Good morning, everyone. I'm delighted to be joined by our Group CFO, Kate Ringrose, and our Chairman, Scott Wheway, for the question and answer session. I'm sure you've all had a chance to look at the results and to look at the presentation. I would suggest that we dive straight in to take your questions. Emma, if you could let people know how to do that, and we'll get going. Thank you. Ladies and gentlemen, if you wish to ask a question please press star followed by one on your telephone keypad. If you change your mind or wish to remove your question, please press star followed by two. When preparing to ask a question please ensure that your phone is unmuted locally. To confirm that press star followed by one. Your first question today is from the line of Alex Leung of UBS. Please go ahead. Hi. Good morning. Yes, Alex here from UBS. Three questions from me, if possible, please. First, you obviously are not giving guidance for 2021, but you have flagged GBP 100 million to GBP 120 million of new negatives today, which would be a quarter of your operating profit for the continuing business. You also state potential restructuring savings coming through. I just thought it might be useful to start, if you could walk through a bridge of the various parts that you think could offset the new negatives, and do you think there are enough offsets in total for continuing EBIT to rise in 2021? I thought I'd start by trying with that. Just coming on to the Spirit disposal process, the language is the intention remains to sell the assets, I just can't help but wonder whether this is sort of softer language than has been used in the past, especially in light of the sort of quite strong recovery in commodity prices since the disruption last year. I guess also you've now had about six months or so to talk to the market and establish if there's interest. I'm just wondering if there's anything you could share around that process with us. Third, and finally, I'm aware it's quite a sensitive topic and it's probably quite difficult to answer, but just with the ongoing industrial action, there are various headlines and numbers around cancel appointments, backlogs, et cetera. Is there anything you can share with us regarding the potential implications? Are we seeing anything coming through customer numbers or satisfaction levels at this point? Thank you. Alex, thank you very much for that. Let me take the question on Spirit Energy and on the industrial action, and then I'll ask Kate to talk you through some of the moving parts. I would applaud you on your attempt to get us to give you guidance in a slightly different way. Kate will talk you through some of the things we've spoken about, but I think there is a lot of uncertainty, which is obviously why we're not looking to give guidance. On Spirit Energy, our intention is absolutely to exit Spirit Energy. You're right, commodity prices have recovered, which is really quite good, but you also know that the move to net zero, the decarbonization of the economy, it means there are fewer people that are in the market for these types of assets. There's no signal to take in terms of the wording. What I prefer to do is to tell you when we've done things rather than to necessarily tell you what we're going to do. I wouldn't read anything into that. Our key focus is to get the portfolio where we want it, Spirit's not part of that portfolio, and make sure that we get the best value that we possibly can for the assets. We also look forward to when we can focus more on the core businesses. On the industrial action, there's a number of questions you asked there. We measure our Net Promoter Score for engineers, and it's substantial. It's in the 70s. Net Promoter Score is how many people say they like you versus how many people say they don't like you, so promoters less detractors. It's usually up in the 70s for engineers. That's probably in the 60s at the moment. We see a little bit of an impact, but not a huge amount. Now, in terms of some of the numbers that are out there, when we entered into the lockdown first time, so what seems like a long time ago, but less than a year ago, we postponed a huge amount of work because we weren't allowed to do it. Things like service visits, annual service visits were deemed to be non-essential. We postponed them, we caught up with them. Now, in the numbers last year, to the extent we didn't complete all of the annual services, is we give customers a refund for that part of the contract. It's GBP 65. There's about GBP 7 million or so cost in last year for that. Just over 100,000 customers either said they actually didn't want us to go into their house because of COVID, or that we would struggle there. That, there's about GBP 7 million cost in there. What we did when we entered the lockdown that we're in at the moment is, early this year, we can actually, we're permitted to do annual service visits, but one of the things we're trying to do is to make sure that by de-layering the organization, our colleagues have more of a voice. It's easier for me, the fewer layers for me to go through to talk to them. I picked up in talking with our colleagues that they were nervous actually going into houses for what they deemed to be non-essential work for two reasons. One is obviously, there's a personal issue for them, and they go home to their families every night. The second thing is, if you're going in and doing six, seven service visits a day, or ideally eight service visits a day, then they were worried that they could end up spreading coronavirus. We took the decision