merger work, yes, there would need to be synergies. There might need to be some diversification benefits, but it would have to work in order for our shareholders for us to even consider this. And the bar is pretty high. We think our portfolio is very strong. We have the ability to invest in our portfolio, invest in further onshore, offshore wind assets in the U.K., especially with an Allocation Round 6 or Allocation Round 7 contract, which will give us 15 or 20 years of fixed revenues for the business and allow us to be confident to cover the dividend very strongly and carry on reinvesting excess cash flows.

So the way that we would look at it was what is in the best interest of our shareholders. And unless it was clearly in the best interest of our shareholders, we'll continue with our current investment objective.

And move on to a few more operational, let's call them, questions. So over the next 5 years -- this is from [ Tim ]. What portion of CapEx will be needed to fund the repair or replacement of existing wind farms as they age?

So the way that we look at this is probably quantify it more as operational expenditure rather than capital expenditure. But I can see why the question has come through that way. Effectively, you've got the turbines. There's some major components within the turbine. You have the generator. You have the blades, and you have some other aspects, which on -- over time, sometimes need replacing.

In terms of the costs that we saw as an overall business last year, it's about GBP 227 million. Of that, it's something like 30% to 50% in any 1 year, which goes towards the overall operations and maintenance of the turbines directly themselves. And that will be funding the physical hardware, which is used to replace failed hardware, also refurbished hardware as well as well as paying for some of the risk management along with the staff that are obviously on the wind farms doing the actual work themselves.

As we go forward and we look to repowering, even though that's some way away for us, that will be a different conversation at a different time. The cost for onshore wind and offshore wind have reduced over the last 10 years. So we expect that if we were to invest in new projects, required genuine CapEx, that those costs would be pretty competitive, and as you see, much more competitive than the cost of gas.

Question from [ Stephen ] on wind speed. So why do we have below budget wind generation almost every year? Can we improve the budgeting process?

Thank you for the question. It's a very fair one to address. So we did a holistic review of our wind speed estimations in 2024, as we said before, using a third-party consultant. We took the -- that exercise very seriously. Our Board was heavily involved in it. And we felt we did exactly the right exercise that led to a reduction in our long-term expectations of energy generation of about 2.4% every year.

We've even looked at whether there are any climatic effects that one could speak to as to wind speed variability going forward. As yet, there are no conclusions from that. There's a reasonable degree of uncertainty given the climate modeling.

So if you look back over the data set, as I mentioned earlier, back to 1996, it is characterized by periods of time where you have over and underperformance of wind speed versus the long-term mean. So going forward, our expectation of our central case estimation remains to be assessed in 2024. We're as interested as you are in having a budget that is deliverable, but as it comes to the science and the industry practice and standards that we've applied, I think we've done that, exactly the right exercise, and we've done it quite prudently. As we said earlier, the last 6 months of last year were a more normalized wind climate and beginning to this year, it is relatively strong, too. So perhaps that is a year where you will see a reversion to mean.

Another question on generation and wind speeds, I guess. Is curtailment a problem? And how does it affect impact -- sorry, affect income?

So curtailment is an issue for the interim. It's principally a factor that the grid is not being built out in the way that was foreseen for the distributed energy system that we have now. You might see, if you look at the likes of RWE and SSE, there is significant -- and National Grid, significant investment in the grid coming up over the coming years, which will alleviate that problem in order to make sure that the grid is there for when generation generates, it can be transported to the right area.

In Northern Ireland, where we hold a number of assets, it's slightly different, where there is no compensation for grid curtailment there. That's subject to change in the future, but that's all factored into our fair value with what we think are prudent estimates. In the U.K. for some of our assets, there's something that you might have heard of called the balancing mechanism. And that's a factor whereby if a wind plant is curtailed, it can bid into this mechanism and be compensated somewhat for the loss that it has from not being able to generate. And that helps National Grid balance the overall position in terms of supply and demand. But the key to this is investment in grid. Investment is coming.

Okay. Just taking note of the time, we'll try and get a couple more questions in, and then we'll have to draw things to a close. There's 2 here that are quite similar. So what is the net gain to the company of buying back shares versus using the same funds to reduce gearing and therefore, the cost of debt?

Thank you. So on an economic analysis, if you buy a share back at a, say, 25% discount, then the return on that is whatever you think your return is at NAV divided by 0.75. So that, at present, is a relatively high return. The return from paying off debt is you then stop paying the interest on that part of debt that you've repaid. So taking the cost of our revolving credit facility as an example, that would be around 6%. So the return on buying a share back is undoubtedly higher than buying -- retiring the debt.

But as we said, for the long term, if the company continually buys its shares back, it will shrink itself into not existing. It will, of course, add some value to the pence per share in terms of NAV. But our expectation is in the medium to long term that we'll be reinvesting back in the business to create future cash flow. The good thing about that future cash flow in and of itself and growing NAV is that it inherently reduces your gearing. I also think, by the way, that retiring some of our debt doesn't really affect the cost of any new debt that we take. That's really a matter of the market at the time, where interest rates are and perception of credit. And that isn't anything that we've really been challenged with at all. We did a GBP 750 million refinancing in September 2024, which was very competitively bid and worked out very well for us.

So maybe we'll end with this question. Would it be prudent to diversify into other renewable assets or even buy another investment trust at a big discount to NAV to help secure future revenue growth?

So we were very clear to signal in our results that there is a dislocation in the market at the moment. And that could present opportunities for a business like UK Wind. We have to see how that develops over the course of the coming years. So to hypothetically answer your question, yes, it is in theory possible, assuming that one could actually make it happen, to buy another company using one's own shares. But we would look at it as we look at all new investment for the business. Is the thing that you are buying additive to the return profile that your business presently has? Does it outperform the things that you could inherently already invest in? And is it in the long-term best interests of the shareholders of the business. Those would be the principles that we would be guided by in your theoretical question.

So I think that concludes the Q&A session, and I can hand it back to Paul for -- to close today's session.

Thank you, and thank you for taking all those questions. Could I please ask investors not to close this session. You'll now automatically be redirected to provide your feedback in order the team can better understand your views and expectations. This will only take a few moments to complete and is greatly valued by the company.

On behalf of the team at Greencoat UK Wind PLC, we would like to thank you for attending today's presentation. That concludes today's session, and good afternoon to you all.

Good morning. Welcome to UK Wind's 13th Annual Results Presentation. Before we get into the results and the presentation, just a bit of housekeeping. We expect to run for about 30 minutes and to allow plenty of time for Q&A at the end. If you're online, please familiarize yourself with how to ask questions so that you're not frustrated later. I think it's pretty obvious, but I haven't done it myself.

There's also a disclaimer in this pack at the end, which I'd encourage you to read in your own time. And lastly, for those in person as a health and safety conscious business, just be aware of the fire exit signs over there and the doors on the right behind you.

So Steve and I will take you through the results shortly. But before we do, we just wanted to give a bit of context to the results. So the broader market backdrop for renewables is very positive. The future of deployment of renewables in the U.K. gathers further support and pace. And I'm sure you've all seen the award of around 15 gigawatts of wind and solar capacity in the recent AR7 auction. And the pace of electrification also continues. We'll look at that a bit later in the presentation, too. And it's clear that in the short term, wind and solar will be the generators that provide the extra electrons.

There's a disconnect, of course, between the broader positive sentiment around renewable energy and renewable energy investment trusts. It won't have escaped any of you that it's been a challenging year with falling NAVs and below budget performance weighing on sentiment across the sector. So it remains clear to us that this is a sector that, frankly, is still too big for the amount of inherent demand. And whilst a number of companies have left the sector, we think that this could be the year where we see more of that, particularly with the advent of activism and the launch of processes that everybody can see. So we remain of the view that further rationalization is necessary for a return to health for the sector.

And against that backdrop, we delivered relatively robust cash generation again and shown that the Board and Manager are active in addressing the situation that the company is in. So our actions in 2025, which we'll talk about in more detail later, GBP 181 million of disposals all at NAV, taking the total to GBP 222 million, GBP 109 million of buybacks, so GBP 200 million in total and a significant reduction in debt principal of GBP 168 million. And you'll also see in the financial results this year, the effect of the change to fee basis in December '24, turning into a reduction in cash paid for fees for shareholders.

So whilst these actions demonstrate ours and our Board's commitment, it's clear that there's more to do to enhance shareholder value. We remain a highly cash-generative business. And if we look at the capital allocation optionality that we have over the long term, it's significant. So we'll also walk through our priorities for 2026 and then look at the 5 years beyond that.

Steve will now take you through the results.

So thanks, Matt, and good morning, everyone. So as Matt said, I'm going to take you through the financial and operational performance during 2025. And here are some of the financial highlights. And I think you all know it's been a difficult year with wind speeds during the first half of the year being some of the lowest we've seen this century. And then backdrop of that falling power prices over the course of the year as well. But despite that, we still had a pretty robust dividend cover of 1.3x and net cash generation of GBP 291 million. And that was helped by wind speed normalizing during the back end of last year.

We also thought we'd present here our EBITDA number to help you compare us against some of our broader peers. And it's also worth noting that whilst the portfolio IRR might be 11%, our dividend yield on NAV is now at 8% and 11% on our share price.

So on to net cash generation. So again, consistent with previous years, we've got a very high operating margin of 71%. And this is a high operating business with high revenues and relatively low operational costs, and this will remain a high-margin business for the years to come.

In terms of looking at some of the variances over the year, as you can see, revenue is slightly up compared to last year. And there's a combination of factors to do that. One is the lower management fee, one is lower debt costs and also the inflation linkage in our revenues as well, which helps increase the underlying cash flows year-on-year, all things being equal.

SPV level debt amortization, again, might appear low compared to last year, and that was because in 2024, there was a one-off payment at Hornsea 1 relating to weight compensation proceeds that we received, which we used to delever the project. And the actual overall reduction in debt level will continue because of the disposal we made in H1 -- H2, sorry, for Hornsea 1.

Also, as Matt mentioned earlier on, we've reduced our debt principal by GBP 168 million during the year. So that will continue to reduce the overall debt burden of the business.

Tax is slightly up from 2024, and this is reflective of the ongoing run rate of the business being a high operating margin business, but also some of the writing down allowances, changes in the government that came out from the November budget, which we'll touch on later on.

