Centrica plc

good to go good morning everybody it's brilliant to be here today and as usual i'm joined on the stage by our cfo and the new youtube sensation russell o'brien for those of you that watch this video no doubt our leadership team here in the front row and our chairman here's a number of other centrica people so 2025 is a year of significant progress building further on our journey to make centrica a stronger higher quality business building on the foundations that we've been laying for growth we're recycling capital from non-core assets investing in assets like size vlc grain lng and the meter asset provider assets that will both grow and stabilize our earnings profile eliminating downside risks we're adding long-term value and we're building future optionality 2025 showed our resilience and our further improved operational performance but it also had its challenges Conditions remain difficult for Centrica Energy throughout the year, as it did for many, many commodity traders. But I'm delighted with what the team delivered in 2025. But as always, I'm looking for more. And it's a mark of how far we've come that collectively we're not satisfied with £200 million of EBITDA from optimisation. We collectively were not satisfied with more than 11 pence EPS in a difficult year. because our expectations of what Centrica can deliver have fundamentally changed. Over the last five years we've invested £3 billion and we've returned around the same amount to shareholders including increasing the dividend by 22% this year. Balanced capital allocation reflecting our commitment to growing the business and to rewarding our owners, our shareholders. We've now bought back a quarter of the company since 2022 Thank you very much. and neither is our discipline if the projects don't stack up we won't invest and surplus capital will always come back to shareholders always we expect to invest at least another 700 million pounds this year maybe more mainly in assets that fundamentally strengthen our portfolio and we expect to continue investing at about the same rate right through to the end of this decade And that's what underpins our confidence in delivering £1.7 billion of EBITDA, or better, by the end of 2028. And it's why we can tell you that we'll continue to grow that beyond 2028 to £2 billion by 2030. Now both of these numbers include the impact of expected but not yet confirmed extensions to the four existing advanced gas-cooled nuclear power stations into the early 2030s. Two billion pounds of EBITDA in 2030 would see our EPS more than double over the next five years. But I'm never satisfied. So rest assured that my aim is to do even better than that. By focusing on value, we've made Centrica a much stronger business than it was six years ago. We're running the business as well as we possibly can. We're investing in a disciplined way. And it's the same approach that will deliver the next phase of our growth. We spoke in July about how we saw opportunities to transform Centrica. Our transformation program is going well. It's a key part of delivering our full potential. We've made progress anchored in three simple principles, all underpinned by technology. Number one, improving customer experience further. Number two, driving more commercial growth. And number three, continuing to deliver on cost efficiencies. A lot of this benefit will be in the retail business, but there's huge potential across the entire group. Last year we delivered net benefits of £100 million. And unlike other companies, we're not recording transformation costs in exceptionals. If we had done that, 2025 EPS would have been two pence higher. So another company, it would have been 13.2, not 11.2. the program will ramp up this year and we expect to take another half a billion pounds out of the cost base by the end of the decade over and above what we've already done underpinning earnings growth and helping to create new opportunities now ai is a part of that and it's a huge opportunity for us we're working with world-class partners to explore how we can further deploy technology including ai but not only ai to transform our customer service into reduced costs and I'm going to lay out some of the specific examples of that later. So with that, with the opening, I'm going to pass you over now to YouTuber and CFO, Russell O'Brien, who's going to take you through the numbers.

Thank you. Okay, thanks Chris and good morning everybody. So over the past years, we have reshaped the way we run Centrica with a focus on three business units, retail, optimization, and infrastructure. And we've taken this opportunity to simplify our reporting, aligning the segments to the way we now run the business. And we've also shifted to EBITDA as our main performance and guidance metric, which is a better measure for the business as we invest in the portfolio and grow. Now, I recognise there are a few moving pieces, so I've put a very funny video explainer on the website, as Chris is mentioning, and some other materials, just so that no one's confused by the resegmentation, and it unpacks everything in a little bit more detail. The main change is splitting Board Gosh and Centrica Business Solutions into the component parts, so Irish retail, for example, is now reported alongside the same UK activities, Irish optimisation within Centrica Energy. and we've also moved our irish power assets and our growing meter asset provider into their natural home and infrastructure so now to the numbers i'd like to highlight three key points first we've reported solid numbers overall in the context of external challenges demonstrating the resilience of our business second our progress on vesting and transformation program gives us more confidence in our medium term earnings outlook And third, our balance sheet remains strong, giving us the financial platform to execute. Adjusted EBITDA for the year was £1.4 billion, and adjusted earnings per share was just over 11 pence. we delivered operating cash flow of over 900 million pounds while we had a free cash outflow of 200 million pounds after doubling investment to 1.2 billion and after returning over a billion pounds to shareholders through the dividends and the buyback adjusted net cash closed at one and a half billion retail and optimization delivered almost 800 million pounds of ebitda with retail contributing 574 million broadly flat year on year Within that, UK Home Services delivered almost £170 million of EBITDA and the 7% top line growth reflected improvements to our commercial propositions and pricing and was supported by a razor sharp focus on costs. Margins expanded from 4.3% to 6.8% and we're pleased to have moved out into the profit range we outlined ahead of schedule and there is still much more to come. Business supply also delivered a strong result. UK home energy supply and optimisation both faced external headwinds and saw EBITDA decline. And I'll come back to both of those areas in a moment. And finally, infrastructure of £728 million of EBITDA was lower due to a combination of asset sales, realised prices and outages in Q4, offset by a lower than expected loss at rough. As usual, we can find more detail on the business performance in this morning's release. as consumer demands change competing effectively in the retail market requires efficiency innovation and resilience and we were behind the curve in many of those areas but the evidence is clear we are moving in the right direction for the first time in over a decade we grew customer numbers across all of our retail businesses simultaneously underpinned by the simplification and the use of technology this includes the migration to ignition and modernized planning systems and services unlocking commercial flexibility deeper customer insights and cost efficiencies those dynamics were key to the improvements and services retention is improving we're building new growth channels and we're managing margins effectively but as ever we're not satisfied we are still losing customers we shouldn't be losing and there's more we can do commercially We want to continue growing our retail customer base, but we won't adopt the pricing behaviour we're seeing from some of our competitors. We believe it is unsustainable. We'll remain nimble, of course, and compete hard, but our primary focus is on delivering value over volume. And with more insight, we're able to identify and focus on those customers who really want our products and services, helping them get better solutions for them and creating more value for Centrica. Home energy supply delivered a resilient performance in 2025. As expected, the market continued to pivot towards fixed price tariffs, which had a dampening effect on margins, and weather was an £80 million headwind through the year in the UK. Now, on the other side, the energy price guarantee scheme reconciliation saw us record a gain of £42 million related to revenue from prior periods that was not recorded at the time. And the results, as you've seen, benefited from other costs and revenue phasing from earlier periods. Bad debt remains a challenge, with the latest figures showing over £4 billion of debt past due across the industry. And a bad debt charge in UK home energy supply increased to around 3% of revenue. Now, we continue to advocate for Ofgem to take more proactive steps. to help those who genuinely can't pay and address those who can but choose not to but in the meantime we do not expect we do expect those additional costs we face this year to be recovered in future periods and the ups and downs reflect the essence of the uk home energy supply business short-term volatility offset by through the cycle predictability and since the price cap began in 2019 as you can see our average margin is 2.3 percent That's above the 1.9% allowed during the first four years of the cap and broadly in line with the allowance since then. Supported by the price cap mechanism, this is a business that generates solid, through the cycle, regulated earnings and cash flows. Centrica Energy posted us off the result, primarily driven by gas and power trading. Against that backdrop, we've remained focused and driving long-term value. And £200 million of EBITDA in a tough year is a big step forward from where the business was a few years ago. RETO, a renewable route to market business, again performed well. Assets under management grew by 17% to over 19 gigawatts. Centrica Energy is now consistently one of the most innovative, responsive and commercial partners to asset owners across Europe, strengthening our ability to grow more in this area. In LNG, the teams have fundamentally transformed the portfolio over the past couple of years. We are now 100% hedged until 2028 and over 80% until 2030. So we've protected any downside and retained valuable physical optionality. Now, we're not satisfied with the absolute performance in gas and power trading, but we do take comfort in strong relative performance. in really difficult markets the team generated a positive margin and remained consistently disciplined through the year consciously reducing risk rather than chasing aggressive positions is a core principle of how we operate this limits downside with returns skewed to the upside when markets allow in the short term more rational behavior is returning with gas trading recovering a little bit in the second half but events as we've all seen in the past week demonstrate the market remains very volatile and it looks like it'll take some time for them to stabilize so given all that we expect Centrica Energy to be below its sustainable EBITDA range for this year we remain confident though in the longer term outlook with earnings unsupported by expanding our geographic footprint and capabilities adding further diversification and growth options to the portfolio So, of course, the challenges we saw last year demonstrate why it's so important to continue building a predictable contracted infrastructure portfolio. And 2025 saw as more than double investment year on year, spending almost 400 million as I will see 200 million in grain and 225 million in the map, which was higher than our target. After other movements, including decommissioning and disposals, we saw free cash outflow of 167 million pounds. We returned £1.1 billion to shareholders in 2025, which means we've invested and returned £3.6 billion over the last two years. The balance sheet remains strong and we expect surplus capital to emerge over time as the business continues to perform. But, as we've demonstrated, we keep the balance sheet under close review and our commitment to maintaining that discipline is unchanged. Now to the outlook this year. alongside streamlining our segments we've simplified simplified our guidance ranges but there's no change to the underlying numbers all we've done is restate on an EBITDA basis in 2026 we expect retail to be in its EBITDA range of 500 to 800 million pounds and that's after the transformation spend in the year We currently expect optimisation EBITDA to improve somewhat relative to 25, but remain below the medium-term sustainable range at around £250 million. And assuming the second spirit energy disposal completes around the middle of the year, we see £500 to £650 million as a sensible range for infrastructure, including, importantly, about £175 million from the key regulated and contracted assets. As a reminder, earnings from the spirit disposal assets will continue to be recorded through the P&L until the transaction completes later this year. We also assume rough will be around break-even, driven by a continued focus on optimising indigenous gas sales and cost discipline. We expect investment of at least £700 million. This includes transformation, further investment into the map and our power assets, including size we'll see. today we've also laid out guidance on interest and tax to help with your modeling including a structural decline in the effective tax rate as we pivot the portfolio away from highly taxed spirit energy earnings so we're all excited about our transformation program which is accelerated over recent months and underpins our plan to deliver top-line growth while driving underlying efficiencies through the organization Our operating cost base is just under £2 billion, including bad debt and depreciation. 3% annual inflation on that is a £300 million earnings headwind by 2030. So driving cost efficiency is a huge opportunity and a necessity. And we're ramping up multiple work streams and we're already taking actions that are making a real difference, which Chris will talk about shortly. In 2025, we reduced OPEX by 3%, net of inflation and costs to achieve of £100 million. Looking forward, we aim to deliver a further half a billion pound reduction by the end of the decade. And we have around half of those savings identified already and are working hard to lock in the remainder. That means we expect our nominal cost base to remain broadly flat by 2030, with efficiencies fully absorbing inflation and the cost of supporting growth. And from what I can see today, there will probably be around £600 million of cost to deliver those benefits, around £400 million of OPEX and a further £200 million of CAPEX. And we will be as disciplined in our OPEX investment as we are deploying capital generally. The earnings benefit will come through over time. As Chris says, we'll be transparent with the costs and we don't expect exceptional charges. We want to give you the tools to assess our performance, and more importantly, we want to ensure our colleagues are fully focused on delivering value. So to summarize, Centrica's performance in 25 was resilient in the face of some external challenges. The assets we've brought into the portfolio over the past year mean we are increasingly confident of being able to maximize sustainable earnings, the foundation of our financial framework. And we're successfully balancing rewarding our shareholders with retaining the strength to support our growth ambitions. And with that, let me hand back to Chris.