to be slightly stricter than the government guidelines, and we postponed again annual service visits. I think we've postponed, I said this at the parliamentary select committee earlier this year, 230,000 or so, 240,000 service visits. We've postponed them, but we will perform those service visits within three months of the lockdown being lifted or our assessment that it's safe to do so. That's the big impact on customers, but it's about keeping them and our colleagues safe. In terms of the impact of the industrial action, we're prioritizing our elderly and vulnerable customers. Undoubtedly, when you have a number of your engineers on strike, it does impact service. When we've seen that over, it's got into a pattern in the last little while of Friday, Saturday, Sunday, Monday. Obviously, there's less demand at the weekend. When we see that, we've probably got a backlog which is not a large number, and we clear that within a day. If the strike finishes on the Monday, we have that cleared by the Tuesday. The service levels have held up really quite well. It is regrettable that we have this industrial action, but I would note that the vast majority of our staff have signed up to our new terms and conditions, and the dispute remains with one union. We've actually been in talks with Acas over the past month or so, which does demand an element of confidentiality. I'm encouraged by the fact that we're able to get into these talks, and I remain committed to if we can find a way to have a negotiated collective settlement so that we can move forward. One of the things that we've been able to do with our new terms and conditions is increase our recruitment. We've recruited 50 apprentices over the last two years. We're now in the market. We're going to have 1,000 new apprentices by the end of next year. We've got five, six, 7,000 applications just now. That's what our new terms and conditions allows us to do. It allows us to recommit to a direct labor model. It is painful. The impacts are manageable just now. I don't like the impact on our colleagues. I don't like the stress that they've got through it. I'm really hopeful that we find a way through that. With that, maybe if I could ask Kate to take you through the moving parts that we discussed this morning for 2021. No problem. Hi, Alex. Let me start with what we know and talk about it from what are the upsides that we know. Firstly, the restructuring benefits. We've talked about it being in excess of GBP 100 million, and I think you'll hopefully see in the 2020 results that there's a meaningful cost improvement fall through that we're seeing in our OpEx numbers, and we expect that to come through again next year as the significant restructure that we did in 2020, those benefits largely roll into 2021. That's one. The other area we anticipated improvements in the loss situation in CBS and CHS, and commodity prices have improved. Those are more known as they are today upsides. With regards to the known downsides, the big ones there being ECO, and also we talked about wide-gauge availability, and also just where we are on strike, which is likely to be a bit of a downside going into 2021. The other area that is more unknown is weather. We assume a normalization of weather. It was warm in 2019. If you have a normalization of weather in 2020, that is an upside. What we don't know is what the impact of COVID will be in full. That's particularly in regards to business volume consumption and the bad debt situation. We don't know in full what the strike impact is going to be. The other unknown is trading performance. That's how I hold it as a relatively balanced situation on the knowns and on what we know are the ups and the downs. A few factors that we don't know how they're going to call out as yet. Great. Thank you very much. Really appreciate that. Maybe just Chris, very shortly, just as a follow-up. Just on your point about clearing some backlogs potentially by sort of Tuesday as following the strikes over the weekend, is there a cost associated with that, or is it very efficient of operations to sort of get back in line? Well, I suppose it depends how we do it. If we do it with our own staff, then there's no additional cost. There will be an impact of the strike on the bottom line this year, undoubtedly. We also had the second Beast from the East. That also, if you recall, we had that in 2018, and that had a bit of an impact on our results as well. There will undoubtedly be an impact. My focus is on moving us forward, hopefully with a collective agreement with the one union that it's still outstanding with, and we get back to doing what we do best. Perfect. Thank you. The next question comes from Ahmed Farman with Jefferies. Please go ahead. This morning. Thank you for taking my questions. A few from my side. I just wanted to ask if you could tell us the impact on the continuing EPS from the allocated cost that was removed over from Direct Energy in 2020. Is that an additional year-on-year positive moving part that we should have on top of the factors that you have in slide 15, or is that already covered in the restructuring benefits? Secondly, could you talk a little bit about the technical pension deficit, where it stands? It would be helpful to understand where it stands today on a mark-to-market basis and give us a bit more specifics around the timeline of the negotiations with the trustees. Just finally, I think in the prepared webcast, you had a comment about margin improvement in British Gas Energy. I just want to see if you could give a bit more color around that. Putting