Management fee led to a GBP 6 million saving of cash for shareholders. We remain the first and only person in our sector to reduce fees to the lower of NAV or market cap. And obviously, now we're on market cap. And actually, it's worth pointing out that although it's a GBP 6 million saving in cash on a P&L basis, it's actually more like GBP 10.5 million savings for shareholders, which we think is a significant share of alignment between the manager and our shareholders. And indeed, if we continue to trade at around about a 24% discount to NAV, the ongoing charge ratio will fall to 73 bps, which we think is a pretty competitive proposition and shows again our alignment with our shareholders.

So just a few points on dividend cover. So again, we believe it's a very robust position, 1.3x despite those really low wind speeds during H1 and the lower power prices experienced during the whole year. That normalization of wind speeds during H2 really helps get close to budget. And we've seen that performance continue in the early part of this year, which we can touch on a bit later on. You can also see on this chart some elements of the capital allocation activities that we've undertaken during 2025. So that includes GBP 181 million in disposals, GBP 109 million spent on share buybacks and GBP 168 million reduction in debt principal. And that's left us with a net increase of cash on the balance sheet at the end of 2025 of GBP 16 million.

So in terms of dividend track record, this is a 2025 was the 12 consecutive year of paying at or above inflation increases dividend, which leaves us as one of only a handful of FTSE 250 businesses to have achieved this, and we're pretty proud of that fact. We've announced a 3.4% increase in dividend for 2026 to 10.7 pence, we think this stands us out against our peers. Historic dividend cover has been 1.7x, which again, we think is a healthy position. And going forward over the next 5 years, the guidance is 1.8x, giving us plenty of capital to allocate in the best interest of shareholders.

So on to net asset value and what the balance sheet looks like. So moving from left to right on the chart, you can see the net cash generation delivered 13.2 pence per share, which led to the 1.3 dividend cover. At the beginning of the year, some of you may remember, we are forecasting 1.8x dividend cover. And in order to bridge that gap from 1.8x to 1.3x, about 0.2 of that was due to the aforementioned lower budget generation due to the low wind speed principally in H1. 0.2 again was from lower power prices and 0.1 is from a combination of factors, including some late revenues and a reduction in REGO pricing achieved during the year.

You can also see the equity effects of capital allocation here, 1.3 pence per share increase as a result of the capital allocation, where, as I mentioned earlier, we spent GBP 109 million buying back around 95 million shares. And then looking at some of the forward valuation assumptions. I talked a bit about power prices in '25 and in '26 onwards, we also see a reduction. We'll talk more about that on the next slide. And going right to the other side of the chart, we've also shown some of the impacts of government policy during the year.

So firstly, writing down allowances were reduced from 18% to 14% in the November budget. And we all know about the ROC indexation consultation, which was announced at the end of January, reducing the inflation on the ROC buyout from retail prices index to the consumer prices index. And together, both of those effects have had a 3 pence per share impact on NAV.

So on to power prices. So first, just taking a step back, so how do we come up with our power prices. So in the first couple of years, we take the futures market. So this is actual traded prices in the market where people are buying and selling power at those prices, and we take those and use those directly for the first couple of years. After that, we use a leading market consultant to come in and forecast the rest of this curve, which you can see in the top left-hand side of here. To 2029, compared to last year, we're about 10% lower. So there has been a drop in power prices. And in the 2030s is around about 5% drop, and this trends towards the 2040s onwards round about GBP 50 a megawatt hour in real terms.

Maybe just thinking a little bit about supply and demand as well and the dynamics there. So with data centers, with AI, with electrification of heat, electrification of transport, we see some strong factors to increase demand for electricity. And we think that's going to help support power prices over the short, medium and long term. Also, what's interesting about all those factors is they could be responsive. So not necessarily baseload drawing power, they could be responsive to intermittent generators like wind, which we think will be helpful for us again in the short and medium term.

In terms of why power prices have been reducing, it's principally a result of gas prices as we soften up from the war in Ukraine. There's also, to a lesser extent, the impact of carbon softening as well. It's important to remember that 60% of U.K. wind's cash flows over the next 5 years are fixed and have -- the vast majority of which have a very strong inflation linkage as well.

We've also been exploring options to fix power prices, both in the short and medium term. And over the past 2 or 3 months, we fixed 150 gigawatt hours per annum of offshore wind up until for a couple of year period. And we're also looking at additional options as well, both physical, financial and insurance options in order to mitigate some of the power price risk.

Final point on this slide in the bottom left is the table. So as you can see here, we're showing what the dividend cover is over the next 5 years of a range of different power price assumptions. I think what you can take from this is that even at a very low power price, like GBP 30 per megawatt hour, we're still more than covering our dividend after inflating that dividend by CPI too, which shows the resilience in the business model.

Okay. So we talked a bit about wind resource, and we thought this chart would just help explain exactly the phenomenon that we experienced during 2025. So you can see the horizontal dash green line show the H1 average and then the H2 average. And you can see that massive change from H1 to H2 with that normalization of wind speeds. In H1, we had 4 months out of the 6 with more than a 20% reduction to the annual long-term average.

But that big recovery in H2 has really helped us in terms of delivering that net cash generation and the 1.3x dividend cover. And indeed, that improvement has been seen in January and February, where we're above budget to date and combined with some of the lower late revenues that we didn't receive at the end of '25, gives us some significant tailwinds going into Q1 2026.

Now of course, in terms of availability of our turbines, it's important to make sure that your kit is available to generate as and when the wind is blowing. And we're pleased to say that last year, we had availability more or less on budget.

So going on to the balance sheet. And where the -- what the debt structure looks like. So many of you will know that we have term debt, but we've also got about 10% of our debt is structured in RCF, short term. About 20% is amortizing. That's related to Hornsea 1 with the rest all being term debt. And that is spaced with different maturities, as you can see on the right-hand side here, which we believe reduces refi risk. We like the option of the term debt because it allows us to decide when and where to deploy our capital rather than being fixed with in terms of the amortization profile.

We also think the bank market is highly liquid, very competitively priced and flexible in terms of repayments, which some other structures do not give you. And as I mentioned earlier, we've actually reduced our debt burden by GBP 168 million during 2025. So although gearing hasn't reduced to below sub 40%, that's mainly as a result of a decrease in GAV rather than the gearing itself in absolute terms not reducing.

You'll note also that we have a couple of upcoming maturities, one in November and one in May next year. We've already started discussions with lenders, and we're seeing very strong appetite to refinance that debt. And we expect the cost to be broadly similar to they are today and in the worst-case scenario, maybe a few million more in terms of interest costs per annum. Our current lenders have significant appetite for this. And we've actually seen that in 2024, we managed to refinance GBP 750 million through our existing lender club, and we expect to continue that going forward. The refi that we're working on at the moment, we expect the November tranche to be refied probably late Q3, maybe early Q4, with the May '27 maturity refied in Q1 2027.

So Matt will talk to us now about market backdrop, capital allocation and strategy. Thank you very much.

Thank you, Steve. So let's zoom out for a bit of broader context on the renewable energy market backdrop, which we spoke a bit about at the beginning and also our plans and actions for capital allocation and a bit more about the longer-term strategy of the business.

So electrification, as we mentioned earlier, continues at pace. You can see here, based on the range of forecasts as estimates, an increase of between 50% and 100% of the number of electrons that we need by 2040. It's pretty significant. All demand is good for generators. But in particular, and it's a point that Steve touched on, dynamic demand or demand that's responsive to pricing is particularly good for intermittent generators when you don't get to choose how you dispatch.

If you just look at one of the examples of potentially demand-driven use, you see the blue wedge that grows over time. That's the electrification of transport. So whilst EV targets for this year are slightly behind government targets, I think it's 25% versus 28%. There are still 2 million EVs on the road today and expect it to be 6 million to 7 million by 2030. That's a lot of electricity that's needed, right? And just to do a bit of simple math, if you had 7 million EVs, you go and plug them in a home, let's just guess the average charging rate is 3 kilowatts per hour. I've got about 7, I think in my house, but.

If you do that, that's 21 gigawatts of instantaneous demand if everybody plugged their car in at the same time, which, of course, they won't do. And it's not that we don't have the number of electrons for that, we do, but 21 gigawatts of demand is 1/3 of peak demand, right? So I think there's a high level of coexistence of interest in optimizing when things are charged. But all of this you can do today, right? You just need a half hourly meter at home, lots of people have those and a smart cable. And if you do that, I don't really mind when my car is charged as long as it's charged at 80% by 7:00 a.m. An algorithm can pick, if you like, the half hours overnight that is cheapest. They could, in the future, coincide with a more intermittent driven system with the times when renewables are generating, obviously, not solar. And that is quite helpful in terms of reducing or being constructive for the capture rate discount that intermittent generators can get.

Another key area of growth in demand and one that we think is underestimated by most forecasters is data centers, AI. I don't know how much you will use AI more than you used to. I certainly use it quite a lot. I didn't write this speech or presentation, by the way, but it's going to get a lot of use, right? And data center operators themselves are recognizing that the constraints in getting connected are around their preference for baseload power demand. But actually, a lot of hyperscalers, Google included, you can go and see on their website, are looking at how they can order programming that their data centers do, so nonessential tasks to match the point at which you have either cheaper electricity or an abundance of it. So I think the smart demand future is coming. And I think that's really, really constructive for intermittent generators.

So that obviously brings the question of where, if we think we need more electrons, well, where are they going to come from? So you've all seen the outcome of allocation round 7. It's 15 gigawatts of new renewable capacity. Why renewables? There's a couple of main reasons, and we'll address this in a carbon agnostic way. So first, speed. Renewables are relatively quick to deploy. Once you have the grid program in place and a lot of work, I think you can see it's been done on that. Onshore can be built in 12 to 18 months, depending on the size and complexity of the site. Solar could be 6 to 12 months, again, depending on the size and complexity. Offshore wind obviously takes a little longer, perhaps 3 years, but that's a relatively short-term deployment when you think about the alternatives of where new electrons can come from.

So first, you think about nuclear. I personally think nuclear does have a significant role to play in the U.K.'s electricity mix. But the flash to bang from award of subsidy commencement of planning and project for Hinkley Point is 2013 to the first electrons in 2030. That might be a slightly uncharitable characterization because some of that time is spent on planning and modeling and health and safety and design, which is replicable across energy future nuclear energy plants, but it's still a relatively long time to wait. The second new area, of course, would be to add new gas. But given that there's a significant global demand for gas turbines, the waiting period can be as much as 5 years.

