SSE plc

Good morning, everyone, and thank you for joining us today as we set out our transformational, fully funded investment plan to deliver high quality capital and earnings growth. As I give my first presentation as Chief Executive, I am delighted to say that before us lies the most exciting period of growth I have seen in my near three decades at SSE. And by leaning into the UK Network's opportunity, we are underlining our position as a top tier European energy player. Over the course of the next 30 minutes, we will outline how we have been ramping up delivery of game-changing infrastructure, provide a brief update on our financial performance, and finally, lay out the detail behind a bold new plan that faces into the paradigm shift underway in our sector. Before I hand over to our Chief Financial Officer, Barry O'Regan, to run through our results for the half year, I want to briefly set the context for how our integrated strategy optimises growth and creates long-term sustainable value. SSE's position at the heart of the energy transition in our core UK and Ireland markets has created a once-in-a-generation opportunity for the group to significantly increase our investments in homegrown, secure and clean energy infrastructure. We have great options across networks, renewables and flexibility, but within that, the single biggest opportunity is in transmission. And that's our focus this morning. Under this plan, we will be investing £33 billion, of which 80% will be in networks, growing the regulatory asset base by a compound annual growth rate of around 25% to 2030, and positioning SSE as one of the fastest growing electricity network companies in the world. This will drive increasing levels of high quality index linked earnings with clear visibility to achieve between 225 to 250 pence earnings per share by 2030 after adjusting the equity placing we have announced today. We are also able to extend our sustainable and progressive dividend policy over the same period. And it is important to emphasize that this is a fully funded plan with a firm commitment to maintaining a strong balance sheet. Around 90% of this will be self-funded through strong operational cash flows or by steady increases in our levels of net debts and hybrid capital. The remaining 10% will be achieved through a combination of today's equity placing as well as targeted disposals. This is a hugely exciting investment plan which will deliver significant long-term value creation over the course of this decade and beyond. Our confidence is underpinned by SSE's track record of delivery. The roll call of SSE-built additions to the energy system in recent years is impressive and includes the delivery of complex projects like the Shetland HVDC connection, Viking Wind Farm, Seagreen, the North East 400 KV scheme, Slough Multifuel and KB2. And the relentless delivery continues with the headway we have made on construction and planning milestones over the past six months. In networks, construction is now well underway on four of the 11 major transmission projects, with all major consents submitted and supply chains secured for the remainder. In renewables, we are making strong progress on our 2.5 gigawatt construction program, including Dogger Bank, where 88 out of 95 turbines are now installed, with the project remaining on track with the guidance we issued over a year ago. In addition, Yellow River is fully commissioned and Berwick Bank is consented and on track for participation in upcoming auction rounds. And flexibility completes the picture as we progress construction on two vital new thermal generation projects in Ireland. As we'll set out today, networks are the growing core of our investment plans, but they continue to be complemented by selective and disciplined growth projects across our other businesses. And of course, it is critical that in making this progress, we put our people first. Everything we will talk about today is underpinned by the hard work and dedication of our employees and contract partners, so keeping them safe and well will always be SSE's primary concern. It is therefore pleasing to report continued strength in our safety performance through a period of increased construction activity over the past six months. And with investment set to accelerate, it will be critical to maintain our focus on looking after those who work for and on behalf of SSE. I'll now hand over to Barry for an overview of performance in the first half of the year before we turn to our exciting plans for the next five-year period.

Thank you, Martin, and good morning, everyone. I'm sure you'll be keen to see further detail of our new investment plan. However, it is important to briefly cover financial performance in the first half and our reaffirmed outlook. The £655 million adjusted operating profit delivered by the Group over the past six months was in line with usual seasonal averages and therefore keeps us on track to deliver on our full year expectations. The first half saw a step change in transmission investment and earnings, so it's worth pausing to highlight the continued evolution of the latter. Around two-thirds of earnings were generated when regulated networks, an increase relative to the comparative period and in line with the continued upweighting of investment in that area. The increase in high-quality regulated earnings is a trend that is set to continue as we deliver on our investment programme. Turning to the bottom line, the group delivered adjusted EPS of 36.1 pence, in line with our expectations for the period. In our combined networks businesses, adjusted operating profit fell by 84 million over the first six months. Profits almost doubled for transmission, driven by the continued increase in investment as we make substantial progress on our large capital projects. Turning to distribution, profits were lower, as expected, given the non-recurring inflation adjustment in the prior period, with operational performance remaining strong. Overall, we continue to be pleased with the underlying financial and strategic performance achieved by our regulated businesses, which sets them up well for their future growth. In SSE Renewables, strong progress continues to be made on Dogger Bank construction and we were delighted to announce full completion of Yellow River in October. Whilst increased capacity largely offset unfavourable weather conditions, the 20% decrease in hedge prices that we flagged in May meant that adjusted operating profits have reduced this period. With the usual seasonality, meaning that over two-thirds of operating profit for this business is generated in the second half of the year, we remain confident that earnings will be higher on a year-on-year basis. Turning to flexibility, adjusted operating profits have fallen since the previous period. This movement was mainly due to the customer's business, where a bad debt release in the comparative period is combined with lower volumes in the first half. We expect a greater proportion of profits to be recognized in the second half for this business. Below the line, net finance charges were stable, reflecting a combination of capitalization effects and use of hybrid debt with coupons expected to increase in FY27. our tax rate continues to decline with the full expensing capital allowances available on our increasing investment programme. As you know, our dividend policy is to deliver 5% to 10% growth across the year. And as set out in May, our planned approach means that we today declare an interim dividend of 21.4 pence, being one third of our FY25 dividend. Turning now to the financial outlook for FY26 and FY27, we are pleased to reconfirm the detailed segmental guidance we gave in May. With half-year results within the normal ranges of seasonality, we see the strong performance noted today continuing through the key winter months, subject to the usual variables around weather, market conditions and plant availability. and consistent with the approach in prior years, we will provide specific EPS guidance later in the financial year. Looking further ahead, the strategic execution that Martin highlighted earlier means we remain confident in delivering against our FY27 earnings projection. With the first half financial performance now covered, I'll pass you back to Martin for more detail on our transformational investment plans.

