Okay. Good morning, everyone. Looks like we've got most people filing in. Terrific. Thank you. Thank you very much. Good morning. Welcome to the United Utilities Fiscal 2026 Interim Results Q&A session. My name's Chris Laybutt, as you all know, and I'm delighted to play the role of host for this session. Today I'm joined by Louise Beardmore, CEO, and Phil Aspin, CFO. We'll stick with the usual format. If you'd like to ask a question, please raise your hand or shoot through an email or a Bloomberg. I think leading us off this morning is Julius. You were first off the rank, so please go ahead.
Thank you. Thank you for taking my questions. I guess two for me. The first one is, you mentioned in the presentation that, like, the emergence of new investment drivers. And I think there's also PFAS mentioned on the slides. Just wondering, are you referring to this more like for after AMP8, like into AMP9, or is that something that we could already see now through the reopeners in AMP8? If so, can you give us any indication on how sizable that could be? Then secondly, I mean, given that I'm the first on the line, obviously, I have to ask on your expectations on Cunliffe and the white paper that comes out in December, just in terms of, like, which recommendation do you think will be taken and what's the process, what's the timeline?
Yeah, any of the color would be appreciated. Thank you so much.
Fantastic. Nice to see you this morning, Julius. Thanks for the question. Let's take the reopeners and the growth first. I think, you know, as we went through AMP7, there were a number of opportunities for additional growth items. We saw that with green recovery. We have been really clear, both when we spoke at the capital markets and also in terms of interactions with regulators, that we see lots of opportunities for growth drivers as we move forward, both in terms of additional housing, new legislation that is coming through, whether that be new drivers that we can see emerging, data centers, additional areas of growth from the government. We are engaging with regulators, as you would expect us to, in terms of those opportunities, and we expect them to play through just like they did in AMP7.
You're absolutely right. With AMP8, there were a series of reopeners that were actually stated. In addition to those, and they're particularly around asset health and the opportunities to drive asset health improvements. We are engaging with regulators with those conversations. In relation to Cunliffe and the white paper and the timeline for the white paper, I think, look, you know, in terms of when the recommendation or the report that came out in the summer, there were lots of recommendations, 88 in total, many of which very investor-friendly in terms of the things that Cunliffe was promoting and suggesting. We are now obviously waiting for the government's response. We expect that to be in December.
What I think is probably useful is to just look at what am I seeing and feeling in relation to intent. I think there are a couple of things that I'd point to. The first is, you know, Emma Hardy, when she spoke at the Moody's conference, was very, very clear about her desire to drive those recommendations and also for the white paper to be out before Christmas. I met with Emma Reynolds last week as the new Secretary of State. Again, she is very, very clear. She's picking up the recommendations. She's driving those hard with the team, in terms of coming out with both the white paper and the implementation plan. Also, you may not have seen, but she was also at the DEFRA committee this week.
and again, on record, was very clear about her intent in terms of driving those recommendations through. I think what we can expect to see in December is that white paper and transition plan. At the same time, I think what we're also expecting is that we will also see a strategic policy statement for both Ofwat and the Environment Agency.
Great. Thank you.
Thank you.
Okay. Thanks. Thanks very much, Julius. Jenny, over to you.
Thank you very much. Hi, morning everyone. Two questions. One, just around politics. Obviously, we are getting more and more noise around the energy side in terms of government treasury want to do something deflationary on bills on the energy side. Are you thinking, or hearing anything with regards to water, any noise there in terms of support on the affordability aspects? Then just coming back to on the uncertainty mechanism, is there any firm timeline in which you will be going to Ofwat to apply for the reopeners? What should we be watching out for on sort of getting the clarity on the size of potential investments there? Thank you.
