Good morning, everyone. Now we've still got people coming in. Just give it a few seconds. Okay. Great. Looks like we've got most people coming in already. Good morning, everyone, and welcome, and thank you for joining us at such short notice this morning. This morning we've released preliminary FY 2026 financial results slightly ahead of schedule and launched a GBP 800 million equity pricing to accompany upgraded capital expenditure guidance. We have around 45 minutes for today's call, giving us plenty of time for you to ask questions. With that, I'll hand straight over to Louise and Phil. Louise?
Great. Good morning. Thanks, Chris. Good morning, everybody, and thank you for joining Phil and I to talk through our FY 2026 results and details of the additional AMP8 growth submission and equity raise that we have launched this morning. I'm really keen to talk through our results and to share more about the exciting plans that we've submitted to Ofwat today. As we move through the deck, you will hear three key messages. Number one, we've made a really great start to AMP8, and we are delivering on the things that matter most to our customers, our communities, and the environment. We've delivered a strong set of financial results with a 7.5% asset growth coupled with a 42% increase in underlying EPS. We're delivering improved environmental and operational performance, and our supply chain is mobilized, and our delivery pathways are well established.
Number two, our supportive regulatory backdrop and the new approach to incremental investment provides the opportunity for rolling submissions. This has enabled us to announce investment plans of GBP 1.4 billion as part of Ofwat's 2026 reopener process, representing the first phase of our incremental investment program. With this investment, we're focused on providing the water infrastructure for thousands of new homes, powering data centers, enabling clean energy, and strengthening the resilience of our infrastructure. Due to this, we have added an additional circa GBP 2.5 billion to our CapEx guidance, the balance of which is expected via future reopeners as we continue to invest further in the Northwest through the AMP.
Incremental CapEx is to be fully funded with a GBP 800 million equity placement that we have launched this morning, of which GBP 400 million is a cornerstone investment from Atlas with The Future Fund. Lastly, I'm pleased to announce our upgraded financial framework. Our asset base is growing to 25 billion by 2030, equating to a compound growth rate of around 10%. This growth is fully funded, and we're now guiding to regulatory return of 10%-11% across AMP8, which is an increase of 100 basis points. Let's start with year one performance. Look, I'm not gonna cover everything that's on this slide, but I'm really keen to pull out a few key highlights. While the U.K. experienced a relatively dry year, the North West still saw average rainfall.
Despite this, our spill performance improved despite that above average rainfall and with activations falling 23% and duration falling 27% versus the prior year. The focus on pollution incidents remain, but importantly, we've recorded no Category One pollutions, the most serious form of pollution. We've seen an 80% year-on-year improvement in our performance measures, and this year we fixed more leaks than we've ever done before. We replaced over 150 km of mains, more than in the previous five years combined, supporting long-term leakage reduction and fewer supply interruptions. Our in-year leakage performance is the best the Northwest has ever seen.
Despite this progress, we do expect to miss our regulatory three-year rolling average target for FY 2026 because that reflects the impact of prior years and the time it then takes for the rolling methodology to capture this year's really good improvements. Our in-year ODI penalty of GBP 35 million is in line with management expectations for the year one, and we're confident in delivering net rewards across the AMP8 period. Delivering a high-quality service every time for customers is really important, and it's central to building trust. We've got a Trustpilot score of 4.5, which is excellent, and we remain above median and in reward position across all regulatory customer service measures. With bills rising this year, we have focused on robust credit control, and our bad debt charge is in line with expectations at 1.8%.
With the size and scale of our capital program, health and safety remains our top priority. Our lost time injury rate has reduced by 30% during the year, reflecting strong continuous improvement. Engaged, committed colleagues are central to our success, we're really proud to report an outstanding 90% engagement score, well above global and U.K. high-performance benchmarks. Our strong culture is also reflected in our Glassdoor rating of 4.6 out of five. The strength of our brand as an employer is really critical to ensure that we retain and that we attract the very best talent we need to deliver our ambitious plans. Lastly, on financial performance, we've delivered a 42% uplift on underlying EPS compared to the prior year, coming in at GBP 1.071.