Thank you, Barry. It's important to set the scene for why a huge acceleration of investment in infrastructure will be needed in any realistic energy transition scenario. Regardless of shifting political priorities, electrification of the global economy is unstoppable and accelerating. As you can see from the slide, there is a dramatic ramping up of electricity demand from 2030 out to 2050. That is a staggering amount of growth for the system to accommodate, particularly against a backdrop of an ageing gas generation fleet, nuclear closures, and a reliance on imports from jurisdictions going through similar uncertain transitions. It is also worth emphasizing that the surge in energy demand is unlikely to be smooth or linear. We will need a system that can accommodate uncertainty. These projections have a number of important implications. First, the need for a much more strategic, centralised approach to system planning to ensure the right infrastructure is built in the right places at the right time. We are seeing this materialise through the Clean Power Plan, the development of the Strategic Spatial Energy Plan which will follow, and ambitious planning reform. Second, it requires a clear focus on the cost of capital and crowding investments in electricity infrastructure because this is what will deliver in the long-term interests of customers. This was a key factor in the government's welcome decision to rule out zonal pricing in the summer and remains the driving force behind policy and regulatory decisions that are adding momentum to our strategy for value-enhancing growth. Meeting the needs of an electrifying economy requires four things. Rapid expansion and reinforcement of the transmission network. Strategic local distribution upgrades and modernization. A doubling or even tripling of homegrown energy generation supply and a greater focus on storage and flexibility to keep it all in balance. All of these drivers underline the multi-decade organic growth opportunity in front of SSE's carefully selected business mix. The need to alleviate system constraints and rewire Scotland underpins the huge projects Transmission has well underway. This is investment that the grid needs today and it will lay the foundation for development of smart grids and a digital economy in the future. In distribution, the next price control will mark a shift in pace as we deliver increasingly strategic plans that accelerate electrification for consumers. Across renewables, which remain the cheapest form of new generation, we have a premium pipeline of options and significant delivery expertise. The North Sea leads the world in offshore wind and the capability we have developed through projects like Dogger Bank and Sea Green gives us an enviable platform for future growth. And finally, our flexibility capabilities give us resilience against unexpected market developments in an increasingly electrified world. Thermal plants will be rewarded in all transition scenarios, whether providing grid stability or security of supply, and it is complemented by a customer's business that is meeting the demands of a digitalized world focused on AI and data center growth. With supportive policy frameworks and the expertise to deliver, SSE has unique access to the multi-decade organic growth opportunity in these core markets. We briefly touched upon some of these numbers in an earlier slide, but it is worth walking through what this once in a generation opportunity means. The £33 billion investment plan presented today is a trebling of the investment we delivered across the previous five years. This investment brings with it industry-leading capital growth, with our combined networks RAV set to treble to around £40 billion by the end of the decade, a 25% compound annual growth rate. Disciplined further investment in renewables is likely to add a further 1.5 gigawatts of projects, combining with the 2.5 gigawatts already under construction to take installed capacity to around 9 gigawatts by 2030. This is growth that will create significant value for the group across the life of the plan and the longer term. it will underpin an increase in adjusted EPS to between 225 and 250 pence by FY30 after accounting for today's proposed placing. When compared to last year's FY25 EPS base, which remains unchanged, of 160.9p, this is compound annual growth rate of between 7% to 9%. This accelerated investment is underpinned by secure UK government regulatory frameworks and it will unlock growth across the wider economy and support thousands of jobs over the course of the plan. Turning to transmission, Ofgem's strategic approach to regulation has provided unprecedented and welcome visibility on investment to 2030. While we continue to engage constructively with Ofgem ahead of the final determination on Rio T3 next month, the vast majority of the transformational capex plan we announced today has its origin in the ASTI and LOTI programs. Between the agreed ASTI and LOTI regimes and business as usual programs, we see SSEN transmission investments increasing to around £22 billion across the period, net of the share from our supportive investment partner. This will deliver a 30% CAGR in the transmission asset base, making it one of the fastest growing electricity networks in the world, with earnings increasing at an even faster rate over the plan. And as I will come onto over the next few slides, with the high degree of visibility we have over the CAPEX plan and with all major consents submitted, we are making sure that the business and the supply chain are well positioned to deliver. The Asti and Lottie projects are required in every realistic energy scenario. They are well advanced with mature designs, optimised configurations and a supply chain ready to deliver. Around 90% of our investment in transmission will be spent on these projects and business as usual investments and it reflects the supply chain inflation we have seen over the past few years. These projects will connect homegrown renewable energy and transport the power produced to areas of increasing demand across the country. And they offer clear value for money for consumers by reducing current constraint costs, establishing the foundation for security of supply and reducing our national dependence on volatile energy markets. This high degree of visibility means that the transmission story today is all about safely and efficiently converting the lines on this map into critical national infrastructure. And this is happening at pace. As I said earlier, four of the 11 ASEAN lottery projects are already in construction and all major consent applications have been submitted. All supply chain frameworks that we need have been secured, and we are working with our partners on their delivery capacity and manufacturing quality. This isn't a desktop exercise. This is securing key equipment. This is inspection of manufacturing facilities. This is accelerated innovation and support of the supply chain. It is heavy recruitment ahead of need, vast training programmes and deep community engagement, and this is all well underway. With our own resource in the transmission business increasing five-fold in the past five years, we are putting everything in place to deliver most of these projects by 2030, ahead of the next phase of projects that will surely follow. This is an exciting moment for SSE, for Scotland and for the UK, but we are acutely aware that local communities have a major stake in these projects. Having conducted what we believe to be the largest public consultation exercise Scotland has ever seen, we continue to engage with all parties and adapt our plans where we can. We are also investing in housing and community benefit funding that will have a lasting, positive impact on the north of Scotland. Ultimately, these vital projects are in our licensed conditions and they will be delivered. The need is there, the supply chain is there, and consenting is progressing. They will make a huge difference to our energy system as constraints are eased and more homegrown clean energy is connected, providing a tangible economic payback for consumers. Distribution upgrades are more localised, but they are much greater in number and hugely exciting in their own right. In its early consultations on the upcoming price control, Ofgem agrees. The regulator points to significant growth in electricity demand driven by the advance of technologies like electric vehicles, heat pumps and digital industries. Distribution's southern licence area has enormous strategic potential as it unlocks data centre growth in the M4 corridor, while the northern network will connect increasing Scottish renewables capacity with local communities. We, alongside the system operator, are already creating the plans and Ofgem is working on the frameworks to move from a just-in-time network to a well-planned strategic one. At the same time, the government is legislating for local area energy plans to create a bottom-up vision of local needs. We see this business as consistently delivering around 10% RAVKAGA through ED3 alongside high-quality index-linked earnings. And it promises to drive growth for the group well into the 2030s and 2040s as we bring electrification to the doorstep. Renewables will be the foundation of the future global electricity system. SSE has a premium pipeline and world-class teams to deliver clean North Sea energy which will power European economies for decades to come. In the course of our 2030 plan, we will complete major projects like Dogger Bank, which are backed by long-term, high-quality and index-linked CFD contracts. This reflects and is indeed a direct consequence of our demonstrable track record of driving value through selective capital allocation in premium projects. We also have further options in offshore wind and additionally a significant pipeline onshore. Our plan outlined today includes around £2 billion of uncommitted capex with which to bring forward further investments. But let me be absolutely clear, SSE will continue to maintain the strict capital discipline that has served us so well in the past and prioritise value over volume. Any investment we sanction will have a clear route to value creation with adequate contingency for execution risk, deep consideration of supply chain capabilities, and will be delivered through our established models, such as via partnership and project finance in offshore wind. But we must not lose sight of the longer term opportunities here. The UK and Ireland will need a strong and diverse renewables base to meet their energy goals, and there is no doubt SSE will be a major part of that. I'll now pass you back to Barry for more on the visibility on earnings and value creation this plan gives us and how we are funding it.