Morning, Jenny. To pick those up in order, I think the first thing I'd say is from a bill's perspective and a cash, a cash performance perspective, I've been really pleased actually with the way that cash performance is maintained with the increase that we've seen in bills. Team have worked exceptionally hard. We've doubled the number of customers who were on affordability schemes, et cetera. We have not seen any degradation in cash performance. In fact, you know, it's held extremely strong. That's down to the way that that's been managed. One of Sir John's recommendations was very clearly the need for a national social tariff. We expect that to come through as part of the white paper.
You know that that's something that United Utilities has long pushed for, and is something that would be an extreme benefit, particularly in terms of here in the Northwest. We continue to influence and discuss how that could look as we move forward. I'd expect that we may well see some movement on that, or clarity on implementation of that as the white paper comes out. In relation to the uncertainty mechanisms, the conversations are ongoing. You know, you know as well as I do what our CapEx profile looks like. It goes up and then it comes down the other side. It's in everybody's best interest to smooth that out. We've talked about AMP9 and AMP10 and what we can see coming with the environment act legislation along with everything else that we can see.
It's in nobody's best interest to have a CapEx profile that looks like it does. Again, we, you know, there were opportunities last time round, particularly in terms of things like transitional investment and the green recovery, and we expect those to play through. So conversations are ongoing.
Thank you.
Okay. Thank you, Jenny. Sarah?
Yes. Sorry, just to come back to the white paper, I think this is gonna be a massive document. A lot of noise in there. Just to make it really simple for us, please, three simple questions. What specifically should we be looking for? What will you be looking for? If we can do a control find, is there something you can point to that if we see it, we can go, okay, this is good for you.
Thank you.
Good morning, Sarah. I'm probably not expecting it to be hundreds and hundreds of pages long. Just to give you an indication, I think it will be thematic in terms of what comes forward, and what they are proposing to set out. I think we're all clear that we want to understand what the regulatory regime looks like as we go forward, how that's going to be managed and how that's going to be coordinated, what supervisory regulation starts to look like, and more importantly, you know, essentially what the structures and the timelines look for as we move forward. I think what we're all looking for is exactly the same thing, which is clarity around the timescales and what that transition plan looks like.
You know, I think it is not going to be hundreds and hundreds and hundreds of pages long. I expect it to be thematic to set out the direction of travel, the things that they are taking forward and at pace. I also think it is important to point out there are a number of things that can be done without legislation change. Again, I think I would be looking to see how much of that they are making a commitment on and moving on ahead of any of those legislation windows as well.
Terrific. Thank you very much, Sarah. Pavan?
Hi team. Good morning and thank you for taking my questions. I have two, please. Firstly, I'd like to ask about the EPA and the two-star rating from a few weeks ago. I can imagine you found that outcome, sorry, disappointing. I wanted to just get a bit more color from your perspective on what drove that rating and whether you see there's anything in your underlying performance that you think you need to reprioritize. On a related question, can you provide some color on the potential EPA reforms that we should be seeing in terms of those ratings in the coming years? That's my first question. Secondly, I wanted to ask about funding and the balance sheet. Can you remind us if you see yourself as fully funded for AMP8?
Does that change in a scenario where you have additional, whether it is reopeners or transition spend? How should we think about your balance sheet and funding options, particularly as we look into AMP9 and beyond? Thank you.
Hi. Morning, Pavan. Thanks for those questions. I'll take EPA and I'll hand over balance sheet to Phil. I think first things first in terms of EPA, yes, you know, we're obviously disappointed, but, you know, we are the second highest company in terms of EPA performance. Thirteen out of possible sixteen stars for this EPA period. The underlying performance remains on track. What we have seen is a change in methodology, and particularly in relation to definitions on pollution. Things that were driven by both storms and power interruptions are now included in EPA. A third of our pollutions are actually caused by issues with energy resilience that we're seeing up here in the Northwest. There are two drivers to that.
One is storms and the fact that we're on an overhead network, and that's particularly a challenge in some of our more rural areas of Cumbria and Cheshire. Secondly, the balance loading that we're seeing between renewables and the grid. We've got some real specific challenges. Actually, Phil Duffy referenced that himself just recently at the EFRA committee. It's something that we're focused, very focused on, both in terms of what could we do, but also working with the energy companies as well, 'cause I need to see better levels of resilience in terms of driving those improvements. We are extremely focused though on what it is we need to do.
