SSE plc

Good morning everyone. I'm joined today by Gregor in person and Martin digitally. Today we plan to cover two things. Firstly, our interim results to 30th September 2021. And secondly, a strategic update containing the detail behind what we are calling our net zero acceleration programme. You will have seen the outline of our capex plans in this morning's release and I fully appreciate that you'll be keen to hear more. However, Our performance in the half year to 30th September forms part of the foundation for that exciting plan, so we'll reflect on that briefly before getting into the detail you've come for and answering any questions you might have. I'll start with a word on safety performance. Our day-to-day priority is always to ensure everyone goes home safe after every working day. We've enjoyed a run of improving safety performance over recent years, and for the six months to 30th September, Our total recordable injury rate fell to 0.16 from 0.19 over the comparable period in 2021. Nevertheless, every injury is an injury too many and we maintain an ongoing determination to keep everyone safe. No review of recent months would be complete without mention of our involvement in COP26. Our principal partnership of the summit here in Glasgow has left us more committed than ever to a strategy that creates value whilst addressing climate change. Our strategy is fully aligned with the UK government's net zero strategy and that of many other countries around the world. Strategically, we've made good progress over the last six months, reshaping the group and driving forward our plans for growth. Our disposals programme has created £2.8 billion of value and further simplified the group's focus on electricity assets and infrastructure. You will also have seen earlier this month we completed a further capital recycling of a stake in Jogger Bank CEE, We've made steps forward internationally in Japan through a joint ownership company formed with Pacifico Energy in Denmark with our bid for the Thor offshore wind tender and in the US with pre-qualification for the New York Bight auction. Closer to home, construction is progressing well on Seabank, Dogger Bank A and B and at Viking and we've amalgamated Berwick Bank and Marr Bank into a single wind farm with a potential capacity of 4.1 gigawatts. In thermal, KB2 CCGT achieved first power in October, and we welcome to track one accreditation for the East Coast Cluster, which includes our interest in the Net Zero Humber project. Turning to networks, excellent progress has been made in transmission on the Shetland HVDC link, while needs cases under the uncertainty mechanism continue to progress. And in distribution, an ambitious Rio ED2 business plan goes to final submission to Ofgem in December. It's been a busy half year that has seen us emerge strongly from the pandemic and lay the groundwork for an acceleration to net zero. I'll now hand you over to Gregor, who'll run through the financial performance.

Thanks, Alistair, and good morning, everyone. Whilst renewables output was significantly lower than planned due to the weather conditions, our other businesses have delivered a solid performance during the first six months, as recovery following coronavirus continues. Adjusted operating profit increasing by 15% to £377 million. Adjusted profit before tax increasing by 30% to £174 million. And adjusted EPS increasing by 44% to £10.5 above the expected range provided. And the second half of the year has started well. as average wind speeds have returned towards planned levels and with thermal and hydro plant in particular achieving strong prices in the market. Subject to normal weather, plant availability and similar levels of commodity prices over the coming winter months, we would expect to report full year adjusted earnings per share at a level which is at least in line with the current Bloomberg consensus of 83 pence adjusted earnings per share. We'll provide further guidance later in the financial year. Market volatility has, however, impacted the reported metrics, which include £1.4 billion of positive mark to market movements and operating derivatives held at the half year end. And as I've said before, The movements of these derivatives demonstrate the volatility that can arise on revaluation from period to period, which is unrelated to current operating performance and therefore excluded from SSE's adjusted profit measures. As you will be aware, the last few months have seen significant volatility in both power and gas prices in the market. An extended period of calm weather over the summer months coincided with a substantial increase in gas prices across Europe and has led to some significant movements in the wholesale market prices. However, I'm pleased to say that the Group has managed any direct exposure to these short-term fluctuations well during the first six months of the year due to a combination of factors. Firstly, Our balanced portfolio means our regulated networks businesses are insulated from power price movements, whilst thermal and gas storage have improved results by providing balance against lower renewables output. Secondly, disciplined application of clearly defined hedging policy has limited any short-term exposure to power price movements. In addition, low trading limits, which are closely monitored, reduced any potential exposure from liquidity or shape positions. Performance across the regulated networks businesses has been strong. In transmission, adjusted operating profit was 58% higher than the comparative period, as the newly commenced T2 regulatory period resulted in earlier phasing of allowed revenues. And in distribution, a combination of higher allowed revenue and volume recovery following coronavirus lockdowns in the prior period meant that operating profit increased by 34%. However, in line with the wider market, renewables have seen a significant decrease in adjusted operating profit to £25 million in the current period. A prolonged period of high pressure across Northern Europe over the summer resulted in one of the least windy periods across most of the UK and Ireland, and one of the driest in SSE's hydro catchment area in the past 70 years. This shortfall, which was around 30% or 1.2 terawires at low plan, was compounded by the need to buy back edges in the volatile markets. Despite the renewable's results, together these core businesses contributed over 95% of Group Adjusted EBIT in the year. Elsewhere in our complementary businesses, Thermo demonstrated its value with strong balancing market performance and achieving higher market prices, despite lower year-on-year availability due to phasing of planned maintenance to respond to system needs and unplanned outages. Merchant operation of the gas storage facility enabled that business to capture the spread in the gas price markets. Business energy showed continued recovery following coronavirus lockdowns. However, Airtrust's recovery was impacted by net adjustment to historic accruals in the period. The distributed energy result is adversely impacted by the inclusion of operating losses from the contracting rail business up to its disposal in June. Following disposal, it is expected that this business will return to a small operating profit as it continues to develop battery, solar and heat network related opportunities. And the corporate unallocated costs increased as transitional service agreements from past disposals unwind. The group through the EPM and gas storage businesses is exposed to price movements on net unsettled commodity contracts and physical gas inventory held. At 30 September, the total net re-measurement under IFRS 9 of these unsettled contracts and inventory totalled over £1.4 billion. However, these do not include the re-measurement of around £1.3 billion of own use derivatives which are excluded from recognition under IFRS 9. Taking these derivatives into account, the group does not expect to realize significant gains upon settlement of those contracts. The volatility in these revaluations and the exclusion of certain contracts under IFRS 9 demonstrate why these re-measurements are unrelated to current operating performance and therefore continue to be excluded from SSE's adjusted profit measures. In addition to these re-measurements, the higher power prices have led to a £182 million reversal of historic impairment charges being recognised on the SSE thermal operating assets. This reversal, which does not impact on cash, evidences the strategic importance and value of flexible generation in a period of volatility. Finally, a number of other adjustments including disposals and true-up adjustments on prior year exceptional transactions have been recorded as exceptional in the period. Like Alistair, I will save discussion of the capital investment required for our net zero acceleration programme until later. However, our existing capital investment plan for this financial year continues at pace. Alistair has referenced the progress we have made on delivery of our projects this year, which has seen over £1 billion investment to date. In many ways, we are already accelerating our investment in net zero. Even excluding project development expenditure refunds, this represents a more than 50% increase on prior year spend and demonstrates our continued delivery. We now expect capital investment expenditure to be in excess of £2 billion for the full year. We've also progressed at pace to simplify the group, to predominantly focus on our renewables and networks core. Since the start of 21-22, we've completed the disposal of a contracting rail business, as well as completing the disposal of gas production assets in October. And we have also agreed to dispose of our equity stake in SGN for over £1.2 billion. Disposal is conditional on receipt of certain regulatory approvals and is expected to complete by 31 March 2022. Following completion of SGN, we will have achieved headline consideration of over £2.8 billion, significantly in excess of the £2 billion target. and including the expected SGN gain on disposal, which we expect will be in excess of £570 million, we have achieved over £1.4 billion in exceptional gains on sale. The CAS generated and gains recognised in disposal demonstrate the value SSE can create. Following the completion of the Triennial Valuation during the period, it was agreed that the contribution holiday received in respect of the CHEPS scheme will continue. And changes in financial assumptions and experience adjustments have meant that the combined net surplus for both schemes has increased by £81 million during the period. SFA's strong balance sheet continues to be underpinned by high-quality assets and following continued capital investment in long-term generation and infrastructure assets Adjusted net debt and hybrid capital has increased by over £700 million to £9.6 billion. And in line with the accelerated net zero investment programme, we're targeting a four and a half times debt to EBITDA ratio at the end of this financial year. Our S&P credit rating remains at BBB plus stable outlook and our Moody's rating remains at BA1 stable which has been updated to stable outlook earlier this morning following the strategic update announcement. These compare favourably to peers and reflect the group's business mix, funding plans and future dividends. SSE remains fully committed to our 2023 dividend plan and continues to target dividend increases in line with RPI for both this year and next. As such, we are declaring an interim 2122 dividend of 25.5 pence. This will take the total dividends declared to over £15 per share since SSE's formation in 1998. Our post-2023 plans will be covered in more detail shortly, but looking ahead, we are clearly in a strong position to create lasting value for shareholders and to remunerate their investment with dividends going forward. In closing, our first half has demonstrated yet again the resilience of an optimal business model that drives both economically regulated and market-based earnings from assets and operations that are critical to decarbonisation. I'll now hand you back to Alistair for his introduction to the strategic update that you've all been waiting for.