Thanks Russell. The trends shaping the energy system became ever clearer in 2025. uk electricity demand grew for the second year in a row following many years of decline and intermittent generation rose to over a third of total supply now looking forward demand growth will accelerate and renewables penetration will continue to grow so will the need for zero carbon basal electricity dispatchable backup electricity generation and electricity storage to keep energy secure and affordable for the household and the businesses that will drive the economic growth the UK needs. There's a once-in-a-generation investment cycle underway to meet these growing needs. The challenges of delivering new projects are real. Planning, good connections, supply chains. None of this is easy. A couple of years ago, you could pretty much pick up a gas turbine off the shelf. Today, there's a five-year waiting list. So existing capacity will also be needed for much, much longer. And as you can see, the expected proportion of gas-fired electricity generation in the mix in 2040 has almost doubled. That creates huge opportunity for us, and it's why we believe our strategy is the right strategy. Focused on the assets that will be needed to support a fair and affordable energy transition, whilst remaining pragmatic and retaining the flexibility to adapt however the transition progresses. the right strategy is one thing but it must be coupled with the ability to deliver and that's way more than about reshaping the portfolio it's about way more than that it's about rebuilding a platform that allows us to compete in a rapidly evolving retail market and about building the capability to identify develop and operate the infrastructure assets that will define our future now we've now got the foundation and the transformation program that will help us deliver this next phase focused on the core areas that I mentioned earlier customer service commercial growth cost efficiency transforming customer service is critical to our success we've made progress improving our digital contact channels but we're consistently identifying more areas for improvement our aim is to reduce contact by at least 30% now it's not that we don't like speaking to our customers we really do is that we want to give them fewer reasons that they have to contact us we want to use technology to help us make their lives easier and to offer more relevant products and more relevant services now if we achieve that that will be a significant efficiency gain but we want even more we're also aiming for a further 40 percent of customer contact being handled through enhanced digital channels including far more use of ai to support our colleagues by ramping up the use of technology we're freeing up time to solve the thorny issues really difficult issues for customers and to drive commercial performance creating the right jobs in the right places as we grow our business we're investing in the skills and the capabilities that we need for this future rewiring how we work to sharpen accountability to grow expertise and to help us serve customers far more efficiently that extends to our central functions we've reduced headcount there already by around 5% mainly by eliminating duplicated roles following the restructure of the business and by embedding new more agile ways of working we can make our core processes much much more efficient the savings potential from this area alone is well over a hundred million pounds a year improving commercial performance is still the biggest opportunity that we've got to grow the business Russell mentioned the success we've seen in retail. There's no magic behind the improvements. They've been driven by focusing on the details of our processes, getting to the root cause of poor performance, and identifying the solutions. Take boiler installations as an example. We've seen decline in profitability there for years, which is a bit of an issue. But by working to improve each individual step in the process, for example, job pricing, scheduling, we were able to unlock a £20 million profit improvement. as a key contributor to the better performance and services last year we're already moving on to the next target areas we're implementing a combined customer lifetime value model across retail so we can identify opportunities to maximize value across the group that might mean that we trade off value in one part of the business to secure more value elsewhere we're happy to do that the overall group benefit is what matters this is only possible by having the right people in the right structure of the right data the same capabilities that are supporting our investment programme. Discipline investment is central to our progress and it's central to our future growth driven by the stronger capabilities we've built across our infrastructure businesses. Power under Dave Kirwan, gas under Martin Scargill and Spirit Energy focused now on Morecambe Net Zero. Deemed with deep technical expertise, proven operational discipline and a value focused mindset that creates broader growth options for the company. in size well c in green lng and in the map we're investing in high quality long duration regulated and contracted assets that will fundamentally reshape centrica and deliver critical national infrastructure for the uk we're doing a similar thing in ireland with our peakers now we made our initial contribution to size well c in november we've got earnings in 2025 relating to size well c and earnings will grow in a predictable way for the next 15 years We expect our share of the RAB to grow to around £8 billion by commissioning. That will be against a net equity investment of around £500 million and project financing of £5 billion. Real value creation with very, very low risk. The map is also a real success story. It's hugely outperforming our expectations, the expectations we had when we set the business up. we installed over a million metres last year which makes us the fastest growing map in the UK and we've now got more than 1.6 million metres on the wall just around two years after we set this business up the capabilities that we've built are unlocking future growth opportunities both in the UK and overseas now Dan, Gareth and the team deserve huge credit for what they've achieved but they don't get any special treatment now we've seen what they can deliver in 25 I expect even more this year We're still early in the ownership journey, for example, at grain, but the value of the asset is clear. Earnings are highly contracted. The importance of the terminal will only increase as the UK becomes ever more reliant on imported gas. And I've been delighted to see the strong alignment we've got with ECP, our partners, on the key priorities for the asset. And I'm confident we've got the right team in place to deliver on the full potential of this absolutely critical business. Now we've got to acknowledge that not everything has gone completely to plan. Commissioning, for example, of our Irish peakers has been delayed and they're now due around about the middle of this year. Now that's partly due to grid connection delays and we've secured a modification to the capacity market contract to compensate for that, mitigating the value impact. But it also reflects missteps that we've made as we build back our construction capability. we're not happy about that but we have learned valuable lessons and we're confident that will be applied to future projects we've not really built big infrastructure for over a decade we've also been proactive in managing our portfolio recycling capital from non-core assets you saw our recent disposal last month portfolio simplification has allowed us to accelerate value sharpen our strategic focus and reduce our exposure to commodity price volatility collectively the actions were taken are fundamentally reshaping our company steadily shifting our portfolio towards more regulated more contracted earnings as russell laid out home energy supply has a regulated underpin while services and b2b both generate more stable cash flows from contracted activities the trajectory in the existing infrastructure portfolio is very very clear and we've got several opportunities that could even accelerate that pivot the government consultation which will decide the path forward at rough closed yesterday And we expect a public update, hopefully later in the first half. We're optimistic about the outcome, given the critical importance of gas storage to UK's energy security, which was acknowledged both in the consultation document and by MISO recently. But we remain super focused on the value proposition. And we won't keep rough open speculatively. We need clarity to justify redevelopment. The government is also due to publish a decision on financial support for nuclear life extensions over the next few months, including the potential for a CFD at Science Wellbeing to underpin a 20 year asset life extension. These are two very clear opportunities to pivot merchant exposed assets to regulated exposure and to substantially extend asset lives. Even Centricate Energy has got an element of predictable fee based earnings. and has materially reduced the downside risk in the LNG business, way beyond I think what people appreciate. If you look further ahead, the steps we've taken to expand our organic growth pipeline, for example our partnership with ExEnergy and further development opportunities at Grain, allow us to be disciplined, to focus on the most valuable opportunities, and to adapt as the energy transition develops. Our investment focus remains the same, assets that support security of supply. assets with a regulated and contracted underpin where we can add value through optimization assets where we can bring our incredible capabilities and our extensive experience to bear now we will remain predominantly a uk and irish business for the foreseeable future but we don't restrict ourselves by geography we're focusing on areas where we have or can build a durable competitive advantage that will allow us to create more upside than if we just focus exclusively on one or two countries. So I would hope that in five years Centrica will be more geographically diverse but it will be in targeted places where we have deep market experience and insight primarily from our trading activities in Centrica Energy. That's what supported us investing in batteries in both Belgium and Sweden and it's how we can deliver future value from future opportunities. We told you in July that we're targeting above £1.6 billion of EBITDA by the end of 2028, underpinned by the Transformation Programme. That's unchanged. Within that, retail and optimisation will deliver growth, plus infrastructure pivots from merchant to regulated exposure. By 2030, we expect retail to reach around £800 million. As Russell explained, we can keep OPEX flat in nominal terms, with top-line growth flowing through to higher margins and higher earnings. That's after a couple of hundred million pounds of additional OPEX that we put in to support the growth that we see. Expanding our capabilities means that optimisation can move back towards the top of its existing range, about 400 million pounds of EBITDA, with opportunities to do much, much better in the right conditions. So that's 1.2 billion pounds of EBITDA in total. We expect infrastructure to grow to about 800 million pounds of EBITDA by 2030, and that assumes further nuclear life extensions. And almost two thirds of earnings... from regulated and contracted sources from infrastructure by that point that's up from less than 5% today far higher quality earnings if you bring that all together we've got good visibility of reaching £1.7 billion of EBITDA by the end of 2028 that's underpinned by the £4 billion investment programme we've already told you about and depending on the opportunities we may spend even more than that as long as the value is there Beyond 2020, we expect to continue investing at the same rate, around £600-800 million a year until the end of the decade, but only if we see the value. By 2030, we're aiming for EBITDA of around £2 billion, with around two-thirds of that EBITDA coming from businesses with regulated and contracted earnings. Now, of course, there's going to be a range around those numbers to reflect the near performance there always will be. but that range will tighten as we grow the share of lower volatility, more predictable, more contracted, more regulated earnings. And given the structurally lower tax rate of the new infrastructure we're building, post-tax earnings will accelerate faster than EBITDA. We're aiming to more than double our EPS in the next five years by 2030. So the picture's clear. We're building a fundamentally stronger, higher quality, more predictable Centrica. plc plc plc we've made real progress reshaping this business more regulated more contracted earnings reducing downside risks creating upside opportunities delivering against their investment program and recycling capital from non-code assets into higher quality growth opportunities at the same time the transformation program is taking hold it's supporting earnings today 100 million a benefit in 2025 and it's laying the foundations of the future now two billion pounds of ebitda by 2030 and more than doubling the EPS is ambitious, but it is very achievable. I am very confident of that. To do that, we'll continue investing. There are fantastic opportunities for us to deliver value by doing that. Super opportunities. Centrica is a far, far stronger company than it was five, six years ago. It's even a far stronger company than it was just a year ago. We've built resilience. We've diversified our earnings significantly. we've created huge optionality for the decade ahead we're really looking forward to delivering on that opportunity for our colleagues for our customers for our shareholders to creating real value so with that I'm going to stop talking with an aim of making 30 minutes I've probably gone slightly over so I apologise for that Russ and I will be delighted to take your questions and I'm sure a lot of them are going to be number questions or questions on videos that we put on this morning so with that happy to take all your questions now there's no questions on the phone from online but if you're online you can type your question in I think Fraser's going to have a speaking part later to relay those questions and we trust Fraser that they're not his questions