We're making real strides on our CapEx delivery with spend in line with expectations of GBP 1.5 billion. We've delivered asset base growth of 7.5%, and a regulatory return of 13%. Our balance sheet remains strong with gearing at 60%, and a final dividend of GBP 0.3578 per share. Look, let's move on to the capital program. As we've transitioned into AMP8, we've made a great start managing the ramp up in the capital investment. We've successfully recruited over 1,300 new colleagues to join United Utilities, whilst at the same time onboarding over 100 suppliers that's helped us deliver our ambitious AMP8 program. The scale-up of our activity, which you can see demonstrated here on the graph on the left-hand side, hasn't impacted the quality of our outputs.
Our effective and efficient delivery of the capital program has enabled us to achieve our year-one regulatory outcomes, and our spend is in line with profile. As the pie chart shows on the right-hand side, AMP8 is scaling up with projects progressing through the delivery cycle. Our award-winning approach to standardization Project Blueprint is playing a really vital role in the key stages of project delivery. The methodology and focus is keeping us within cost and quality allowances while accelerating delivery for customers and our communities. By standardizing those designs and bulk purchasing materials and embedding more efficient maintenance regimes, we're cutting cost and time across multiple projects. This approach allows us to identify repeatable solutions, streamline design, and secure critical components early. Government policy and regulation is now underpinning a multi-decade of growth.
The opportunities as we see with tightening environmental standards, a need for greater asset replacement, coupled with new housing and industrial growth targets focused here in the Northwest, a region that has some of the strongest growth of anywhere in the U.K. The recommendations from the Cunliffe review provide the conditions for a new direction for water, resetting regulation with a single integrated regulator, and the need for balanced risk and reward. Today, we submitted to Ofwat our proposals for additional investment to support growth in housing, the new green economy here in the Northwest, coupled with proactive asset replacement. The new regulatory landscape I just outlined is evidenced by Ofwat's new approach to in-period adjustments.
This new and much welcome change allows us to now address new and emerging requirements that have been established since our PR24 determination in a way that is more agile, enabling us to respond to national and regional growth requirements, while also supporting a more sustained capital delivery profile, as demonstrated in the chart. The additional CapEx that is proposed for AMP8 enables us to maintain and strengthen the supply chain and support economic growth as we transition into AMP9, and the delivery of a sizable future investment program that will be supported by this retained and deployed supply chain capacity. The GBP 1.4 billion program submitted today sets out how we will deliver the vital infrastructure required for thousands of new homes across the Northwest region, unlock capacity for data center expansion, and facilitate decarbonization.
We've also outlined investment in our gated delivery schemes to drive improvements at Lake Windermere, as well as investments in our assets to strengthen the resilience and reliability of our networks, treatment works, and services. Beyond this, there are additional regulatory windows in 2027 and 2028, and to propose further investment to support asset health and regional growth, alongside other targeted areas specified in the AMP8 determination. Taken together with the prospect of additional investment in the final years of the AMP, we expect this to lead to circa GBP 1.2 billion incremental investment in AMP8. Subject to approvals, in total, this would deliver an additional GBP 2.5 billion of capital investment on top of the current AMP8 program previously announced. That supports a circa 10% compound growth in the asset base between 2025 and 2030.
The growth will be facilitated by an equity placement of GBP 800 million that has been launched today. We expect to remain within our gearing target of 55%-65% throughout AMP8. The visual shows the communicated timeline for decisions and also dates for future in-period submissions. We expect a draft decision in August for the submission we have made today and the final decision due in December. Our focus has been on ensuring we have a high-quality submission that reflects the categories and investment areas that Ofwat has identified and expects to see. We are really encouraged to see the changes to in-period adjustments that Ofwat has embraced and the signal that this sends about the changing landscape ahead. This will help us to deliver with pace and flexibility the infrastructure that is needed to support the rate of growth that we are seeing here in the North West.
I'm now gonna hand over to Phil.
Thanks, Lou, good morning everyone. Now turning to the FY 2026 financial highlights. At the headline level, underlying EPS was up 42% on the prior year, coming in at GBP 1.071. This was driven by rising tariffs, resulting in 20% revenue growth, partly offset by rising costs, which I'll come to in a moment. We're making real strides in our capital program, our CapEx stepped up around half a billion this year, with the same increment coming through to take us up to the GBP 2 billion mark for FY 2027. Lastly, importantly, our dividend continues to grow in line with inflation. Next, turning to the underlying profit bridge. Underlying operating profit was up GBP 274 million, in line with expectations. Underlying revenue increased by GBP 431 million, reflecting the PR24 Final Determination.