Thanks, Gregor. We've been spending the past two years moving our strategy forward, reshaping the group through strategic disposals and focusing it on the electricity infrastructure needed for net zero. As a result, we've been creating a wealth of opportunities right across our businesses, both domestically and internationally. As we said in May, this led to us taking a comprehensive evaluation of our CAPEX plans and the sources of funding that will underpin them with the aim of maximising our potential over the decade ahead. With that evaluation now complete, SSE is today setting out its resulting net zero acceleration program, which represents the optimal pathway for the group. And as you will see, the plan is transformative for the SSE group, ambitious for accelerated growth, focused on unlocking value from the transition to net zero, paced to deliver long-term shareholder return, and aligned with a 1.5 degree pathway. Our net zero acceleration programme will accelerate clean growth, lead the energy transition and maximise value for all stakeholders. It includes enhanced, fully funded £12.5 billion strategic capital investment plans to 2026, alongside ambitious targets to 2031, all aligned with net zero. The plan represents the optimal pathway for SSE to build on its position as the UK's clean energy champion. enabling delivery of over 25% of the UK's 40 gigawatt offshore wind target and over 20% of UK's electricity networks investment whilst deploying flexibility solutions and exporting renewables capabilities overseas. It is an ambitious but deliverable roadmap for how we will allocate capital and seize the fantastic opportunities we've created over the next decade. Importantly, it contains the investment needed to meet a 1.5 degrees pathway, and it will maximise both earnings and asset value growth while remunerating shareholders with a new growth-enabling dividend plan. In this strategic update, we will set out how the reshaped SSE Group provides the right blend of businesses to create sustained value on the journey to net zero, provide details on the £12.5 billion CapEx plan, which is a 65% step up with a billion pounds a year additional investment and our plans for funding it. Outline what this bold investment plan will deliver by 2026 in terms of capacity, regulated asset value and critically shareholder returns. And set a clear ambition for where this trajectory will take us into the 2030s. The energy transition is gathering pace. and the opportunities in front of us are crystallising rapidly. Today, we're giving shareholders a comprehensive strategy for creating long-term value. It is no accident that we are ready to seize the wealth of opportunities that are emerging in the transition to net zero. Following a highly successful disposals programme, the reshaped SSE Group is now firmly focused on renewables and regulated electricity networks. We've talked about their net zero aligned growth potential already, but they share common capabilities in the development, construction, financing and operation of world-class, highly technical electricity assets. The other businesses SSE retains are highly complementary, providing customers with additional green power solutions and routes to market. With significant synergies running through the group, together the SSE businesses provide an ESG-aligned growth investment opportunity, an attractive mix of regulated and market-based income streams and valuable linkages with each other which support efficient financing. SSE has been transforming into the optimal combination of electricity infrastructure businesses. Our business mix allows specialisation in electricity assets such as in renewables, networks and low-carbon power stations, alongside the ability to create value right across the electricity value chain as new opportunities emerge in hydrogen, batteries, and distributed energy. This reshaping into electricity infrastructure has already demonstrated its value in terms of total shareholder returns since the retail transaction. So in summary, SSE's business mix is very deliberate, highly effective, fully focused and set to deliver long-term shareholder returns on the journey to net zero in both domestic and international markets. At COP26, I was encouraged by the collaborative efforts taken by countries across the world to tackle the climate crisis. The challenge of limiting global warming to 1.5 degrees C will require significant actions from individual countries to commit to cut emissions over the next decade. This presents exciting options for SSE in its traditional home markets as well as overseas, where we are actively pursuing opportunities to export our renewables capability. Here in the UK, the government's net zero strategy sets a globally leading ambition for net zero electricity in the UK by 2035. This strategy demands a quadrupling of wind generation, which in turn requires network capacity to more than double over the same period. And to achieve this, it's estimated that over £250 billion of investment will be needed in the UK alone. As the UK's national clean energy champion, SSE is central to delivery of these opportunities right across the low carbon energy value chain. As I mentioned earlier, we're delivering a substantial proportion of the networks and renewables investment needed by the UK government. We also have consent for the UK's largest pump storage project. We're developing options for gigawatt scale distributed energy solutions and we're developing critical flexible first of a kind carbon capture and hydrogen projects. We are accelerating investment in the low carbon electricity infrastructure that will support the UK targets. And this provides a platform for sustainable future growth abroad in activities where SSE is globally competitive and proven capability. So now for the highlights. This is what I like to call the plan on a page. We'll be investing £12.5 billion over five years in high growth, low carbon assets split approximately 40-40-20 across networks, renewables and our flexible generation and other complementary businesses respectively. The plan is fully funded and well balanced, providing an attractive mix of regulated and market-based earnings. This is a huge acceleration of investment that will see an additional £1 billion spent annually on high-quality options and projects. To help deliver this accelerated growth, This morning, we're outlining our baseline plan to sell down minority stakes of around 25% in both transmission and distribution. They'll still be core to SSE's businesses, but the proceeds will help realise value and unlock further growth, both in electricity networks and elsewhere in the group. This type of partnering has already proven successful for us in renewables, but we'll continue to deploy that approach to realise developer premiums and fund further pipeline and capacity growth, both at home and abroad. And our new growth enabling dividend plan will enable us to offer an attractive growth profile while providing shareholders with strong income. The plan rebases the dividend to 60 pence in 23-24 before targeting at least 5% dividend increases in 24-25 and 25-26. And we expect the dividend to total more than £3.50 per share over this five-year period. We believe this represents a highly attractive combination of of dividend and capital appreciation. This investment will drive serious growth. By 2026, we expect to add over four gigawatts of net renewables to double our capacity, increase underlying networks RAV by around 10% per annum, and achieve a compound annual growth rate of between 5% and 7% in adjusted EPS over the course of the five-year plan. We plan to maintain a strong investment grade credit rating too, targeting a net debt to EBITDA ratio of 4.5 times. This will enable the SSE group to continue delivering projects at record-breaking scale, such as Dogger Bank and Barrick Bank. And finally, there's the longer-term vision. Fast forward to 2026, and delivering this plan will have given us a fantastic platform from which to grow further. But this is just the foundation. We're looking further ahead, and we are thinking bigger. By 2031, we're targeting over 13 gigawatts of net installed renewable capacity, building on our existing ambitions to add one gigawatt a year of the net new renewable capacity by the second half of the decade. A renewables pipeline of at least 15 gigawatts, maintaining the 2026 level. Another three gigawatt net of low carbon flexible technologies, including carbon capture and storage, hydrogen and batteries. and the network's RAB of between 11 and 13 billion net of minority interests. These targets will in turn mean we can set and meet 1.5 degree aligned science-based carbon targets. In a world in which decarbonisation ambition continues to expand exponentially, we're positioning ourselves to take more opportunities as they emerge. These are exciting times for the SSE group as it delivers for shareholders and society. It will consolidate the work we've done over the past few years to transform the business, while building a foundation to achieve a significant international footprint into the 2030s. The strategic review carried out by the Board was robust. Our resulting plan reflects the immediacy of the net zero opportunities ahead, the views of all stakeholders, including some quite vocal but constructive public opinions. and the considerations we have given to all possible routes to value creation. Ultimately, the review sought to identify the best way to drive sustainable long-term value for all shareholders, deliver on the scale of our capex investment and growth opportunities, and optimise the sources of funding for those commitments. We ran a number of detailed scenarios and considered all possible asset combinations which were fully tested with independent advisors. Following that rigorous process, we concluded unequivocally that the existing strategy combination of renewables and networks together with integrated complementary businesses was the optimal route to deliver on our growth potential by providing funding power to drive large-scale CapEx projects forward, maintain a strong investment credit rating and an efficient financing capability, retain existing shared skills, intergroup investment opportunities and synergies. And importantly, optimised risk adjusted returns for long term shareholder value. This plan represents the path that will create the greatest long term overall value for shareholders and society. SSE's purpose to provide the energy needed today while building a better world of energy for tomorrow provided powerful proved powerful in steering us through the worst of the coronavirus pandemic, but its ultimate aim is to tackle the climate emergency. Our purpose was central to the Board's considerations when conducting the strategic review that's culminated in the plan being presented today. And this purpose, coupled with a strategy of creating value for shareholders and society in a sustainable way, is a driving force behind our leadership position in the energy sector. Our purpose aligns with that of governments and society. It was behind our participation in COP26 this month, and it guides everything we do. I use the plural government very deliberately. The climate emergency is a global phenomenon, stimulating decarbonisation the world over. And if decarbonisation of energy accelerates, electricity becomes the core of the global energy system. Global electricity generation is predicted to at least double by 2050, with generation from renewable technologies needing to at least travel as a result. And SSE is among the best in the world at deploying renewables, with a lead player in the world's largest offshore wind market and the world's fifth largest national economy. And by developing platforms in international markets like East Asia, Europe and North America, we're creating options in carefully selected international markets, while we see future growth. We bring our capabilities in development and delivery, with local knowledge and other important skills provided by carefully chosen partners. However, hitting net zero also requires decarbonising heat and transport. According to recent projections by the UK government, the increasing decarbonisation of society will more than double electricity demand by 2050, and this will require electricity networks to increase both their capacity and reach to meet this demand and keep the system in balance locally. This means networks are no longer just steady yield businesses. They're exposed to the same growth opportunities as renewables and our plans reflect this. The UK Prime Minister seeks a clean electricity system by 2035 and the energy crisis has turned attention towards gas price dependency. We've seen a dramatic reduction in our own carbon emissions during the last decade as SSE's legacy coal output was phased out in an orderly and managed way. But our generation mix through the next decade will be defined by the rapid deployment of renewable and low carbon technologies. Our enviable pipeline of onshore and offshore development opportunities will enable us to reach 50 terawatt hours of clean renewable generation by 2031. However, recent market volatility, worsened by calm weather conditions, has renewed focus on the optimum way to provide security of supply and price. Whilst the current system needs have been provided by unabated generation plant or beard at high prices, this cannot continue in a clean electricity system by 2035. SSE is flexible generation already, and we have more optionality in low-carbon flexible plants than any competitor in the GB market. We boast mature options in pumped storage, carbon capture and storage, hydrogen and batteries. By 2031, we expect over 90% of SSE's electricity generation output to be from decarbonised sources. This represents a key interim milestone in the transition to net zero, not just for SSE, but for the UK as a whole. Aligning to a one and a half degree pathway is urgent and it has cross-party political and international support. SSE is at the centre of this and has the capabilities and options that will be absolutely vital to achieving net zero, whatever pathway you choose. We continue to engage stakeholders on climate-related issues every step of the way. We continue to champion our Just Transition strategy, the first of its kind by a corporate, and we firmly believe that fair tax, a real living wage and green job creation underpin a just transition. We received overwhelming support at our 2021 AGM for an annual shareholder vote on our net zero plan. And we took that as a clear signal of ongoing support for our decarbonisation efforts. With a window of opportunity closing to prevent the most dangerous climate change, plans to decarbonise the global economy must accelerate. That is why we can announce today an acceleration of our science-based carbon targets to align with a science-based target initiative's 1.5 degree pathway for the power sector. These revised targets for scope one and two absolute emissions cut in half the previously planned emissions for 2030 for SSE and are a crucial step towards achieving net zero across all business activities by 2050 at the latest. This acceleration towards net zero is integrated with the acceleration of investment we're outlining today. We have the confidence to deliver on these challenging targets because of the wealth of clean growth opportunities we are creating. There's a lot of detail on this slide that Gregor and Martin will come on to shortly, but the point I'd make is that the range of opportunities available to us is second to none. Today we're building more offshore wind than anyone in the world, including the world's largest offshore wind farm at Dogger Bank, and we're developing at Corrie Glass the first new pumped storage project in the UK for 30 years, providing critical flexibility. Only by being part of a larger group can this world-class renewables business take on projects of this scale, backed by a stable asset base and credit rating. Our network's investment capabilities and pipeline are also immense. We are pursuing major projects above and beyond the Rio T2 settlement through Ofgem's uncertainty mechanisms, and our Rio ED2 plan is a step up from ED1 and will yield still more investment in bringing net zero to the front door. In our people, we have world-class asset developers, the best builders and the best operators. Again, like the business mix and asset base, this is no accident. We're focused on long-term growth and we invest in the assets and people to make it happen. To recap before I hand over to Gregor, what we have for you today is a fully funded plan that enables SSE to cement its leadership position in the UK while expanding overseas. It's a plan that will accelerate the group's growth over the next five years, with more installed renewables capacity, more much-needed low-carbon flexibility, more networks RAV, attractive and visible EPS growth, and manageable levels of debt. It rebalances our capex allocation across the group, proposes to extend our highly successful partnering model to electricity networks, and sets out a growth-enabling dividend plan. This is a platform for longer-term growth and ambitious targets over the coming decade as we develop, build, operate and invest in the infrastructure that will help deliver net zero. I'll now ask Gregor to talk you through the five-year CAPEX plan in more detail.