that are actually coming from online so AJ you had your hand up first we'll be there and then we'll come to you Hi AJ Patel from Goldman Sachs two questions just one on the 22 pence of earnings so your capex beyond 28 runs at 6 to 800 million you look at that and you think towards the end of the plan you should be around still net cash or broadly break even um what assumptions have you made about buybacks in that 22p or alternatively is there balance sheet headroom here to further invest or return to investors when the right opportunity arises and how does you know i had really good comments about risk mitigation you know the hedging that you've done on the lng the investments you're making to make a higher quality business but your credit metrics change over the last three or four years. I imagine that should start to bear some fruit, which should only accelerate the opportunity you have for growth and value creation. And then the last one, I'm being a bit greedy here, so apologies. Just on the assumptions, what do you assume in the numbers for 2030 for commodity prices, obviously quite a lot of volatility, so just to help us understand what are you sort of holding yourselves like for example are you making any assumptions around roughcast storage size will be what gas price assumptions what power prices anything you can give us on here just to help us

really believe in that achievable 22 pence that you talked about so most of those i think are for russell let me touch on briefly that you mentioned about the hedging and lng just to explain what we've done there um i don't think that doubling the share price is dependent upon us having lots more buybacks so there's potentially um capacity in there but on lng those of you that have covered the company for quite some time will remember when we had just the sabine pass contract we basically bought uslng and a henry hub index and the sync market was nbp or ptf in europe and the close-in cost was 300 million dollars so if we didn't lift any lng we had a 300 million dollar liquefaction fee to pay now if henry hub's low and european gas prices are high happy days but if that's not the case then um it could be slightly more stressful what the team have done i think unbelievably well and it highlights one of the benefits we've got in centrica is over the last couple of years we've entered into deals with US domestic gas producers effectively to buy gas off them at a European gas index so we went to producers and said look would you like to diversify your range of income those that don't sell LNG so you can have some Henry Hub exposure you can have some TTF exposure And they said yes. Ultimately what's happened with a number of deals is we now effectively have taken out the basis differential risk. So we now effectively buy Chenier on a European gas price index. So we've matched that. So the sink sale market and the purchase of the index risk has been taken out, which is absolutely huge. Massive de-risking of the portfolio. What that's then done is it's given us a position in physical pipeline gas in the U.S., and that's given us the encouragement to open an office in the US now so those deals make sense just to de-risk a huge risk out of the portfolio but what we like to do in Centrica is to look for optionality so by doing that we've now got a team in the US that are managing our domestic gas position and they will deliver value out of that when we went into power trading in the US we did that from Denmark mainly But now we've got a team there and we intend to grow that business. And the reason I wanted to kind of pause on that is I'm not sure people realise we've taken that risk out of the senior contract, but it highlights what we like to do in the company. Let's do something that makes perfect sense, but it's got a potential upside. So now with that, there's loads of difficult questions on our assumptions. And if I got that wrong on assuming buybacks, Russell, please tell.

So let me just sort of walk you through the spreadsheet a little bit of how we got to those numbers which might help everybody so of course there's two billion pounds worth of EBITDA at the end of 2030 so capex wise we assume we've completed the four billion pound program by the end of 2028 and as a proxy for now we've just assumed that we have six to eight hundred million pounds worth of capex in the years thereafter which will begin to generate a little bit of additional earnings there's no assumption for additional buybacks in the share count number that's not because we're not going to do buybacks it's just to keep your modeling very simple so as surplus capital emerges and buybacks become an opportunity that's definitely something we're looking at um you remember last year i took you through a waterfall of how the balance sheet will evolve in the coming years to end of 2028 nothing really has changed there so we see that we will invest in the next couple of years but also begin to build up uh positive cash flows rebuild our balance sheet strength and that gives us optionality either for more investments or returning surplus capital so you can use that as a proxy i think for modeling still The other thing that's important, I think, on the modelling is when you look at that headline EBITDA and try and work out how that goes down to EPS, you've got to remember that the tax rate of Centrica will be going down in the coming years. That has a sort of amplication effect on the EPS. We've got the second big spirit divestment this year. Once we've cleared that out, you can see the tax rate will be getting a lot closer to this, sort of 25%. risk mitigation you asked about and credit metrics and those types of things so you said it's been the same for the past couple of years which is actually not correct so if you go back to the summer and you read the S&P review of Centrica we were very happy to see that they have started to give us credit for the investments we've been making in the past couple of years so the FFO to net debt metric of 50% which has been there in the past has now been adjusted to 45% but more importantly if you read the schedules and the outlooks that they're guiding for Centrica they say if you continue to invest in rateable regulated contracted assets we do expect that those metrics will be further loosened. Now we haven't got that yet and we've got some adjustments we've got to make through the grain lng deal for example but we're definitely going in the right direction in terms of credit metrics and as you look through that period to 2028 and 2030 the proportion of cash flows as chris just laid out going from 45 regulated up to 70 should help the metrics uh in in a good way Assumptions, we don't do anything too clever, we just look at forward curves in terms of commodity prices, gas prices, power prices. Gas prices will have a very limited effect on the group by the time you get to the end of this decade and for rough and those numbers we're basically assuming zero given the uncertainty there. size will be will be on a merchant basis but of course as we've outlined there are discussions of potentially getting a CFD for that asset but that would probably be a longer time frame than the one that you're looking at and if we continue with the nuclear reactors we're just using for the four AGRs forward power prices so that's how the model works. Perfect, brilliant, thank you.

Go to Anand, go to Mark, go to Havan, go to Jenny and then go to Dominic.