ECO costs aside, where do you see that margin in 2021? What do you see as sort of the medium-term outlook? What can be achieved in the context of restructuring in a more competitive environment? Thank you. Brilliant. Ahmed, thanks very much, good morning. Let me try and touch on the margin improvement in British Gas, which will be more qualitative than quantitative, then pass on to Kate for the technical pension deficit. I'll touch on the restructuring, Kate will give you more detail on that. Look, on the margin improvement, obviously, as we take costs out, non-productive cost, operating costs, you'd expect that to fall through to the margin at the bottom line. Rather than give a prediction on the margin, you can see that they've been under pressure. You know the allowable margin from the price cap is 1.8% plus an allowance for an efficient operator, it's about 3% tops. We are the only company at the moment, as far as we can see, that's making a profit. You forgive me if I don't tell you where I think the margin will be. There are a lot of things we can improve in that business, and we're committed to making those improvements, and driving the margin higher whilst giving our customers hopefully better prices as well. On the continuing impact or the impact on EPS from the cost with the Direct Energy, it's a bit of both. You asked, is that added on to the benefit that we stated, or is it part of the restructuring? It's in the numbers that Kate will talk to you about and that we mentioned this morning. But it's not simply that if you take out Direct Energy, these costs fall away. Obviously, we have costs that are allocated to different parts of the group. The bigger the group, then the smaller an allocation a business gets. With the disposal of Direct Energy, that's taken into account in terms of the restructuring, taking out lots of bureaucracy, lots of the levels, the overhead cost. It doesn't just fall away. It does require work. Undoubtedly, having a simpler group makes it far easier for us to have a simpler structure running that group. It would be within the numbers that Kate's talking about. Maybe that's the point at which I can hand you over to Kate. She can talk to you about the numbers, and then she can talk to you about the pension deficit. Kate will be too modest, but I did the last pension and negotiation with trustees, and I actually went over the time allowed. I took a month more than was allowed, and I'm really confident that in Kate, we've got somebody who will do it far quicker than I did, but she'd be too modest to tell you that. Thanks, Chris. Just focusing on the question on the continuing EPS. When we talk to the efficiencies, and we anticipated from the sale that we were at risk of having a stranding element, and we've taken action in 2020 to ensure that that's not the case. There's around about GBP 40 million is the allocation of costs that would have before gone to the Direct Energy businesses that's been allocated to the continuing businesses. We've taken action to ensure that that doesn't recur in 2021. That's part of the in excess of GBP 100 million of efficiency costs that we talked to as an upside. Again, for clarity, we do expect most of that upside to fall through into the British Gas businesses. Moving on to the technical deficit. I can't give you a view of what the mark to mark would be as of today, but it's right to say that as we'd expect all else being equal, that as the gilt rates increase, that the technical deficit starting point and kind of the music stops, with regards to the technical deficit on the 31st of March. What gilt rates are at that date will be the most important factor for how we set that technical deficit. There are a number of other things that come into play. It's a pretty complex sort of series of assumptions and negotiations that come into play. I'm certainly hopeful that it won't take 15 months. We started this quite early. The chairman and the trustees and ourselves have been in conversation for some months now on the various parameters that we need to work through in anticipation of it, because we're all eager to get to closure and be able to have clarity as to what the deficit is and what the funding requirements are. I think that's pretty much it for me. Okay, thanks. The next question comes from the line of Mark Freshney with Credit Suisse. Please go ahead. Hello. Good morning. Thank you for taking my question. Just to drill down a little bit more into the pension deficit. Clearly, there's a couple of ways you can approach ongoing contributions or a one-off payment using some of the Direct Energy proceeds. Perhaps you could talk about whether it would be possible to do a big one-off payment to clear the whole thing. Secondly, on the pension deficit, regarding the ability to get the deficit to self-sufficiency, i.e. where it ceases to be a problem once and for all. Is that something you think you may be able to wrap up in this round of negotiations? I guess thirdly to that, what is the Well, yeah, those are my two questions. I think that one's definitely in my court, Mark. With regards to the pension deficit, clearly, there's a number of ways that we can deal with the funding requirement as and when I know what that is. Ultimately, we need to get to an agreed technical deficit position to be able to then look at what is the right way to fund that, both from a company perspective and from a trustee's perspective. The Direct Energy proceeds form a part of that. I can't really give you all the different things that come into play in that negotiation