Thank you, Martin. As we have outlined today, it is crystal clear that the right strategy at this point in the energy transition is to pivot the group further into the transformational networks opportunity. And Martin has just outlined not only the strategic importance of this investment, but also the high degree of visibility we have, our confidence in delivery, and the market-leading capital growth it brings. Over the next few slides, I will cover the clear visibility this strategic plan provides of value creation and earnings growth through the rest of the decade and beyond. Today's investment plan marks a significant evolution of capital allocation from the preceding five years. What has historically been a 50-50 investment split between networks and markets now becomes 80-20, up-weighted in favour of networks. And this up-weighting provides the group with a significant enhancement in earnings visibility. By FY30, we expect that around 80% of earnings will be index linked through either the stable regulatory framework provided by networks or from our energy businesses where CFD, ROC, refit arrangements and a rising capacity mechanism provide a clear line of sight over future earnings. This is a material step up from our position today. offering investors significant earning stability and protection as we materially grow the business over the course of the decade. At the same time, we will retain 20% of value upside potential, mainly through flexible services, which also provides the group with resilience against unexpected market events. And with 80% of investment targeted towards networks, it should come as no surprise that the majority of expected earnings and asset-based growth will come from those businesses. Whilst negotiations over T3 remain constructive and ongoing, we expect the rapid regulatory asset growth in those businesses will deliver a RAV of around £40bn by FY30. and this will provide a firm underpin to the step up in long-term earnings. And while more moderate earnings growth is expected in renewables and flexibility, these businesses continue to provide the group with value upside potential as I have mentioned. It is important that as we pivot and grow, we retain a sharp eye on commerciality and efficiency. And that is why we are also committing to driving up-weighted annual recurring cost efficiencies across the group of around £200 million by FY28. This is an investment plan that has discipline and efficiency at its core. that offers visibility of value creation and therefore provides us with the confidence to target adjusted earnings per share of between 225 and 250 pence by FY30, after accounting for today's placing. This is equivalent to a 7% to 9% CAGR from the FY25 baseline that we reported in May. That visibility of growth enables the extension of our sustainable and progressive dividend policy, with dividend per share continuing to increase by between five to 10% per year to FY30. This fully funded plan opens the door to an unprecedented investment opportunity that will change the group's shape, size, and overall trajectory. It also has a commitment to a strong balance sheet at its heart, reinforcing our commitment to existing investment grade credit ratings, whilst leaving ample headroom for further earnings growth well into the next decade. With 33 billion of investment and 6 billion pound of other cash requirements, such as dividend and interest payments, we expect the group will have a total cash requirement of around 39 billion pounds, which will be met via a combination of primarily self-funded sources. Around £21 billion is expected to come from strong operational cash flows during the period, with a further £14 billion from increasing net debt and hybrid capital issued in a steady way throughout the plan. This expected debt increase is smaller than our three-fold increase in regulated assets, and when combined with the growth in earnings, means we remain below 4.5 times net debt to EBITDA throughout the course of the plan. Around £2 billion is expected to come from targeted asset rotations across the range of premium assets in our portfolio. These disposals will be timed to meet our investment needs towards the end of the five-year plan, with assets selected to maximise value. And for the remainder, an equity placing of £2 billion will support the significant increase in investment announced today. We don't take issuing equity lightly, as you can see from the extent to which this plan is self-funded. But it's absolutely the right thing to do to unlock this exciting plan, grow the business and deliver attractive returns for our shareholders. I'll now quickly step through the structure of the proposed non-preemptive equity placing to certain eligible institutional investors, which launched this morning at 7am. The intention is to raise gross proceeds of £2bn through an accelerated book build, which represents approximately 10% of the current issued share capital. Concurrently, we have a separate retail offer in the UK through RetailBook. The proceeds we expect to raise today will enable us to deliver a plan that is the foundation for long-lasting and sustainable growth of the highest quality. We have an exciting opportunity in front of us and the plan we have announced today represents a pivotal moment in SSE's evolution. I'll now hand to Martin to close.