The second point really is cost. So you can see here that in 2024 money prices for the sites that have got 15 gigawatts of capacity in CFD, ranging between GBP 65 and GBP 90. The government's own expectation of the cost as in the levelized cost of electricity, and all the data is on their own website. For a new gas plant is around GBP 150 a megawatt hour. And having said -- I'll steer clear of carbon, I will make a slightly political comment. I mean I think it's pretty clear in the short term, renewables are there. There is quite a lot of political noise out there that says, well, actually, we don't need renewables, we can rely on gas. There's a lot of things we can do.

I think the fundamental question that a lot of that fails to address is where are the electrons going to come from and when, right? Renewables is there, you know the cost, the grid is being built around them. They're deliverable. And if you want a vision of what a future looks like where you really start to curtail renewable growth, just look at the PGM market in the U.S. So that's in a significant fall in the amount of new renewable projects that are expected to be connected. And that's fine.

But where are the new electron is going to come from? So if you look at the prices in that market, and we have assets in there in our U.S. business, power prices are up 10% to 15% over the next 3 or 4 years. Why? Because there's going to be a shortage. Capacity prices are even higher. So there's a glimpse of the future of what it looks like if you don't have renewable capacity coming online.

So having spoken about how many renewables there are and how they're great, it's probably a good moment to just set a reminder of what UK Wind's business model is, how it's worked over time and how reinvestment has been a key pillar of it. So over time, we've generated GBP 2.4 billion of free cash, GBP 1.4 billion has gone in dividends, which is a number that always staggers me every time I read it out and GBP 1 billion has gone back in reinvestment. And it's always been structured that way and designed for the long term to grow organically in essence. And of course, the amount of capital available to do something with can be enhanced by disposals.

So if we look at how that played out in 2025, we show here the commitment and work that we and the Board have done to deliver on the priorities that we had. So first of all, net cash generation, we've added back the amount of debt that we amortized inherently and the disposal and affected our sources. And you can see the dividend is there. It's been maintained, it's 12th consecutive year of paying a dividend that increases in line with inflation.

A significant amount of debt repayment that doesn't appear in the gearing ratio that many are fond of because the NAV has fallen. We've accepted that. We've acknowledged that, but GBP 168 million of principal came off of the debt stack that we had last year. And GBP 109 million spent buying shares back, as Steve said, taking the total to GBP 200 million over time, the largest program in the sector, the balance being a small amount of cash. So looking at the work that we've done over 2025, it's clear that there's more to do to protect and enhance shareholder value.

So we'll look at where we're going in 2026. And just a further demonstration of us being a cash-generative model, we set out a range of net cash generation for the year for next year. There's a bit of excess cash on the balance sheet. And we remain focused on delivering further disposals in line with the GBP 222 million we've delivered in the last 14 months and work continues there fulsomely.

If you take that as our sources are available to allocate throughout the next year. The first port of call, as it's always been for UK Wind is a dividend that's supported by a very clear policy. I would say it's unrivaled in clarity. You've 12 years of knowing exactly what's going to happen and being surprised to the upside. You now have a dividend that is targeted to be linked to CPI rather than RPI because of the changes made to the RO through the indexation consultation. It's a very clear signal for investors that the dividend is there. That's the policy. It's unambiguous.

Beyond that, I think it's clear to everyone that share buybacks, particularly when you're at the discount that we stand out this morning are an accretive short-term use of capital. So that will definitely be a feature of this year. But we also have to be mindful of the balance sheet of the business. So despite paying off GBP 168 million of debt last year, we still stand above our 40% debt level. That doesn't have any sort of inherent consequence for the business. It just means we can't draw more debt to invest. But nonetheless, if we wanted to with a small amount of capital that sits at the bottom of the waterfall, make a disciplined return to reinvestment, we think it's sensible to be below 40% in most cases. So our first priority this year will be to degear the business a little, and we expect to repay a portion of the RCF on its next row day, which is the end of March. We'll announce that at the time.

So when we think about a return to reinvestment, this isn't -- I wouldn't expect if I were you for us to go out and buy a whole bunch of shiny wind farms. Really, we're talking about investments that have relatively low cost but reasonably high optionality. So looking at the assets that we have in our own portfolio, there's a number where for a relatively low cost, you can seek to extend the lease beyond the horizon, the operational horizon that you presently have to preserve the optionality for repowering. That isn't going to work for every site. Not every site should be repowered.

But if you can get the optionality for it at a relatively low cost that to me seems like a very sensible investment that plans for the future deployment of the business. And there are also adjacent extension opportunities across our portfolio where, again, for a relatively low amount of money, you could secure the rights to build sites without taking development risk. So that's the sort of characterization of reinvestment opportunities that we're thinking about this year. But you'll note that it comes at the end of the waterfall.

So then if we look forward to the next 5 years and think about the capital that we'll have to allocate, again, a further demonstration that we remain a highly cash-generative business. And we show here the outturn. We've quoted EBITDA figures for the first time, as Steve said, to, our comparison against a broader set of peers. And net cash generation, GBP 2 billion to GBP 2.4 billion. We've used a sensitized range across power prices and energy production, GBP 1.2 billion of dividends, that's our current dividend inflating in line with CPI over the next 5 years. And that leaves a material amount of capital at the end, GBP 0.8 billion to GBP 1.2 billion, so central case, GBP 1 billion to deploy over the medium term.

And that to me seems like a pretty good moment just to remind people of the UK Wind business model. It's always been built on reinvestment, right? 13 years on from the IPO, the average age of our site is just over -- our site is 9 years. You can achieve that through reinvestment, right? And if we invest with discipline, as we've done today, you can see here that by adding the blue stacks of cash flow, which are the future yield from reinvestments, you can increase the amount of free cash that's available to investors, which then increases the amount that you have to deploy going on and so on and so forth. In effect, it's compounding in the fund's hands. That's the power of reinvestment. Obviously, our existing portfolio's cash flows will fall, but that green line in effect is assuming that we never do anything with excess dividend cover. So it's an unrealistic scenario, but it's a point to illustrate the power of reinvesting over time.

You also, when you reinvest, grow the gross asset value of the business. So all other things being equal, you reduce the percentage of debt over time by growing the GAV of the business. And it is clear to us that there's a range of medium-term opportunities for investment, some in our portfolio, some outside. And when we look at what to invest in, we'll have the same discipline we've always had, thinking about what works for the products that UK Wind is, what's most additive to the portfolio and also using reinvestment and disposals as a way to trim and shape the portfolio in terms of fixed cash flow. That's the optionality that's available for us.

So just to summarize before we allow some time for Q&A. Let's be clear, we recognize that there are challenges in the sector. As we've said, we remain of the view that there's just too many products in our sector for the level of inherent demand. But there are signs that rationalization is underway with the advent of activism and the things we mentioned earlier. And against that backdrop, we've continued to take action and we will continue to take action, setting out what we've achieved last year and where we expect to go this year and reinforcing that we have unrivaled clarity in our dividend policy. Because looking at the longer term, looking back at the renewables market, looking at AR7, looking at the electrification of demand, we have a cash-generative model with a huge addressable market. So we believe it's a year where you might see sector rationalization, return to health with fewer larger companies. And in the meantime, our job is to generate and allocate the capital that we have as wise stewards of your company.

Thank you for your attention for the last 32 minutes. We're now going to move to Q&A, which John will compere.

Good morning, everyone. So we'll start with questions in the room. There are some online that I've got here that we can address first. So if you -- there's a mic, if you want to put your hand up, I can come to you if you just state your name and your organization, and we'll go from there. Given the mic is with you actually already, we'll start with Ashley.

Ashley Thomas from Winterflood. Just 2 questions. Firstly, on weight loss because you mentioned the 2024 weight loss compensation Hornsea 1. A couple of weeks back, we had the consent for [ Outerdousing ]. And I think Equinor historically it estimated, I think, about a 67 bps output loss from weight loss, GBP 30 million to GBP 90 million revenue loss. So I just wondered you sort of, have you had discussions with the developer at Outerdousing regarding any potential compensation? And have you modeled any potential impact from weight loss for Hornsea 1?

And the second question was on fixed price certificates because I'm aware in the ROC FiT indexation response that Schroders gave, there was quite an extensive response regarding the potential FPC consultation as well. So I just wondered if you could perhaps provide sort of an update on your thoughts regarding that potential consultation and any feedback you've had with the government?

Thanks Ashley, yes, you can have the first one.

Thanks, Ashley. So in terms of weight loss compensation, there are different ways that developers and operators deal with this. So there's some private law contracts where you enter into direct discussions with developers and builders of offshore wind farms, even onshore wind farms as well. And we can't comment on specific projects for obvious reasons. There's also protection in planning as well under many of the projects where there is an obligation on the developer of the project to compensate the losses that such projects cause on surrounding wind farms as well. So there's a couple of protection mechanisms there.

And again, I can't comment on the specifics here. In terms of the model weight losses, typically, you do build into your energy yield forecast over time, the impacts of weight losses through everything from new wind farms, even tree growth as well. So they are modeled in on the whole into new projects and the cash flows over the course of a project.

So Ashley, you also mentioned the fixed price certificate review. So as you can see from our engagement on the RO indexation review, we do speak to government a lot at a lot of different layers within Schroders and also on behalf of Greencoat UK Wind specifically. So we had a decent amount of engagement on RO indexation consultation. We're, of course, disappointed with the outcome. But we do feel that as part of that and as part of the discussions that we had around zonal pricing, there is an understanding and recognition from governments that this market is sensitive to disturbance in cost of capital.

And when you think about the things that we've spoken about earlier in terms of what's yet to be built, 15 gigawatts of AR7 projects doesn't mean tomorrow, you have 15 gigawatts of operational projects, right? So the cost of capital remains an enduring theme for the delivery of those projects. And we think this is a point that the government is alive to and aware of. And when the fixed price certificate review is published, we'll again be engaging with government to discuss it.

Colette Ord, Numis. Three from me, please. You've mentioned about not all of the projects are suitable for extension and just some of the smaller reinvestment opportunities. If you can give a bit more color or quantum around what you think is deliverable in the relatively near term.

Second one is on the statement you made on being alive to dislocation opportunities and what we might infer from that and whether there is anything in your viewpoint that would see you look to add different types of technologies or other areas of the market into your portfolio as part of that potential dislocation opportunity?

And then thirdly, in results, you talked about some inconclusive work on the energy yield assessments. Obviously, you've made some adjustments in previous periods, and you're obviously monitoring that. If you can just give a bit of color about the inconclusive nature of that or what we need to think about timing-wise, would be great.