You know, I'm really pleased to see the improvements that we've seen in terms of compliance or overflow reductions, some of the areas of focus where what we're actually seeing is some of the early investment that's going in and, more importantly, the improvements that we're seeing as a result. You're absolutely right. We now have a new methodology that is being consulted upon, that sees a series of changes again, most notably, a change in categorization of pollutions. So currently we have pollutions categorized one to four. It's categories one to three that count for EPA. Going forward, there will be no category four. That will all become category three. So again, it's going to be another change. I think we're going to continue to see the methodology change and evolve. That's out for consultation at the minute.
United Utilities, along with lots of others, will be making obviously representation about its, its implementation. I think, you know, what is, there is some good stuff in the EPA too, you know, it's going to, for example, include details about compliance through overflows. That's not included at this minute in time. I think that's important. I think what is important is anything that drives greater transparency, is something that we, you know, we all embrace, but we do need to understand when methodologies are changing. Because as a result of that, what's important is that we're tracking underlying performance and we can see where that's improving. More importantly, if there's areas that we need to focus. The results of the consultation are due to be published early next year.
and that will drive in terms of the implementation of the, of the new methodology. I'll hand you over to Phil, in relation to balance sheet.
Morning, Pavan. Nice to see you. Yeah, sort of, as you know, we've got a very, very strong balance sheet. Today we're reporting 60% for net debt to RCV gearing, benefiting slightly from a little bit of an inflationary tailwind at the moment. That's sort of feeding into the numbers a little bit. As you know, we're very comfortably within our 55%-65% range, as we look through this AMP in terms of the funding of the AMP8 program. It's probably worth just reminding you that the headroom extends beyond that because, you know, the Moody's Baa1 threshold is 68%. There's quite a lot of flexibility there.
Clearly, in terms of any reopeners, there will be a lot of discussion around the context, the scale, the size of that, how often, what may or may not fund that in-period, in-period revenues. There are quite a lot of moving parts to all of that, but I think we are approaching that from a really, really strong position. Just longer term, in terms of AMP9, clearly, we all expect a lot of funding, a lot of investment continuing into AMP9. We also are very, very positive around the Cunliffe recommendations in the context of Cunliffe calling out the need for the sector risk profile to be looked at.
I think specifically he cited the Moody's work that had been done where effectively they progressively downgraded the quality of the regulatory framework over the last two price reviews. You know, if we have some reversal of that, that will extend that sort of capacity as well. You know, as a reminder, if we were to revert back to a Moody's position that was more in line with energy, then that 68% would become 75%. You know, that's worth bearing in mind. There are a lot of moving parts and understanding how that price review in the future lands is going to be a big part of that as well.
Thank you.
Thank you. Thank you, Pavan. Mr. Freshney, over to you.
Unmute myself. Hey, can you hear me okay?
We can,
Hey, can I ask on, you know, what went to the hypothetical of the hypothetical when we're talking about, you know, the white paper next month? I mean, it's clear that normally, I mean, we're already starting to talk about AMP9 now. Normally, the next review should start next year, right? The regulator should, once they're done, CMA should be moving across to the next review. Yet the primary legislation is probably not gonna be done next year for, for the Cunliffe implementations. And then the regulator has to be set up. It would seem that, you know, at some point we may be looking at a rollover of review or a one to two year, likely two year extension of this review. What are your thoughts on that?
The reason I would ask is because, you know, your returns have been fixed at, you know, relative to what CMA and Ofgem are doing at fairly, fairly low levels. This review does not, does not appear, you know, you, you know, we are yet to see outperformance. I am just wondering what you guys would like to see on any potential rollover review and what your thoughts are there.