Thanks, Alistair. I've always said that I'd much rather face questions about how we're going to fund the extraordinary investment opportunities available to us than questions about where the growth is going to come from. And today, we're not only setting an ambitious growth plan to 2026, we're also clear that this plan is fully fundable and deliverable. Our track record of creating value for shareholders is clearly strong. In the next five years, we'll see a significant acceleration, investing 65% more than existing plans. Our renewables capacity will double and will grow and sustain our secure pipeline to more than 15 gigawatts. Be no doubt that as part of the SSE group, the renewables business will grow and thrive with our credit rating diversified earnings and financial strength giving us the ability to build some of the world's biggest projects. NetWorks Rav will increase by almost £1.5 billion, even accounting for our sell-down plans, indicating the huge levels of investment being created in transmission and distribution. These are now growth businesses requiring substantial capex investment and offering index-linked growth, and our plan will enable us to harness more of this. Over the five years, we're targeting 5% to 7% per annum adjusted EPS CAGR, maintaining a 4.5 times net debt to EBITDA ratio, and of course, aligning ourselves to the 1.5 degree science-based targets, as outlined by Alistair earlier. We think these targets are impressive, given competitive markets and demanding regulation, and they allow us to provide shareholders with attractive, growth-aligned returns from a dividend-targeting at least 5% annual increases to 2026 after rebasing at 60 pence in 23-24. We have exceptionally attractive growth options right across the group. This plan will see us significantly increase the rate at which we are investing, adding £1 billion a year of additional capex onto existing plans. But it also reallocates capex across regulated and non-regulated businesses, providing the right balance of risk and returns. In short, the plans will deliver enhanced investment in a balanced mix of low-carbon infrastructure across our core networks and renewables businesses, and our complementary businesses as well, while retaining a strong investment-grade credit rating. Within that, we're dialing up SSE's renewable share of CapEx by over two and a half times the previous plan, That increase equates to around £3 billion of additional investment over the five years and reflects the scale of the opportunity and the strength of our renewables pipeline. Networks will account for a smaller proportion of capex as we rebalance, but this is net of our anticipated stake sales. And we still expect to invest more in absolute terms into networks during the period as we capitalise on the high growth opportunities on offer. FSC's 40-40-20 capex allocation strikes an optimal balance of risk and return across an attractive blend of investments. Whilst we'll talk a lot about the renewables and net worth investments, much of that last 20% will be investments in flexibility, which will likely yield higher returns given the less mature nature of the technologies involved. Overall, this is a plan that offers balanced risk and returns, based on the optimal mix of regulated and unregulated assets. Not only is this a comprehensive and fully funded plan, but it's also a plan that offers a great deal of clarity since around 60% or £7.5 billion is already committed. The bulk of the uncommitted spend is in renewables, transmission and thermal, where we see the significant additional growth opportunities Alistair outlined earlier. Here we have good visibility and confidence on our potential investments. These remain subject to government and regulatory processes in which we have a great deal of experience. Well chosen partnering has been a key part of SSE's financial strategy for many years. SSE is well placed to manage development risk and can create value from selling down stakes to retain typically 40% of a project and working with equity partners for construction or operation. This established approach brings benefits, including securing developer premiums, reducing single project exposures, containing non-earning debt, and bringing in partners with different risk appetites at their preferred stage of the project cycle. We've also previously been clear that we would consider extending a partnering approach through sales of minority interest stakes in our electricity transmission and distribution businesses. Partnering would release capital to facilitate growth opportunities in the network's businesses and elsewhere in the group. The exact timing and scale of any sale are yet to be decided, but in order to realise all of this growth potential while maintaining the most attractive balance of risk and returns across the group, today's plans assume a 25% stake disposal in both transmission and distribution, modelled early in the financial year 2023-24. This would mean our net share of RAB would grow from around £7.5 billion currently to almost £9 billion in 2026, and between £11 and £13 billion in 2031, representing RAB growth in excess of 50% over the decade, even after the 25% divestment. We've recycled capital and SSE renewables to grow, and we've also seen this potential as a key enabler in networks too. Transmission and distribution have huge CapEx requirements, and bringing in financial partners will crystallise value and enable further growth in both networks and SSE's other businesses. It will allow SSE to optimise growth plans and will maintain the substantial synergies the group offers, enabling SSE to have enviable positions across the low-carbon energy value chain. In 2018, we made a clear commitment to shareholders in the form of our five-year dividend plan to 2023. We will deliver on this and continue to target dividend increases in line with RPI in the remaining two financial years to 31 March 2023. However, with 18 months of that dividend plan remaining, the Board has considered what the right dividend policy should be thereafter. We assessed and balanced a range of factors including financial and sector market trends, credit metrics and cash flow profiles, total shareholder returns, growth opportunities and different funding options including networks stake sales. Based on the favourable conditions for growth Alistair outlined earlier and SSE's unique opportunity to create value in the transition to net zero, the board concluded that in order to maximise value creation, the future dividend policy should be aligned to the company's growth ambitions. And so, after fulfilment of our existing commitments to 2023, we will rebase our dividend to 60 pence in 2023-24, before targeting at least 5% dividend increases in 2024-25 and 2025-26. We also intend to retain a script dividend option for shareholders but to restrict earnings dilution by capping take-up at 25% from this year onwards. This will amount to a total dividend of at least £3.50 a share over the five years to March 2026. Following this dividend certainty over the five-year plan, the aim is to set SEC's businesses up to support a similar level of annual dividend growth in the longer term. This rebase dividend with attractive growth balances income to shareholders with an accelerated growth plan based on high quality assets. It represents a unique opportunity to invest in a balanced business with a clear dividend outlook to 2026 and beyond with a strong growth story facing into the transition to net zero. We've always been clear about our commitment to maintain a strong investment grade credit rating. This investment plan is designed to maintain credit ratios comfortably above those required for an investment grade. This will be supported by a rebase dividend and is aligned with a net debt to EBITDA target ratio of four and a half times. Ultimately, this will help underpin our ability to invest in large scale projects that are needed to deliver net zero. And in line with this, today Moody's have published an update confirming SSE's rating and removing it from negative outlook, which is indicative of the robust nature of this plan. With so many opportunities available to us, every investment we make has to create value and we only allocate capital where we see returns comfortably above our whack. In offshore wind, we target equity returns in excess of 10%. In competitive markets, that target remains possible from the best sites and with strong project delivery. In onshore wind, we aim for a spread to WAC on unlevered projects of 100 to 400 basis points, with the higher end of the range reflecting assets with higher levels of merchant risk. When evaluating carbon capture and hydrogen investments, we'd expect higher returns of 300 to 500 basis points spread to WAC, given that these are earlier stage, first-of-a-kind technologies dependent on the nature of support mechanisms available. In networks, we expect to achieve a return on equity of between 7 and 9%, with some outperformance assumed as we build a highly valued regulated asset base that provides financial stability. In short, we take a disciplined approach to our investment decisions on a technology and project basis. And while the options in front of us are immense, we only take them forward where we are clear that they are accretive. The five-year investment plan announced today optimises CapEx allocation. It balances risk and financial exposure between large-scale projects, different technologies and index-linked earnings. Indeed, around 60% of EBITDA is underpinned by index-linked revenue streams. With an expected CAGR to 2026 for UPS of between 5% and 7% after dilution from minority stake sales, it provides a stable platform for long-term earnings and progressive shareholder return. As you can see, this is a fully funded plan that optimizes SSE's options. 90% of the spending is earmarked for net-zero focused assets and businesses. And with our baseline dividend commitment of at least £3.50 per share and interest in tax, we forecast the group will require around £18 billion to deliver this plan. Operational cash flows, including developer profits, which are treated as operational activities, will fund around 65% of the investment plan. Asset disposals, which will comprise the £1.2 billion disposal of SDN expected to complete this financial year. Alongside the minority transmission and distribution stake sales, another residual non-core asset disposals will provide another 25% of funding. The remaining 10% will expect to be funded through incremental debt issuance, ensuring the credit ratios I outlined earlier are maintained and balance sheet strength is not sacrificed. Setting out our sources and uses of cash in this way highlights two things. First, the importance of continued capital discipline. We've shown time and time again that with effective capex allocation, raising debt and capital recycling, we can unlock accretive opportunities in a decarbonising energy sector. Second, the value of partnering to maximise growth in renewables, we're able to realize significant developer premiums through our joint venture partnering approach, selling down stakes at the right point in the development cycle to realize value and fund further pipeline growth. As we've highlighted already today, we believe extending a partnering approach to our networks businesses can have a similar effect. As Alastair said earlier, this is not a restrictive plan. and we'll be well positioned to capitalise on any further favourable opportunities that might arise. And our track record shows we are highly effective at generating such opportunities. I'll now hand you over to Martin, who will take us through his business units.