Consistent with a typical regulatory approach to setting prices, there's a big step up in allowed revenues in the first year of the AMP, which, with increases in revenue allowances over subsequent years expected to be lower. This is partly offset by a GBP 40 million adjustment relating to diversions activity to accommodate the now aborted northern leg of HS2. As I mentioned earlier, operating costs were up year-over-year, primarily due to three factors. Expenditure associated with the expansionary impact of the AMP totex program. Inflationary pressures impacting the cost base and specifically employee costs, rates, and regulatory fees. With other costs, including both the step-up in contributions to Ofwat's innovation fund and the impact of dry weather last summer. We continue to maintain financial discipline, with balance sheet gearing at 60% benefiting from near-term inflation.
Our capital investment program is progressing well, resulting in the RCV growing to GBP 16.5 billion, a 7.5% increase year-on-year, with net debt at GBP 9.9 billion at March 2026. In the year, we raised around GBP 1.5 billion in term funding, outperforming the Ofwat debt indexation mechanism by around 80 basis points and locking in sustained benefit across all five years of the AMP8 period. This funding, together with the renewal of committed bank facilities, extends our liquidity profile to the second half of FY 2028. In the first year of this new regulatory period, our regulatory returns strengthened to 13%, supported by near-term inflation.
Financing performance continues to be a robust underpin to our Return on Regulated Equity, or RoRE, while we also benefit from both a gearing impact, given the notional company's gearing of 55%, and the higher level of near-term inflation when calculating the nominal regulatory return on the actual capital structure. Turning to look ahead. I am pleased to set out here our near-term technical guidance. Underlying revenue next year is expected to be between GBP 2.7 billion and GBP 2.8 billion, with underlying operating costs increasing by around GBP 100 million, in line with the regulatory allowance. We continue to benefit from our disciplined and prudent energy hedging. Our hedging levels remain above policy minimums, reflecting proactive execution during the benign market conditions, which means we are fully hedged for summer 2026 and over 90% hedged for winter 2026/2027.
Depreciation will be up by GBP 50 million-GBP 60 million, reflecting the continued asset base growth, while underlying finance expense will be lower and underlying tax is expected to be negligible due to full expensing. As I've already mentioned, CapEx will step up again significantly to around GBP 2 billion next year, resulting in asset base growth of around 10%. ODIs are expected to improve markedly, resulting in a lower net penalty. We remain on track for a cumulative reward over the AMP. Lastly, our total dividend for next year is expected to be GBP 0.5554 per share. Complementing our near-term technical guidance, we have our medium-term financial framework. I'm pleased to be able to upgrade our financial framework today, reflecting both the revised outlook for capital investment and the associated GBP 800 million capital raise also announced today.
Key aspects of the upgrade for the AMP8 financial framework are regulatory returns expected to be in the range of 10%-11%, an increase of 100 basis points in the level of outperformance. AMP8 capital investment is now expected to be around GBP 11.5 billion, an increase of GBP 2.5 billion. That results in an RCV annualized growth over AMP8 accelerating to around 10%, an increase of 3% in the compound annual growth rate. Thanks, and I'll now pass back to Lou to take questions.
That's great. Thanks, Phil. Look, the plans that we've outlined today see capital investment over AMP8 move to circa GBP 11.5 billion, which in turn delivers a strong compound asset base growth of circa 10%. Our robust balance sheet will be supported by the GBP 800 million equity placement that we've launched this morning. This enables us to maintain our 55%-65% target gearing range across the AMP, underpinning strong regulatory returns of 10%-11% that is coupled with a progressive inflation-linked dividend. I want to just summarize before we go to questions. We've made a really great start to the AMP. We've delivered a strong set of operational and financial results. The GBP 2.5 billion investment plan will enable the growth that is needed in our region.
Finally, the plans that we've discussed this morning reflect the upgraded returns guidance that we've taken you through. More importantly, it also sees our asset base growing to circa GBP 25 billion by 2030. I'd really like to thank you for your time this morning and recognize that you've jumped on a call quite quickly. More than anything, really keen to get to questions, and Phil and I are keen to hear anything that you'd like to ask. Thank you.