Thanks, Mark. I think there's two things. I mean, obviously we've guided to 100 basis points of outperformance, but just in terms of the two years versus five years in terms of the regulatory cycle. I mean, I think what matters for us is that any growth that we have to deliver is facilitated. Whether that be within a two year or a five year cycle, we've got very strong relationships with our regulators. I think what's important is that we get clarity over the funding mechanism. I think it probably brings me back to one of the questions that Sarah asked me in terms of what am I most looking for in terms of the white paper is clarity around some of those timescales, actually, and how that evolves over time.
I think that's something that we're all looking for. CMA obviously will publish its final outcomes in March. You know, I know there's already a lot of conversation going on with DEFRA, with the Cunliffe implementation team, about both the regulatory cycle and some of the inputs, particularly in terms of the long-term strategic plans for both water and wastewater. I think we're all looking for that clarity on that timescale. I think what's important, whether it's two years, five years, a rollover or whatever, is that the growth that is to be delivered is facilitated and recompensed accordingly.
Thank you.
Terrific. Thank you, Mark. Mr. Nash.
Hi there, everyone. A couple of questions for me, please. Firstly, can we go back to the CMA? They published in their initial findings what I thought was quite an interesting study on coming up with a new sort of frontier modeling sort of tool for your totex. Usually at this point, I'm usually in front of you going, Louise, why did you not appeal the, why did you not appeal, the, the FD? On the returns, you know, maybe clearly you would've got higher, but the totex one was a bit of an eye opener for me 'cause it looked to me that they seem to think that Ofwat had awarded you more totex than they would've given you if you'd had a CMA appeal.
The question I have for you on that one is how much of an indication does that give to us or how much comfort does it give to us that potentially you could be, you should be coming in line more with the CMA number than the Ofwat number, and that we could probably see a totex outperformance come through. Secondly, I like your term, I think, environmental supercycle that you have in your presentation. You talk about PFAS. There is very little in PFAS in AMP8, as I understand it, in spend.
I know we've had a couple of questions earlier about your reopeners, but I'd be interested to know what sort of scale, what actually is the scale of the reopeners that we could potentially look in, particularly with things that aren't in AMP at all, like the PFAS one. I mean, I've been reading some reports that the industry could be up to 10 billion GBP a year of PFAS, as clearly across the whole country. But UU does have a reasonable PFAS exposure. Some color on that would be great for me. Thank you.
Great. Thanks, Dom. And morning. I think first things first in relation to CMA. You know, this decision that we ultimately made was around the overall package, rather than each individual item. You know, we have talked quite a bit about that. Obviously, it is remembering that going to the CMA opens up everything, not just the particular item that you may be appealing. You know, we felt that the FD for us was balanced. We saw significant movement between the interim and final position, particularly on totex allowances. We were able to negotiate some company-specific targets on things that were important to us, both in terms of combined sewer overflow spills, internal flooding, and also some changes to the economic models in relation to rainfall patterns. Those were things that were really important.
You're absolutely right to say that when you look at some of the outcomes from the CMA, there is a number of companies where when you look at the models that they've run, they've suggested different totex allowances. I think, you know, everybody always points to models and sort of says, well, they're very, very simplistic. I'm sure that's what the economic regulation teams will be saying too, particularly in terms of some of those broader conditions that, you know, those models need to take into consideration. I think what is important, that is something that Cunliffe brought out in his review, is that you need to understand the regionality in the context of which you're operating on. I'm expecting there to be lots of representation on that, Dom, as part of the response that's gone back in from companies.
In relation to your questions about, oh, but Lou, does that give us some confidence about totex outperformance? I think there are two things. One is, look, we've got a number of transformation projects running where we are driving transformation in relation to totex delivery. I talked at the Capital Markets Day, particularly around driving standard assets and standard deployment as a way of managing costs and managing costs within profile. I think long gone are the days where you can deliver big totex outperformance and not continue to reinvest in your assets. There is always more that needs to be done, and so I think, you know, it's incumbent on us to continue to do the right thing. But, you know, rest assured there is a huge focus on costs and cost delivery.