Thanks, Gregor. At the risk of over-repeating ourselves, SSE is building more offshore wind than any company in the world right now. And that's a stunning statement. and testament to our capabilities in delivering projects that will provide strong growth in terms of both long-term earnings and asset values. And our updated CapEx plan was here to invest £5 billion in renewables over the five years. Around 50% of this renewables CapEx is on assets currently under construction, 30% is forecast to spend on projects currently under development, and 15% on future pipeline investments. By 2026, we will have constructed Seagreen, Dogger Bank A and B, and Viking, adding 2.6 gigawatts of new renewables capacity to the portfolio. And these will likely be complemented by Dogger Bank C and Seagreen 1A, as well as ARCLO in Ireland, assuming progress is as SSE would expect. That will lead to an overall doubling of our renewables capacity, and we are on track to enable delivery of over a quarter of the UK government's offshore wind target to 2030. We have the track record and capabilities to deliver these world-class projects and they will create value. We expect to see a CAGR of 11-12% in adjusted EBITDA over the period. Looking further ahead, the range and scale of opportunities targeted will amount to significant growth potential for FNC renewables during the course of the decade. We have clear line of sights to a trebling of our renewables capacity by 2031 to more than 13 gigawatts, reflecting our targeted run rate to add over one gigawatts of new renewables capacity per year. This would see us increase renewables output fivefold over the next 10 years to hit 50 terawatt hours. And driving this growth is our superior existing secure pipeline. SSE Renewables already boasts an enviable secure pipeline of around 10 gigawatts and 2.6 gigawatts of this pipeline is already under construction which includes the world's largest offshore wind farm at Dogger Bank. The remaining 1.4 gigawatts required to reach our 2026 targets will be supplied by our existing options. But pipeline is the lifeblood of a development business and that is why under plans set out today by 2026 we would expect to reach and sustain a secured pipeline of over 15 gigawatts for at least the second half of the decade. Within our existing secured pipeline, the breadth and quality of named options is evident by the table shown. As well as SSE's flagship construction projects, offshore options include Barrick Bank, which would have a potential capacity of 4.1 gigawatts. And we have Corrie Glass, which could be the UK's largest pumped storage project, but I will come on to that later. However, our future secure pipeline depends on us establishing and maturing our early stage development areas today. And to that end, we have over 10 gigawatts of future prospects that we are working on building into the secure pipeline. These future prospects will drive the continued growth of the group in the second half of the decade and beyond. And these exclude near-term opportunities for further growth, including the Scottwind auction, where we have submitted compelling bids with our partners, VIP and Marabeni, as well as other auctions, we are opening up internationally. In Seagreen 1A, Boat Bank, North Falls and Archway Bank, we have a range of extremely high-quality projects with Seabed already secured. And if recent developments tell us anything, it's that Seabed is an increasingly valuable commodity. These projects are at different stages, but are highly deliverable within a decade and will all be needed if government targets in the UK and Ireland are to be met. And as you can see, our early steps towards carefully selected international expansion are already adding options to our future pipeline. As the UK national clean energy champion, we will always have a strong foundation in these domestic markets. But a more internationally diverse pipeline can unlock far greater renewables growth. We are primarily interested in offshore and onshore wind, where we are well placed to export our capabilities working with local partners to enter fast-growing markets. To that end, we recently announced our entry into the Japanese offshore wind market by acquiring a majority stake in a joint ownership company formed with Pacifico Energy. The deal saw us acquire 10 gigawatts growth of early-stage development opportunities with potential to enter big rounds around the mid-2020s. Meanwhile, earlier this year, we announced our partnership with Asiona, a leading Spanish renewable energy company, to form a 50-50 joint venture to enter the emerging Iberian offshore wind markets, and we subsequently expanded the JV scope to include Poland as well. These markets will not reach the size of the North Sea, but over the longer term they will create opportunities. Elsewhere in Europe, We are also partnering with CIP once again and Danish Energy Company and our holding on the tender process in Denmark to develop the 800 to 1,000 megawatt Thor wind farm off the country's west coast. We continue to look at the east coast of the US, both organically and via partnerships, and have looked at onshore platforms there as well. And having recently incorporated SSE Renewables North America, we submitted a pre-qualification application to the Bureau of Ocean Energy Management to participate in the New York Bites auction. Our imminent move into Japan's growing offshore wind market represents an exciting step for SSE. It will help support the further expansion and diversification of SSE Renewables' longer-term growth pipeline in a country in which offshore wind growth is a key policy aim. Japan already has clear offshore wind targets of 10 GW by 2030 and up to 45 GW, by 2040 as the country seeks to decarbonise. The new company contains a talented local development team with 10 gigawatts of existing early-stage offshore wind development projects spread across Japanese waters. The existing early-stage projects are expected to use a mixture of fixed and floating technology and the two most advanced projects have secured grid access and advanced local stakeholder engagement has been undertaken. In Pacifico, we have been fortunate to find a partner with not only local knowledge, but developer capabilities that match our own. And these are initial steps, but there will be more to come. And whilst we see plenty of opportunity, as ever, a measured approach with capital discipline will guide our decisions. We will only execute on the most accretive options. Back in more familiar times, our hydro fleets continued to to provide critical flexibility services to the system. It is a well-established technology, but its role in a renewables-led energy system in the future will only grow in value, and recent market volatility has highlighted its importance in balancing the system and enabling wind. And our secure pipeline also includes Coriglass. This would be the UK's largest pumped hydro storage project and the first to be developed in over 30 years. Construction would take around five years, at an estimated £1.2 to £1.5 billion, and its life would far exceed 40 years. Located in the Highlands, the consented 1.5 gigawatt project would have 30 gigawatt hours of storage, more than doubling existing UK capacity, and it could power 3 million homes for 24 hours. The system benefits the significance, and they include reducing wind curtailments and helping accommodate more wind onto the system, maintaining grid stability and displacing fossil fuels. Engagement with government and Ofgem on the need for a revenue stabilisation mechanism has been positive. Over the summer, BASE highlighted the importance of long-duration storage in its smart systems and flexibility plan, with a separate consultation launched. And recent events have clearly served to underline the case for the project, as the value of flexibility and storage has come to the fore. We anticipate that there will be clarity on policy direction for pump storage next year, and stand ready to build in the second half of the decade. As renewable capacity on the system increases, so too does the value not only of storage and flexibility, but also of lower carbon thermal generation. All credible net zero pathways show that lower carbon thermal generation has an important transitional balancing role to play in ensuring security of supply whilst the UK and Ireland decarbonise. However, we are in no doubt about the need to decarbonise and repurpose our fleet for the net zero world, and we are making progress. Our new highly efficient TP2 CCGT will display less efficient generating plants on the system and has the potential for hydrogen blending in the future. And in terms of S&C's older plants, we continue to envisage the closure of more than 50% of the existing fleet by 2030. Despite year-to-year variability, we expect to meet our updated absolute emissions and carbon intensity targets by 2030 at the latest. And meanwhile, our partnership with Equinor to develop plans for a number of first-of-a-kind low-carbon power stations in the UK's Humber region, as well as at Peterhead, opens the way to the UK's first power station with CCS and the world's first 100% hydrogen-fuelled power station. With government support, while located existing assets, a strong carbon price and backdrop, and the value of flexibility becoming clearer by the day, there are real tailwinds for our future low-carbon thermal portfolio. Our plans for 2026 include £600 million of capex in this area, but we expect this to ramp up in the latter half of the decade in line with delivery timetables for the UK CCS programme. And, as Gregor mentioned earlier, the higher returns available these first-of-a-kind technologies will help optimize the balance of risk and returns across the group flexible and renewable energy are at the heart of ssc which creates a strong platform for our distributed energy and our customer businesses the distributed energy business is primarily interested in batteries solar electric vehicle infrastructure and heat networks all from a growth perspective and is developing a combined battery and solar pipeline over 1 gigawatts of which 350 megawatts is currently secured. On batteries we acquired a 50 megawatt project in Salisbury and has surfaced a number of interesting projects with partners externally as well as internally on the SSE of State. Options exist at Ferry Bridge and Fiddlers Ferry for 150 megawatt batteries for example. SOLAR is at an earlier stage but offers potential given SSE's capabilities and together SSE sees these technologies as offering a multi-gigawatt opportunity. The business also has ambitions to develop hundreds of superfast charge points around the country, and the heat business continues to expand. And these businesses all align with the group's net zero focus strategy and offer interesting platforms for growth. SSE Business Energy offers a reach to market for renewable power. And with the advance of corporate PPAs and corporate decarbonisation, The potential for growth is clear and the synergies are evident. In Ireland, this is particularly the case with data centre growth. And whilst the group does not see itself as a domestic retailer in the price cap GB market, SSE Electricity is a great business that works alongside Generation in the more integrated Irish market structure. Customer businesses are our green shop front and part of the SSE story. And SSE has the market and electricity asset skills to enable these businesses to prosper. And they are highly complimentary to the other businesses within the group. I now hand back to Alastair, who will cover our network's businesses and conclude.

But today, thanks to net zero and the related increase in electricity demand described earlier, I would characterize them with a very different word. Growth. Across the two network businesses, we expect to deliver between 8% and 9% CAGR in combined gross RAB over the next 10 years, hitting nearly £12 billion in 2026 and potentially up to £18 billion in 2031, with almost £7 billion of capex by 2026 or in excess of £5 billion net of stake sales. And these businesses, with their regulatory asset base, provide two clear benefits within the group. First, they provide index-linked returns, which are a scarce commodity in today's environment. And second, they provide the group with the capital strength it needs to deliver and develop large-scale capital projects, such as the biggest offshore wind farm in the world. These businesses are fundamentally growth engines, growing themselves while enabling net-zero delivery across the group. Transmission's Rio T2 business plan, a network for net-zero, reached a final settlement of nearly £2.2 billion of approved investments to make the network fit for the future. Add to this the Shetland HVDC project and a certain view of total expenditure across T2 becomes around £2.8 billion. We said in May that this would take the transmission route to above £5 billion by financial year 26. However, we also said that growing a network To meet net zero would require use of Ofgem's uncertainty mechanisms. While the extent of the additional projects approved by Ofgem remains to be seen, we are progressing the proposed East Coast HVDC link from Peterhead to the northeast of England to meet a 2029 energisation date, seeking to reinforce the network in Argyll to 275kV and looking to replace the Fort Augustus to Skyline. Initial needs cases for all these projects have either been or will shortly be submitted. Further investments to connect new renewable generation through the volume driver uncertainty mechanism are also likely. While these remain subject to a range of factors, including generated commitment, planning, and of course, off-gen, the direction is clear. Ambitious government renewables targets suggest these projects will be sorely needed. So taken together, we could see an overall business gross route reaching around 6 billion by 2026, which would be a gross CAGR of around 12%. Once a stake sale is factored in, net capex is expected to be in excess of 3 billion, a greater than 10% increase from the previous plan. It's also likely that there will be further investment needed through Key 3, although this growth is less visible. Scott Wind is expected to unlock up to 10 gigawatts of new offshore wind, meaning further system upgrades and a likely second HVDC link from Peterhead to England. we'd expect gross RAV to reach between 8 and 10 billion by 2031, representing a CAGR of 9 to 11%. And if the timing of the reinforcement required to facilitate the Scotland rollout were to be accelerated, we could see a path for gross transmission RAV to grow to as much as 12 billion by 2031. Based on the system operator's own forecast, connected generation in the north of Scotland could increase from around 8 gigawatts today to nearly 25 gigawatts by 2030 and almost 50 gigawatts by 2050, depending on the scenarios chosen. And these forecasts are only going in one direction. SSCN Distribution has submitted an ambitious stakeholder-led draft ED2 business plan, which proposes around 4 billion in gross baseline investment, an increase of around a third on an equivalent ED1 period, Translating that into the five-year plan to 2026, we expect to see around 2 billion of capex as we move into the ED2 price control period from 2023. This equates to an increase on annual investment of more than 15% and incorporates just part of the ambitious distribution investment plans out to 2028. The ED2 business plan is subject to final submission next month, but we expect it to achieve 5.5 billion gross rounds by 2026, representing a CAGR of around 8% across the five years. I've already mentioned the value that electricity networks bring the group in terms of portfolio diversity. Within this, our business has a unique geographic spread, offering operational resilience and growth opportunities at both ends of the UK. The Climate Change Committee has forecast that the shift in low-carbon technologies could almost treble the demand on electricity networks by 2050. In our network areas alone, electric vehicle charging and heat pump capacity could see exponential growth by 2030, and it is the likely load expenditure required to keep pace with this expansion which has informed the thinking behind our draft ED2 business plan. Looking beyond ED2, out towards the end of the decade, depending on off-gem determinations and the level of uncertainty mechanisms then required, we expect the growth RAB, the distribution business, to reach 7 to 8 billion, representing a CAGR of 7 to 8%. We have provided a lot of detail this morning, so I'll pause to summarise. This investment plan will not only drive growth for the period to 2026, but also pave the way for SSE's businesses to grow substantially through the second half of the decade. The SSE of the early 2030s will be bigger, bolder and better. we will have cemented our leadership position in the sector and established a significant international footprint. To put some specifics around that, we've today set a number of targets for 2031. Firstly, to maintain a pipeline in excess of 15 gigawatts, delivering more than one gigawatt of net additions per annum. Secondly, targeting a five-fold increase in renewable output to 50 terawatt hours per annum. underpinned by more than 16 gigawatts of net renewables and low-carbon, flexible generation. Thirdly, reach a network's RAV of 11 to 13 billion net, equivalent to an 8 to 9% gross CAGR. And finally, and importantly, meet our updated 1.5 degree science-based carbon targets. Taken together, all of this will drive significant acceleration in EBITDA and EPS. as we deliver on these ambitious plans through the decades and maximise long-term shareholder value. We've made great progress in reshaping and refocusing the SSE Group on delivering what's needed in the transition to net zero. We have a strong platform for growth with a highly desirable pipeline and tremendous opportunities ahead of us. Today's update represents a substantial acceleration of our investment strategy, backed up by clear plans for delivery, funding and a rebase dividend with attractive growth that will create long-term value for all of our stakeholders. We're maximising our potential and this investment accelerates our pathway to net zero through achievable 1.5 degree science-based carbon targets to 2030. We remain ambitious and will pursue further opportunities to promote the long-term success of the company, having given deep and careful consideration to all the many strategic options available to us. We are absolutely confident that this is the optimal plan. At SSE we are powering change and we are creating value.