Hi, Amit from Jefferies. Thank you for taking my questions. Chris, I wanted to start with your comments around the pipeline for future investments when you referenced pausing the buyback. Is that a topic that we are going to see material clarity over the course of this year? And I just want to – obviously, we understand sort of the rough discussion that you referenced earlier, but what else is in that pipeline? So interested to – sort of sort of get more on it i also wanted to ask you about sort of the nuclear life extension so you sort of reference size will be but is there a opportunity or to get meaningful nuclear life extensions on the rest of the fleet as well and is that sort of reflected in the doubling of the eps by 2030 or is that sort of just based on as you sort of see things today and then maybe a question for for russell so i'm trying to just sort of understand a little bit better your guidance for 2026 and where that may differ from consensus so if i add the various divisional data points that you have given us on ebitda and then adjust for consolidation for so last year it's it feels like almost 1.4 billion group ebitda which is not very dissimilar from where consensus is so is that sort of a fair interpretation so and then it just seems to me sort of the big difference really versus where consensus expectations is on the interest cost again you know please tell me if you disagree and i'm just trying to understand why is the interest cost that variation if you can give us some color on that thank you brilliant okay there's quite a lot in there so um

I would hope we would get material clarity through this year. So the government's gas consultation closed yesterday. We made a submission under that. I thought that was... I was really pleased to see it. I wish it had come out a bit earlier, but very pleased to see how it was written. And it certainly recognised the importance of gas storage, as did NISO's recent report. And as the UK's largest gas storage facility... i think rough is very well placed so i feel more confident about rough but i'm also very clear-eyed about it so either we get something that makes sense for us to unlock the two billion pounds create over just under 5 000 jobs in the construction phase or we don't this is why we keep a huge pipeline of opportunities so that and there have been things that we've had in the pipeline that we've walked away from days before signing and we can do that because we know we've got other stuff there so rough would be one i would hope um we have been discussing more about um x energy so the government's recent publication of how they'll support and small and advanced modular reactors is asking for submissions by the or sorry starting on the 4th of march um clay cell the chief exec of x energy and i went and seen government last week talking about this and we expect to submit something um hopefully on the force but you know sometime around them and what that will do is lay out what we would be looking for to advance probably what is a maybe a 10 billion investment or so 9 or 10 billion for Hartlepool for 1 gigawatt in Hartlepool but what it will lay out is we actually see this as being a 50 or 60 billion program so about 5 or 6 gigawatts of these reactors across sites in the UK and you know again a lot of these things are kind of binary because you either get the support framework that you're looking for or you don't but the government are super keen on nuclear there's cross-party consensus on that between the two main parties because size will see was started by the previous government finished by this one so it's an area where they all seem to agree we think x energy is some of the best technology out there we're still looking at Rolls-Royce SMR technology as well and we see a huge opportunity so that's something that we could you know I don't think you're not going to see massive capex on that in 2026 because you've probably got several hundred million pounds of pre-FID expenditure on that to make sure that the sites are right but I hope we'd get some acceleration there Morecambe net zero is progressing quite well also and so we see we saw the national wealth fund coming in to take a proportion of the um costs in the feasibility study for the pipeline from the peak district cement producers over to um to uh to the west coast i'll give myself the east irish sea but the west coast of the uk and it specifically recognized the role of more so those are opportunities that we see quite substantial um upside and hopefully we get some clarity we expect to take final investment decision on the cash flow peak in Galway and Ireland that's probably 340 meg so that's probably plc plc plc plc The inorganic options are more likely to have more of a skew towards contracted and some merchant exposure, a bit like Isle of Grain. And the reason for that is we don't have the cost of capital to compete with others to buy existing regulated asset-based businesses. That's why we're creating them. That's why we help to create Size We'll See. We want to create that. In Ruff, we want to create that. In Morecambe, because it wouldn't make sense for us to compete against people with a cost of capital 200 or 300 bits below ours. So we hope we get some there. On the nuclear extensions, to be super clear the 1.7 billion of EBITDA was 1.6 the difference between those two numbers is we expect extensions so two of the plants, two of the advanced gas cooled reactors are due to go out at the end of March I think 28 we expect those to be extended if they're not extended the guidance is 1.6 so there's just under 100 million in there the other two are due to go out of service I think in March 2030 and so there's probably 10% of the 2 billion EBITDA which relates to having the four advanced gas cooled reactors working all through 2030 so it's not purely dependent upon that the numbers are in there now I don't think these things will be going by 2040 I don't even think they'll be going by 2035 I think we will we have to watch the degradation in piping in the boiler work and in the graphite core and I think we will get a series of one or two year extensions but at some point it will be a case we'll see we'll have to shut these things down because they're nuclear they have to be safe so i'm increasingly confident we can get them going to the 2030 hardly people have been out for quite a while which is frustrating but effectively that's less wear and tear so you had that one to the end so i think we'll get those extensions i think i think i said before if if we were offered the chance to sign up just now to these things running until the shutdown in 2035 i'd sign in the dotted line because i don't think they've got much life beyond that um russell 2026 guidance let me talk everybody through that so um it was on the slide but let me just go into a little bit more details to retail

uh previously we had guidance ranges for the individual businesses we've simplified that and tidied that up so a range of 500 to 800 for all those businesses you can choose your midpoint maybe as a way to get started there but i think as we sit today we're quite comfortable with how retail's looking for the year uh optimization i was clear about that in the speech below the 300 to 400 million pound range so 250 as we said today for that business infrastructure again a little bit dependent on prices although we've hedged a lot of the nuclear production and the spirit production this year so we've guided 500 to 650 some of that's also dependent when the spirit energy second divestment closes we're thinking around mid-year so perhaps you could take the midpoint of both of those you mentioned you you'll use the console adjustment that we had this year i think that's a good proxy so i would pencil that in that's fine and then there was the interest expense where we noticed that some people modeling Centrica just hadn't quite got that correct so we wanted to just flush that out today so 100 million pound cost for 2026 is our current expectation let me just give you the maths behind that because it's quite important so Centrica of course has some debt from quite a few years ago at relatively high interest rates and a large cash balance which is all floating and what's happening is as interest rates are going down and half of your debt stack is fixed your amplification on the reduction in your interest is more pronounced so just for example the rate that we paid on the bonds in 24 was just over 7% which is the 6.6% in 25 but on the cash a steeper drop because it's all floating from 5.1 to to 4.36 so you've got both higher fixed rate debt and it's not all floating so that's part of the dynamic the other thing you have to take into account is there's a difference between p and l interest charge and cash paid on interest that's things like decommissioning and other things that move through the p and l but not through the cash flow statement let's call that around 40-50 million which you probably want to adjust as well so the IR team will be very happy to walk you through the intricacies of our debt stack but I think that's probably the best explanation I can give you from here

mark freshney from ubs i have three questions firstly on the lng hedge position which i i think is 100 out until 2028 is that to use your parlance written in black ink or red ink um just secondly regarding the rough storage facility which you now expect to break even is that all because you're extracting the cushion gas and and i guess the third question is more philosophical about the efficiency plans i mean businesses continually need to do efficiency plans and the ones done by your predecessor and your predecessor before that the benefits seem to go back to customers and when i look at chris when you mentioned your transformation plan i think it was six months ago and you said there would be upside to the 1.6 billion or the range 1.3 to 1.9 um here today we find that the only upside is the 100 from nuclear life extensions so should we be conceptualizing the efficiency planners business as usual and something that protects existing efficiencies or the existing businesses and profitability

or will this be the one plan apart from the one you did a few years ago that did show through but is this going to be one that does actually bring shareholders any benefit let me take the last one first i hope so so the 100 million benefit in 2025 um but we booked the costs in core earnings so most companies and what we used to do when i joined i was talking to the chairman this morning and i think we're the only two left in the board from that point when i joined we had this massive cost efficiency program and we were spending hundreds of millions of pounds a year in the middle column. And everybody said, well, it's in the middle column, it's great, it's bloody well cash out the door. And actually, I would argue, rather than that, going back to customers, our costs didn't actually go down, they went up. And so we had lots of ways of explaining why we'd done a really great job of taking out cost, but we'd put cost back in. So the first presentation I did as CEO was to show that we'd taken out 15,000 people and the wage bill had gone up so I don't care how many people work for us I care what we pay and so I actually don't think that delivered much in the way of benefit and I had to present every six months the somewhat convoluted story about cost benefits but I just I think we were I think we were kidding ourselves on now look and say I don't know 65 our office is 65 million pounds lower than 25 or thereabouts and it wasn't 24 Now, the reason that you'll see some going back, if you take, for example, X-Energy, I'm probably going to get kicked for saying this number, but we would anticipate for that project, the first project for a gigawatt of advanced modular reactors, the pre-FID spend will probably be about £600 million. You can't capitalise that. That's expense. Now, we wouldn't expect to pick up all £600 million, but that's why when Russell said we expect to keep costs flat over five years... offsetting inflation but also offsetting the fact that we expect about a couple of hundred million of growth related expense some of that will be as we go in more to buildings and things ourselves you've got your you've got your pre-fid spend you've got your front-end engineering and design civil engineering works all of that kind of stuff i think you should be able to capitalize that on a successful project investment decision and don't set the accounting standards so you'll see some of that in there we would expect to spend more again only if the value is going to be there but we're going to have to be slightly more speculative I think in some of that so I think the efficiency programme will deliver rough storage is absolutely because we're taking out the gas we're not injecting however we reserve the right you know Kasim's team work very closely with Martin Scargill's team if today for example we see the chance to inject at 10p and sell at 50p we can inject we can change the flow in rough three times a day the nominations you make three different nominations I think but our modelling is simply that we're going to take the indigenous gas out and at some point the pressure drops to such an extent that you can't get any more out and then on the LNG hedge I would just say nice try that would be commercially sensitive I would say that we expect to I think to be moderately flat, but it's not so much that we've hedged everything in and it's all flat, there's still work that the traders, the traders are very, very busy in Kasimstein, but I don't know, Russell, if you want to give any more from that LNG.