because that is confidential and ongoing. There are various kind of parameters that we look to to make sure that we get the best result possible for both the members of the schemes, as well as the company position. With regards to self-sufficiency, this is a young scheme. It's probably one of the youngest schemes that's on the market. Self-sufficiency is something that is arguably a way away. However, with regards to how our asset performance is working, that's really encouraging and working very well. We've also quite well hedged. We changed the parameters of the hedging of that asset portfolio to look at how we can remove some of the potential volatility to ensure that ultimately from a Centrica perspective, the volatility of the technical deficit is well managed and under control. Okay, thank you. The next question comes line of Martin Young with Investec. Please go ahead. Good morning to everybody. I hope everybody's safe and well. Three questions, if I may. The first just gets back to the margin issue in the domestic supply business. Is your indication that there will be an improvement after the GBP 80 million jump in the ECO costs is taken into account, which means when they perhaps roll off in 2022, we could be looking at a bigger jump in margins in 2022? Questions two and three relate to the future and how you intend to take advantage of the energy transition. Your concluding comments in the presentation alluded to being agile and bringing forward new products. I think it's probably fair to say at this juncture, you don't have much, by the way, for the domestic market that could be described as being innovative. I don't think you have a time of use tariff there, for example. I just wondered if you could say some more about the types of things that you intend to launch and when you intend to launch them. Sort of allied to that, you indicated that you're looking to build the customer book. You obviously picked up Robin Hood Energy, for example, last year. I understand there were some sort of minor issues with the onboarding process with Robin Hood Energy. How can we be safe in the knowledge that when you pick up customer books, you can bring these people onto the Centrica platform in an efficient way? Thanks. Martin, thanks very much for your questions. Let me take the energy transition questions, then Kate can talk about the margin in the domestic business. I would say that the ECO obligation, ECO3 finishes, I think, on the 31st of March 2022, but ECO4 starts on the 1st of April 2022. I think the ECO obligation is with us. The current program will follow, but Kate can talk about the margin supply. In terms of being agile and looking to bring new products out there, I would say we have agreements with a number of the U.K. car manufacturers to install their electric vehicle charge points. We're walking the talk as well in terms of the number of electric vehicles that we've ordered from Vauxhall. We did the record order last year, then we beat our record and doubled it this year. We've also got a new agreement, as you'll have seen earlier in the year with Vauxhall, whereby if you buy an electric vehicle from Vauxhall, we fit a charge point for you. We also have a tariff which gives you 30,000 free miles. Time of use tariff really does demand customers to have smart meters. We have large penetration there. It is something that we're looking at. You're right. At the moment, the time of use tariff that we have is essentially the same as other people, which is an overnight cheaper tariff. The team are working on that. Our new system allows us to be far more agile. The other thing that we've done is that even in our existing system, previously, it would take us weeks to change propositions. By simplifying the company and simplifying the decision-making process and not accepting maybe easy explanations, actually, we can change our tariffs within our existing system in a matter of hours rather than in a matter of weeks. Our new energy platform is absolutely essential to be innovative as you described. We're also able to make improvements on the legacy system that we've got. Moving on to the customer book acquisition. When you take on a couple of 100,000 customers, I think that's what Robin Hood Energy had, undoubtedly, you're going to have bumps, and you'll hear from the people that it didn't go well. I would say that the performance of that onboarding exceeded all of our expectations. We onboarded and retained more customers from Robin Hood Energy than we had actually expected to. Recently, in early this year, we took over the customers of Simplicity Energy through this Supplier of Last Resort process run by Ofgem because Simplicity Energy went out of business. That onboarding has gone incredibly smoothly. The characteristics of some of the Robin Hood Energy customers meant that they actually went onto our legacy system because one of the things that we're looking to do is to make sure that we, an agile way of working is to test and learn and make sure that the new system works properly. The assessment was that we weren't ready to take on that large volume of customers from Robin Hood Energy. The Simplicity Energy book went right onto our new system, and it's gone incredibly well. We are making progress there. It does take time, and we can always be more innovative. We also have to be a bit more front foot in our marketing. We buy more green energy than any other supplier in the U.K. You wouldn't think that if you looked at the marketing. We need to get smarter on that, and that's something that the team are