Thank you, Louise. Okay. If you would, if you'd all like to use the raise hand function to ask a question, given we don't have a lot of time, if you could keep your questions to one or two to begin with, then we can come back with follow-ups if we have time at the end. Jumping straight in, Pavan, would you like to go ahead? If we could see you, that'd be brilliant. Thank you.
Thank you, Chris, and thank you team for taking my questions and congrats on getting the strategic update out. My question is, you're raising today even though the reopeners have yet to be approved by Ofwat. We have to get the draft and Final Determinations later in the year. What gives you the confidence that this additional spend you're requesting will be approved? Is there an automatic element that was embedded in the FDs or have you had conversations with the regulator? The one small add-on I'll add to that is can you talk about your engagement with the supply chain in terms of actually delivering on this CapEx? I'll keep those questions. Thank you.
Okay, thanks. Thanks, Pavan. Look, I think there were sort of three elements to that question. I suppose let's start first with why now. I think what's really clear is we can see what's ahead. We've been able to see the ambitious growth rates that have been put here for the North West, the additional housing, the new towns. You know, as we look forward, we can see that runway. And more importantly, given the size of the 2026 reopener that we've put forward today, as well as the fact that Ofwat have now set out that annualized process, which is moving much more consistently with what you're used to seeing from an energy and an Ofgem perspective, we can see that future runway ahead.
The call that they've put forward for asset replacement and supporting additional growth across the region. Those things combined mean that we've now got full visibility of what that future runway looks like. In terms of the regulatory process, as I've said, there are three opportunities, if you like, 2026, 2027, and 2028. What we thought was really important was providing visibility to the market about what that future runway and that pathway looks like, and being in a position where we were fully funded to ensure that as we put those submissions in, they could actually be delivered. We're really clear that the drivers of the investment that we are putting forward are absolutely aligned with the government strategy.
What we are seeing is a rapid rate of growth here in the North West. Manchester is growing at a rate that is, you know, that is much greater than what we're seeing in the rest of the U.K., but significantly across Europe. I've got a huge amount of defense spending that's gonna be happening here in the North West with BAE, for example, and the submarine program that's been announced in Barrow. There's a number of strategic programs that are going here, are going on here in the North West that have been announced that this growth is also underpinning. I also think what's really important is the point about the supply chain, and I think you saw it in one of the slides. What we're actually doing here is strengthening the supply chain.
We've been really pleased, Pavan, with the start that we've made to year one. You know, we've moved from a sort of sub model that sat underneath that to 100 suppliers now working and embedded across the supply chain. The submission that we've put in today goes in as well with support from the supply chain and also support from local politicians, Andy Burnham, the team at GMCA, for example, in terms of underpinning the growth. I think what's really important, it's remembering that this work that we're putting forward is predominantly civils driven as opposed to component driven in terms of some of the infrastructure growth that you're seeing elsewhere. We're seeing that capacity in the supply chain.
It's enabled, it's here, it's working with us already in the North West. More importantly, we're committed to make sure that it is actually maintained as we go through the AMP, because we know AMP9 is gonna be a big plan, and we wanna make sure that that supply chain is strengthened and continues to grow as we move from one AMP period to the next.
Perfact. Thank you, Pavan. Dom, would you like to go ahead?
Hi. Hi there. It's Dominic Nash here from Barclays, and thank you for the, for your presentation. Two questions from me. Firstly, clearly you're, you're putting in this GBP 2.5 billion of extra sort of Totex. Could you give us some color as to the impact on bills and what you think, how you think you're gonna be profiling the bills and the revenues for this extra spend? Secondly, I think you've given a new RoRE update for AMP8. Could you give us a little bit more color as to sort of the breakdown of the components within the RoRE component as to where we think the outperformance is gonna come from?
Brilliant. Morning, Dom, thanks for those questions. I'll pick up impact on bill, then I'll hand over for Phil to pick up on RoRE. In terms of the impact on the bill, the sort of package and the sort of cumulative impact, if you like, of the GBP 2.5 billion that we've talked about is circa a GBP 10 on customer bills. I think what is very clear is that obviously this is investment that's happening now, what we've announced this morning is 4,000 additional jobs. That's in addition to the 30,000 that the AMP8 plan is already supporting. This is an increase in bills, it's for growth today for a bill impact that will materialize somewhat later on. I think it's also important to note that obviously we've got strong financial support out there.