Thank you.

The eyes of the world have been on Glasgow looking for answers to the climate emergency. seeking to hold global warming to a 1.5 degrees Celsius pathway. COP26 drew in world figures, policy makers, industry leaders and celebrities. And SSE was there too, standing proudly alongside the UK government's presidency, supporting its aims to engage the world on climate action as the UK's national clean energy champion. We engaged with a wide range of stakeholders about practical solutions Not because we think we have all the answers to climate change, but because as a national clean energy champion, we have a huge role to play in the coming decades.

The SSE, of course, is one of the UK's own homegrown green energy champions on this event and throughout COP26 as our principal partner. I'd like to begin by looking at the work of the company as it is a great example of the UK's clean energy transition in action. It's a model we want to see replicated again and again as we seek to decarbonise our power sector, not just here in the UK, but across the globe.

By putting the best possible mix of renewables, networks and other low-carbon businesses to work on decarbonising the energy sector, SSE is creating lasting shareholder and societal values. Our strategic focus aligns with governmental targets that are being adopted around the world, and we are expanding into overseas markets to make the most of the opportunities this presents. In the UK alone, SSE's renewables trajectory will have enabled over a quarter of the 40 gigawatt offshore wind target by 2030. SSE in transmission and SSE in distribution will account for over 20% of the upcoming investment that is needed in Britain's electricity networks to decarbonise heat and transport. And SSE thermal will lead investment in the low carbon technologies that will provide the flexibility that is proving so critical to maintain UK system equilibrium in the transition to net zero. These businesses have common capabilities in the development, construction, financing and operation of world-class, highly technical electricity assets. And now, backed by an accelerated capital investment and expenditure plan for the five years to 2026, they have renewed impetus to pursue ambitious growth and carbon targets in the decade to 2031.

I mean companies like SSE are really leading the way in terms of deploying offshore wind technology and I think at Dogger Bank I think it's the largest offshore wind development in the world. This is a great testament to British skill, British entrepreneurship and innovation so it's a fantastic thing to be part of. I'm very pleased to sign my name. It was really good to see my signature there with so many other people celebrating what is an outstanding British achievement.

We are SSE, and we are powering change.

Thank you. Right. It's probably been quite a long session, so what we thought we'd do now is just take a few minutes for a break so people can grab a coffee or whatever they need, and then we'll be back to answer all of your questions. So we'll see you very shortly.

And the first question comes from the line of Aya Patel from Goldman Sachs. Please ask your question. Your line is now open.

Good morning, and thanks a lot for the presentation this morning. I have a few questions, if I may. So firstly, I was wondering, on the state disposal of the transmission and distribution assets, Will you be keeping the gearing broadly in line with the regulatory assumptions, or could it have a gearing structure that is more similar to SGM did, so more closer to 80-85% gearing? Then in terms of the plan, you've highlighted that I think in previous presentations you had a funding model where you sold down to basically a 40% ownership stake in your offshore wind projects, and then clearly the rest of the asset rotates I was just wondering how many gigawatts of asset rotation have you assumed in your plan and what type of rotation valuations, as in maybe a NPV to invested capital would be quite helpful here. So growth and net gigawatts on the renewable side, that'd be helpful. And then in terms of the plan, how much is allocated to securing pipelines for renewables over the plan? That'd be really helpful.

Okay, thanks AJ. Greg, do you want to take the disposal and I'll do a bit on the plan? You can come back as well.

Yeah, that's fine. Yeah, look, AJ, good to speak to you this morning. Yeah, our assumptions are we'll be around the off-gem gearing levels around 60% to 65%. That's the planning assumption that we've got in our modelling at the moment.

Yeah, look, and... And on the gigawatts and asset rotation, AJ, obviously we're targeting over a gigawatt net, and we talked about over two gigawatts gross, basically. So in terms of particularly offshore or some of the assets where we would rather project finance, I think we'd be looking to retain between 40% and 50%, but doing it on the basis that we can still retain get the project financing that we need. And then on allocation stuff to that pipeline, Gregor?

Yeah, well, we said in the statement, you've got a detailed statement that, you know, there's about 35% of the spend in renewables that's on the existing pipeline and 15% on the new pipeline. That is what we are kind of expecting. So, yeah, that's a proportion of the 5 billion. So that's all I would say at the moment. That's flexible. It depends partly on how quickly we move forward with some of our projects.

And then just, sorry, if you don't mind, one final follow-up. It's just, why 25% on the network? Is that just how you see the world in terms of your investment opportunities, and that can change over time, or... Just the justification would be a really helpful thing.

I think we're looking to bring in a minority partner that has limited operational and strategic influence. We think 25% is a good fit for probably a financial investor. Bear in mind, the transmission business is a lot of new assets which are ideally very good for pension funds on an annuity basis, distribution business gives a bit of, at the heart of net zero, these are really attractive assets. So 25% was kind of the right level and also met some of the requirements that we need for capital recycled in the business. Bearing in mind, we're looking at balancing our overall capex more kind of in a 40-40-20 basis. Whereas networks at the moment is accounting for 55% of our capex and renewables 25%. So it's a combination of those factors.

Okay. Thank you very much.

Thank you.

Thank you. And the next question comes from the line of Deepa Vantenkaran from Bernstein. Please ask your question. Your line is now open.

Thank you. That's Deepa Venkatesh from Bernstein. So I have a few questions. Firstly, on the disposal, so in the waterfall chart of that $18 billion, could you just help understand what all goes in the disposals in there of roughly $4.5 billion? So it's the SGN stake, stake sale. The 25% network sale, is there anything else substantial like asset rotation of offshore wind or anything? Just because that number, the residual number after SGN is $3.3 billion. That seems quite high for a 25% stake sale. I think my own estimate was maybe close to half, you know, maybe $1.8 billion or something. So maybe that's the first one. Secondly, on the option to kind of stay integrated and not do a renewable spinoff, I think in the statement, You've talked about two things. One is that as a standalone company, you think, you know, large projects like Berwick Bank or Dogger Bank can't be funded and that there would be disenergies of, I think, 95 million on an annual basis. So I just wanted to check the basis for that because, you know, GE has announced it's a very large company splitting into three and they come to, I don't know, 150 to 200 million of disenergies. So I just wonder how a small renewable company spinoff could have such high disenergies. And secondly, you know, you've got Orsted building really large projects across the world and they are a standalone company and many of their issuances trade at lower yield than yours, although they have the same credit rating. So I just wanted to understand, you know, what was the advice that was given to you and how do you substantiate these differences versus Orsted and GE? Thank you.

Okay, fine, thanks. Do you want to do the disposals and then we'll do the separation chat?

So, look, the disposals are the 25% minority interest, SGN, which will come through in the period, the £1.2 billion of proceeds. Also some non-core assets, which will include our telecom stake, a 50% telecom stake. and the waste energy joint venture that we're doing in Slough, they will come through in the period. The developer profits in terms of offshore wind disposals and sell-down, that will come through the profit line, the 65%. That will be included in there.

Yeah, look, and on the separation, we are a company that's, that's together at the moment, so obviously whatever we went through in terms of dis-synergies, they are whatever happens when you separate them, and Greg will talk about the detail of that. There are obviously issues, a number of issues with that separation plan. One is the scale of businesses that you can take on. There are financing issues as well. It's a less attractive financing structure. Plus you've got just some of the core synergies around duplicated central and other costs. So overall, we were very clear that we've got the optimum plan we need for now. And as we said at the time, we'd done an exercise to go through the detail of what some of those numbers were. And we obviously put those out there for those that wanted them. But Gregor, you might want to comment in more detail.

Yeah, we've got all the PLC costs that you need to be duplicated. Actually, IT costs are pretty significant in this day and age. You get good synergies across the group, procurement, HR, finance, all the usual costs you would get. In addition, you've got EPM, because you need to have energy portfolio management functions in this market. You know, it's a volatile market. You need that sophistication. And then you've got additional financing costs that you would have coming through on an annual basis, just the weaker nature of the credit of the businesses. I mean, you talk about Orsted, but remember Orsted is majority state-owned, and I think people forget that when you look at their analysis. And then on the kind of one-off costs, those are costs that we would have in terms of dealing with some of our debt that would require some kind of payments because of splitting the group. So that's kind of where we are on those costs. We've obviously done a lot of work on that internally, and we've had some professional work on helping us with that as well.

Okay, thank you.

Thank you.

Thank you. And the next question comes from the line of Martin Young from Investec. Please ask your question. Your line is now open.

Yes. Good morning to everybody. Hope everybody's safe and well. I've got three questions, if I can, please. The first one is around the big strategic picture that you've painted this morning. I think we all agree that there is huge, huge opportunity both nationally and globally and obviously you've set out your ambition to be a global player in offshore wind. You set out your national ambitions in networks but given the scale of that global opportunity in offshore wind and given the fact that You're kind of opening the door with a 25% sale in the networks. Is this not just a halfway house to full separation? And in a number of years, when you've secured some projects in other jurisdictions on the offshore wind side of things, we're going to be coming back and having a discussion about about a full demerger of networks and renewables. So interested in your views there. The second question is around the presentation of net capex when you talk about networks. Is that you basically just taking 75% of gross capex or is that gross capex less what you believe you are going to get in for the 25% disposals you've outlined this morning. And then the third question, which is hopefully an easy one, I did note that the interest rate has moved up very slightly. You have very low indexed linked debts. in your portfolio, so just wondered what was behind that increase in the average rate in the first half of this year relative to the first half of last year and indeed relative to the full year FY21.