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

Thank you team for your presentations. I'll ask you two questions please. Firstly, Chris, I want to follow up on Mark's question on the transformation program and the retention of those benefits. So if we exclude the pre-FID expenditure and everything else, how are you comfortable that you can retain any proportion or a good proportion of that relative to your competition i guess the question i'm asking is what's different about centrica versus what some of your peers will be doing in the businesses where you're driving these efficiencies and then the second question i have is can you unpack a bit more the drivers of the lower optimization trading profits this year and my question is

how do you expect those factors to evolve ie when we're thinking about 2027 2028 should we assume you're back to the midpoint or is it a gradual ramp up based on market conditions as you see them today thank you let me get the first one and maybe russell can take the second one um so you're talking about in the retail business effectively so if you look um most of our competitors are losing money in the retail business and russell mentioned about unsustainable pricing that we're seeing we're just not going to play that game I've always been dubious from being very open of a value over volume explanation when it happens after the fact and Gary who runs B2C retail and Dan who run B2B were quite clear when we spoke at the start of the year saying if we think that it's value over volume we say at the start of the year so it's not an explanation for losing customers and I think if we end the year with flat customer numbers I'd be delighted I think customer numbers probably will be a bit down because we're not going to chase unsustainable pricing But in the regulated, in the price cap part of the business, what you really want to do, and it sounds very uninspiring, is to be better than average. And so if we run better cost-saving programs than our competitors, we put them under more pressure. If they're making losses, they're under even more pressure, and you cannot resist gravity in perpetuity. So if we look at our biggest competitor, Octopus, I think their last account showed that they doubled their OPEX and they doubled their headcount. and we've always thought that when you get to a point where you have a broad range of customers in the b2c retail book your costs are going to go up because some customers are dead easy to serve and some customers are slightly more difficult to serve we have always had a very broad range of customers we value every one of them so we have efficiencies we know how to deal with all the range of customers we have efficiencies that we can put in place some of these companies are learning how to deal with customers with more complex needs and you see that their costs are growing Our cost to serve is lower than Octopus's cost to serve today. We already have a cost advantage. The cost advantage that is portrayed through a different system, you can see this in the consolidated segmental statement, the numbers don't bear it out. So we have a cost advantage today. Now, is it possible that we put through lots of cost savings and the regulator absorbs that into the price gap? It's entirely possible. but by doing so they put other people out of business and if they do that then it's an uninvestable market they want an investible market we pick up other customers but at some point you have this market has to have enough profit in order to attract the investment that's required we're not perfect and we've got loads of opportunity it's funny every year we make like our customer service our customer satisfaction numbers they're as high as they've ever been but the opportunities i see today are more than i saw five or six years ago when it was pretty low. So every time you improve, you just see more opportunities. And I think that's what great companies do. You just continue to improve. So if you're behind somebody, you catch them up more quickly. If you're ahead of them, you just increase the gap. And so we're going to continue to invest in that. We're going to continue to invest in customer service. We're going to continue to invest in delivering efficiencies. And I'm as confident as I can be that not only will we deliver the benefits and retain some of that, but that we'll deliver the 1.7 and the 2 billion of EBITDA in 2028 and 2030. It's going to be difficult. It's going to be hard work. um but it's entirely possible so so i think we'll be able to retain some of that but if we don't and the regulator takes all that still for us competitively is not a bad position it might mean we make a little bit less but the market has got to be normal and the 2.4 margin today that we've got which is causing a lot of financial distress you know there's five companies now i believe that don't meet off jen's own financial resilience rules so it's getting worse that means they're eating into capital that they've got in order to stay in the business that's not sustainable What we could have done was, and I've always said this to you, we could have sat for four or five years and said, you know what, the market's going to come back to us, but we haven't. We have invested heavily in improving our customer service over the last four or five years, but I still believe the market's going to come back to us. But we're going to continue to invest constantly. We're not going to sit and wait. Kasim often talks about complacency being a word that worries him. We're not complacent at all. So we'll keep pushing. We're going to deliver these efficiencies. Maybe we're going to deliver more. If the regulator takes them, that's fine for us. We're always looking for something whereby whether you go left or right, you win. And whether the regulator allows us to keep them or whether the regulator takes them back, in the long term, that's not bad for us in this market. But I do think we ought to keep them. The proof is going to be in where the OPEX is. And I think that we thought long and hard about this. I didn't like when I was CFO putting restructuring costs through exceptional items because the organisation thinks it's free money. And so whilst it's slightly painful, and we would otherwise be talking about 13 pence EPS, and we'd be talking about, you know, we're going to invest even more in 2026 in transformation. But we want to make sure that everyone understands that when you spend a pound on transformation, you have to get more than a pound benefit. Otherwise, let's not spend a pound. But we'll separately identify that, I think, each time we do the results, but they'll be in the core results. Lower optimisation. When's it going to change? When is the market going to change? What date?

All right, so there was disappointment in the second half of the year and where we thought we might have ended up in centric energy versus what I told you at the mid-year. I mean, if you sort of stand back, I mean, commodity markets, as we know, are inherently volatile. And we saw that through the energy crisis and a sort of different type of volatility and movements in the past couple of years. and so you had that exceptional dislocations in 22 23 and then you moved into a period of elevated geopolitical concerns risk high volatility but hard to read volatility and at the end of 2025 we did see the beginning of a broad-based normalization across the global gas hubs but it didn't really go back to where it was before and so that meant that in the second half of the year our gas and power trading business continued to face challenging conditions and we didn't see an improvement perhaps we thought we might have what just remind you of the sort of core of that business when we see seasonal and locational spreads our core strategies our fundamental based strategies are to take stock gas storage positions power positions interconnects and all the rest and then through analysis of supply and demand put positions on and although there was an improvement in the second half of the year there was a couple of factors that made it more challenging the level of the summer winter spreads was still too risky the margins were not quite there so we didn't put that much risk capital to work and also the movement back into more normal market conditions happened really quite deep into the injection season so Centrica had not taken as much capacity and therefore has less optionality has moved through the current period so that just meant we've got a bit of a you know we're starting in the back foot a little bit for 2026 hence the main reason for moving the guidance down for this year And you've seen in recent days there continues to be regulatory news flow changes in the market that just make it more difficult for us to step in at the moment. But does that mean that we feel that there's a change to our longer term outlook for that business? Absolutely not. We've got a great team. We trade across 28 countries in Europe. The gas and power markets, when they do stabilize, we will be there with a risk capital ready to get back to work. our renewable route to market business continues to grow now at 19 gigawatts under management that's got a stable cash flow base to some extent and the contracts we write and optionality around that lng we've just discussed a lot of optionality there We're growing our business in gas and power trading into the U.S. We now have an office there. We're beginning to trade both physically as well as on the exchange. That helps us underpin our natural gas supply into Sabine, but it also gives us more optionality as well. And if you take all of that together and a broad assumption that markets will normalize, we're comfortable we'll get that business back into the 300 to 400 million pounds worth of EBITDA that we've seen before. Jenny, let's go for you.

Thanks very much. Jenny Ping from Citi. A couple of interrelated questions, please. Just firstly, I was very intrigued to see your slide on CCGT, and obviously you guys have been linked to potential merchant capacity and interested in your comments around the cost of capital. So when we look into the 2030 numbers in terms of that data, predictable earnings stream that you talk to how do you plan to deal with this merchant capacity if you were to go down that route especially in the context of some of the changes in the commodity markets we've seen recently the italian decree the merit order comments from the european commission and a more headroom coming through in the capacity auctions. So we'll be interested in that as a first. And then secondly, just on, I guess, affordability and bad debt, obviously bad debt continues to go up. You commented that the expectation is to see that to be recovered. What I can see is, you know, the government's only talking about 10% of the overall 5 billion as a first tranche. What gives you that confidence?