looking at at the moment. Some of the other suppliers that look very green are not as green as they might look. They tend to buy certificates rather than buy energy, but we buy 11 gigawatts of renewable energy every year. There is certainly more that we can do on that. Maybe I could pass you on to Kate, who can talk a bit about the upcoming margin improvement and whether that does include the increase in eco costs in 2021. Yeah. I think it may be helpful just for me to explain a little bit what happens with ECO. Technically, because it's tied to the license, the accounting rules require us to cash account for ECOs. This is why you have this phasing dynamic, which is closely tied to the cash we actually spend. That's why we have an acceleration of spend in 2021 relative to 2022 and to 2020 and 2019. When we get to 2022, we've got one more quarter of ECO3, and then we have a new regime, a new pricing dynamic starting on the 1st of April. It's definitely our strong preference to phase the spend more evenly through ECO4, which will allow less choppy margins as a result. Okay. In terms of 2021, if the margin in British Gas domestic retail goes up, that is after taking into account the GBP 80 million jump in the ECO, is that what you're saying? Yeah. Yeah, thanks. The next question comes line of Ajay Patel with Goldman Sachs. Please go ahead. Good morning. Okay, a few questions here from my side. I found the slide 11 really interesting. I just wondered if you could, maybe Kate could walk through a couple of points. The main one here is that at the moment you haven't incurred an additional cash amount for an increase in bad debt charge, but you made a provision for it. I'm just wondering if we think about this year, what are your assumptions, or how are you thinking about the bad debt charge to put through? As in, it sounds like you're a bit ahead of yourself already. Do you go back to historical norms or do you continue to provide for that sort of double run rate or what I think you said was the first year after the financial crisis sort of levels even into this year? It's a sizable component of the cost that was born in H2. On Business Solutions and Home Solutions, these businesses were sizably loss-making and have been for a while. I'm just thinking, when you talk about that GBP 100 million of cost reduction, does that include the costs that would come down as these businesses move towards being break even? I just thought maybe one for Chris. The low-cost software that you're introducing in the supply business and the 36,000 customers that you've migrated over, what is the end intention here? Is it to move several categories of supply of customers over onto that over time? Just a little bit more from that. I know maybe a bit early stage, but it'd be really helpful. I was just thinking on the cost per head chart that you put there. I imagine some of the mitigations this year were one-offs, right? Some furlough arrangements, for example, or bonuses being held. What would that cost per head look like if you strip those out, just to kind of get a better understanding of what maybe the underlying performance there is? Ajay, thanks very much. Let me take the last two, so the low-cost software and the cost per head, then let Kate take the first two that you asked. On the low-cost software, what we've got is a legacy SAP system, which is a very good system, but it's not fit for the future. Systems now, I'm quite allergic, as I've been very open to in the past, I'm quite allergic to the idea of a big bang system implementation. I've yet to see one that goes really well, and I've yet to meet someone that seen one that goes really well. How I think the market is moving, but how we are definitely moving is that we have spent the past, well, a lot of last year testing our new software. It's not one bit of software. It's testing different parts that help us run the back office for the energy, but also help us to have a good customer interface. We've spent some time testing that, which is why we've got these customers on this platform. I mean, we'd previously tested the software on the small and medium enterprise market in what was UKB. We've got a couple of years experience of running this, and we're confident actually that this can do what we want it to do. There are a number of different types of software. We're not just looking at one type, but we're confident that we can see a path to migrating our entire customer base from the legacy SAP system to our new system. Obviously, we want to take our time to do that. We will do that in the coming years, and that's about as precise as I would be at the moment. The intention is that this is how we'll operate our energy business going forward. It's not, however, just because the costs are competitive. It's a completely different way of working. It's something that's organized around satisfying the customer and dealing with the customer queries when they call in rather than the system we've got today, which is to deal with specific historical legacy industry processes. One of the big things about what we've learned from looking at some of these challenges that have come in. It's not just about the system, it's actually about how you work. It's the way of working. I'm quite enthusiastic about that. We will obviously be cautious, because the last thing you want to do is to detrimentally impact the customer experience. On the cost per head, in terms of the bonus change, that is a part of it, but it's quite a bit below half of the change in cost per head. On the furlough, I suppose the