Thanks Barry. We are building on the strength of a business that sits at the very heart of the energy transition. Our balanced portfolio of capabilities, assets and businesses offers investors resilience against inflationary movements and market volatility. With supportive policy frameworks and delivery expertise, SSE has a strategic growth opportunity that will create sustainable value for both shareholders and society for decades to come. We now look forward to working with investors, governments, regulators, communities, suppliers and consumers to help build a homegrown energy system that is independent of volatile international markets, more affordable for customers and better for the environment. To conclude, this is a defining moment for SSE. we have an ambitious plan that leans further into one of the world's fastest growing electricity networks, underlying our status as a top tier European energy player. and it offers a clear, well-defined funding route that balances the need for financial strength and earnings growth. Rapid capital growth in our businesses as we grasp this once-in-a-generation opportunity and it offers long-term value creation with clear visibility over earnings growth and a sustainable and progressive dividend policy. This is a hugely exciting opportunity and we are getting on with delivering it. Thanks for your time this morning. We will now move to Q&A. And if I can ask that we please keep it to no more than two questions each so that we can get to everyone in the time we have. Thank you. I'll now pass over to the operator.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. We will now go to our first question. One moment, please. And your first question today comes from the line of Rob Pulley from Morgan Stanley. Please go ahead.

Hi, good morning. Yes, Rob Pulley from Morgan Stanley. First of all, congratulations on a very well put together plan. Very exciting times and great to see that earnings profile. I'll stick to two questions. I'm sure there's lots. So firstly, if we could talk about the Asset rotation, £2 billion as part of your funding package. The footnotes seem to imply it will come from renewables, but is that explicitly the case? And is any stake sale in electricity distribution ruled out or included in the guidance? And secondly, given today's double news around data centres across Europe, may I ask, could SSE monetise renewables any of its legacy power plant sites with grid connections for data centres, as we are now seeing elsewhere, not just in the US, but also UK and in Europe. Thank you very much.

Yeah. Good morning, Rob. Thanks for the question. I'll look at the disposal question. So, yeah, there's 2 billion disposals. How I'd look at that is over 25% of that will come from our non-core assets, primarily our Slough waste energy plant, which is the only one we've left. And then we also have a stake in a network telecoms fibre company and we also have a loan note. So in reality, those will all probably take place in the earlier parts of the plan. The remaining 75% of disposals will be towards the back end of the plan. It could come from any of our business units. Ultimately, we will decide closer to the time what makes sense strategically and financially for ourselves at the time.