Thanks. Okay, great. Thanks, Martin. I understand exactly the issue. I think on global offshore, I don't think there's a global renewables company out there today. The biggest one in the world is based in America and only, as far as I can tell, really focuses on solar and onshore wind. The global renewables market is vast. So we will be looking to enter selective geographies and do that on that basis. We've set out a very clear plan for how we want to do that. Martin and his team are obviously working away in Denmark currently and other locations. But we've got a fully fundable plan that we believe in. We see networks as being core to the future of the business. We see huge opportunities coming from the growth of those networks as well. As Greg has said, as and when we do that disposal, we'll be looking more at financial players and we'll be looking to maintain control and participate in the huge upside that we see coming out of networks. we are absolutely focused on the plan that we've got and we don't see it as a halfway house to full separation.

Yeah, on your point on CapEx, it's 75% of gross CapEx. On the interest, it's kind of marginally up. It's, you know, partly reflects, you know, some of the refinancing that we did and, you know, over a period of time. we'd expect the industry to slightly go up. The one point I make is on the index-linked side of things, the SEC only has 3% of index-linked bonds, probably the lowest of all the utilities. We are highly levered to benefit from inflation, and where inflation is at the moment, I think that is beneficial. So I think we're in a pretty good position in terms of our portfolio now.

Okay, thank you. Thanks.

Thank you. And the next question comes from the line of Chris Labatt from Morgan Stanley. Please ask your question. Your line is now open.

Good morning. Thank you. Thank you very much. My question is first of all just on your funding package. You've announced today a package that includes an expanded asset rotation program, a reduction in the payout to equity which is a slightly different approach to National Grid in that you decided not to gear up the balance sheet. Did you give consideration to increasing gearing as part of the package? And I guess with a V1 credit rating, just some comments around how you arrived at the final package would be helpful. And I guess the second question would be just some general comments on your EBITDA growth, which looks very strong in renewables. EPS growth is slightly lower at 5% to 7%. If you could give us just maybe a guide to where the stronger and weaker contributors are within the segments, that would be useful. And then just a very quick one on storage, which was very strong first half. If you could give us some sense as to what you're looking at for the full year for that segment, it would be quite helpful. And I guess a difficult question to answer, but is there any sense for some sustainability in the contribution from that asset going forward?

Thank you. Okay, great. Well, current volatility, I suspect so, but we'll let Martin comment on the storage stuff. Just quickly, before Gregor dives into funding and any other comments he's got, on the EBITDA EPS growth, obviously we've got very substantial growth in the RAV of the networks business as well in there. So what you've got here is a balance, Chris, of you'll have stronger earnings growth in generation or renewables specifically or renewables. generation and renewables than you will get because we've got strong growth in the RAF base of those networks businesses so they won't be generating or throwing off quite as much cash or generating quite as much profit as you might expect and I think simplistically that's how I'd look at it and that's why we talk about the balance of good strong earnings growth but also very strong asset growth as well regular funding.

Just to add to that I mean it's something that we've been seeing for a number of years now that returns are coming down in networks and you can see that equity, return of equity is coming down almost halfing in terms of the price control. That has an impact, but we've got brilliant, absolutely brilliant RAB growth, which is creating a lot of value. So that is really positive. In terms of the funding package, it's a balance. When we've talk to our shareholders. They wanted us to have a balance and reasonable levels of debt. They wanted us to have a strong investment grade credit rating that allows us to have the flexibility to deal with the volatility that we have in the markets. And we worked through that. I think the package that we put together gives a positive position. Clearly, we have to balance the dividend with growth, and we've got substantial growth coming through the business. And the final thing I'd say is that, you know, having given the rating indices a clear indication of our plans, it's good today to see Moody's, you know, affirm our rating as stable from negative outlook. And that's a really positive thing for our business. So I think we've got the balance right. You know, we can see, in a couple of years time how we progress with our plans and where we are to consider whether we want to gear up but gearing up has consequences and I don't think that's the right thing for us to do at the moment I'd echo

Greg's comments on volatility and Martin and all the businesses that he's got, one operating in volatile markets, but secondly, the scale of some of the individual projects we do means that we prefer to have a strong balance sheet. We need the scale of the business and we need a strong, solid balance sheet. We're obviously delighted that we've been able to deliver that as part of the package today. But anyway, volatility and storage, Martin.

Hi, morning, Chris. Yeah, I mean, essentially, storage, we kind of follow a relatively standard kind of hedging methodology where we just basically hedge the kind of summer-winter spread. And there's obviously been a lot of spot volatility through the summer. So that created an opportunity for the assets in the first half. But that will involve a reprofiling of some of the hedges in the second half. So effectively, a bit of value has essentially moved forward. But clearly, if through the winter we see a whole bunch of high spot for the solidity, that will clearly be a very big positive for the assets and for the business. And they're now obviously all set and engineered to respond to those conditions. And not only does it create quite a good revenue opportunity, I guess it provides very good defensive hedge qualities. to the rest of the book, including the intermittent wind risk we obviously have. So it clearly has its place in the portfolio. I think the second part of your system was, sorry, the question was whether we expected that to repeat going forward. Don't know, but it strikes me that the market logically, there's less storage clearly in the market. And it goes back to the decision on RAF, which has received some commentary, obviously, over the last few months, given what's happened on prices. But LNG competition seems a little bit more likely aggressive internationally that removes effectively a bit of storage from the systems and obviously the end of coal removes another bunch of energy storage at a point when the market is by definition a little bit more intermittent and you'd have thought that these assets would have a role to play. It is noticeable that gas price has been moving around a little bit on wind speeds and indeed CCGT demand that arises from those wind speed variations and so clearly gas storage has a role to play in that integrated energy system and we're very pleased that we've got those assets.

And I think even longer term as well, Martin, the possibilities for hydrogen storage and things like that will, I think, will play into those assets having an enduring value. Thank you.

Thank you very much.

Thanks, Chris.

Thank you. And the next question comes from the line of Jenny Ping from Citi. Please ask your question. Your line is now open. Hi, thank you.

Just two clarification questions, please. Just on your 5% to 7% earnings increase or CAGR over the period, can you clarify if that is post the minority sell-down plus the farm-down expected of offshore as well as the farm-down gains? And then secondly, just going back to the four and a half times net debt EBITDA target, can I also just clarify this is effectively excluding all of the offshore wind assets which you expect to farm down to 40% as they'll be for project finance and off balance sheet. And how do you treat the minorities of the ET and ED businesses here? Thanks.

Okay, thank you. Greg, quite technical, I'll leave it to you.

Yeah, so the CAGR assumes that we've sold down the minority interest and also farm downs. Any gains on the offshore wind development projects will come through the profit line, so that will be included in our EPS number. On your net debt to EBITDA, we will take the proportion of the debt. We've got, as you know, a detailed schedule on our website that details how we calculate that adjusted debt to EBITDA ratio and it takes the prudent position in taking into account our earnings on an equity basis. So that's how we would do it and we do the same for the networks businesses as well.

I think there was one there maybe about the accounting for the 25%... Oh, okay, yeah. Sorry. Jenny, is that okay or any follow-ups?

Sorry, I'm not clear on the meta either. I haven't seen what's on your website, so can you just walk me through that, if you don't mind?

Well, it's quite technical. Basically, the debt that the minority interests have, we wouldn't include in adjusting their debt number, and we'd take our share of the EBITDA number.

And then just on the offshore wind, because they're all going to be project finance, presumably that's all off balance sheet?

That's right, yes.

Okay, thank you.

Thank you.

Thank you. And the next question comes from the line of James Brand from Deutsche Bank. Please ask your question. Your line is now open.

Hi, good morning and thank you for the presentation. I've got three questions. Firstly, on the guidance, power prices, obviously near-term, but also medium-term power prices have increased a lot in recent months and also inflation expectations have increased a lot. Maybe you could just comment on your 2026 guidance, whether that reflects the current forward curve to both power and, I guess, less importantly, inflation, or whether it reflects prices as they were a few months ago or earlier. That's the first question. Secondly, on the networks, the 7% to 9% equity return you're saying you're expecting from your networks, I'd just be keen on understanding that a bit better. So does that include top X, ODIs, and financing or is it just Totex and ODIs because sometimes companies show these metrics in different ways and maybe you could just help us understand a bit whether you expect to outperform much on Totex and ODIs because I think you already have some outperformance on the on the financing side and 79% didn't seem to leave that much that's over for Totex and ODIs and then the third question As you mentioned, gas storage is being an area of investment potential for the future. A lot of people are talking about new salt caverns being needed for hydrogen. How soon could the future be? Because it seems like, given the time it takes to build new storage, that that might have to come to the agenda pretty quickly and probably before 2026, given the ambitions that are out there for hydrogen. Thank you very much.

Okay, great. I think there are two final questions. Martin, do you have any new gas storage?

Do you want me to say anything on power prices first?

I'll give it on the guidance and then you can comment on that as well. I mean, clearly, we've seen prices move up, not quite as much at the back end of the curve, but we will have some value benefit coming through there and there could be some inflation. So we take our point in time. I think we're reasonably prudent in our view. So if the markets did move up a bit and we have clearly higher inflation over a prolonged period of time, we will benefit. On the return on equity for the networks businesses, that's a target, remember, and it is a target that is post-tax nominal. So you have to inflate the cost of equity and then look at outperformance. We're not getting into specific numbers because it'll be different for distribution and transmission. Distribution, clearly, we're putting a business plan into off-term on the 1st of December, so we want to kind of pledge our views on that. But, you know, we would expect some Totex outperformance. We'd expect, you know, to kind of get some incentive outperformance as well. And over a period of time, we've managed to get some debt outperformance. So it is a target and it is a range. And we'd want to work towards the top end of that range if we can, but that will be challenging.

And then Martin, any comment? I'm not sure the power curve goes down to 26. I've not seen too much trade in that period, but...

Yeah, I suppose that's exactly what I was going to say. The power price is obviously probably half to winter 22 and then probably loses another roughly third on paper to winter 23. And there's nothing much beyond that. And it's actually reasonably illiquid beyond, let's say, summer 23. Although positively... I mean, gas prices have been pretty constructive, but actually positively for our exposures on power, carbon prices have obviously been very robust and are being driven by policy ambitions that perhaps if we were discussing this a year ago, we may have had a bit less conviction about, but they seem pretty robust and pretty strong. And it's not just kind of UK policy, kind of post-Brexit, it's own UK emissions trading scheme, it's what's happening in Europe today. with its own carbon ambitions and sea bands etc. So that's going to be important for power prices going forward. In terms of hydrogen I mean I guess I mean for me this is a real kind of big policy story movement over the last year. I mean hydrogen was being talked about a year ago and is now being talked about with real conviction and obviously the government has made various announcements about its own ambitions to its net zero strategy. including selling 5 gigawatts of hydrogen provision by 2030 and production targets as well. At the moment it's a bit difficult to know exactly how all of that coordinates itself through but it's clearly coming and as you rightly point out our assets are well placed to respond to the requirements of that transition and we stand ready to do so. At the moment we're probably a little bit more focused on the carbon capture story which is obviously also going through its own policy and actually happy to report is sticking to timelines, which I think is real positive.

And from a physical sense, Martin, obviously our gas storage assets are sat right in the middle of the Humber cluster in terms of between Humber and Teesside. Absolutely. Great.

Thanks a lot.

Thanks, James.