Our bad debt charge is absolutely in line with management expectations and what we were expecting to see. You know, more than anything else, you know, we've got a robust package of support that's there for customers as they may need it, and United Utilities is recognized as doing so. You know, we've had lots of conversations about what that bill impact is, you know, that's materializing a little bit later on, for the growth that's happening now and underpins both the government and the regional growth strategy. Phil, on RoRE?
Morning, Dom. On RoRE, when we set out our AMP8 guidance initially when we accepted the FD, we said the 100 basis points of outperformance was coming across a number of different areas, financing, ODIs, PCDs, and Totex. We were very clear that the substantial underpin to that was financing outperformance. As we move forward through this first year of the AMP, we've had more visibility of things. Things have settled down. In the context of the financing outperformance, we've talked a bit more about that today in the context of continuing to outperform in terms of the new debt that we've issued. There we've outperformed by 80 basis points in year one against the Ofwat debt indexation model.
That's locking in more outperformance both in year one and through the rest of the five years of the AMP that's supporting the overall position. Obviously you'll have seen me talking through the bridge in terms of the current year performance. Obviously that position is leveraged 'cause as you know, the way the regulatory model works is the focus is on real returns. The higher inflation environment is also leveraging the financing outperformance as well. That's flowed through into the numbers. As we look forward through the five years of the AMP, we're now confident of revising our guidance to at least 200 basis points of outperformance.
Okay. Thank you very much, Phil. Mark, over to you.
Hello. Thanks for taking my question. I mean, my understanding is the filing has to be with Ofwat tomorrow. How much have you actually asked for relative to the, I think GBP 1.4 billion CapEx? Have you risked the amount that you've asked for and said, "Look, you know, Ofwat will not give us, is unlikely to give us all of that"? Secondly, in-period adjustments. When we spoke, Phil, if I recall correctly, you did mention that you would do some work with consumers to see if you can recover some of the returns, sort of, and the amortization of that within this review. Within that GBP 1.4 billion CapEx, or in addition to that, how much fast money is there to help support the balance sheet?
Those are my two questions. Thank you.
Okay. I'll take it, the first question, first. The GBP 1.4 is the totality of the submission that's gone in today. There are a number of key elements of that. GBP 400 million is at the asset classes that Ofwat have specifically asked to see. That's where they've invited submissions based on certain types of asset types. The rest is around supporting housing growth and industrial growth here in the Northwest, which is underpinned by really strong growth and planning activities that are already here and underway in the Northwest.
As we also said, there's some elements in there that as well, that are also around our gated submission, that we've been in very detailed conversations with Ofwat about. I'll hand over to Phil to pick up on the in-period adjustments.
Morning, Mark. Yeah, in terms of in-period adjustments, as you know, the revenue is subject to effectively further discussions with Ofwat. As you've highlighted, that's also subject to customer engagement, which is the normal process that you go through. We are expecting and planning to have revenue coming back into the back end of the AMP. We're not particularly looking to accelerate fast money as you, as you outlined. Effectively, most of this is, the investment is slow money CapEx going into the RCV. Clearly there will be returns and other contributions coming back through revenues. We're not accelerating beyond the normal rate of say depreciation, fast cash effectively.
Basically what you're saying is that you've asked for GBP 1.4 billion. You expect 100% of what you've filed for because you've spoken to Ofwat or you see it as such a sure thing. There's not really much in terms of in-period adjustments at the back end.
I think what we're saying, Mark, is that we've guided to GBP 2.5 billion worth of CapEx. We see that across 2026, 2027, and 2028 submissions. Those submissions will go in. As you know, there are always discussions backwards and forwards with Ofwat. Based on that forward trajectory of what we can see, the fact that they've now put forward annualized processes for investment, particularly around asset replacement and with the growth that we see over the totality of the period of the remainder of AMP8, we're guiding to a central point of an additional GBP 2.5 billion CapEx. That will be over those three submissions. You know, that's the entirety of what we see for AMP8.
Mark, just to add, I think in terms of the revenue coming back, you know, there will be a modest revenue. We're not accelerating lots of fast cash, which I think was the gist of your question. Sort of this is effectively CapEx and slow cash money. The normal depreciation and the return rates, et cetera, will be flowing back into revenues, and that will be potentially a three-figure number. You know, we need to have those discussions with Ofwat as we step through the process.