And then thanks, Rob, morning. To your other questions, I mean, data centers is obviously a fascinating question. Obviously, we saw the news this morning. I mean, the opportunity for data centers and the AI trend, I think, affects us across a number of businesses. I mean, firstly, there's obviously the constructive reality of increasing demand for our generation businesses. There's also the flow through to distribution where we mentioned in the presentation we've just given we would expect an increase in demand in particular our southern network and for distribution to have obviously a key role to play in delivering that demand. For the customers business they're also very well engaged with tech players in terms of CPPA possibilities and of course that also applies to renewables and the ability to get generation projects across the line there. Specifically on thermal, we have always said that we think our sites offer very good value in terms of redevelopment and playing into transition trends and just as a reminder, Already on our sites, we have previous thermal sites and these are mostly coal sites. We have built batteries. We have built multifuel. We've provided emergency generation in Ireland for the Irish government. And we are also in the process of building an HVO plant at Tarberts. And so that kind of underlines the value we've all seen. And of course, the data centre angle possibly adds to that going forward.

Very clear. Well, congratulations again. I'll turn it over. Thank you.

Thank you. Your next question comes from the line of Mark Freshley from UBS. Please go ahead.

Hello, good morning. Thanks for taking my questions. I have two. Firstly on, you know, the six overhead line planning consents that you're due to get middle of next year. I mean, you were very impassioned about, Martin, about the conversations you've been having with the community and why these assets are essential. but you are dependent upon something that's very much outside of your control. What is it that gives you confidence that this time it will only take 52 weeks rather than two and a half years? And just secondly, regarding the renewables business, I mean, I think there are some big capital commitments for Doggar, etc. It seems to me that you really, you know, I can't remember a time when you've actually reduced spend so much in that business. And is it fair to assume that there's envelope in there for Barrick Bank and maybe a couple of other no-brainers, but you really are pivoting capital away from that business? Thank you.

Thanks, Mark. Let's deal with the transmission confidence and planning. Firstly, I mean, just to re-emphasize some points here, our confidence in the transmission ability to deliver is firstly, we have had a strategically minded regulator that has given us enough notice to build capabilities. So we referenced a five-fold increase in our resourcing. It is worth pointing out as well that that resourcing, some of that comes from the North Sea oil and gas, so we get the expertise from that, but also we've managed to pivot some of our renewables expertise, project managers, project directors, engineers, et cetera, into that business. That's a high-quality resource business. We've also, because of the strategic mindset of the regulator, been able to build supply chain frameworks and contract the supply chain, tier one supply chain partners that we know very well. So we think we're well set up from that perspective. Then it comes down to the planning. That bit is less in our control. But maybe a couple of things. Firstly, you referenced the Scottish government and their 52 week commitments for overhead line planning, consenting. We see that as backed on the ground by a trebling policy. of resourcing they've put into the consenting units which will ultimately define and decide some of those decisions so we see that as a positive and then just on the numbers in the last just over the last few months we've had two substations and two overhead lines consented right now we have two out of five of our marine consents and two expected soon we have five out of eight of our overhead line consents and there's three of those in the 12-month process we just talked about and 13 out of 21 substations consented, including Netherton, which is a major one. So that is the basis for our confidence. We have the ability to logistically get everything ready on the ground with people and supply chain. We think we've got the backing of a Scottish government that understands the transition need and the economic importance of us delivering this infrastructure in a timely way.

Yeah, and look, on the renewables CapEx, we've got about £4.5 billion in for renewables CapEx, Mark. Over £2 billion of that is currently unallocated, and we will only take that forward, clearly, if the projects, as Martin said earlier on, meet our hurdle rates and our discipline. That obviously also allows for Berwick Bank. We've done rigorous stress testing of various possible scenarios, and Berwick Bank will be part of that. Obviously, that's a multi-stage project, and obviously the timing is to be confirmed and equity ownership stakes, etc.,

um has to be decided in the future but that's all part of the scenario scenario analysis we've done thank you we will now go to our next question and the question comes to the line of dominic nash from barclays please go ahead um good morning and congratulations martin on your first results as ceo i i think it's a fair

Reflections say that you're setting a high hurdle for future presentations. So, congratulations. Two questions for me, please. Firstly, could you give us some colour on the wriggle room and the uncertainty around that £33 billion sort of investment programs 2030, because clearly, we OT3 will get probably what the first week of December or so. And then secondly, on the on the renewables where you've been up to 5 billion or 4.5 billion. Clearly, we got uncertainty over AR7 and maybe AR8. So I'll be interested to know why your confidence is set on 33 billion and realistically, could the capex numbers go up from there? Secondly, on the four and a half times net debt EBITDA sort of guidance that you'll be within that limit by 2030, I think that's unchanged from the current net debt EBITDA number. Could you give us some color again on, I think, the SNP report recently, which was discussing about how you treat JV net debt and whether or not your net debt EBITDA numbers will need to sort of reflect the kind of, I think they call it orphan debt, in your JVs. Thank you.

Yeah, maybe just a couple of headline comments while Barry gets the numbers. I mean, we've said and very strongly the CapEx plan and funding options have been stress tested against a range of possible scenarios. And obviously that is important. I mean, just on the specifics of AR7, clearly we're in an auction process. We wouldn't say too much about that apart from just to remind investors that we have always and consistently taken a very strong capital disciplined approach to investments. And that applies to Dogger Bank, which is why today we are obviously announcing on Dogger Bank that we're still on track with exactly what we said a year ago. Obviously, that's a year later than we originally planned when we took FID, but we're still in line to beat our hurdle rate on that. And that's because of the risk managed way we approach that. You'd expect us to apply all of the learnings from Dogger Bank, but all of that same investment philosophy to future renewable investments, including Bank, including Corey Glass and other onshore wind prospects.