Thank you, Colette. So when we look at repowering or extension, so thinking about repowering first, the thing that many people don't consider is that if you've got 10 years of operational cash flow left, if you want to repower the site, the economics have to be extremely compelling because you're about to forego 10 years of cash flow that you can get from the existing site. So given that our oldest site is 23 years old, it isn't an immediate thing for us. It's really about spending the relatively small pounds number to secure the optionality for it later. That to us seems like a pretty decent investment given it's not particularly capital intensive.

Not all sites will work for repowering. If you have a 6-megawatt site that's got 3 turbines at 2 megawatts, they're not sort of spaced out like modern turbines would be. You may not have the ability to augment the grid beyond 6 megawatts, for example. And you definitely need a lot more land. So it's almost like having a new site. But some of the bigger sites that you have are more accommodating. So it isn't one that you would consider applicable to every asset that you have.

In terms of extensions, there are a number of -- the best place to get planning for a wind farm is next one that already exists because by then, by and large, most of the objections to the first one being built have kind of fallen away. So there are a number of adjacent extension opportunities across the portfolio that we could access, again, without taking development risk.

In terms of magnitude of capital, we put this kind of last in the waterfall, if you like, for a reason. These are not hundreds of millions of pounds of investment. We think the first priorities are degearing the business and addressing share buybacks throughout the year.

You mentioned that you've seen the wording that we've had in the Chairman statement in this presentation. I mean it's simply a reflection around being alive to the market opportunity. And there's lots of opportunities as we discussed, right? It is a dislocative year. You can see a number of things are underway. Obviously, we wouldn't comment on any of them specifically.

You asked the question of, well, would you consider different technologies? It comes back to all of the set of considerations that we make when we're thinking about new investments. Is it additive to the portfolio? How does it work in terms of the portfolio's cash flow construction? If it's diversification, is there some real resource benefit that one can really bring to light. But the bar is pretty high, right? There's a lot of wind that we can invest in both in our own portfolio, as we've mentioned before. And also as a result of AR7, that's a GBP 40 billion opportunity as well as the recycling of assets that will go into delivering the equity to build those assets. So I would say it's a high bar.

And Colette, just on the last point around the inconclusive work on energy yield, it's probably worth just taking a step back. In 2024, we looked at our overall portfolio. And looked at bringing that in line in terms of the data for calculating the energy yields there, and that led to a 2.4% reduction on average across the whole portfolio of our energy yields. During 2025, we then looked at what the potential future impacts of climate change could be on our sites.

And so what we did, we commissioned a study with a leading expert to take a bunch of different climate models and different temperature scenarios over a 10-year period, over the next 30 years and looked at what the impacts of wind speeds could potentially be. And the results of that were inconclusive.

Basically, the range of uncertainties was such that you couldn't really draw any conclusions, and that's principally because the climate models themselves have so much uncertainty. And what you actually see is that as temperature increases, it doesn't actually correlate with wind on many sites. It will go up and then wind will go back down as temperature carries on going back up again. So there's a significant amount of uncertainty there, which led to the inconclusive results. However, we remain alive to that question, and we will keep working on that question and see if there's an improvement in the climate models, which we expect to happen over the coming years, and we'll carry on looking at that piece of work.

I'll just do a couple of online questions to keep it interactive here. So both on sort of capital allocation.

First one is, given that the shares are currently trading at a significant discount to NAV and buybacks offer an immediate accretion, is there a specific hurdle rate or IRR that you are looking at for any new investments in 2026?

Secondly, similarly on the same point, your capital allocation strategy relies partly on disposals. How deep is the pool of private buyers? And are you confident that you can still sell assets at or above NAV?

Thank you, John. So when we look at how buybacks work in the market today, right, it's obviously economically accretive. You just take your funds return at NAV and you divide it by well, minus your discount, that should be your IRR. And frankly, if you like your own assets, you should like buying them back at a significant discount, right? And we have done that. We've spent GBP 200 million buying our own shares back over the last 2.5 years. So -- and that over time has added a decent amount to the value of the business in terms of pence per share.

So we published in our half year results in effect, if you like, a sort of grading of hurdle as to what one would have to consider a new investment return to be in order to be better than the short-term effects of buybacks.

I think what we're seeing here is something slightly different. Our first priority is going to be degearing the business. I think that's something that investors will, in general, like. And the investments that we're going to make, as we just discussed in answer to Colette's question, are relatively small about preserving future optionality. Another way to write that would be, of course, that the amount of capital spent on them is unlikely to make a material difference to what would already be a big share buyback that's been delivered or perhaps more to do. So we won't set a specific target for the small low-cost, high optionality investments that we have. But as we've said, if you look at our waterfall of capital allocation throughout the year, buybacks is there in a second.

The question also touched on disposals, John. So yes, look, we've delivered GBP 222 million of disposals after 14 months -- the last 14 months. You will have all probably observed that the right time to sell a rock asset probably wasn't somewhere between October and January this year. So that has stymied somewhat transactional activity, although a few things have gotten away. It's something that we continue to work on ardently under the Board's supervision. And you can expect an update from us in due course.

I would just point out that beyond disposals, which we very much are pursuing and are in a number of active processes, we do have free cash flow generation to add to what we can deploy in capital allocation. I just wanted to make that point because for many of the funds in our sector that doesn't really exist other than the ability to reborrow.

We go back to questions in the room. I think Joe, you had a question or maybe more than one question.

Joe Okore, RBC. Just one from me, please. Just thinking about the selective reinvestment you spoke about, particularly the characteristics around it being low CapEx but high IRR. Also apply those same characteristics from early-stage development projects, which some of your peers have focused on. As you're going to weighing up those 2 different options, can you just talk a little bit towards why you prefer reinvesting in operational assets on a risk-adjusted basis?

So it's sort of somewhere in between really. The low-cost optionality investments are for preserving the future ability to make construction or operational investments, which is UK Wind's bread and butter. If we think about development, it's something that both Steve and I spent a lot of our careers doing. But to think about investing in development would be a very long and informed conversation with our shareholders. It's not the sort of thing that UK Wind has done, spending a significant amount in development has challenges if you're a yielding business.

So I think we're not signaling that we're about to start investing in development. That's not the fund's mandate, although both of us and broader Schroders Greencoat have the ability to do that. These aren't really development investments. They're more about preserving future optionality with relatively low costs.

And ultimately it will come down to the risk-adjusted return. And we think the risk-adjusted return, the types of capital opportunities that we've got at the moment are very attractive and actually quite deep pool of opportunities too.

Conor Finn from Barclays. A quick one on the recent fixes. Does that signify that we should expect you to kind of run a higher level of fixes and hedges than you have done historically?

It's something we keep in mind, and it depends upon the commercial viability of the options we've got in front of us. I mean what we are seeing is the market is becoming more sophisticated in terms of what it can offer generators in terms of those fixes, both physical, financial and as I mentioned earlier on, insurance-related projects -- products as well. And again, we'll look at what the risk reward is in terms of the balance and the impact on NAV to see what makes most sense at any one time. So we're not setting a specific target, but it's something we are certainly exploring in more detail, and you've seen us transact on that basis over the past 2 or 3 months.

And I would just add, where you can enter into NAV-neutral fixes, that's the sort of thing that we would consider. 150 gigawatts is, of course, a significant part of the 5 terawatts that we sell every year. right? But it demonstrates that you can fix these things on a NAV-neutral basis. And just to go back to where we stand, the next 5 years are 60% contracted with most of the linkage coming from CPI. So it isn't a burning issue at the moment, but it is something that we'll continue to explore.

And over time, we expect us to do more and more of those fixes as the assets roll off their subsidies.

I'm just going to come in with 3 relatively quick, more numbers-based questions here. So can you talk about the cannibalization assumption embedded within the power price curve? And how does that change going further out?

Secondly, on Slide 10, dividend cover fall slightly in 2027 to 1.6 before improving again. Can you also explain the moving parts behind that shape?

And then finally, how much of the RCF do you think you could pay off next month with the excess cash you have on balance sheet?

Thank you, John. Do you want to talk about the capture assumptions, and I can address the other 2 questions, Steve.

Yes, sure. So in terms of the cannibalization rates, and we look at what we experienced in the market and what the outturn position was from last year, I think it's 13% in 2025. And that helps us inform what we look at going forward. We use over the short and medium term, the numbers from our market consultant. And over the longer term that blends into a more of a fixed number. So it's baked into our power prices and increases over time up until the mid-2030s.

And I think one of the points to think about there going forward is some of the some of what we mentioned around the advent of dynamic and responsive demand. We think that will be constructive for capture rates for renewable generators as well the expansion of battery capacity in the UK.

Dividend cover. So if you look at '27's dividend cover, you're right, it's 1.6. That happens to be at least in the estimations that we receive the trough of power prices in the next 3 or 4 years, and that comes from market data. That's why it's lower for that year.

And as to how much of the RCF we would repay, we'll look at the end of March as to where we are in terms of liquidity. There isn't a particular new amount of information that is going to arrive. We've got already January and February's generation data, and we know how much cash flows over from last year in terms of ROCs. We think it will be a meaningful amount, but we'll announce to the market what that is when we sat down and work through where we are cash-wise at the end of March.

And maybe it's just worth reiterating we're over budget year-to-date as well. So the cash position of the business is very strong.

Do we have any more questions in the room? Just wait for the mic, just in case for the recording.

[ Steve Luc ] from Canaccord. Just coming back to Slide 21, the cash flows. I mean there's quite a bit of volatility. Obviously, you can see 2027 coming down and then we see quite a sharp move up to 2030. What's actually driving a lot of that movement? Is it just the short-term medium-term price assumptions?

Yes, that's right, yes. And the blue line accelerating the green line is really a function of when you get back to reinvesting and what you invest in. We're obviously not going to be doing very much reinvesting in the next year. So that's why it takes a while for it to accelerate back upwards.

Thank you. Do we have any more questions in the room? Okay. I can hand it back to Matt and Steve for concluding comments.

Thank you for attending and for many of you for coming in person. It's the first time in a while, I think UK Wind's held an in-person results meeting, and it's good to see many of you here. I hope that was constructive for our online guests as well, and there were no frustrations in terms of raising questions. We'll now spend the next couple of weeks talking to institutional shareholders as part of our road show. There are also a number of retail events. I think this afternoon, I'm recording a video. So there should be more content upcoming. And if there's any questions you wish that you'd ask that you haven't, you know where we are, ask John.