to see some of your bad debt on your balance sheet to be recovered and that continues to go up thanks look on the um on the ccgts the so we've always been clear that we look at regulated and contracted and so how i think the market's going to evolve and if you and the government will see this chris stark who's the he's got a great job title like he's head of mission control or something for clean power and chris will tell you this that he expects we'll have to rebuild the entire uk cct fleet but we're going to have far more renewables and so ultimately ccts which might provide base load just now will provide backup generation going forward so ccts will just be like peakers and so what you're going to have to have the way the market has to evolve in order for this to happen is you have to get capacity market payments which is attractive enough for you to keep the asset open and it will have to cover basic maintenance etc and a return on capital and then you'll get the positive spark spread when you have to run and if you have to run and the spark spread is negative you won't run because you need electricity at the point you need to run the spark spread has to be positive so it's like if you take it from a macro level if the rent doesn't exist for CCGTs CCGTs won't be there So when we look and see, I don't think, you might get to like RAB models, I don't think so, but I think it'll be more the capacity markets kind of tried and tested people seem quite comfortable. And I've been quite open, like I would love if we had a bigger position in thermal power generation, because I think that what will happen is that you'll see this morph into more capacity market contracts. but as we're finding in the Irish because things always go wrong when you do a project always there's no very few I think Heathrow Terminal 5 is the last big project I saw that actually went incredibly well everything goes wrong it's late it costs too much money and so the build out of renewables which is very very ambitious will not happen in the time frame that we think it will happen but not necessarily bang on budget bang on schedule so the gas fire generation you've got will have to run so you'll have the capacity market payments and you'll have the positive sparks spread and it's really quite typical of the asset classes that we're looking for in Centrica which is something that makes sense in the base case and you make a decent return and has a skew to the upside because the downside on these assets will be if your maintenance isn't good and you get called on to be in a whole world of pain we know how to run ccgt's we're pretty good at it we've got um a big one in uh in point gate in ireland and so we know how to do that so the downside is in your own hands and the upside is probably going to come from the market those are exactly the kind of assets that we would look for but they're not regulated but they are heavily contracted if you look at Isle of Grain it's mainly contracted rather than regulated now why did we feel that we had a unique bidding position on that well we know that asset because of a quarter of the capacity but our capacity is up in 2029 and so we know today so Kaseem's team figured out what we would bid in 2029 for that capacity so when you look at it on a stand alone basis that sets the floor because we will either bid and get that capacity and we know the return on the asset or we'll bid and we won't get the capacity and the only reason we won't is because somebody's bid more so we're always looking to see how do we establish the floor and although I've got quite a high risk tolerance I am always looking at the floor, how solid is the floor and then what can you build on top of that so CCGTs I would love to be there the trick is to be in the right place in the merit order you then touch on what happened in Italy about the carbon pricing unless you had a rock solid so it's quite clear there's going to be some movement in terms of where carbon pricing is going to go so unless you have something that's rock solid irrevocable in terms of spending money on lots of carbon capture you're probably not doing that at the moment and what the news from Italy the other day probably undermines that but we're not looking at that just now so if we were to look at a paper station with CCUS carbon capture utilisation and storage we'd have to make sure that that was irrevocable that that was absolutely cast iron you know russell be looking at raj or general counsel we'll be looking at that um and if it wasn't we probably wouldn't do that because that is too much of a risk and some people will have woken up on tuesday morning to the news from italy thinking shit our business models under threat we will never be in that position we're always looking to see how do we spread the risk how do we garden the downside how we make sure that the contracts are with the right counterparts how do we make sure that the regulation is absolutely cast iron so you could look and then say well what if a future government changed the law well if governments change the law and undermine contract rights then countries become uninvestable that's what you see in some developing countries i don't think the uk will get to that point because if it did the capital outflow would be absolutely huge so so some of the stuff we look at a very detailed micro level how tight is our contract some of the stuff's a very it's a very high level macro level which is okay if the worst happens what does that mean for the country because we're kind of tied into we need things that are good for the country we take a view as to whether something's likely or not but it's also why we look for example at spreading our geographic risk i think we've you know fixed operations have started to invest but we look and say well there's more that we can do the office in the US is one thing I would expect us to enter one or two new countries outside Europe in the trading business this year and we're in very small positions in Belgium and in Sweden but I'd be quite happy to grow and I don't think in five years we're going to be in 20 countries I don't think that we're going to physically be in two or three or four countries I think you're going to have something that's less than 10 but more than five and that also helps you with the risk Yeah. Bad debts, you want me to? I mean, I'm happy to have a go and get it wrong.

Oh, I'll fix it then.

I think the high level and the bad debts, bad debts are recovered through the price cap. That's why I think people don't appreciate how regulated the earnings are in British Gas residential energy. So you recover it through the price cap. If you're better than average, it's a profit centre, and if you're worse than average, it's a cost centre. And debts are, I think they've gone up fourfold or something. So the debt on our balance sheet is £1.2 billion or so. It's absolutely huge. The thing I worry about more is that means that there's a bunch of people that can't pay. So something's got to happen in order to fix that but the regulator has got to come up with the right answer. We call for a social tariff. We've been calling for that for quite some time. We can't differentiate between those who choose not to pay and those who really can't pay. We wish we could. um and if we get a social tariff then those who can't pay will be treated as compassionate and at the extreme a social tariff would mean some people will get energy for free those of us that can afford to pay more will see prices go up and that's right and those that can't afford it at all could ultimately see free energy and those who choose not to pay well then you'll be able to take action against them and because at the moment because of the way that the price cap works and the cost being socialized those who simply choose not to pay are being subsidized by those who do pay and that's wrong because there's a lot of very poor people that are paying their energy bills they shouldn't be subsidizing people that can afford to pay so um it's high it's a concern it's a working capital issue this is why we campaign for financial resilience because we've got the working capital we've got a very good cfo who manages the balance sheet to make sure that when you know gary's business needs a float of one two three four five hundred million pounds working capital we have the cash we have the liquidity We campaign for financial resilience because those companies that run it very, very tight in the balance sheet, I don't know how they're coping with this at the moment. And we don't think that systemic risk should be left with consumers, which it is just now, because if they go under, consumers ultimately pay the cost. Did I get my numbers right or wrong?

Nearly. So actually, broadly correct. So it's actually 1.9 billion pounds worth of net debt on the balance sheet, including both billed and unbilled. So that's a challenge. And if you look at note 16 in the accounts we published this morning, what you'll see is that's predominantly in that greater than 360 day category. So that's the same trend that British Gas is seeing as the rest of the industry is seeing. Our bad debt charge as a percentage of revenue went from 2.3% to 2.8% in the year, so about a £40 million increase charge. So it's a way on the P&L, but as Chris says, over time we're expecting to get a recovery for that. But it's that older debt that's the real challenge.

Excellent. Tom, I'm going to go to you.

hi there yeah it's a dominash from barclays a couple of questions from me please um the first one um i think is to you russell i think you mentioned before that uh you previously published a waterfall chart and on the waterfall chart you know you came up with your ebitda's your capex's uh your requirements and then you also said that you had a net debt ebitda sort of target or goal between norton one times i think it was um for one sort of like a limit and one sort of like a target i think but on our numbers i think that gets you about one billion pounds of sort of headroom uh which i think quite a few of us in this room probably here marked as buyback um rather than anything else um can i just confirm that that that sort of headroom still remains and it's basically just now either going to be uh option on capex and less likely to be to be buyback but whether the headroom is still about the one billion pounds the second question as to you chris actually it's kind of hard following up from jenny's one on on on gas um sort of double double one here is that the government clearly has a policy to decarbonize completely um and you are bringing up the doubling of ccgt output and so one of my first question is is why are you doing that when you can't build this side of 2031 and you don't have any ccgts So what do you sort of message you're trying to tell us about that? And secondly, clearly under the current government, I think there is no doubling of gas expected. In fact, gas has continued to go down. So do you have like a roadmap to whether or not we could see the gas strategy change this side of 2029, or do we think we're going to need a sort of change in government before we end up with a more sort of gas as a transition fuel sort of narrative? Thank you.

let me take the one on gas so the numbers that we showed were from Aurora so they're external numbers so that's not our internal forecast that's an Aurora forecast and the doubling of CCGT is in the mix rather than our position I think it depends on what you think is going to be the building but the more intermittent electricity we've got the more gas generation we're going to need and then the question comes in terms of how much economic growth do you think there's going to be how much increase in electricity demand do you think there's going to be now there's a huge notional increase in demand from data centers i think when you look at the physical requirements of building everyone talks about a gigawatt data center i think that's half a square mile apparently it's five billion dollars worth of chips in the plant we would build the power station for one and a half billion or so and you might build it co-located not connected to the network it takes you five years to get a turbine so you're saying it's 23 how do you do all of this kind of stuff um the numbers we're saying that are out in the um i think in the 20 by 2040 so there's a whole bunch of stuff in there that aurora might have got right i might have got wrong my belief is that um we will see growth in electricity demand we will see economic growth in the uk and we will see growth in ccgt as a share now the We've got a big biomass plant on the UK. Will biomass survive or not? Because we've been talking about biomass with carbon capture and storage. So you might see a change in that mix. So gas might replace, because there's lower emissions from gas than there is from biomass. Whether you buy the argument that it's renewable and biomass is a political question that I don't want to get into. But you could see a change. That's about 3 gigs of something that's on the system. It's now 8% of UK demand. obviously you'll see the reduction in the by 2040 the ford advanced gas cool reactors will be off as 4.8 gigs um hinkley c should be on size you'll see definitely won't be on by by that but also definitely i'd be amazed if it was on by that point i'd be delighted but i would be amazed i think roughly around there so there's a whole bunch of assumptions what we know is the assumptions will be wrong but you will need more gas fire generation the question about how much electricity will be generated i think that's open to debate because we don't know what the weather patterns are going to be like in 2040 but we can take the risk that intermittency increases because weather patterns become more changeable so you're going to have to have the capacity which is why you're going to have to have the capacity market payments which is why they're an asset class that we like whether they'll generate 300 days a year or three days a year i have no idea but i like the kid for three days a year we're capital and it goes for 300 then we're making a lot more money and bringing down costs for customers so there's a long time between now and 2040 but I think the current government recognises gas as a transition fuel I think the question on some gas I was in Qatar in November I want to see your party energy ministry people said that they don't think gas is a transition fuel they think it's a destination fuel and they said can you deliver that message in the UK I'd rather not get involved in that stuff that's for you guys to deliver but I think what that signified is they no longer see blind decarbonisation as being an issue and therefore they've probably got more discipline in terms of how they're going to get their gas out of the ground and I think we're seeing a lot of pragmatism in the UK as well I think if you look at that gas consultation That's not the consultation of somebody who's pursuing blind decarbonisation. It was a very measured, very sensible consultation. NISO, who come out and recognise the need for gas storage, is a government body now. And so I think we're seeing a lot more pragmatism. And what we find is to just steer away from all of the kind of politics and all of the headlines and stuff about, you know, net zero this and that. The reality is what we're trying to do is to decarbonise, have secure energy and have it that's affordable. And we think CCGTs are going to be right in there. i would love to have more ccgt's but only at the right price if you know if somebody else has a lower cost of capital and they'll pay more then fine i think at the moment people are struggling to value these asset classes i don't think they're attracting like if you've got a really low cost of capital you want to buy a network or you want to buy and you want to be in the cfd so wind or something that's where the lower cost of capital is going um if that allows us a chance to get in and build a ccgt position i would be delighted right and then