I think it's also worth sort of, just reflecting on the fact that these reopeners are gonna act like a mini price review. The submission that we've made today, is exactly what you'd expect to see in terms of, you know, from AMP8, from an AMP8 perspective, the level of assurance, the level of submission that's gone in. Again, we'll get an interim determination view on that in the summer, opportunity for further conversations in December, and we've already got racked and stacked what's going in for 2027 and have started some of that early engagement with Ofwat.
You know, from a regulatory process, this will be conversations backwards and forwards, but what we can see is that forward trajectory, and based on the demand that we're seeing here in the North West and how that underpins the strategic growth, you know, the defense program, the submarine program in terms of Barrow, the new town that's been announced in Manchester, et cetera, that's where it. This is the new news and the additional growth coupled with the asset replacement reopen process as we move forward.
Thank you.
Great. Ajay, your turn, mate.
Good morning, thank you for the presentation. Is it fair to say the bulk of the increase we're seeing in the return side is coming from higher inflation? What inflation assumptions are you assuming over this period? Just so, or at least maybe how they've changed so we can kind of factor that in. The second one is on ODI performance. Like, the start's been a little bit more disappointing than maybe the beginning of the AMP. Could you just maybe just revisit the picture of getting to a positive territory by the end of the AMP?
Certainly. Do you wanna pick up inflation assumptions and I'll pick up ODIs, Phil?
Yeah. Great. Morning, Ajay. The bulk of the, as I said, the 200 basis points is significantly underpinned by financing outperformance. Yes, it's coming from financing outperformance. As I said, that breaks down into two components. On a nominal basis, we are outperforming the Ofwat debt indexation model as I said, by around 80 basis points, so that's a very significant level of outperformance from debt issuance on a nominal basis. Nothing to do with inflation. When we step into the inflation part, because we're regulated with a real cost of debt, any high levels of inflation do play through and leverage that position further. There's a combination effect going on there.
In terms of the inflation assumptions in our plan, we're assuming a 3% average inflation over the AMP8 period. Obviously that's higher at the front end, reflecting the higher near-term inflation in year one and the expectations for higher inflation in year two given the recent events in the world. But that reverts quite quickly back to Bank of England target levels at the back end of the AMP period.
Ajay, in relation to your question on ODIs, we've always been quite clear that we see, you know, a negative start in terms of the AMP period and that will build to an overall positive position over the AMP. In relation to those measures, they are taking time to build. As I say, with leakage, had a cracking year 1, but actually I've got a rolling average from the previous two years that needs to roll through. Those ODI returns are at exactly where we thought they'd be, and over the period of the AMP contribute a positive performance as part of the overall returns guidance that we've provided.
Okay. Thank you. Thank you very much. I think next up we have [Ahmed Farman]. Please go ahead.
Hi. Hi, thank you, and congrats on the update. Maybe just, Phil, a quick clarification question for you. We, as I see you're on consensus right now for 2030, the net income is about GBP 800 million. Bringing together all the pieces, the higher RAB, the outperformance, but then the profiling the revenue, could you give us a sense of what this sort of, what does the new plan means in terms of potential upgrade to the 2030 sort of numbers that we see on consensus? Or is the earnings benefit more in AMP9? I just wanna maybe just bring it all together to get your views on that. Maybe sort of separate question from the transaction today.
Could you just remind us where we are in the sort of the reform process now, and your latest expectations on the transition plan, et cetera? Thank you.
Do you wanna pick up the first bit, and I can then pick up the transition plan?
Good morning, Ahmed. Yeah, I'll take the first question. I guess, as you know, with the regulatory model, the way the regulatory model works, as I sort of discussed when I was stepping through the revenue bridge, there's a very big step up typically in the first year of the AMP and then a sort of modest progression of revenue going through the AMP period. That's typically how the regulators have profiled revenue. You're right, there's always a lag in terms of a regulatory model of revenue coming through. The real accretion to EPS here will fall into effectively AMP9. As I sort of talked earlier, we are gonna be talking to Ofwat around revenue adjustments in AMP period as well.