way I think about that is that we did actually incur additional costs, in terms of extra overtime costs and in terms of what I mentioned earlier on, there's about GBP 7 million in cost to customers where we didn't fulfill their annual service visit. The total furlough money we took from the government was GBP 27 million. We topped that up and paid GBP 35 to those mainly engineers that were furloughed. I don't see that as a one-off. That helped to compensate for the costs that we incurred to keep those jobs open, because we still had to do the work. The reason I wanted to share the chart on the cost per headcount is I think it is really important that we realize that what we've done now is to take out management layers in the organization, take out more expensive people that were maybe more focused on running the company rather than on giving a good customer experience. That's something that we, as a measure that I use a lot when I look at companies, is something that I want to continue. The cost, if you see headcount coming down but the wage bill going up, that tells you that you're taking out frontline staff. That's not often the way to improve customer service. That's what's different about what we're doing at the moment, is actually all about making sure that we only have the overhead which is required to run this business. You should see that in our reducing average cost per employee. With that, I'll pass you on to Kate to talk through slide 11 and then your question on the cost savings in business and home solutions. Thank you. Looking specifically on bad debt, and I think, Ajay your question was what are our assumptions on the cash impact of it and how do we hold bad debt going into 2021? A bit of context may be helpful. The big kind of dynamics around 2020 were, from a collection's perspective, we weren't able to follow through collections in all areas because of the restrictions that we were able to perform. Particularly in the small medium enterprise segment, we are seeing an increase in aged debt in that area. When you look at the increase in bad debt provision that we've put in, it's fairly evenly split between the B2B part of the supply business and the residential energy part of the supply business. What we don't know as at the end of December is what the extent of the economic impact is going to be on our customers and when they and therefore us are going to feel the extent of that impact. That's what's created the significant uncertainty. What we did was we went back to 2009. We looked at what kind of increases in provision rates we saw then, and we've used that as a proxy. We've kind of tested what unemployment assumptions we have versus some of the banking stuff that was released a short while ago. We're in the range of what they were talking about. That's what we've used to assess what the bad debt requirement could be for those balances as at the end of December. When I look forward into 2021, the way I think about it is we may be over or under-provided for those December results. That impact may hit us earlier and be more excessive than we thought. It could also be later and could be less impactful than we thought. That will then allow us to kind of true up what the right provision rate would be. We'll know that in relatively short order through this year, given the cash collection cycle that we have. Okay. How many Home Solutions? Sorry. Just moving on to the other question with regards to efficiency costs and home solutions and the like. We are expecting an improvement in CBS and CHS in terms of their performance year on year. That will be a combination of efficiencies, but also gross margin improvements, and particularly in Centrica Home Solutions, a significant reduction in depreciation. It's by no means all an improvement in efficiencies. There's an element of it. When I look at the in excess of GBP 100 million efficiencies that we're calling out in 2021, I do expect the vast majority of that to fall into British Gas. Some element will be home solutions, but by no means that significant relative to the services and energy side. If you could just indulge me just on one thing, just with Chris. You've got a huge benefit happening on the pension deficit side. You have now the ability to pay down some debt. It's clear that your free cash flow is going to sizably improve over the coming years once these effects start to hit through. What are your strategic priorities at the moment? Is it to establish yourself as an energy and services company, and that may involve utilizing some of the capital for growth in the future? Focus on around the dividend and shareholder remuneration? Just trying to understand how you're, at least, I know a bit early, and then into the strategy day and into the second half of the year, but just the sort of early sort of thoughts around that would be really helpful. On that, Ajay, I think that I wouldn't want to be drawn on what we'll see in the second half of the year, because obviously strategy is something that we will agree as a board. What I would say is that it was not an easy decision for us as a board to cancel the dividend last year. For us to not pay a dividend for 2020, it does not make for a good shareholder experience. We are absolutely focused on restoring shareholder value. It's not been a pleasant experience to own Centrica shares for a number of years, and we want to change that. We want to make sure that we've come out of the COVID situation, so we see more clarity there. We've progressed further with the reshaping of the balance sheet, Kate was talking