Thank you. And the next question comes from the line of John Musk from RBC. Please ask your question. Your line is now open.

Yes, good morning, everyone. Three questions, I think, from me. One, a clarification, just going back to Deepa's question, which was looking at the $4.5 billion of disposal proceeds. And then you tell us we have to take out $1.2 billion for SGN, right? But that would still leave 3 billion plus on the other disposals. I would assume that the RAB at the time you're going to sell those assets is going to be in the 9 billion level and the 3 billion would imply somewhere, or 3 billion plus would imply somewhere around 13 billion in proceeds. that that looks like quite a hefty premium to rcb that you're assuming on those disposals and just wanted to clarify if there's quite a chunky other disposal that we should be thinking about in there you mentioned some items but i'm just not sure how many millions of pounds we should ascribe to those um secondly and sort of bigger picture obviously the The calls for a full separation have been quite vocal from some shareholders. I assume we've discussed these new plans with all shareholders. So have you convinced some of those more vocal people that this is now the right way forward? Is there any discussions you can share from those? and slightly linked to that and only a small throwaway one at the end. Did you consider cutting the dividend now? Why wait to 2023? Obviously you had a previous plan, but if it's something you need to do, should you be doing it sooner rather than later? Thank you. Do you want to do the disposals?

Yeah, I'll do that too. Yeah, look, John, I'm not going to give you precise details. You guys are big enough and old enough to work out the numbers. But look, we've got telecoms business, and you can go back and refer to what we sold that for, for the previous 50%. We've got a waste energy business, joint venture that we're building at the moment, and then we'll sell out. And you can get the relative multiples from our previous transaction. These will be a few hundred million. I'm not going to detail that. And I think in your... And most analysts, some of the parts, you tend to underestimate the premium to have of these businesses. Our transmission business is the fastest growing transmission business in Europe. We can see a lot of opportunity there at the heart of the, not my words, but previous politicians' words, the Saudi Arabia of renewables. There's huge opportunities there, which... Financial and infrastructure investors are always keen to invest in and our distribution business is the heart net zero. So, you know, maybe it's your assumptions there. The one thing I'd say in disposals, our record speaks for itself. We've outperformed in all our disposal programs and I expect to do that in this one as well.

Okay, thanks. And in terms of our plan, as we said earlier, we've We announced in May that we were going to have a significant update to the CAPEX review. We trailed a number of things over the summer, you know, success of the disposals program and significant growth, more opportunities such as the acquisition of the business in Japan. We've seen a lot more ambition now. The government probably caps off for the 2035 target. Martin's referred to a lot of policy that's come out including the policy that came out around COP which in a more micro basis rather than a one and a half degree global basis is driving forward the UK's agenda and on the back of that We need scale, we need a strong balance sheet. We don't need to be distracted. The opportunities in front of us are enormous now. And as we've talked about, we need reasonable financing and we've given you that. And any sort of separation of the business would give significant financing issues. So we also obviously had a lot of discussions with shareholders post the May results and all the way through the autumn as well to discuss all the things that we were doing to understand their views. We did get a range of views. We continue to transform and pivot the business strongly into the net zero world and have done that very well since we separated the retail business. So today obviously we treat all shareholders the same and today we've announced all of those numbers and all those plans and we obviously look forward to future engagement with all our shareholders over the coming weeks and expect that to be positive and we'll take their comments positively as well. In terms of the dividend, as Gregor said, We had a package. We had a lot of things to achieve. We had to take advantage of the opportunities in front of us. We have to deliver for society. We also have to deliver strong growth for shareholders over the long term. We wanted to maintain a strong credit rating, a strong balance sheet, so we could take advantage of the colossal opportunities like Berwick Bank that we have in front of us. And this package, I think, delivers on all of those fronts strongly. We had no reason to change a dividend promise that we'd made previously, and so we'll maintain that promise. But we also wanted to reflect going forward the opportunities for the group and the strong growth potential of the group. So we've set a dividend at a level that we think is sensible. We've underpinned it with a growth promise which is aligned to the strong earnings potential of the group later on in the decade. And we've given people a very clear five-year view, which I think is far more of a view than you'll get from most companies about where that dividend's going. And we've set clear and ambitious targets out to 2031 to demonstrate what we're also looking to target on a longer-term basis. And I think on that basis, the dividend... has been maintained and then set on a basis that's entirely consistent with hitting all the things we need to deliver value for shareholders and wider stakeholders as well.

That's great. Thank you very much. Thank you.

Thank you. And the next question comes from the line of Ahmed Faham from Jefferies. Please ask your question. Your line is now open.

Yes, hi. Thank you for taking my questions. Just a few from my side. I just sort of think if you could share with us a little bit more about the underlying assumptions for that technology behind the new business plan and how do they compare with your sort of previous sort of business plan assumptions. And if there are, you know, any sort of measures specifically you have taken to lock in the CapEx on future projects, given the commodity price assumptions are today. So that would be my first question. My second question is I think you show a chart, one of the charts, and at least 10% return expectation for renewable investments. Could you talk a little bit about how that sort of evolved? How does that compare with some of the projects you've delivered? in the past and so the underlying leverage assumptions behind that calculation. Thank you. Okay, that's great.

The line wasn't that clear, but I think you were asking about technology and the underlying assumptions of the business plan and particularly how they may be impacted by either probably commodity and or inflation generally. So we're obviously driving forward with technology. Dogger Bank's installing the largest wind turbines in the world. When we get to Barrick Bank, we'll probably be looking at bigger and more innovative turbine technology again. In terms of that business plan, as we've said, around 60% of it is already committed in terms of CapEx. So we've still got more to go. I think generally on those investments, We'll obviously have to price them up based on the commodity price at the time. This may be a short-term bubble. It may be a long-term bull run in terms of underlying commodity and wage price inflation. But I think we're going to be in no different position from anybody else there. I think the only difference that we have as a company is that we've got an amazing set of options already baked in in terms of seabed and planning and land options and things of that nature which support those developments, whether that be offshore onshore wind, portfolio of onshore wind, things like Corrie Glass, etc. So I think we can definitely be competitive. We've proven that we can win auctions before and we can do so on an accretive basis looking at something like Doggar and or Seagreen. We've obviously sold on those assets post the auction wins at significant premiums and generated value for shareholders on the back of that. So 60% of it's kind of locked in and we know what we're doing. The other 40%, we're very confident in the quality of the underlying options that we have. And we're also confident that the market will be able to bear the prices from that inflation. But I think Martin may want a quick comment as well before we hit Gregor on the return.

Yeah, fantastic. I mean, obviously, projects have ups and downs all the time. So yes, a case of metal prices up, other wage costs may be up, but obviously indexation is probably higher and FX probably looks better from the UK perspective. We've also got very strong relationships with AEMs, really good kind of history with them and also obviously a very ambitious plan going forward which helps us create an economy of scale there. And ultimately, if you think about offshore wind, even with some of these commodity price movements, it still looks very competitively cheap. And so there is scope, clearly, for that to be passed through in kind of auction processes.

Okay. I think on your 10%, I think you were referring to offshore wind. So, you know, that's a levered return. And we would assume for the generation aspect of it, it's going to be 60%, 65% levered for this transmission element as well, which tends to be geared at about 90%. But that then gets sold off. If you look at returns for our existing projects and what we're building at the moment, Beatrice obviously is well above that, significantly above that. I'm not going to quote your number, but it's very attractive in terms of the returns we made there. And that's partly because of the way we structured that and how we've taken that forward. But also, that's been a very good project. One of the earlier projects In terms of Dogger Bank, we've said we expect to be in excess of 10% and Dogger Bank AB, and we'll announce financial close to C later this year, we'd expect them all to be well above 10%. Seagreen, because it doesn't have a CFD contract, is getting towards 10%. It depends on your assumptions on power price and the power curve. You'd probably say today if the power curve where it is and stays where it is, it probably just gets over that 10%. But it is a target. But you know, the discipline that SSE has, we tend to kind of out-achieve and out-perform our targets.

Thank you. Okay, thank you.

Thank you. And the next question comes from the line of Dominic Nash from Barclays. Please ask your question. Your line is now open.

Yes, good morning. A couple of questions from me, please. Firstly, just following up from an earlier question on capital structure and your position as to whether or not you're going to do a potential split or not, as one or two of your shareholders might be agitating for. Can you just confirm that your decision today, your final decision is unequivocal out to 2026 and we should see from the work today that there's going to be no option for you to sort of change your mind in the next sort of years. The second question is on the 60 pence dividend. Could you give us some colour on why 60 pence? Is there a risk that It neither satisfies the income investors and neither satisfies the growth investors, or do you think that that is the optimum number and right? And the final question I think is probably following up from Jenny's question earlier on your sale of your 25% stake. Can you just tell us how will you be accounting for that post the sale? Will that be fully consolidated or proportionally consolidated? Fully consolidated. The capex and the net debt numbers, will they be the whole numbers and how do they get reflected in your net debt EBITDA calculations? Will it be consistent with your other JVs and planning? What's the scale for EPS dilution, which I think was probably what Jenny was questioning on the growth rate, which I believe you said would be a 5-7 growth rate after the disposal of the 25%. Is that correct? Thank you.

Okay, I'll let Greg confirm all the things you've asked at the end, but I think you are correct. Just, yeah, the plan today is absolutely the optimal plan. The board are very, very clear that that's what we want to do and that's what we're going to go forward with. There is no other plan out there. We're committed to that and that's what we're going to go and deliver. And I think in delivering that, that will give us the base that we need to deliver even more going forward. I think that's important as well.

I think we've answered the dividend. It's a balancing act and we've got to look at the significant growth. We are putting in a billion pounds additional a year into our CapEx plan. When we've talked to shareholders, our shareholders understand there's a balance there. And we think what we've provided today is a good balance for moving forward and growing the dividend. You can put numbers into a model and play around with them and you can get a number around that. I think this is a number that we've worked on for a number of months with the CapEx programme and looking at the sensitivities around the business and That's what we've come out with. I don't know if I've got too much more detail there. On the networks business, we will proportionally consolidate. That will come out as a minority interest line in the numbers. We will take out on our adjusted debt number the debt associated with the minority interest, as you would expect, but we wouldn't recognise the earnings either, which is consistent with what we do with other joint ventures. And then on EPS, yes, it's after the disposal of the 25% stake. The EPS dilution from that stake, I think, from then was around 6 or 7p. So that's kind of the relativity of that.

Thank you very much.

Thanks so much.

Thank you. And the next question comes from the line of Mark Fruchene from Credit Suisse. Please ask your question. Your line is now open.

Hello. Thank you for taking my questions. So firstly, on the 12.5 billion, just to be clear, that doesn't include the partner share of CapEx and networks, right? The 25% that you'll divest, their share of the CapEx and RAP growth, it doesn't. It's not reflected in that $12.5 billion. Secondly, on the use of off-balance sheet debt, clearly we've got the numbers for Seagreen and Doggo and Beatrice, but in terms of the quantum of off-balance sheet debt that you'll be using, which I guess we would need to add to the CapEx to get a true picture of what you're investing, could you give us some colour on that? And finally, just on the 25% script cap, how are you intending to exercise that? Would that be undertaking an on-market share buyback, or would it be through other means? Thank you.