At the back end of the AMP, there will be, sort of revenue coming back into the numbers as well. The, the sort of material components of the step-up and the value will flow really into the AMP9 period.
Yeah, that's fine.
Yeah. Perfect. All right. Your question Ahmed about where are we up to with reform and the regulatory agenda. You may or may not have seen yesterday that the government announced Dame Julia Black, who is essentially going to lead a lot of the transition activity and the transition to a new regulator, and I think that's a real positive step and something that we really welcome. Obviously, we've got the King's Speech in the next two weeks, which again underlines a number of the elements of the Water Bill more broadly. You know, we are starting to see movement.
I also think that the Ofwat communicating the processes in terms of in-year submissions is also a really great signal of the transition that's starting to be made to the new regulator. That announcement only happened yesterday with Dame Julia Black's appointment, but, you know, there's a lot of work going on now to enable this transition, and we look forward to seeing what's outlined in the King's Speech in a couple of weeks' time.
Thank you.
[Perfact]. Alex Wheeler.
Morning, to you from me, please. Just following up, I guess, on the reopeners. It sounds like you're pretty confident in the submissions, but if there were to be a haircut on the number that you ultimately got there, should we still think about it as a GBP 2.5 billion total CapEx? Would it be a case of, you know, bringing CapEx forward from AMP9? I know you've spoken in the past about that AMP9 CapEx plan being very large. I'd be interested to get your thoughts there. Then just on the gearing, Phil, I'd just be interested in where we land now. I know you've talked about the 55%-65% range, but what's the sort of expectation on the moving parts there and the phasing upwards? Thank you.
Great. Thanks, Alex. I'll take the point around the CapEx and Phil from a gearing perspective. Look, I think what we're really clear about is that we've got these three openers, 2026, 2027, 2028. You know, there will be movement in scope across those dates. You know, we're already starting to build what's in 2027. Some things may move around according to planning timelines and things like that, but, you know, that's that sort of central view of what we can see also coupled with the asset replacement that Ofwat are pulling for. In relation to the point about transitional investment, it's a really great point, Alex, because we've been really clear. If you remember at AMP8, I talked about the fact that we needed an adaptive plan. There were things that we would
that we'd push from AMP8 into AMP9, circa GBP 1 billion worth of investment, for example, on the Manchester Ship Canal. As well as the 2026, 2027, and 2028 reopeners, we also have the opportunity around transitional investment as we move into what is going to be a sizable AMP9 program. All of those combined is what's added or what's led to us upgrading our CapEx guidance to a central point position of an additional GBP 2.5 billion for the AMP period. Phil?
Okay.
Hi, Alex. Picking up the gearing point. Today we're at 60% gearing, and that position is sort of benefiting effectively from the near-term inflation position we've had in the last 12 months. When we've looked forward, in terms of the equity raise and the GBP 2.5 billion of additional CapEx we expect to see, you'll note that we're raising less than 40% of the additional amount that we're expecting to raise. Post the raise, we'll fall to the lower half of our range, and we'll see that trend back up through the range, and we are using the balance sheet capacity that we've benefited from from the sort of near-term inflation.
The current year outturn and the expectation of higher inflation in the next sort of six to 12 months will support some aspects of the program and leave us with a degree of headroom as we get to the end of the AMP period.
Okay. Great. Thank you, very much, Phil. James Brand, moving straight on to you.
Great. Good morning and congrats from me also. I just had one question. Obviously the ramp growth in AMP8 is gonna be very strong now, how should we think about how that transitions into AMP9? Is the prospect that, you know, you could be looking at 10% ramp growth per annum, you know, for the next decade? Is that feasible, or do we see things kind of slow down a bit in AMP9, at least in percentage terms? Thank you.
Morning, James, thanks for the question. I mean, we've always been very clear that AMP9 is a sizable program, and we can see here what we need to deliver as part of the Environment Act requirements that are coming through. We can also see how additional requirements are stacked with what's coming through from the Drinking Water Inspectorate, et cetera, and that's before we get to anything that's additive around things like PFAS or forever chemicals. You know, the amount that we need to do in AMP9, we were always quite clear, was significant. You know, I think as we move through and we start to provide greater visibility and clarity of that, you will get a sense of the shape and the scale.