Just moving on to the waterfall chart from last year and the financial framework for the coming years to come. So no change to the expectations of that overall framework. And just to remind everybody, because we don't have it on the screen today, what we were looking at there was the evolution of the balance sheet, where on one hand you had the completion of the £4 billion investment programme, You had the continued progressive dividend. You had the other liabilities, pensions, decommissioning. But you also had alongside that the cash generation from our existing assets and our new assets. And we sort of pushed that all forward to the end of 2020. And what we could show by then is that we would be able to move the balance sheet up to approximately a one times net debt to EBITDA level. we would have a bit of a buffer and reserve just because of the volatility of the business and over time we would expect that some additional financial flexibility could come to to bear and that's right that was about a billion pounds and i think roughly up and ups and downs that's probably the same proxy that i would look at today but it's not there today because of course what we've got to do at the moment is move through the next couple of years continue to generate from our existing assets We've only spent two of the four billion pounds of the capital program, so that needs to come out of the balance sheet into new assets. And we've paused the buyback because we think there's more value at the moment for us to continue that investment program and then make sure we've got a really strong set of cash flows in the future, which gives us much more optionality in whether it's buybacks or other sources or use of capital.

either because you go into a bit of a downturn and you need to float working capital or because your competitors are highly leveraged and you get the chance to pick assets up at a low price so there is a benefit in us having um a slightly more conservative approach to our balance sheet but hopefully people see the fact that we've bought back over a quarter of the company over the last three and a bit years they see that we're super committed i mean we know who we work for we work for the shareholders we get excess capital we give it back but but we think it's in shareholders interest for us to have the optionality to act to pick up assets or to to not worry because you find out for example that off gems next quarters bad debt recovery charges not as high as you would like there are some of our competitors I think it's an existential issue for them as to what the next price cap is. It's not existential for us at all in the short term. But Harry and AJ, and then we'll go to Fraser. And I'm just conscious of everybody's time. I know we're kind of dragging on a bit. I'm sorry.

Yeah, thanks, Chris. I'll make it quick. I appreciate we've gone through a lot of stuff already. It's Harry Wybird from BNPB. um i'm surprised hasn't been asked yet the buyback what's your threshold for reintroducing it i guess you in in the past you've been willing to be quite flexible you know last time that your shares fell a little bit after pausing buybacks you resumed them in quick order um is there a share price threshold below which you'd be interested in restarting buybacks is there you know an opportunity cost threshold but what what would cause you to resume the buybacks i guess another observation is that your um opportunity costs on cash right because your cash treasury rates have gone down it's um you have less to lose in terms of interest income if you spend it on buybacks instead so that's the first one and then the other ones on the capacity payments I wholeheartedly agree with you on capacity payments I think this is something that everyone's not everyone but a lot of people are missing right now I think gas is going to become a regulated asset in Europe and there are still countries which don't have capacity markets which are going to need them would you look in europe for orphaned gas plants look at the netherlands for instance where there's no capacity payment there's no spark spread but those plants could become very profitable if you did get a capacity payment and you've expanded internationally with your trading business so why not become an aggregator for orphan ccgts in europe and then clean up when capacity payments massively rise at the end of the decade

loaded question wow yeah it is you're not selling CCGTs in the Netherlands are you by any chance no sadly not look I think that I mean Russell and I both used to work for the same Dutch company or the company that was Dutch at the time I think Russell spent quite a number of years living there I like the Netherlands it's a place to do business however there was quite a big court case in the Netherlands about decarbonisation targets so you know maybe there's some orphaned assets there for a reason but the Netherlands would be exactly the kind of market that we would quite like it's you know good rule of law etc but And if there's value there, and we know the market, and Kasim's team know the market well, then why not? But we don't look and say that's the kind of place we want to go. We want to create value. And if you take, for example, a market where you say, well, there's no capacity market at the moment, there's no spark spread there, that's a bit more of a punt, I think, than saying, okay, we can see a market where there is a capacity market already, there's a good liquid market we can see the assets there's less of a punt in that and and i our whole thing and whatever it is whether it's technology whether it's in buying assets is not to take the risk of being the first mover but being able to move when somebody establishes that something's possible being able to move quicker in the competition and somebody's even been able to move quicker than the first mover in taking advantage of that so don't hold your breath for us to be coming back and talking Dutch when we're there but I'd love to build our position there look the buyback threshold you know fine we're not going to give you an answer I think our share price today is undervalued not because it's down I think it was undervalued when we started the date or when we closed yesterday but we'll always look at where the value is and we're delighted to have bought back well over a billion shares at £1.30 it must be 1.2, 1.3 whatever the number is and created quite a bit of value there in the capital appreciation but also in terms of the dividend stream that we would otherwise have been paying the first point we look at a buyback is to see do we have surplus capital that we're not confident that we can deploy or do we have a I don't know the right word, but unexpected gains. I can't remember when it was. It was a couple of years ago where we upped the buyback by 500 million quid at the last part of the year. That's because our performance in trading was beyond anything that we expected. And we looked and said, okay, we've got a bunch of ideas, we've got a bunch of capital, but we really didn't expect that. It must have been 2023 or something. And so we just stuck that into the buyback. So if we have surplus capital, then we'll look in there. I think of it first and foremost as being an efficient way to return capital to shareholders. It's not to say we ignore the share price but I think if we had surplus capital and I went to the chairman and said I think our share price is a bit overvalued like if I was the chairman I'd probably think I might need a different chief executive because if I look and say the share price is overvalued on a structural basis that means that I've run out of ideas and so I think that i think we're materially undervalued today based on what i can see um but i also think that the capital we've got in the balance sheet today can be invested to create more value for shareholders by delivering that value than it will be by buying back shares if a number of these things that we've spoken about don't materialize then the capital we've got in the balance sheet today we might not have as many ideas therefore we might say you know what we're going to return some of that to the shareholders but what we're not going to do is on a daily basis take a view on the price and I'm not going to tell you where I think the trigger price is I will tell you I think we're undervalued today excellent AJ you don't have another four questions do you

out if it's out of goldman sachs um so it's more just thinking about those nuclear sites and it's a little bit far along the line but um at some point there is a point where these assets close and just wondered what the development options are outside of being nuclear stations and i know you've got the smr opportunity but

you know you have connection it's secure there's a there's there's a lot of opportunity for repurposing in some way and that was very much a debate over the last quarter so yeah anything you could give us there that'd be helpful you think so the first it's no coincidence that the first anticipated the deployment of amr technology is at hartlepool where we've got a 1.2 gigawatt power station that at the moment is due to close in 2028 so i think it will go into the early 2030s So you've got a grid connection, you've got a highly sealed workforce and therefore you've got the conditions to build a power station. I think if you look at nuclear, the ex-energy stuff we're looking at is 80 megawatt reactors. They're quite small, you could deploy them. Really their optimal deployment is in a four pad, so a pad of four, 320 megs. And so theoretically you could put them anywhere. But the reality is I think that you find, I think the UK is quite neutral on nuclear. And I think if you live in a community that has nuclear power, like if you live in Ayrshire where Hunterston is, they would love, I think, nuclear power stations down there because they've been there for 50 years, they know it's safe, well-paid jobs, etc. But I think if you go to a Greenfield site and say, you know what, I'm going to build a nuclear power station here, you're probably going to have some problems with the local communities. And so I think that the natural use for the existing nuclear sites is to deploy nuclear technology. but if you can't then so the question is could you build a ccgt at hartlepool and use the one point connection absolutely you just have to make sure that they because there's a lot of work that goes i mean when when you get to the point of decommissioning nuclear power station like Hunterston is still taking on apprentices there are people that will work for their entire working life on decommissioning that power station so you've just got to make sure you've got enough room enough land around it but yeah these are valuable connections existing grid connections in the system when you've got a number of years they're certainly valuable the question when you come and look into project management is what's in the critical path so

if you can't get a turbine for 5 years you kind of have to order things in advance but they certainly have value 100% and this one was just for Russell so sort of expanding on Dominic's point the 1 billion of the headroom that we were talking about at about 28 so if you have a target of 2 billion by 2030 and we're expecting the mix of the business to improve and 1 times was the number at 2028 then could we be talking additional one one and a half billion by 2030 of extra headroom um just thinking how how we should be thinking about that risk profile and how it affects those numbers so i think that for now we stick to the waterfall chart i gave you last year for the journey to 2028 but

you know rest assured chris is pushing us all hard to do better than that and if that happens there'll be more flexibility all around for everything that's on that chart 2030 a combination of the transformation program the continued growth of the assets that we're investing in as well as new investments that might come through that time of course it's going to give us more flexibility and that can either be for new investments or greater returns so that's one of the reasons today we wanted to give everybody comfort that there's a journey beyond 2028 and it's a positive journey Fraser any questions online