Okay. Well, even I can confirm the $12.5 billion excludes the 25% that is being paid for by the assumed new owner on the assumed sale or potential sale of the business. So obviously the overall capex would be higher if we did not sell those businesses down. So I'll confirm that. And then the off-balance sheet, I was going to think about that one, but anyway, Gregor.

Yeah, so... I think your question of balance sheet, is it kind of impacting on the ratings and how does all that play out? You've got to remember, you know, with the disposal of SGN, actually there's quite a lot of off-balance sheet finance that comes off. So our percentage of off-balance sheet funding comes down. If you look at those projects and add the gross spend, you know, clearly we'll get significant... additional capex but we're talking about net appropriate ssc and you know the offshore wind projects are 40 so we pick up 40 of that through our investment we treat the investment as an equity investment not a capex investment and that's how we account for it so i don't think i don't want to get into gross and then detailed numbers but we can take that offline if you need a bit more detail and the script That's great. We'll manage that through a buyback to keep it at a certain level. I think that's probably the easiest way, but that's what we're proposing to do.

Okay, so would you do the buyback after the final so you'd look at what it's been for the full year? Because I think there's some nuances around exactly when you would do it.

Yeah, we'd do it after the final because the interim is a smaller proportion. of the overall dividend. So we do have the final.

Okay, thank you.

Thanks, Mark.

Thank you. And the next question comes from the line of Sam Eyre from UBS. Please ask your question. Your line is now open.

Oh, hi. Thank you. Good morning, everybody, and thanks for a great presentation and very helpful questions today. I've got one more question on sort of the big picture and then maybe one on detail that we haven't touched on yet. But on the big picture, you used the phrase a few times that this is a fully funded plan. And when I heard that, I sort of understood you to be saying, you know, there wouldn't be any questions with the plan period of needing to raise additional equity. And I just wanted to give you a chance to confirm for me that that's right. And then also, I suppose... Just help us understand how you thought about the trade-off between funding this very strong growth plan that you have by selling down stakes in the networks versus maybe by raising equity, because that could have been an option and others have pursued that route. So a little bit to challenge what you're setting out today, just wondering how you thought about that trade-off. And then, that's my big fish question, and then if there's time for a little detail, just to pick up one of your charts that shows a decent contribution from the abated gas generation just in a few short years' time. I guess that might be a question for Martin, but I wondered if you're able to share any of the economics around abated gas and kind of how that works in terms of carbon. Do you have to pay – do you get the carbon certificate back on abated gas, or what's the – What's the economics of the abated gas business that you look to be getting into very quickly from me? So those are my questions. Thank you.

Okay. Big picture. It is fully funded. I can't remember the slide in there that Greg has showed, but with the $18 billion basically in the breakdown. So we just thought it was important, given other presentations other companies have made where there was some there were some questions emerged after the presentations about how that was funded, so we thought that was important. And ultimately, I think in trying to balance our capex and what we do with our balance sheet, we decided that a disposal of networks and doing things that were in our control where we're at the behest of the market to do anything was the right way to go. It's always, I think, good to have strong organic plans. So that's why we went for the disposal rather than anything else.

Yeah, and also to probably rebalance that CapEx make-up because the network spend is increasing significantly and therefore we would have been out of sync between renewables and networks. So there's a balance of that and taking value at a point in time where premiums are rather high. So why wouldn't you take some value there?

Yeah. Look, and Greg, Gregor, obviously, has got a slide there generally on returns and what we'd expect overall on returns. But Martin may want to comment more on the structures. Obviously, we're working through the details with government at the moment.

Yeah, well, I'll just say on the EBITDA, there isn't a significant amount of EBITDA coming through from any of the kind of carbon capture hydrogen kind of generation because the capex starts later in the kind of –

period so you don't get the earnings coming through till later in the next period but martin will comment on the mechanics of the contractual arrangements with government right i mean essentially this is all kind of going through consultations at the moment i mean the government's obviously in its process with the clusters of which the east coast cluster and high net one the acorn cluster at the moment is reserved the acorn cluster contains peter head the east coast cluster contains keeping So the notion that they're discussing with players at the moment is effectively a dispatchable power agreement. And as I say, this isn't all confirmed, but we think the direction of travel is probably a private contract, there's probably a payment for availability and performance, and there'll be a mechanism to ensure priority dispatch for abated clients over unabated clients, probably through some top-up payments, which compensates for any short-run marginal costs and disadvantage and then the TLS fee will be just passed through and again discussion as well on term of that but 15 years is a number we've heard a bit and is obviously consistent with other contracts administered by the LCCC and I guess critically if all of that comes together then these assets will operate in the market just in the normal way in the merit order but the process is that the clusters are in their own discussions and negotiations Once that completes, then the power stations available will also get in their own discussion. So this is a long way from being finalised, and what I've just outlined is a direction of travel and understanding rather than a comprehensive, this is the final answer.

Fascinating. I think we look forward to hearing more about that, and it's groundbreaking stuff. So thanks, Martin.

Probably down to the last one or two questionnaires if we can, because we're starting to run out of time. But if there are any more, we'll try to take them quickly.

Thank you. And we have a next question from Bartek Kubicki from Societe Generale. Please ask your question. Your line is now open.

Hey, good morning. It's Bartek Kubicki, and thank you for taking my questions. Actually, three issues I would like to discuss. The first one is the follow-up on whatever we discussed before, i.e. your asset disposal. You are disposing of premium assets, so I guess you are expecting premium valuation. What if the premium valuation doesn't materialize, meaning what is your alternative plan for that? Cut on capex, capital increase, gearing up, whatever you can imagine. So what's your alternative plan? Secondly, on these four gigs of renewables addition in the next four and a half years. Obviously, this is Dogger Bank, Seagreen and Viking. Could you actually repeat or elaborate again what are the other projects you are including in the plan and whether they are conditional on CFDs or you are willing to go merchant for instance, given the fact where the power prices are right now. And lastly, on the above 10% equity return on your offshore wind, if we can actually compare apples with apples and if you can give us a spread over your WAC you are assuming in those calculations. Thank you.

Okay. Look, on the disposals, I don't think anybody recently has struggled to dispose of any UK regulated assets. and that probably has persisted for the last 20 years plus. So I think we remain pretty confident that's the case. If we have to come up with a plan B, then we'll do so. But we probably haven't spent a lot of time on it, and I wouldn't want to have idle speculation about something that I don't think is going to be needed at this point in time. So we remain confident that we'll dispose of those businesses as and when we want to. On the renewables bit... As we've said, 60% of the capex is committed. There are a variety of projects you've got there. Martin went through them in some detail, so he'll probably end up slightly repeating himself, but he can run through some of the things that we've got. There may be some substitution depending on exact timing, an exact cut-off. If you wanted to cut things off in five years' time, we might have bought slightly more or slightly less of certain assets. But, Martin, maybe you do that, and then Greg can go to the WAC calculation or spread

Yeah, I mean, so we rattled through this a bit. But then obviously you've got Dogger Bank, AB&C, Sea Green. Then you've got Sea Green, 1A, Arco and Viking. And then on top of that, there's options on the onshore pipeline. We talked about our bid in terms of Thor in Denmark. Obviously don't know the outcome of that. And then there's other things that we are kind of looking at from a development angle as well. So we're pretty confident about that number. Is that what you're looking for?

I think so, Martin.

Sorry, we didn't quite catch it.

We've got Seagreen 1A, which is essentially the current one, and then we've got Barrick Bank, which some people may view as the Seagreen extension because it's kind of next door.

I mean, sorry, my question is here whether you are, I would like to see your risk appetite right now and whether you would be willing to go merchant with those projects as well. I mean, sea green extension or onshore wind. or whether this is conditional on any CFD options.

We'll make that decision at the right time. We've obviously, we're merging the 58% of Seagreen at the moment. And I think we've got a range of options as to how we try and mitigate risk on it. But Martin, you may want to comment in the detail what you and your team should do.

No, that's absolutely right.

Sorry, can you hear me okay?

Yeah. There's an auction process next year. Obviously, we are looking to see whether we can compete successfully in that. And then we'll review at the end of that process, whatever we need to do. I mean, just in terms of merchant exposures for wind, probably I'd kick myself if I didn't point out that the flexibility of the rest of our portfolio gives us some cover against some of the risks that other people might face, which is obviously an advantage to our overall portfolio.

Okay. And Greg? I'll give you a kind of post-tax nominal statement. type return it's easier to give you that because again you can work it back and do the maths it's around seven seven or eight percent that type of range that we'd be looking at in post-tax nominal for offshore wind and in terms of IRR spread I'm not going to give you a spread because you know you're putting your mortals for wax. Everyone's got different wax numbers.

You can all tell us your wax and we can all tell you whether we think we're materially different from your consensus or not. Okay.

I made it easier for you, Bartek. I gave you the number.

Nothing easier than that.

All right. Let's discuss it later.

Okay. Thank you. Thank you. Right, last question, I'm afraid, because I think we will be running out of steam otherwise.

Okay, thanks a lot. And the last question comes from the line of Verity Mitchell from HSBC. Please ask your question. Your line is now open.

Ah, morning, everybody. I got the last question. Here's a question just back to dividends. You've explained a lot about your dividend policy, but you're the only company with regulated assets that's not got any inflation-linked dividend. So if you just talk through, why you decided to go for absolute 5% growth rather than what you've done before, which is inflation. Thank you.

Well, we're confidently expecting that that dividend of at least 5% will be higher than inflation. And as we've said, it's going to be at least, and that's just the benefit of owning SSE and having an attractive mix of regulated and market-related dividends. which are tucked into areas of such high growth at the moment. I think also with our businesses, they are fairly unique in the sense that they've got so much growth in them compared to many other businesses at the moment. Gregor?

Yeah, no, I think you've answered that. You know, I think it's also the mix of the business, you know, be 40% renewables, 40% networks and 20% other technologies, including thermals. So it takes that balance and it gives a bit more certainty to the shareholders in terms of what that growth profile would look like, at least 5% growth, which I think will then be able to kind of map out in their models a bit more firmer than maybe an inflation-based model, which is becoming a bit less kind of the focus. As I said earlier, we have less index linked debt as well, so that gives a bit more flexibility as well over and above inflation.

Okay, thank you. Apologies if there are more people with questions. If you come through to the IR team, we'll definitely be looking to arrange calls. We'll have an extensive shareholder engagement and indeed analyst engagement program going on over the next couple of weeks. And we'll obviously look forward to seeing you and hearing from you. And if there are any specific questions as well, obviously the team can try and answer some of those on email as well. Really appreciate you all giving your time this morning. I know it's been a long one and there's a lot to digest, so we look forward to continuing to set out the benefits of our new and bold net acceleration plan for net zero. And thank you very much and look forward to seeing and speaking to you over the coming couple of weeks.

Thank you. Thank you. This concludes today's conference call. Thank you for participating. You may now all disconnect.