In relation to the scale of the reopeners, look, you know, PFAS is one that's talked about. And there's both obviously PFAS in water, and we've got two projects in there. You may have seen something on the BBC recently about, oh, well, one of these projects and one of these notices, that was the regulatory notice to enable us to access the funding to get those projects in, and they're purely precautionary. There's a couple of elements. One is PFAS in the actual water supply itself, but also in terms of biosolids. That is an area that is continuing to emerge and evolve. We're also seeing quite significant increases in relation to house building, in terms of new house building targets.
You know, my, our previous Secretary of State, who's now got the housing portfolio, has just announced 10 cities, two of which in the Northwest region. It is really an emerging and changing picture as we go through. In relation to scale, it is a bit hard to scale at this moment in time. I think, you know, but rest assured those conversations are ongoing with the regulator on those topics driven by those areas that they are focusing on growth. You know, we have had 35 applications, for example, for data centers. You know, there is a huge volume of additional work that we are seeing in terms of demand, and we are now working through and prioritizing that.
Thank you. Terrific.
Thanks, Dom.
Thank you, Dom. And last but not least, James?
Very kind, very kind. Good morning. A couple of questions. Firstly on reopeners, there's been a couple of questions already on reopeners, but I guess this has been touched upon a little bit. I was wondering whether you had any visibility on how the split might look for reopeners between fast money and slow money. Obviously I guess one of the biggest themes in a way in Cunliffe was spending more on maintenance of assets. You know, maintenance CapEx is normally treated as OpEx, so maybe that points to a bit more kind of fast money bias. Maybe you could share some thoughts on that if that's possible.
The second question was just touched upon, I can't believe I'm at the end of the queue and no one's asked us already, but the topic of the moment, data centers, which you just mentioned, you had lots of applications. Obviously data centers use a lot of water. Could you talk us through how we should be thinking about data centers in the context of United Utilities? Is this gonna be a big driver of investment for you, of demand? You mentioned the applications. Are they, you know, are they ones that are likely to be progressed in the near term or is this further out? That'd be super useful. Thank you.
Great. Thanks so much, James. Do you wanna pick up the sort of fast and slow money and I'll pick up on data centers, Phil?
Yeah. Hi, James. I mean, as I alluded to with Pavan, you know, the split of how Ofwat intend to fund any reopener is clearly one of the things that we'll have to consider in terms of how that impacts funding, et cetera. You know, clearly a lot of investment would go into CapEx and would typically be slow money. Clearly, you know, we'll be pushing to make sure we've got the right balance between fast and slow, in the context of what that means for financial ratios and the performance of the business. As always, Ofwat will be looking to balance that with the impact on customer bills in the near term as well.
James, just in relation to your comments about data centers, look, they're all at various different stages of maturity. We've done two things. We've identified areas in the region where we have spare water capacity. They're not necessarily always aligned with areas where people want data centers, but we've done a huge amount of work in that particular space. In relation to the data centers that we're seeing, it also generates an opportunity for us as well. How can we potentially use stormwater in terms of the cooling that is required?
If you think about combined sewer overflows and the challenge that I have, and the fact that, you know, our sewers are never more than about 15%-18% full, the challenge we have is one of rainfall and we have the highest combined rain network in the U.K. There is a significant opportunity here for how we potentially think about this slightly differently. There is some really interesting engineering that is happening in this particular area as well, but they are all at different areas of maturity. There are certainly areas where we are going to have to put in additional water resources to provide the capacity that is actually needed. I also think it is a bit of an opportunity for the U.K. to think fundamentally differently.
We are working with a number of international organizations looking at how we can use, there is an awful term in the sector called final effluent, but in other words, what has come out of your treatment works then gets returned into the environment. How could we use that? They do not necessarily need potable water. Just looking at this differently from an engineering perspective as well. There is a huge opportunity in there for us to both innovate at the same time as growth infrastructure as well.
Great. Thank you very much.