Yeah. And then, Mark, on the 33 billion. So I think the easiest way to think about it is 20 billion of that is for the 11 megaprojects in transmission. So the three, the three, lastly, the eight projects in the baseline capex. So, you know, as Martin said, four of them are already construction, a real clear line of sight over the consenting and obviously much firmer grip now on the supply chain costs as well. So real clear certainty over that. 20% of the CapEx is for the remaining networks parts, so it's primarily distribution. And obviously we're seeing a much more strategic approach from the regulator as we go in towards T3. So we expect a ramp up in CapEx as we go to the end of the plan. And then 20% is for the energy businesses. And about half of that is in construction at the moment. So whether that's the doggar banks or some onshore and battery projects. And about 3 billion is uncommitted. And, you know, two billion we have allocated for renewables, one in the flexible, but obviously that's quite fungible. And as I said earlier on, that will only be for projects that meet our strict hurdle rates. And, you know, that's all part of the scenario analysis that we've done and the stress testing we've done, which allows for those renewables projects you mentioned earlier on. Then in terms of the balance sheet, so yes, it will be below four and a half times net debt to EBITDA throughout the plan and at the end of the plan. And in reality, we could go slightly above that as well and still be within existing credit ratings. In terms of S&P, yeah, our understanding is that they will be temporarily putting on the project finance debt for assets in construction only. So, and they're the only agency doing that. So for us, that will mean Dogger Bank B and C will go onto the balance sheet, but they'll come off again in the next two years, but those projects clearly come off at the back end once they're into operations. And then obviously you'll get Barrick Bank is further out. Clearly we've allowed for Radnor scenario analysis. Again, Our projects are back-ended. It depends on the phasing of those projects, what equity stakes we hold in that as well. So we won't need to change our four and a half times net debt to EBITDA for that. That's all allowed for in the scenario analysis we've done. We've shared the plan with S&P. I'm not expecting any surprises there. Thank you.

Thank you. Your next question comes from the line of Harry Rybird from BNP Paribas. Please go ahead.

Hi, morning, everyone.

Thank you.

So two from me, please. So the first is, I think when we've discussed, you know, equity needs in the past, you've talked about, you know, awaiting news, you know, Rio T3 result and AR7. Have you had any discussions with Ofgem recently around returns, but also around fast money that made you more confident to go ahead with this big plan now, which I guess, you know, many of us are thinking, you might do afterwards once you had had some certainty so was there a trigger here um where you felt like you had better visibility and then the second um it's on the thread of rob's questions on data center sites there's actually a different angle on this and if you if you think about um you know how data center moms like to play out in europe versus the us i mean volumetrically we've got tons and tons of new wind and solar capacity being added in europe relatively much more than in the us you know volumetrically i think the picture looks a little bit different but in terms of peaks and maybe it doesn't. And I wondered, what are you thinking in terms of capacity payments and the levels that capacity payments could potentially get to in a squeeze scenario for peak demand from data centers? Do you think the level of capacity payments that are clearing in the recent auctions rather sustainable level, or do you think there could be, you know, upsides to those over time if you start to get real squeezes on the peak demand side? Thank you.

Okay, thanks, Harry, and morning. Firstly, on the question about off-German T3 engagement, and I think it's a kind of why now question. I mean, we said back in the summer that we expected a lot of news flow through 2025, and that news flow included zonal pricing and a decision on that, which, I mean, obviously that was one of the key themes, investor themes earlier in the summer. And obviously we referenced in our presentation that we were delighted that the government listened to industry and listened to investors like us and ruled out and took Zonal off the table. We obviously had the draft determinations important. I'll come back to that in a second. And then we've also had the SSMC for ED3 where we saw a regulatory tone. which continued to be strategic and forward thinking and progressive. And so from a policy perspective, that felt all quite good. Then on the ground, we've already referenced the progress we're making on consenting and indeed construction for transmission. And when we put all of that together, we thought now was the right time to come out with an exciting plan and show shareholders our thinking. Just in terms of Ofgem discussions, of course, since that draft determination was published, we have been in good constructive discussions with Ofgem over the last four or five months. You'll recall the three themes, the three major themes, that we were particularly interested in was the capitalisation rates, the cost of equity and incentives, and also the Totex, the gap between our view of Totex and theirs in that draft. Look, all I'd say is we've had good constructive conversations with the regulator we think understands the need to make networks investable, and I'll again reflect on the SSMC tone for that as clear evidence of that. then to your capacity mechanism question um this is um firstly i'd agree with you on the demand points i i think i've consistently played down some people's attempts to extrapolate a u.s demand trend for the uk and europe i've always been much more careful about that we are clearly starting to see constructive demand growth and obviously in the background you The government and NISO understand the need for capacity mechanism reform if they require new build peak thermal to accommodate that. So those reform processes are going underway. Obviously, you do have an example here. In Ireland, you've seen capacity mechanism prices, I think, up to certainly over 175 euros per kilowatt. as islands had to contract for that same peak capacity to look after the non-linear demand increases they've seen in that jurisdiction. So there is an example there of how the capacity mechanism has had to step in at a higher price. What I've consistently said about the capacity mechanism is for new build, given the rises in capex, that are ongoing for CCGTs, we think the cap will have to be reviewed. And for existing plants, just because of the age of it, and again, we referenced it in our presentation, and the need to get spares in and inventory and make sure engineering capability and reliability are absolutely guaranteed, we expect capacity mechanism payments to have to at least stay where they are to accommodate those kind of needs. Effectively, the line I've used is, before, it is difficult to be bearish on the capacity mechanism from its current price of around £60 per kilowatt.