about pensions, et cetera. We want to see a bit more there, and we also want to be able to demonstrate that we can see line of sight, not only to stabilize but to ultimately grow this business. It is absolutely a topic of conversation in terms of the shareholder returns that I have regularly with our chairman, who's here. If Scott wants to add something to this, I'd love him to come in. Scott is on the call with us. It is something that we are laser-like focused on. Rest assured, we want to restart it as soon as we can. I'll ask Scott to add something on dividend. Thanks. Scott here. I realize that it is frustrating that we can't say more at this point. I think, to be honest, that Chris has described all the moving parts that we have under consideration. The only thing that I would add is, along with owning Centrica stock not being a good experience over the last few years, our team's analysis is that occasionally we've, in the past, been guilty of overpromising and then under-delivering. You'll notice that our tone of voice is very deliberately and unapologetically cautious and prudent in this point. Now, we know just how important the dividend is to our shareholders. Just as soon as we do feel that we've crossed the threshold of being able to describe confidently what the future trajectory looks like, we will share it. We're not being callous in that nature, but at the moment, we just think it's prudent to stay where we are, and we'll have more to say later in the year. Okay. Thank you very much. The next question comes line of Jenny Ping with Citi. Please go ahead. Hi. Morning. A couple of questions from me, please. First set to go to Kate around the balance sheet. You obviously talked about the hybrid buyback with no replacement today. Can you just confirm that you've spoken to the rating agencies around not going to lose the equity credit on the other hybrid that's still outstanding? Secondly, just in terms of the buyback of the gross debt, which you've talked about in terms of trying to find value for money, can you give us a sense of how much cash you need to hold at the group level? Obviously, you talked about the disposal of the U.S. business as helpful in terms of the amount of cash at the group. Is there anything else we need to think about in terms of collateral or any other things? i.e. what is the minimum amount of cash you want to hold? Then one for Chris, just going back to one of your comments earlier in terms of Centrica being the only operator making a positive margin at the moment. I know you haven't been uber vocal in terms of lobbying government, et cetera, in the past and had really not much interest to do so. What do you think needs to change in terms of the market structure for things to improve? I don't see any sense of hurry from the government point of view to change this loss-making structure that the market seems to be keep on going. Yes, we've had a few smaller suppliers going bust, but it hasn't really stopped the status quo. Any thoughts around that would be helpful. Thank you. Absolutely. Thanks, Jenny. Let me take your last question first and then let Kate go on. Look, you're absolutely right. I have no interest in getting into a public debate about energy regulation. I do, and our chairman does as well, Scott does, we engage actively and constructively with all of our stakeholders, whether it's the regulator, whether it's government, and we share very open views as to where we think the regulation should be and what the impacts are. I would step back, and this is something that you'd, given what you do, you know better than me, you know investors more broadly than I would. The reality is, if you have a market where structurally it's loss-making, that is an unsustainable position. Because what that means is somebody is paying for the privilege of being in that market. Therefore, if you step back and look at it from a high level, it cannot go on like that. You're right. Energy bills are politically sensitive, and I wouldn't profess to tell politicians how to do their jobs. What's clear to me is that we need an energy retail market in the U.K. which is investable in order for it to be sustainable. I think that we have got government and regulators and the like that also recognize that. We all know what we need. There are different routes to get there, but the reality is, no market which makes continued losses can survive. There has to be a profit at some point. We'll continue, if you forgive me, we'll continue to work constructively with Ofgem, with government, with other stakeholders in order to try and have an energy market which is investable and fair for consumers. With that, maybe Kate will take the other two questions that you had. Thanks, Chris. Hi, Jenny. The first one is a relatively easy one. Yes, we have been engaging with the credit rating agencies with regards to the remaining hybrids. As a reminder, that's GBP 450 million due in first quarter in 2025, and we do expect that we'll be able to retain the part equity treatment on that. With regards to how much cash do we need, we had about GBP 1.1 billion of cash available on balance sheet at the end of the year. I think it's fair to say that with the sale of Direct Energy, we don't need as much cash as that. We do still need an element of cash on balance sheet to manage the sort of collateralized and the trading relationships, although we do use our credit rating to quite good effect to do that in an efficient manner. There is a degree of cash that we need to have available. As a reminder, we also have access to