Good morning, and welcome to our 12th half year results presentation. Thank you for joining us. We expect to run for around 30 to 35 minutes and to allow some time for Q&A at the end. Stephen and I will take you through the results shortly.

But before we do, we wanted to make some remarks about the market backdrop and our response to it. It's encouraging to see share prices across the sector rerating with our share price up around 12% since the end of last quarter. There's further encouragement in that the sector is showing some signs of consolidation or exit to rebalance the supply of investment companies with today's demand. But as of this morning, we remain at a significant discount to our NAV. We wanted to reiterate that we and our Board remain dissatisfied with where we are and we're fully aligned with shareholders to continue to improve the company's overall attractiveness against the market backdrop. We've always taken a long-term view in managing UK Wind and we're guided by taking actions that are in the best interest of our shareholders.

And just to remind you, that includes being the first to agree on a appropriate rebasing of our investment management fees, which is unmatched across the sector, being the first to start a material buyback program, which has been extended to GBP 200 million and recognizing that as gilt yields rose, our return needs to adjust accordingly. We've also focused strongly on capital allocation and committed to appropriate asset divestments to fund it. We're pleased to announce this morning further disposals to continue funding our capital allocation program. These disposals were once again at NAV, once more highlighting the disconnect between our share price and private market valuations of these assets. The sale of these assets with a total value of GBP 181 million takes us to GBP 222 million of realizations in the past 8 months. We remain strategically opportunistic in assessing further disposals. The proceeds will support our buyback program, degearing and in the medium term, provide optionality to the business.

Going forward, we remain active and committed to doing more to support the company's value proposition and to foster its rerating. We'll now move into the results. Our half year results show resilience against the backdrop of some of the lowest observed wind speeds in the U.K. during the first half of this year. Indeed, according to DESNZ, the first quarter of the year was the least windy since 2010 and this was compounded by low wind speeds in April and May with some recovery in June. This left us 14% below budget but still with robust dividend cover of 1.4x for the half year, demonstrating the resilience of the portfolio. NAV has also been impacted by undergeneration, both cumulatively and in this period and a softening of power price futures and forecasts and we'll address power prices in more detail later in this presentation.

Gearing stands at 41.5% but is forecast to fall below 40% on completion of disposals that we just mentioned, assuming all the cash is applied to repaying debt. The immediate increase in gearing reported in our results is partly a result of the decrease in NAV and movements in the mark-to-markets of our swap valuations. On to capital allocation. With the increase in dividends that we announced earlier this year, we've now paid GBP 1.3 billion in dividends to our investors and reinvested GBP 1 billion in the business. And we expect to have further capital over the next 5 years of a similar magnitude to reinvest from future dividend cover. Our near-term capital allocation priorities remain clear and are supported by the disposal we've announced this morning. At the completion of the current program, we bought back GBP 132 million of shares, retiring around GBP 10 million of forward dividends with an accretion to NAV.

This and degearing is supported by the disposals that we announced. In the medium term and we'll look at this later in the presentation, we have to consider the appropriate allocation of our capital and graded against the discount that we're trading at and the opportunities that we see in the market. We do believe that opportunities do and will continue to exist that could compete with the value afforded by buybacks over the medium term. I'll expand on this later in the presentation. The overall picture for the sector remains positive. We're starting to see a rerating of share prices and some progress on sector consolidation. We also now have certainty on government policy with regards to pricing, which we'll touch on later. And it's clear that wind continues to be the store of the future U.K. renewable deployment. Allocation Round 7 is in progress and it's clear that wind will do the heavy lifting. Strike prices have now been published at an increase over AR6 and the CFD term has been extended to 20 years from 15 years. We expect this will be supportive of the investment climate.

With a net return of 10% to shareholders at NAV or 12% of the current share price, UK Wind is well positioned to remain as the sector leader in terms of target returns, scale, fees and the future investment landscape. Next, to a reminder of the UK Wind business model, it remains a simple business model, buy wind farms, generate electricity, receive cash. And with the cash we generate, we've now paid GBP 1.3 billion of dividends to our investors, which is more than the size of some of the products in our sector. We've also increased our dividend by RPI or more in each of the 12 years since IPO, making us one of a handful of 250 companies who have done that since we IPO-ed. Crucially and our distinguishing feature is that we've also generated GBP 1 billion of excess cash flow to reinvest in the portfolio by buying further projects, which supports our aim of preserving NAV in real terms.

Looking at the balance of portfolio revenues, that remains on a discounted cash flow basis, around 50-50 between fixed and floating. And over the next 5 years, 60% of that -- 60% of our cash flow is fixed and explicitly linked to either RPI or CPI, which we think is valuable given the recent uptick in inflation. What I've just said about dividend cover and reinvestment is shown on the next slide, showing dividend cover of 1.8x over the life of the product and the GBP 1.3 billion of dividends and GBP 1 billion of reinvestment. Also a reminder of what we own. It's a diversified portfolio of 49 wind farms. It turns out that they're all in 1 zone as far as it matters. It's also a scaled portfolio, representing 6% of all UK Wind assets, making us the leading financial owner of wind in the U.K. and the fifth largest owner of UK Wind assets.

There's further detail on the portfolio here, which I know is a slide that will be familiar to those who followed the fund for a period of time. We're spread out across the regions that we operate in, asset types, turbine manufacturers, all of that. The only thing I'd tease out from here is age. So the average age of the portfolio now is 9 years versus 5.5 years at IPO. So over 12 years, our assets haven't aged very much. That just talks to the benefit of refreshing the portfolio with investment and recently divestment.

I'll now hand over to Steve to talk through financial performance for the half year.

Okay. Thank you, Matt. So I'm going to talk through the financials, as Matt just said. The first thing to point out on the slide on dividend cover is we are comparing H1 '24 against H1 '25. And given the lack of additions to the portfolio over the last couple of years, they're actually fairly comparable. So what I'll try to do is highlight some of the differences. So the first point is to mention that net cash generation was GBP 163 million and this is despite the low wind speeds across the U.K., which Matt has already mentioned but also because of the softening of power prices over the first part of this year.

Still though, we have a dividend cover of 1.4x, which shows the resilience of our business model. Now also, it's interesting to look at the net cash generation from '24 because actually it's a similar number. And you might be thinking, well, why is the number the same or similar to H1 '25 when it has been -- had such low wind speeds over the first part of this year. And the answer is availability. Availability this year has been very strong, which means that we're able to capture the wind that we've received and turn that into power and therefore, cash in order to show the strong revenue that we're showing here. Final point to mention on this slide is that we had a 20% higher dividends in '24. And that's largely because of an increase in the dividend that was paid in '24 as a result of the very high power prices received during '23 and '22.

So moving on to cash flow on the next slide. It's a pretty similar story before. Revenue similar to last year but with the lack of wind and lower power prices mean that we haven't -- we've lost around GBP 50 million there. EBITDA, though, 75%, which is, we think, a pretty strong ratio and is typical for these assets, which are very strongly cash generative. Just to tease out some of the other differences here. So operating expenses, you'll see a GBP 12 million higher. That's principally as a result of higher inflation that we have seen this year and also because of some major component exchanges on some of our offshore wind farms. Tax also slightly higher this year and that's largely a result of some catch-ups in corporation tax from '24 and a writing of the tax payments this year. You'll also notice that the SPV level debt amortization was slightly higher in 2024. The reason for that is that we received some one-off weight compensation payments, which we used to repay debt.

Final point on this slide is around management fees. As you will see here, the cash payment to the manager has been GBP 1.8 million less during this period. That's on a cash basis. On a P&L basis, it's actually GBP 4.3 million difference, which shows that the changes that we made at the end of last year, which Matt has already referred to, are actually aligning us further with our shareholders and we believe that's a very important point for us going forward. So moving on to NAV. NAV is 7.8p down. This is primarily due to near- and long-term power prices softening but also due to the mark-to-market on the swaps. The table and chart on the left-hand side of this slide show this but we'll focus on the chart down the bottom left. So as you'll see, net cash generation pretty much matches dividends and depreciation.

Again, this is because of the lower wind speed and the softening of power prices during H1 but we still have this very resilient dividend cover of 1.4x. In terms of capital allocation, this half year, we have bought 35 million shares at an average price of about 115p, and that has added 0.6p to the NAV. In terms of some of the assumptions, we've already referred to power prices and we'll cover that in more detail on the next slide. That has led to a reduction in NAV of 7.3p. Inflation, we've seen it tick up. I mean you'll see it here in the slide. And if you look at RPI at the end of June, it was 4.4%. Mark-to-market, as we've already mentioned, in terms of where we are in the swaps there, that's minus 1.4p. So on to power prices. So the key thing to note about power prices that they are a part of our strategy. Indeed, over the life of the fund, they've been part of the reason why we've managed to achieve 1.8x dividend cover. Because they are part of the fund, we also believe that it's very important to publish transparently what our power prices are and you can see that in the top left-hand side.

The prices start around today, around GBP 65 to GBP 70 per megawatt hour and they trend down to around mid-40s per megawatt hour before we apply a PPA discount as well as a capture rate or cannibalization as some of you may know it. This, as a result, has led to a 7.3p reduction in NAV. Now we thought it would be good to take a step back here just to recap on how we actually come up with our power price forecasts. So in the very short term, we use the futures market. So this is where actual traded power is changing hands in the marketplace. And we believe that is the best proxy for what we can expect to achieve in power prices over the short term. In the medium and long term, we then use a third-party market consultant who comes up with their power prices and we use that in order to forecast those medium- and long-term power prices.

And it's important to note that even that consultant in that medium-term period blends in some of the future prices so that there's always a view to not just the bottom-up economic analysis but also where power is changing hands in the marketplace. So the next question is why are power prices down. So in the short term, there's been some geopolitical headwinds, which have resulted that the gas prices effectively are a bit lower in June -- end of June compared to end of December last year. And what would be interesting actually is to see is that if we were to use power prices in the futures market this week, it would add almost a GBP 0.01 to the NAV, which shows you there is some volatility there. In the medium term, power prices have remained broadly stable and that's principally as a result of some project cancellations or potentially postponements and there's one particular project in AR6, which gave back its contract a few months ago and I'm sure you all know what I'm referring to.