Very clear. Thank you.

Thank you. Your next question comes from the line of Pavan Mahbubani from JP Morgan. Please go ahead.

Hi, team. Good morning. Thank you for taking my questions and echoing congratulations on the launch of this strategic update. I have two questions on returns, please. So firstly, in electricity networks, following up from an earlier question, should we take the confidence with which you've launched this strategic update as a confident message to the market that you now think you will achieve the 9% to 10% nominal returns in T3 that you indicated were a requirement to increase your investment there? That's my first question. And my second question on a related... theme in terms of renewables returns. Can you give us a reminder, you talk about your strict investment criteria, but particularly for offshore wind and for Barrick Bank, how should we be thinking about the key metrics you'll be looking at? Can you remind us what your IRR target would be for that sort of project, whether unlevered or levered? Thank you for taking my questions.

Yes, so just to reiterate on the transmission question, look, again, to repeat, we are in constructive discussions with Ofgem. We don't know what's going to be in their final draft, which I believe is still expected to be the 4th of December. But we feel like we have been dealing with a strategically minded regulator who understands the need for this once-in-a-generation investment requirement to be investable. But we'll see what the final determination say. Sorry, the final determination say, I should say.

Yeah. Hi, Pavan. And look, on the offshore wind, our return expectations are the same as what we laid out in the summer, where we increased to an equity return of greater than 12 percent. And, you know, it is greater than 12 percent. And that also allows for the fact that in the underlying modeling we do, we obviously build in the lessons learned and the experiences we have from Seagreen and Dogger Bank. So we're quite comfortable in terms of the contingencies and the float within the programs there as well. But overall, greater than 12 percent equity returns. Thank you.

Thank you. Your next question comes from the line of Peter Mistiga from Bank of America. Please go ahead.

Yeah, good morning. Two questions from me, please. So firstly, I was wondering if you could bridge a little bit the 22 billion net capex plan in transmission with your business plan. So, you know, how much of the kind of further future projects in your business plan have been excluded? Is there any kind of cost inflation in the Aston Lottie part versus that business plan? And is there any sort of upside risk to that 22 billion capex if some of those future projects come through? And could that sort of pressure your balance sheet? So that's kind of question number one. And then on your 225 to 250T guidance, I'm just interested in some of the assumptions behind that. So, for example, does it have that 2 billion of unallocated capex in renewables spent, but fully unproductive, or are you assuming some sort of return already on that in your timeframe? And are you using the draft determinations sort of assumptions for your ET3, I guess ED3, or are you using something different in terms of where you expect allowances for those businesses to end up? Thank you.

Thank you, Peter. So look, I'll take those ones. In terms of the business plan, obviously, it was done over 12 months ago. And obviously, there's a couple of pieces here. One, they're on different bases. So this is obviously a five-year plan to March 30. That was a five-year plan to March 31. That also included OPEX and obviously, the Ontario Teachers part sharing there as well. Of the uncertainty capex that we laid out in that business plan was £9.4 billion. We have 10% of that in our current £22 billion. So our £22 billion is very clear. £20 billion is for the Lottie, the Asti and the baseline capex. And then you have the £2 billion, which is for new connections and part of that uncertainty mechanism going forward. In terms of the assumptions behind the 225 to 250p, obviously, look, as Martin said earlier on, we had the draft determination. We had the benefit of four months discussions with Ofgem. We believe we've made sensible assumptions in the plan there. In terms of other assumptions we made through the plan, we've made quite sensible assumptions. We've assumed inflation. comes down to around 2%. We've assumed base low power prices for merchant prices at the back end of the decade, on average in the high £60 area, assumed cost of new debt 5% to 5%. So all quite sensible assumptions. And on the question of the unallocated renewables, yeah, the bulk of that will be unearning towards the back end of the plan.

Got it. And sorry, just on the Capex in transmission, do you see kind of any upside risks from those further future projects coming through that you haven't included in your plan?

No, we believe we've got a very robust Capex plan with the visibility we have over the Lottie and the Assene, the supply chain, and our view on the uncertainty mechanism and what we've taken in there with a very robust plan. Got it.

Thank you.

Thank you. Your next question comes from the line of Deepa Venkateswaran from Bernstein. Please go ahead. Hello, Deepa, is your line muted? Due to no response, I will go to the next question. One moment, please. And your question comes from the line of AJ Patel from Goldman Sachs. Please go ahead.