I think that's the other reason as well, why we're taking the opportunity to provide that forward guidance for the looking forward in terms of the end of AMP8, is because what we're also doing is shoring up that supply chain. I don't wanna be in a position where we've worked so hard to mobilize that supply chain, we've got that commitment, that as we literally start to go into AMP9, it starts to come down the other side only for us to gear back up again. That makes no sense. It makes no sense for what we need to deliver in AMP9.
It makes no sense in terms of the regional economy, because actually you're gonna be managing job losses only to then sort of 12 months later turn around and say, "Well, actually, we now need you all back again." It makes no sense. It starts to smooth out what currently is looking like a traditional curve and provide that smooth trajectory as we move from AMP8 to AMP9. We can see what's sat there right here, right now, based on legislation alone, and it's a significant program that we need to deliver.
Fantastic. Thank you.
It looks like, last but not least, Sarah Lester from Morgan Stanley, please come through. Actually, one more from Bartek after that. Sarah.
Thank you very much. Sorry you either see me or hear me today, 'cause tech is not on my side. For the question, you can hear me. It's another question please on the reopener quantum, it's slightly different to the ones you've had so far. I mean, we obviously knew the reopener opportunity was there as part of the PR24 process. Since business plan submissions back in 2023, you did have that very intentional step down in the later two years, the last two years of the AMP. As you've talked about, the LTDS showed that massive step up in AMP9. I'm just curious, if we isolate the GBP 1.4 billion of the reopener, had you always intended to spend this much as part of that process, or has that increased recently?
Were you sitting there one day going, "Oh, you know, we're talking about a large than we had initially expected"? Thank you.
Hi. Morning, Sarah. Look, I think what is really coming through is a lot of new news. I think it's remembering that when the AMP8 plan went in, it was back in 2023 and the current government weren't even in position. If we think about the additional housing that's been announced, the 1.5 million homes, you know, I've got new towns that have been announced here in the North West. The shipbuilding program, there's a huge amount, you know. HyNet has been designated as one of the government's strategic programs, that pipeline running from Ellesmere Port. There's a huge amount of regional growth that's been enabled, that essentially is new news. We'd always been very open and talked about how we manage that transition from AMP8 to AMP9.
It's those things combined. I also think that, you know, Ofwat being very clear, that they'd left a number of sort of hooks, if you like, for additional opportunities in the price review process, particularly around certain elements and also regional elements. For us, they'd left Windermere if we wanted to go back and do anything, which we're obviously putting forward here. Also, you know, I think the moving to this annualized process and welcoming reopeners in relation, not just to the additional growth items, but in relation to asset replacement, is a real step forward. I think a recognition of how Ofwat are moving and transitioning post Cunliffe's recommendations.
Again, I think, you know, that's something we've pushed for, and something we're therefore really, really keen to embrace as well.
Thank you.
Okay, great. Thank you. One last quick question and one last quick answer. [Bartek], fire away, mate.
Let's see the answer. Good morning. Good morning. Just as I said, very quick one. How do you assess the risks that the regulatory framework may evolve in the way where your financial performance will be eliminated or and, or kind of will go down? Meaning, for instance, the regulator will move to a framework where cost of debt will be a pass-through or more company specific, as we are seeing in other countries. Thank you.
Morning, Bartek. Look, I mean, I'll let Phil specifically answer that question. I think what is important is that post Cunliffe, you know, there was a very clear direction that, you know, this needed to be a sector that was clearly had a strong investment profile. There is a recognition that everything that we need to do, not just in AMP8, but AMP9 and AMP10 beyond, there needs to be the returns that accompany that. You know, I've not heard anything that moves away in any way, shape, or form from strengthening that narrative. Phil?
Yeah. It's hard to comment definitively, but I guess I'd probably make the observation that, you know, incentive-based regulation, it's really important to maintain incentives on companies to deliver and perform and, you know, you can see lots of potential dangers of just having a direct pass-through mechanism in terms of cost of debt. I think, you know, we'll have to see how things evolve, but I don't really, I've not really seen anyone talking about that as a sort of proposal effectively.
Okay.
Great. Thanks. Thanks, Bartek.
Thank you. Thank you very much, everyone. That brings us to a close. Thank you for your participation this morning. As always, the team is available for you if you would like to contact the team. Good morning. Thank you.
Brilliant. Thanks ever so much for joining us. Have a good morning.
Thank you.