In the longer term, there's been a rebasing on -- in here from 2023 to 2024 in terms of inflation. And we're quite surprised to see that, that hasn't resulted in a higher power price forecast from our consultant, especially given where inflation sits and the aforementioned AR6 project, which gave back its CFD because of the lack of power prices in the market. Also, it's interesting to note that under AR7, the administrative strike prices for offshore and onshore wind have increased by 11% and 3%, respectively, showing that the government shows that there is some pricing pressure for developers in the marketplace. Now despite all that, the dividend cover is robust.

And if you look at the chart at the bottom left-hand side, you'll see that down to almost GBP 20 per megawatt hour, the dividend RPI linked is fully covered all the way through this period. Further, as Matt has already mentioned but important to reiterate, there is GBP 1 billion of excess cash flow that we can expect to be able to use for capital allocation over the coming years. We think that gives us some very interesting opportunities to maximize return for our shareholders.

Finally, just another point to make. 60% of our cash flows between now and 2029 are fixed and with some linkage to CPI and/or RPI. So moving on to debt. So debt is additive. Why? Our average cost of debt is 4.59% versus our unlevered discount rate of 9%. Therefore, that gap means that when we bring in leverage into the portfolio, there is a significant uplift in the overall returns we can offer our shareholders. If that discount -- if those debt numbers were to narrow, then you would start to question whether the debt is actually additive for the shareholders given the risk that debt brings. But for us, we're very, very relaxed. As of the end of June, we had a gearing level of 41.6%. But with the disposal proceeds we've announced this morning, if we've applied all of those to repaying debt, we would stand at 39.5%. In terms of the structure of the debt, you can see that in the top right-hand side of the text here, GBP 2.26 billion, of which GBP 500 million is amortizing and relates to Hornsea 1. The rest is RCF and term debt.

We believe this is the best structure for us, giving us low-cost optionality and it is easy and flexible to change. Just as a side point, if we were to make no -- to have no share buybacks over the last couple of years, that would mean there would be around about GBP 100 million less on the gearing, which would be something like 1% lower gearing levels. Now that's not to say that the share buybacks are the wrong thing, it's just to show and highlight that capital allocation has trade-offs. So finally, we often get asked about refi risk. And if you look at the chart at the top left, you can see some of the maturities and the coupons that we have in the structure. So if we were to take, as an example, the next 2 maturities, which adds up to about GBP 350 million of debt with a weighted average coupon of 4.6% and we were to think about refinancing it today where we think rates are today, probably between 5%, 5.5%.

And even if we took that top figure of 5.5%, we would end up with just GBP 3.1 million a year in terms of extra interest costs, which we think are insignificant in terms of the overall size of our fund. Further, when we refi-ed the GBP 725 million last year, we had very, very strong support from our lenders. Indeed, we didn't need to go beyond the existing lender base, which shows how much they support us. Therefore, overall, we're very comfortable with our debt structure and we believe it gives us the flexibility, along with the support from our lenders to have a sustainable situation.

I'll now pass it over to Matt to talk about key themes before wrapping up and moving on to Q&A.

Thanks, Steve. So now that we've been through financial performance for the half year, I thought it better to just zoom out not for the camera but to a wider lens just to look at the market context. So we have a slide here on the developments in the U.K. wind market. I think the overall message is that wind remains the core renewable technology in all future system scenarios. You can see the scale of build-out needed from the chart on the top left and that's material. It's roughly 3x the existing offshore capacity and almost twice the onshore capacity. So for us, that's -- if you really just follow the market, that could be GBP 170 billion of new assets to aim at. So the market there, the market opportunity for us is, frankly, vast. We also have clarity on policy. We've spoken to many of you about the review of electricity market arrangements.

And the government has now ruled out zonal pricing mechanism. We and other generators in the sector felt that if you introduce a zonal market and you didn't do it in the right way with the right commitments for owners of existing assets, that could lead to uncertainty in the investment community, which in turn could jeopardize the outcomes of Clean Power 2030. So we're pleased to see that there's a -- the zonal market has been ruled out. There's more to do. The national market reform is also something that we'll continue to engage with our peers and with government on to ensure that we get a good outcome for both consumers and investors. But overall, I'd say this policy development is positive for the investment climate in the U.K. for wind. We touched on AR7 earlier.

And as Steve mentioned, the strike prices are there. They've increased versus AR6. And we know that the CFD term for AR7 assets will be 20 years instead of 15 years. And there are some other important ingredients that, of course, we don't know, most notably the overall budget. But we think that there's good basis to believe it could be an attractive auction round. So I guess I'd say, overall, recent policy developments are favorable for the investment climate for wind in the U.K. I also thought it was worth just to zoom out and talk a little bit about the work that we do on a day-to-day basis on our assets. We touched on this in our Capital Markets Day in May last year. And I think it's such an important part of what we do that it's worth rearticulating.

So there are 3 key limbs to the work we do on managing our assets, generation, so maximizing the number of hours we get from our sites, both in the short term and also in the long run. Revenue, so optimizing what we get paid for the units we produce. And whilst as Steve mentioned, it's less a part of the overall net cash flow factor, operating costs are important, far less sensitive than revenue but there's still quite a lot that you can do to drive efficiencies. In terms of the -- making sure that our sites are available to generate and getting the most out of them, availability has been a strong feature of our performance this year. Whilst we haven't had the wind that we would have hoped or expected, our availability has been really good despite some outages at some of our sites. To talk about what we do in terms of improvement, there's a number of things that you can do to wind turbines and many of you who follow this sector will be aware of these things. Physical upgrades as well and you can see that in the bottom left there. It's simply fixes to blades to allow you to capture more energy from the same amount of wind.

And there's also a lot of technological development in terms of the efficiency of how the turbines operate and in particular, having them operate at higher wind speeds than originally projected without compromising the long-term life of the assets, that does add a material amount to the wind that you can capture. We should also talk about longer-term optionality. So whilst we've got a predominantly young portfolio, it's less than 1/3 of the way through its life on average. We have some older assets where we start to think about life extension, repowering and not exclusive to older assets but also site extension by perhaps adding turbines. And there's no universal rule here. I think often repowering is spoken of as something that's going to work for every single site. We don't think that's the case. And also before you can get to repowering, you also have to consider that if you do it before the end of an asset's useful life, you're giving away the cash flow you can get from generating and you have to take that into account in the calculus of whether it works from a returns perspective.

And also, frankly, not every site is suitable for repowering. If you have a smaller, older site, you're probably going to need quite a lot more land to develop a modern, bigger site. You need to space out the turbines more. You may not have the right size of grid connection to repower it. That said, there are some assets in our portfolio where we're starting to think about the longer-term optionality of extending leases and perhaps in the future repowering. It's a site-by-site assessment. In the last year, we've made quite a lot of progress on securing land rights and securing lease extensions across a number of our assets. We also continue to work quite hard on life extension of our assets, just to get more out of the assets in terms of time as well as the revenue optimization that I mentioned earlier.

The modeled failure rate of our turbines in their 30th year of operation is somewhere around 1 in 10,000 if you have the appropriate levels of forward maintenance and that's something that we pay a great deal of attention to. So there's scope for profitability beyond that. Also around existing sites that you have, you can see extension opportunities. It tends to be the easiest place to get planning for a new wind farm is next to an existing wind farm. It has to be spaced out appropriately, you need land rights but we look across the portfolio and we see a number of extension opportunities and we'll continue to explore those. Frankly, all of this is about the day-to-day work that we do but also thinking about the longer term and creating long-term optionality and frankly, not very much cost. That's the business that we're focused on with asset management.

Capital allocation is obviously an important slide in today's climate. So the first thing to reiterate is dividends have always come first. We've paid an RPI progressive dividend for the past 12 years, as we said before. And beyond that, we generated GBP 1 billion to reinvest. We expect a similar amount over the next 5 years, assuming at par performance. And that's capital that we can use to allocate. We also have, of course, today, the proceeds of the disposals we've announced, so GBP 181 million that supports our near-term priority, which is the completion of our second GBP 100 million tranche of buybacks, as well as the gearing. Beyond that, I think it's worth looking at capital allocation over the longer term. It's pretty easy to work out what you think the return is from buying your own shares back at a discount. So if you have a net return of just above 10% as our fund does on NAV, you buy your shares back at a 20% discount, you have 10 divided by one minus the other, you get a 12.5% return.

So that on the face of it looks fantastic in terms of an investment opportunity. Presumably, you like the assets that you're buying. You're rebuying in the same portfolio. Otherwise, you wouldn't own them. But we think there's a piece missing from the economic calculus because every time you send GBP 1 out of the company, you make the company smaller but unless you've done something to your debt, then the next day is exactly the same amount. So I think it's worth reconsidering in the medium term, what the returns from buybacks actually are. They clearly have a place in supporting our share price and they've been useful to us and we'll continue with the rest of the program that we have for sure. But if you take into account making an investment of GBP 1, that's 12.5% return, you also have to take into account paying roughly 40p of debt for every GBP 1 that you spend. And for us, that marginal rate of debt investment is around 6%, around the cost of our RCF.

And when you merge together the returns of those 2 instruments, it isn't the 12% that you started with, it's more like 10%. And depending on your discount, it could be as low as 9%. So we've shown that in the chart at the bottom. And if you look at the -- where the green line intersects with, say, buying an asset at a 10% IRR, as you trend in with discount, it starts to be more and more compelling to buy assets. All of this really is for the medium term. It's just a point that we wanted to land around how we consider the calculus of buybacks. We do think there will be investment opportunities. There's a lot of projects that are going to get built under AR7. There will be a lot of recycling of existing projects to allow the equity to build projects in AR7. And as I mentioned before, we have some interesting opportunities in our own portfolio. So we look at this over the longer term and ask our shareholders just to think about the benefits of alternatives to buybacks.

Of course, the benefit of reinvesting is that you get to keep the cash inside the company and that further supports an RPI progressive dividend and preservation of NAV in real terms. I've ended on returns there. I mean, returns are really -- that's what the attractiveness is or should be. Our portfolio levered discount rate is unchanged at 11% and at a 15% discount, that would be 12%, 12.5% as we said before. So if you look at the 10-year gilt today, it's 4.6%, 4.7%. Given that our investments also come with explicit inflation linkage on at least half of our cash flows and as we mentioned earlier, for 60% for the next 5 years, I think that's quite a valuable attribute to the fund given that we've seen an uptick in inflation over time.