Thanks, James.
Thank you, James. Back for another bite. Mr. Nash. Yes, we, we can't hear you, Dom.
Sorry, it's 'cause I'm trying to make sure it overruns, Chris, as much as possible. Yeah, one question from me, please. Supervisory regulation, clearly we are in sort of negotiations with the regulatory bodies and the government as to how that will work. What sort of options are you potentially looking at, or what would you like to see to come out of supervisory regulation? Do you see it as a potential sort of hindrance or a help in the way that you actually are going to perform your functions going forward?
Look, I, I, Dom, I see it very much as a help. You know, there is a regionality about these businesses that we run, both in terms of the context of the infrastructure, and even within region. You know, you've heard me talk about the fact that I've restructured the business to be across five counties. You know, Merseyside has got 84% of its wastewater system is a combined system. It's on the west coast. Those storms hit it every single day. You know, even within region, it performs very, very differently. I think regulation that understands the context of what's going on within a region, what those local priorities are, the ability to understand both the performance of the assets and the cost base is hugely important.
Sir John talked a lot about moving away from notional models and the need to really understand those cost drivers. And we're hugely supportive of that. We saw the benefits of some of that from the work that we did in AMP8 and particularly, the allowances that we got in relation to some of the rainfall patterns we're seeing, CSO targets and things like that. The moving away from this ability to just think of something being notional and really understand, and both supervise and regulate accordingly, I think is something that, you know, we would really, really encourage.
Thank you. Terrific. Thank you very much. Next up, Ajay, go ahead.
Thanks, Chris, and thank you for the presentation. Look, I get the argument of the scope and need for more CapEx and then improving return profile even for the sector, but the bit that always seems to be a sticking point is the affordability and how this clashes with those aspirations in some respects. I'm trying to understand, what do you need to see happen in regulation to ensure that these are more aligned with each other, and not a case of we move five years from now, we're asking for higher returns, we're asking for more investment, but there's a consequence of higher bills and the clash with that. Ultimately, it just adds to the risk to the sector.
Great question. I think some of this comes back to what Jenny said a little bit at the beginning in terms of, you know, what needs to happen. I don't, look, we have seen a level of resilience as bills have increased, but, you know, bill increases are a challenge. I think, you know, UU does a huge amount in relation to affordability support. You know, we've doubled the number of customers that we're helping, but I think that is where a national social tariff can really play its part. Because, you know, I, you know, I've been very, very clear that water is the only sector that doesn't have that level of universal support, and that isn't right. You know, from an energy perspective, we have warm homes discount.
It isn't a postcode lottery according to where you live, you know, and therefore it won't surprise you that I continue to advocate for that because to some degree that provides some additional capacity, that's absolutely required. I think the other thing to remember is we all got really strong customer support in terms of the bill package that was put forward. Three in four customers supported the increase in bills, and more importantly, the improvements that they would see as a result.
So, you know, I think it's also about making sure that you're spending customers' money wisely, that we're driving efficiency, we're driving innovation, but at the same time there is a cost and there is a cost for the infrastructure that's needed, you know, and we are seeing the impact of climate change in a way that continues to evolve and to grow. You know, as water companies, it's essential that infrastructure is in place so we can enable the growth that we want to see, you know, whether that be new housing targets or industrial growth targets. At the same time, how do we make our assets more resilient?
You know, and just to give you an indication of some of the things that we're seeing, you know, you may have heard on the news last week, there was a train that derailed up here in Cumbria, but I saw 8% of the annualized rainfall for the year fall in one day, just in Cumbria. The volume that is coming at us is very much changing and the infrastructure is going to have to change and evolve to be able to cope with the climatic patterns. I think that national social tariff is going to be key in terms of how do we, how do we maintain that balance.
Thank you very much.
Terrific. Bertik?