yeah we've got a few I will but there's a couple we won't get to so the IR team will come back on those ones but if we can start I'll combine a couple of different questions on retail so We've seen retail customers growing over the course of the last few years, but then down in the second half of the year, you made some comments about the strategy there. Could you just elaborate on what the go forward strategy is? around the retail, particularly energy supply, customer-based. Are we trying to grow customer numbers, shrink customer numbers? What's the story there? And then the second piece is just around the sort of economics of different tariffs. Probably a question for Russell. What assumptions do we have around the share of regulated retail tariffs versus... fixed rates and how do the economics compare there and then the increasing demand from b2b customers the growth in the b2b business what are the underlying drivers there and how does that impact unit margins so look customer numbers that it's clear the strategy is to maximize the value from that business

um we pulled back on some of the customer acquisition costs or activity last year and in part that was because we didn't see the value and we have reduced our spend at the moment as well we're not going to chase poor business so the strategy customer numbers used to be a great proxy for value i'm not sure that as good a proxy now and so we're just taking a pause and looking at whether new customer lifetime value model how do we determine how active we want to be in the market we're not going to chase numbers so we can see we grew customers but i wanted us to show that we could grow customers in all of our businesses before we said okay now we're going to maximize the value because if we hadn't I think there would have been a credibility issue it would have looked like we were saying you know what we can't grow customer numbers therefore we're going to pretend we've got a different strategy so it's all about maximising the value Russell obviously answered the economics and the tariffs and the B2B growth I think that's something that's maybe a little bit underappreciated Matt Wood who runs that business is sitting in the front row just now when I joined the company that was a 2 billion revenue business with 40 million of profit it's now a 4 billion revenue business with 100 million of profit the growth in that has been quite substantial and we think that we can continue to do our position and we take again that's where we take value over volume because imagine we did large inc customers the margin and large ic customers can be one percent the gross margin you don't need to do much to lose your gross margin and end up losing costs we don't really do large int customers anymore we do smaller customers where the margin is higher there are the odd inc customers have actually done through cassine's business Because if you're a large INC customer and energy's 10, 20, 30, 40% of your cost base, you are very sophisticated when you're buying. And so if they want to buy from us, then they'll deal with our energy traders, who are also quite sophisticated. That's not to say Matt's not sophisticated. But if you're dealing with somebody calling up from the local corner shop, or somebody calling up that's spending... We had a contract in Ireland with an aluminium smelter. They were spending €350 million a year on electricity. and I think our gross margin was less than a million euros and we just stopped it. It just made no sense for us to take that risk. So on the B2B side... we are we have been pursuing value over volume and that has doubled the revenue and doubled the profit or more than doubled the profit um and that's similar to what we're going to do i think in the b2c space but we would expect to see continued growth there but we're not going to go in we're not going to go after the revenue we're going after people say turnover for vanity and profit for sanity i would follow that that logic russell what we're going to do in the fixed price tariffs

When we were in the energy crisis a few years ago, nearly all of our customers in the retail supply book in the UK were on the standard variable tariff. The dynamic has changed as we expected in the past couple of years. We were 25% on fixed rate tariffs in 2024. That moved to 32% in 2025. so that does have a dampening effect somewhat on margins we'd included that in our guidance and our expectations for the business it's a competitive business as chris said we will not be chasing unprofitable tariffs or customers any last questions we're just conscious that it's 10 past 11 so

I think there's a question around or two questions one around guidance for 2026 2025 consensus came down

to an extent through the course of the year 2026 guidance is we've obviously pointed out a couple of areas where where people need to adjust what what confidence can we give the the numbers are not going to drop further through the course of this year and particularly around the the optimization outlook what gives us confidence in 250 versus about 200 last year

we we we give guidance and what's in front of our face and the analysis we can do today centric energy we can see the positions we have we can see the capital we've got placed and we can look at the markets and i think that 250 numbers uh a good guidance for today and that's the same as the rest of the businesses there could be some volatility in infrastructure businesses um or in the retail businesses that's why we have ranges but i think the slide 14 that i gave you today i think is a good

good proxy for 2026 as far as i can see and like every good sell side analyst i will uh i'll try to squeeze in the third one which is taking my inspiration performance in services was was very strong during the year and can we elaborate on the progress has been made and what gives us confidence in getting that business back into kind of teens low teens ebit multiples uh margins yeah look at look so i think a lot of it has been described in uh about boiler service and boiler installation for example is looking at our processes and saying what is it that's working what do we need so

example boilers we had a rule that if you had a boiler that was installed that required that was above the ground floor we put a scaffold up now you get a sky tv dish installed very rarely they put a scaffold up they put a ladder up but they drill a hole in your wall and attach the ladder to the wall so it's still safe and if you say you can't drill a hole in the wall they say well you can't have a satellite dish and so we were putting up scaffold which is expensive we were then leaving it up which i thought was a security risk rather than putting a ladder up so we've changed that we will put up scaffold where we have to but it's not a hard and fast rule and it's these really small things Gary has got the team looking at this and we've got some internal people that are probably the bane of Gary's life because they're fiddling about trying to find all these different things and these things all make a big difference we're looking more at things like for example if you think about our installations team we do boilers we do heat pumps we have the biggest installer of heat pumps in the UK but we do rewires how many people would think I need my house rewired I'm going to call British Gas they probably don't so there's some more marketing for us to do to tell people we've got a bunch of electricians that are out doing rewires a rewire of a reasonable sized house is the best part of ten grand or something so there's a lot of when we tell people what we do we get the demand is there because our competition is somebody in a white van and some of these people are absolutely brilliant but everyone's got a story about like a bad builder or a bad contractor or something you know where we are you don't have to worry about whether you're going to be able to find us you know where british gas is so the opportunity is huge i think the growth opportunity for us in this business is absolutely gigantic we wanted however to get our operations in the right place we were letting our customers down the reschedule rate has gone down massively like 20 odd percent a few years ago it's four percent now and we're meeting the customer promise as 80 percent of customers that call us by 11 o'clock on the 11 if you call it by 11 o'clock with no heating or no hot water we'll be there same day so 80 of our customers we're meeting that for now what we did when we brought it in was we said you don't have to be a british gas contract customer you just have to call us so it was an operational led decision now it's kind of more commercial because if you don't have to be a British Gas customer but we'll go out the same day well why would you be a British Gas customer so those customers that are contracted with us will get preference those customers have got a subscription I think I don't know Gary 100,000 subscriptions or something now or more they'll get preference so we've got the operational discipline we've got the operational performance we've got the brand we've now got more commercial nows and this is we announced last week 500 new apprenticeships You know, the question I'm looking at is to say, well, I don't know, we've got a few hundred electricians. Do we just go out and hire a few thousand electricians on spec? It's probably a bit too much, but it's certainly not that we just hire another five or 10 or 15. So, and again, this is where, going back to the question on how much of the cost savings will come into the, will go to the shareholders. There will be things that we have to lay out costs in advance. And it might be this to say, look, we're going to go and hire 500, 600, 700 electricians because we know the demand's there. But the demand is not going to come on day one. we're going to have to have the marketing we're going to have to spend more on the marketing so I'm very confident about that business because the operations are now very strong and there's a very good chief operating officer in there and she's making improvements every single day I mean you were with the team yesterday in Cardiff I think Gary you've seen some of this stuff making improvements every single day so we know the demand is there we've just not been able to satisfy it now we can satisfy it and we've just got to seed some more money in there so I'm very confident that we'll see growth I'm very confident I can see as we close off because I'm assuming you don't have any more questions and you with your sell side analyst persona on but very confident in our ability to deliver what we said we're going to deliver in 2020 what we said we're going to deliver in 2030 if you look if you look at what we're doing you know we said a while ago we're going to sell out of the North Sea and we're going to put that money into electricity assets, we've just sold our last North Sea asset. So we do what we say we're going to do. We're investing in contracted and regulated assets. I think some people probably at some point thought this size OC thing's never going to happen. I thought that on occasion as well, sometimes in the meetings. But it took us probably the best part of three years. We've now got, I think, a phenomenal investment opportunity. We have earnings in 2025 relating to size OC. How much did we put in? 400 million, 450 or something in November? 380 that look means we didn't disclose that number so I'm in trouble now but you know so put best part of 400 million quid in there and we're making a return on that that will be a full year return in 2026 some of these investment opportunities are huge we've worked very hard with the government and we saw the consultation on gas come out which you could argue has got parts of it written with rough in mind and so some of the stuff that we've got does take years to develop and some of it is binary you know the government says yes the government says no you get planning permission you don't um you get a regular regulatory model or you don't that's why the discipline is so important for us but it has to come with patience on our side um so that we don't do anything daft but you know what we lay out the 1.7 billion in 2028 the 2 billion in 2030 of the fact we think we're going to double our eps or better by 2030 is something that we are confident in it's not easy and we've got a leadership team here and a lot of our colleagues who I think are both invigorated by it and sometimes exhausted by it because it's hard work it's hard work every single day but we absolutely have the opportunities here we've got the people we've got the market positions we've got the brands we've got the finances we've got the balance sheet um and we've got confidence so sorry for keeping you because that's been an hour and 40 minutes reminds me the old centric of things but we would present and then previously we present for about an hour and 15 minutes you'd only get about half an hour for questions the other way around so so thank you very much for coming and we'll see you again in july when we present the first half results thank you