Last and by no means least, a word on ESG. So sustainability and long-term value creation, they go hand in hand. We've published our ESG report. That's available for you to view on the website. We published it in April 2025 and you'll have all the details there of the good work that we do in communities, the amount of carbon that we abate, the homes that we power and that's a really good read. So it's there for you to look at.

And I think, look, we just end with a few closing remarks before we open up to Q&A. So in summary, our dividend cover remained robust against very low wind speeds. We made quite a lot of progress on disposals and we've been very clear on capital allocation. All that lands against the backdrop of, I think, legislative clarity and political support for wind. We know there's a lot to do to improve the attractiveness of the company and we'll keep working on that very hard. We'll now hand over to our call operator to take questions from the conference call. And after that, if there's time, we'll address any questions that have been submitted through the webinar portal.

[Operator Instructions] Our first question is coming from Alex Wheeler, calling from RBC.

Three questions from me, please. First one, just on policy, the end of zonal pricing debate, clearly, a big tick in the box. How are you thinking about reformed national pricing and how that may go? Do you have any indications at the moment about how that may look or the impact it may have? My second question is just a confirmation really. Just can you confirm that you're happy on current P50 estimates following the revisions that you've already done and just confirming that you're happy with where you sit in terms of budgets? And then the third one is just following the conclusion of the recent disposals at NAV, would you see any value in further disposals given the current discount?

Thanks, Alex. Good to get not 1, not 2 but 3 questions out straight away. So as it comes to policy, yes, the end of zonal, as we said, I think, is a supportive move for the investment climate. As we said before, we and other generators made a very clear case to government around maintaining the attractiveness of this market and the landscape of certainty. And I think that's been listened to and honored. That doesn't mean that the discussion is over. It's pretty clear that the other alternative review of electricity market arrangements is to reform national market. Frankly, I think a lot less work has been done on that, given that the focus had been on zonal. So we await detail to emerge. But when it does emerge, we will be engaging with government on it as we have in the past.

I mean I think the main risk is how you express locality in a reformed national market. That has to be at the core of what happens. That could happen through a rerating of network use of system charges. And that I think will be the thing for us to engage on.

Anything to add to that, Steve?

Well, I think it's clear to see from the government's decision on zonal that they have respected the rights and protections of existing generators. And I do believe that any changes that will come through national market reform would also follow those same principles as well. And as Matt said, we'll be very involved in that directly but also working with other stakeholders and peers across the industry to make sure government hears the needs and desires of shareholders. So whilst there is still some uncertainty, it's less on the zonal and we believe that government are very much aligned with supporting the current generators but also making sure that the investment environment is attractive so that they can continue attracting the GBP 40 billion a year that they need every single year between now and 2030 to meet their Clean Power 2030 marks.

Alex, your second question was on our P50s and our generating budgets. So as we spent a great deal of time talking through this in January and in our results presentation in February, so the exercise that we did in the run-up to December was full and holistic across our portfolio, including working with a third-party consultant. We're happy with the work that we did. We think it was right. We think it was appropriate. We spoke in detail about the changes that we made. So we're happy with those budgets. It's obviously frustrating that having to reset that the first half year that follows it leads to a period of underperformance from wind but it is an exceptionally low wind speed period. I mean, I think, look, just to take the question head on, the question is always there, is this a trend? You do have periods of wind speed, if you look back to the 1990s of over and under for 5 years, we're in a period of under wind speed. Whether that means that there's a systemic change or something climatic happening, I think, frankly, is unknowable.

It's something that we've started to explore with consultants but it's pretty clear when you get into the analysis that it layers uncertainty on top of uncertainty. There's uncertainty in climate modeling. There's uncertainty in wind yield estimation. You put 2 together, there's frankly no real firm outcomes that we're able to draw. It's something we're cognizant of. It's something that we'll be talking more about. But for now, we're happy with where we are in P50s.

Your last question, Alex, was on disposals. Given where we are, given that we can sell our assets at NAV as we've demonstrated repeatedly, I think, yes, there's a case for continuing to remain strategically opportunistic when it comes to disposing of further assets. And we've set out pretty clearly what we think we could do in the medium term in terms of capital allocation. Our first priority, of course, is completing the buyback program that we have, which we're well funded to do and degearing, both of which we've mentioned in some detail today.

And perhaps just to add on to that, that we have an investor roadshow coming up where we'll speak with many of you and we'd love to hear directly your views on this. So we will engage with you over the coming weeks and months. And obviously, the capital allocation program will remain dynamic to the feedback and wishes of our shareholders.

Our next question will be coming from Iain Scouller of Stifel.

I've got a couple. Just firstly, on the power price and the 7p impact. Can you just sort of split that out between what was below expectations during this period? I mean I think you're saying like a catch price of GBP 77.65 against a market price of GBP 88. And how much of it is related to sort of short-term curve, longer-term curve? And then the other one is just the 10% increase in the OpEx. You did sort of touch on that. But again, can you just give us a bit more detail around that because that's quite a big move.

Thanks, Iain. I'll take the power price question and leave Steve to give a bit more detail on operating costs. So looking at the overall move in power prices, it's around 3-ish p from the front end of the curve and 4-ish p from the medium to longer term end. And you can observe that front-end part by looking at '25 and '26 futures back in December versus the 30th of June, which, as Steve said, that's when we cut our NAV. And the 4p in the long run is partly down to inflation expectations manifesting into real '24 power prices and also a reset of gas and commodity prices. Those are the key ingredients that go into the forecasters model.

Short run, as Steve said, if we were to redo our NAV as of last night, that front-end part of the futures curve would lead the NAV back up by GBP 0.01 or so. So it's a moment in time. We obviously understand that it's not great for your power prices to go down. We do have that exposure. But over the long run, our model remains good. It's intact. Our business -- our dividend cover going forward, still down to GBP 20 a megawatt hour is there and covered and still plenty of excess cash flow generation to expect. Steve?

So on OpEx, so there are a couple of points that I mentioned earlier on around inflation and some extra component exchanges in our offshore assets. So in terms of the inflation, the way that the contracts work, they're typically looking a year behind. And so what we're seeing in the beginning of this year is the very high inflation that was experienced during 2023 and 2022, catching up in terms of the OpEx contracts. So as we all know, inflation was running into double-digit numbers and that is now reflected in the costs that we see. In terms of the offshore component exchanges, these are specific programs that we had. They were budgeted. So we knew about them and they come as a surprise. And they were -- actually one of them was known when we actually acquired the asset as well. So these are known figures that we were always planning to spend and it's just part of the prudent management of operational wind farms.

Okay. So if you stripped out the -- that component exchange, what would the increase in OpEx be?

Sorry, can you just repeat the question?

Yes. If you stripped out the offshore component exchange, if you hadn't done that, what would the increase in OpEx have been?

Okay. I don't have that exact number, Iain, but how about I get back to you separately, if that's okay.

Next question will be coming from Adam Kelly of JPMorgan.

I just wondered with the sale of the Hornsea 1 stake to another fund managed by the manager, was that externally marketed as well? Was that something that was considered in terms of looking at the valuation for that sale? And related to that, as said in the statement, Schroders Greencoat has got GBP 10 billion of AUM. What of that is private funds with a comparable mandate that could potentially acquire other assets from Greencoat were it to sell? And to what degree does that fund or funds have cash available to buy assets?

Thanks, Adam. So -- as we've said, we've sold 2 interests of roughly 1% in Hornsea 1. This is something that we had externally marketed for a period of time last year and we were pretty close to the altar of a transaction, price agreed. And for idiosyncratic reasons, that didn't happen. So that left us with an effect a whole load of external due diligence that could be relied upon that had already been prepared and if you like, a shrink wrap transaction. That then happens to align with inflows into 2 mandates in Schroders Greencoat that do have an overlapping investment mandate with UK Wind. And just to be clear, UK Wind retains its priority allocation of all wind investment. And that's, frankly, how the marriage happened.

We're obviously a regulated manager. We obviously understand how conflicts work and separation of function. We have a Board. We have a private markets investment committee. We also had, in this case, external transaction valuation validation. So I think we followed exactly the right process and we're very comfortable with it on that basis. To answer your broader question, yes, Schroders Greencoat has around GBP 10 billion in assets under management. It has in the past had quite a few mandates that could co-invest with UK Wind and we've done that on several of our investments in Burbo Bank, London Array and others, for example. So that part of our business has always been additive to how UK Wind goes about deploying assets.

This is the first sale that we've done to another mandate. There are -- there is some available proceeds from some of the funds. I probably shouldn't mention which ones, so I won't. I think more broadly, looking forward, this transaction lended itself well to both the buyer and the seller. I wouldn't think that it's necessarily something that we'd go and repeat. It was a moment in time and it worked pretty well. So we're not reliant on other money coming into Schroders Capital, into other funds to conclude our divestment program. Indeed, the other disposals that we've done have been to third parties who have done their own diligence and made their own investment decisions.

Maybe just one small point to add in terms of the sale to the Schroders Capital managed fund. There was an external valuation by an external provider, which helped provide that arm's length valuation. So we were very comfortable with that. The buyer was very comfortable with that. And I think that should give our shareholders comfort too.

[Operator Instructions] We'll now move to Conor Finn, calling from Barclays.

Just talk through the process for the reassessment of the P50 numbers. I mean you obviously did it for FY '24 and you obviously referenced using third-party consultants. But one of the things that was referenced at the time was the addition of more in recent years bringing the long-term average down. Should we assume then that if '25 carries on as it has in the first half that there will be a further reassessment at the year-end?

Thanks, Conor. Good and fair questions. There's no particular pattern behavior between the type of assets that we operate. We have experienced more dispatch down in our Northern Ireland portfolio than we did last year but that was already something that we budgeted for when we set our '25 budget. Beyond that, I think there's no frank rhyme or reason. There are some sites that have had less than budgeted availability. You mentioned forward-looking at energy yield and the work that we did in the run-up to December last year. So I'm happy to recover that. So the process was to align the correlation period for all of our sites to the maximum data set available. So when you acquire sites along the way, you acquire them in 2017, 2018, 2019, their correlation reference set is a period of time going back roughly 20 years. If you get to 2024, you've now got 26 years of data. So we thought the right thing to do is to rebase all of our analysis.

So using the on-site generation that we have and that track record and then using the longer-term 26-year dataset as a correlative point and having that consistent across the portfolio. That's the work that we did. And given that bringing in those additional years, so just to use a [ cartoonish ] example from 2017 onwards, that's been a period of time where wind speeds have generally been a bit lower than long-term averages. You bring in 1/3 of your time at lower than average and you add it to par and then, of course, your overall average goes down. And that would be exactly true if we redid all of this analysis at the end of this year.