Good morning and congratulations on the presentation. I have two questions, please. First is leverage. I'm trying to think about this picture by the time we get to 2030 and thinking, well, okay, more of the business, there'll be less exposure to merchant, there'll be a higher quality business with more regulated proportion to it. And I'm just wondering, this four and a half times net debt to EBITDA that you're keeping below the plan, Is this scope that that threshold increases, giving you the opportunity to invest more at the end of the plan? And if that's the case, how does disposals fit into this? If you saw that improvement in that threshold, would you need these disposals, I guess, would be the question. And then the second part was on the international renewables business. Given the reduced aspiration on the renewables side, Does it make sense to have an international renewables business? What's the merits of having a business of this scale? I just wondered if you could revisit that for us.

That would be quite helpful. Yeah, OK. Morning, AJ. So, look, on the leverage, as you said, you had less than four and a half times net debt to EBITDA through the plan. Keep us in line with our current credit ratings. Obviously, investing 80% of our capex in networks is going to mean a big shift internationally. in our earnings and our earnings quality would probably go from networks being about 40% of our earnings to over 60% of our earnings by the back end of the plan. But clearly, that's their conversations for a different day with the agencies as that capex starts to get delivered and that earnings quality comes through. If that does free up more capacity, clearly, yeah, we will look at the disposals and what we would do with that capacity at the time. And, you know, the way the beauty of doing the equity today allows us to push those disposals towards the end of the plan and give us more flexibility and optionality around that.

And just on international renewables, I think, AJ, we've consistently said that the vast majority of our time, effort, resources and focus is on our UK plan and our Irish plan. And given, obviously, what we've laid out today, that will continue to be very much the truth of it. We do still have development options, particularly in the southern Europe geography, where obviously we bought the SGR pipeline several years ago. and we've got onshore wind that we can still develop and bring through. So that remains a kind of part of the plan, but absolutely the majority, the vast majority of the focus of Barry and I and the group is on delivering this once-in-a-generation organic opportunity in our home markets.

And can I, sorry, can I have one follow-up just on that? When you weigh up the disposers, I know that 75% end towards the end of the plan, and you haven't been specific if it's renewables or networks, but You know, three years ago, you could sell network assets at real good valuations. You still can now. But the aim was to reinvest it in renewables where you're making sizable premiums above cost of capital. And, you know, the emphasis has changed in this strategy, and I applaud it. But I'm just thinking if I'm looking at that $2 billion bucket of disposals, what's the merit of selling down on renewable assets versus selling down on networks at this juncture? Yeah.

Yes. So look, I suppose the key thing is no decision has been made. It could come from any of our businesses. Ultimately, we believe the distribution is a really attractive business and we believe there's really good growth to come there in the next few years. And we certainly like to capture that. And all we're saying is that we have time to make that decision on what's the right thing for us to do strategically and financially. But we don't need to make that decision now. That's for further down the road.

OK. OK. Thank you very much.

Thank you. As we are approaching the hour, we will now take our final question for today. And your final question comes from the line of James Brand from Deutsche Bank. Please go ahead.

Good morning. Made it in there just about. Congratulations from me as well. Obviously, from the share price direction as well, investors are taking it extremely positively. So congrats. I'll stick with the two questions. The first one is on Berwick Bank. Can I just clarify that it's not included in the plan doesn't certainly doesn't kind of look like it is I guess in theory it could be kind of an initial tranche and if it does go ahead does that have any implication if you want a CFD for instance in AR7 would that have any implications for funding in the current plan or is it the case given that obviously it would take quite a while to get to the point of commissioning and also your model where you raise equity typically towards quite close to commissioning, would it actually be falling outside the plan if you want a CFD? That's the first question. And then the second question is on the 200 million of annual efficiencies targeted by full year 2028. That's a bit better than the 100 million you had in the old plan, and I guess from a starting point where you've already delivered some of those efficiencies. I was just wondering whether you could give some details on where those efficiencies are coming from. Thank you very much.

Yeah, happy. I'll take I'll take I'll take Barrick Bank. Look, yeah. So, you know, we've done quite a lot of scenario analysis and stress testing of the plan. And, yeah, we've made allowance for Barrick Bank, Barrick Bank in the in that part of stress testing. I said earlier on, we have three billion of uncommitted capex. BEREC is a multi-stage project, which obviously we still don't know what stages the project may be in contracts at, what the timing for those are, ultimately what equity stakes we'll hold on to, and clearly any funding will be towards the back end of the plan. So that's all allowed for in that, and that's part of the scenario analysis we've done.

And just on the efficiency programme, James, look, we said very clearly that we thought, well, we don't take issuing equity lightly and we thought that we had to make sure we'd done as much in the business to make sure that it was efficiently run and we were concentrated and focused on the key processes. prospects and opportunities that looked ahead. We've spent a year going through a review. We slightly re-scoped some areas as a consequence. I mentioned earlier, we've actually been fortunate enough to redeploy some high-class renewable resource into transmission to help with that investment programme. And of course, investors would expect us to be running an efficient business, and we've been very focused on delivering that, and that's reflected in the number that we shared with you today. Thank you very much.

Thank you. I will now hand the call back to management for closing remarks.

Well, look, thank you for your questions. And also thank you, Sharon, as the operator for helping us run this session. It has been a pleasure to outline today the transformative growth opportunity we see ahead of us. And I hope that you share our sense of excitement for the years to come. Thanks again to Sharon for our operation facilitating the Q&A. And thanks to everyone for joining us today. I look forward to meeting with many of you to talk more over the coming days. Thanks again.