Hello, good morning and thank you for taking my questions. I hope you can hear me well. Just to maybe talk a little bit about how you have started AMP8 in terms of the potential outperformance. Obviously you have given a guidance on ODIs in year one, but I just wonder if you, if we think about your latest debt issuance, where do you see the cost of debt versus the benchmark, meaning what kind of implied outperformance or underperformance we have here? Also, similarly, if we think about your totex performance, are there any surprises to the upside or to the downside so far into AMP8 versus the allowances in terms of costs, inflation, or in terms of CapEx inflation?
Maybe lastly also on ODIs, obviously for FY 2026, we know it will be negative, but shall we expect FY 2027 to be already positive in ODIs or is it too early to say? Thank you very much.
Morning, Bertik. Do you wanna pick up the first two and I can pick up on ODIs, Phil?
Yeah. So just picking up on the debt side. Your question was around, how are we performing in terms of recent debt issues, Bertik? I think probably the simplest thing is to refer you back to our capital markets day slide that we sort of tabled, where we showed how our performance was tracking against the Ofwat index. That was a very, very positive position. I am pleased to say that existing, you know, debt issues that we have issued in this half have continued to perform in line with the expectations that we had at that time. You know, basically continuing to perform as we expect. On the totex side of things, I think Lou has already touched on this a little bit in the context of Dom's question around totex outperformance.
You know, I think we are very focused on managing our cost position and living within the totex envelopes. We do not particularly see huge scope to outperform. I think that probably all adds to the totex position.
In relation to, to ODIs, BTC, I mean, I think, you know, we've been really clear in terms of we've put the hundred basis points on the table. We see that coming both from financing outperformance, ODIs and, and PCDs. There are some ODIs that are in penalty this year, some that are very much in reward. We are very clear we are driving very hard against targets. Obviously as the infrastructure goes in the ground, you start to see the benefits of that and those ODIs continue to build. We've made a really great start, you know, so for example, on leakage, we'll deliver a leakage benefit this year, this year alone, that is bigger than what we delivered last AMP.
You know, there's some real great progress and work that is happening, but they continue to build as we go through the AMP period.
Okay. Heading back to Julius with a question.
Yeah. Thank you. I'll try and go for a second. Maybe just on the last point on ODIs. I mean, you've seen some improvement in the first half year, but could you maybe give us some indication how much of that is driven by weather? And then maybe also, I mean, the guidance hasn't changed overall on the, you know, net penalty, but has there been some change given that we had like some warmer weather this far, that there were maybe some improvements on the waste side? Just some color. Great. Thank you.
Yeah. Thanks, Julius. I mean, look, we have been really clear that, you know, we expect that we will be in a penalty position for this year, but they build over the AMP and we will be in a net reward position over the AMP period. The weather, although we have seen some dryness to the weather, we have seen some significant storms too. There are some areas we have made great progress, and great delivery, where we are seeing real improvements. You know, we have made great strides in all of our customer service targets. We are in reward on all of those. We will deliver our targets this year in terms of CSOs, for example. You know, we have seen some other areas where we have got challenges driven by some of those storms.
It is a series of ups and downs, and as that infrastructure goes in the ground, we continue to see that build and that delivery. We are extremely focused on driving the benefits and that contribution to the overall 100 basis points.
Okay. Thank you. Thank you very much, Julius. Thank you everyone for joining today. As always, if you have any follow-up questions, please feel free to reach out to the team. All of the materials that Phil mentioned are on the website in relation to the CMD. I'll hand back to Louise.
Brilliant. Thanks, Chris. And look, thanks ever so much to everybody for joining this morning. You know, I suppose just to summarize, really, we've made a really great start to the first year of the AMP, really strong operational and financial performance. The AMP8 program's going really well. I'm really pleased with the way that the organization and the supply chain have mobilized. Our CapEx is all in line with expectations, and we feel that we're really well positioned as we move forward in relation to the transformative period for the sector. You know, thank you so much for joining us this morning. No doubt we will get the opportunity to speak in the coming days. I know there's a lot going on and it's busy, but thank you so much. Much appreciated.
Thank you everyone.