And this year was, I don't pick a number, minus 10%, minus 15% in terms of generation from wind. But that would only be 1/27 of the data. That's the point about having the long term. So if we did repeat that exercise and we're not really proposing to given that we did this fulsomely and holistically and with a third party, quite a lot of time and financial expense to do it, revisiting it after another year is probably not the right methodology but users will be able to read across the relative difference, let's say, minus 10 for 1 of 27 years can bring to the long-term average. I hope that helps, Conor.

As we have no further questions -- audio questions at this time, we turn the call back over to our host for any webcast questions.

So yes, we do have some online questions here, and I'll try and group them together where I can. So 3 questions here on capital allocation. It appears that UK Wind is missing a once-in-a-lifetime opportunity to participate in wind build-out plans for the U.K. What are our plans to participate? Alongside that, how are we looking to grow in the future if we keep selling assets and reinvesting by buying back shares? Are we looking at new areas for investment, including going into Europe? And then finally, will you stop the buyback and use the cash to grow as neither the 8% dividend yield nor buyback seem to be rewarded?

Thanks, John. There are some good opportunities, I think, in the market now. So if you think about just the magnitude of capital that's needed over the next 5 years to build out new assets as we estimated GBP 150 billion, GBP 170 billion, you could be 10% wrong and it's still a huge number. You need all of that equity and debt to be raised. But then probably to get there, some of the participants will need to sell other assets to have the equity in the first place. So I think there is a decent buying opportunity. But we always have to look at the returns that we can generate from the capital that we have available to us. So our near-term priority has been to buy shares back and that has been additive to our NAV and to degear, both of those things we've spoken a lot about today. So for now, the near-term opportunity is there.

Do I think that, that is suddenly going to evaporate if we're not in the market for buying assets for 3, 6 or 9 months? No, I don't. I think the opportunity will be there and enduring given the magnitude of capital that's needed to sate the government's desire for further wind build-out.

And it's probably worth mentioning that even the assets that are going to wind in Allocation Round 7, none of them will reach FID the day afterwards. It will take a while for them to actually start construction and then become operational. So even if you just look at AR7 in isolation, the investment opportunity for those assets will exist for anywhere between 6 months to 5 years in terms of going in at the very beginning or going in at [ COD ]. So we think there's plenty of opportunity there, and it comes back down to capital allocation. What is the best way that we can use the capital we have available to maximize the return for our shareholders. And Matt touched on it earlier on, and we'll talk about it in the investor meetings we have upcoming over the next couple of weeks and months.

I'll probably take the next 2 questions together there. They're kind of different versions of the same thing. How do you stop shrinking, the same as how do you start growing. So we've set out here today the considerations that one should have in terms of medium-term capital allocation priorities. It's obviously dynamic to the share price. But we do see in the medium term, there will be opportunities where it will make more sense to reinvest in the business and to buy back shares unless, of course, our discount remains very, very wide. And you can see that from the capital allocation chart. As to where that money would go if we were reinvesting, there's a notion of opportunity for us now, both within our own portfolio and externally. And we wouldn't have to extend our investment to Europe into a different currency and different market regimes to satisfy spending the capital that we could have. So for now, it's UKW, it's UK Wind, and that's how it will remain.

Final question was around stopping that -- those share buybacks as well. And the clear direction is to continue with the share buyback program. We've announced it. We wish to complete it. And that's the clear direction that we will follow over the coming months.

The next group of questions are really around the dividend and how we present some of the numbers. So again, 3 here. If you amortized your debt like peers, what would the dividend cover have been? Would it have been uncovered? Secondly, does the dividend cover sensitivity slide on Page 11 assume that you generate in line with your P50s? And then thirdly, what will happen to dividend cover when the ROCs gradually run off in the 2030s?

Thank you. So we've set out very clearly many times what our approach is to debt and our debt structure. And we're completely convinced as is our Board that, that is the right structure for a business of our size. So you think of the next set of maturities to be refinanced. As Steve said, the refinancing risk we feel is relatively low and the cost of refinancing that debt today is relatively minimal. But the flexibility that we have means that if we felt we wanted to, we could switch to amortizing debt. And the impact that, that would have on dividend cover depends upon the term over which you amortize the debt and the rate that you secure. And it's also a bit like your mortgage.

So we're assuming that we're paying the amounts that we're paying in interest on all of our debt now forever. If you amortize it, your first period payment has a little bit of principal in it and like your second mortgage payment has a bit more. So actually, over time, it's not quite as impactful as people would think. So I would guide depending on the rate you refinance that the time that you stretch it over, 0.2 to 0.3x on dividend cover probably is roughly the sensitivity that you would have.

And it's probably just worthwhile reiterating that almost 1/4 of our debt is already amortizing in the sake of the GBP 500 million that we have associated with Hornsea 1.

Yes. There was a question also on dividend cover and our sensitivity to power prices. Does that assume that we generate a budget? Yes, it does. That falls out of the NAV. The NAV assumes that we generate a budget. Whether that is or isn't the right assumption, we've addressed. We've answered Conor's question on the P50 work that we did on the intra-year volatility of wind. And like you, we're somewhat disappointed that the first half of this year has underperformed in terms of wind. But yes, it is based on our NAV model. And dividend cover in terms of ROCs, I mean, this is why we publish out a reasonable period of time. So it's not like tomorrow, all of our subsea instruments end and it's not like there's 0 we can do about it. We have the ability to trim and prune the portfolio. We also have the ability to enter into fixed price PPAs and we're exploring that on 2 of our largest assets now. So we feel and our lenders are comfortable with us having plenty of optionality to maintain the right revenue division over the time of these assets.

And that trimming and pruning of the portfolio can include us going after AR7 assets, which would have 20-year CFDs as well, which would presumably be very attractive for us. So we're constantly looking at that, constantly looking at what is the optimal portfolio that we can hold in order to have that balance between fixed revenues and some upside from power prices, too.

A couple of very quick numbers questions. So we talked about the cash flow in Q1 -- sorry, in the first half being down GBP 50 million and 75% of that being due to wind. What was the other 25%? And then can you say how many pence is in the NAV for REGOs following the update?

Do you want to take the first question, Steve, and I'll...

Yes, sure. So as we've talked around, the vast majority of the reduction in budget that we've seen has been from wind speeds that we've experienced. And in fact, the whole industry has experienced, not just in the U.K. but across Europe. There's been 75% of that reduction. The other 25% is principally because of the softening of power prices during H1.

Another part of that power price is also the manifestation of REGOs. So just a word on REGOs. So in 2023, they were trading at between GBP 10 and GBP 20 a megawatt hour. That's not something that if you're valuing your assets properly, you can afford to just ignore. So we included REGOs and that was the right thing to do. The way that we value REGOs going forward is based on, again, a market consultant's projection and REGOs prices have fallen materially over the last 18 months. It's partly driven by a lack of demand for -- from consumers, both industrial and retail for green tariffs in effect. So that's led to the reduction that you've seen in this half year. So on an enduring basis, REGOs are now almost a rounding error in valuation. They maybe GBP 1 a megawatt hour for a decent period of time. So on an NPV basis, it's 1.2p, 1.3p, something like that. So in effect, we don't expect to have much variability from REGOs going forward, given that they're not a significant part of UK Wind's valuation today.

There's a quick question here on divestments. How come these all happen at NAV/GAV? It seems coincidental. Shouldn't some of these be either at a higher or lower price?

So it all depends how you approach the divestment process. And we've been very clear on this. We felt that in a market where one could say it's perhaps a biased market for some things, the best way to form a transaction is to work with somebody bilaterally. So to identify the thing that it is they are looking for to buy, to see if that aligns with what you'd like to sell. And if you have high confidence in the person that you're working with, you then pretty quickly can get to a transaction where you've got a high degree of confidence. And the easiest way to make that go forward is to say the price will be NAV.

And that's what we've done in all 4 of the divestments that we've had. We've agreed that, that's the price. And I think that's the better thing to do. It's led us to getting these things done. Do I think in the future, if we look at divestments, we would consider a more externally marketed approach where, frankly, the price is an open discussion? Probably yes. But in the time that we've had to date to deliver what we've delivered, this was the best way to get things done. And I'm entirely comfortable with the process and the outcome as is our Board.

And so just the final 2 questions here on investments, capital allocation. Firstly, would you consider construction or development stage assets, especially in the context of the hurdle return versus buybacks? And then secondly, are there any plans to co-locate battery storage on wind farms to enhance revenues and profitability per site?

Sure. So UK Wind can invest in construction assets. There's a limitation but it can. We haven't felt the need to, to date given that we felt the risk/reward ratio was actually skewed in favor of owning operational assets. And construction premiums got really kind of chased away. So you were forced to take a decent amount of risk for frankly, not much reward. Both Steve and I have spent a lot of our careers investing in construction and development assets. So we know how it's done. But given the ocean of opportunity in our core market, there's -- we don't particularly see a need to go into those assets at the moment. A lot of the construction opportunities are going to be in offshore wind. I think there's quite a lot of risk there that you've seen in some of the listed companies in the space. So for now, there's enough opportunity in the things that we look at. And there's enough opportunity in the portfolio actually that I don't think we need yet to look at construction and development. Anything to add?

No, I think that's right. I think the only probably point to mention is that we remain open-minded to it. And if a great opportunity came along that really made sense in terms of investing in construction, we would consider it. But it's not something which we desperately think we need to pursue today.

On to my favorite subject of batteries. We don't yet see the case for hybridization of sites to include batteries at wind. I think it makes a lot more sense for solar. The generation pattern of wind when the wind blows is that it's windy for 24, 36, 72 hours. So if the idea of a battery is to capture that arbitrage between lower power prices during windy periods of time and less -- and better power prices during less windy periods of time, you need quite a big battery to do that. And given that a decent part of the revenue stack for batteries is that optimization, is that trading, we don't yet see the case. But these things change. They're dynamic, right? So it's something that we and the Board continue to reassess over time. For now, I think it makes a lot more sense for solar and batteries on a stand-alone basis are just nowhere near UK Wind.

So I think if I'm right, that is all of the questions, both on the conference call and the webinar answered. Thank you all for dialing in and for your thoughtful questions and we look forward to seeing many of you on our roadshow in the next couple of weeks. Thanks for joining.