revolving credit facilities as well, that just give us ready access to cash as and when we need it. I would say that it's more efficient, post the sale of DE than it was, and that's clearly something that will be part of the ongoing conversations and discussions we're having internally as to how we get to the right balance sheet profile. Thank you. The next question comes to the line of John Musk with Royal Bank of Canada. Please go ahead. Yes, good morning, everyone. Just one last from me. Returning to Spirit and that potential disposal, you mentioned that obviously higher commodity prices might be helpful, but buyers are perhaps dwindling as people focus on ESG. From my understanding, the people that potentially might be left in are smaller, perhaps less creditworthy buyers. One of the stumbling blocks is going to be around the decommissioning provisions that obviously sit with those assets. Can you perhaps talk around the buyer's attitude to taking those provisions on board? Also, your attitude to potentially having to retain some of those provisions, as we've seen with some other transactions recently, most notably SSE around Christmas time. Absolutely, John. On that, I'll give you my view on this and then invite Kate or Scott, if they want to come in. What I would say is, I don't want to be drawn on the process that we've got going on here, because I'm sure the parties that are interested in the process will listen to this, and they would like to use it to maximize their value within commercial discussions. What I would say is that we are committed as a board, and our chairman's here, so he can comment this. We are committed as a board to exit Spirit Energy. Hydrocarbon production is not in our future. It's not part of the energy transition, which is where we see our future and the drive towards net zero. I think that what we've got to do is to make sure that we get the best value out of this, and that's a mixture of proceeds and future liabilities. This is something where I am comfortable that we're able to exit. I wish we were exiting two or three years ago. What my boss, what my chairman keeps telling me is, if we think that I'd be more comfortable exiting two or three years ago, just think how it would feel two or three years from now. The key thing is for us to make sure that we get the right exit from this business. I don't really want to be drawn too much, but I do know that RBC are very active in this market. You've got some colleagues that probably know a bit more about this than I do. Chris, thanks. Scott here again. All I was going to describe, obviously we can't discuss an ongoing process, but we do have three core principles around this. One is that we're going to manage the process to get the company the best economic return, as you would absolutely imagine, and that includes all the things that you alluded to. The second one, of course, is that we are determined to reduce our volatility and simplify the way that we do things. The third one is that we need to continue our journey towards net zero. Those three principles will guide the way that we manage this process. Beyond that, we really can't say any more at the moment. Okay. Thank you. Appreciate those comments. The next question comes to the line of Deepa Venkateswaran with Bernstein. Please go ahead. Thank you. Kate, a warm welcome from my side for joining the board. My first question is actually to you. On the net debt, I think you mentioned that the agencies have increased the thresholds. Would you let us know what the new thresholds are for FFO to net debt and RCF to net debt? Are you targeting a particular rating, or are you happy with the current rating? Second question for Chris, any thoughts on the Cheniere contract and the process of simplifying? Is that something that you would also look to exit and maybe take advantage of the fact that maybe the LNG prices are maybe looking better now? Is this also something that you might want to get rid sooner rather than later? Deepa, thanks very much. Let me take the [uncertain] question first, then see if you can manage to convince Kate to share the new thresholds from the credit rating agencies. I think, as Scott said earlier on, quite rightly, we have in the past maybe overpromised and under-delivered. I would far prefer to simply say that for any of our businesses, if we do decide to exit or expand, we'd like to tell you when we've done that rather than speculate in advance. The Cheniere contract obviously is one which, if we were faced with that today, we wouldn't get into, we are into it. We have a very good team which manages our LNG business. They had a very good year last year. We start every year, 1st of January, we start behind the eight ball, so to speak. I would prefer not to start behind the eight ball. I'd rather not get drawn on that, if you don't mind. I'm going to ask Kate to take the question on net debt. Thanks, Chris. Hi, Deepa, and thank you for your welcome. That's much appreciated. Just talking about net debt. A reminder as to what the credit rating agency said before. S&P stated that they would require us to maintain above 45% for the current Baa2 rating. That is higher where the requirements were before the detail. Moody's said that they expected above 35%, this would be revised up if we sold both Spirit and Nuclear. There's a bit of a different approach between the two credit rating agencies that we're navigating. When I talk to the thresholds being higher, I'm really referring to S&P, and it doesn't really matter whether one or both go. When one goes, you've got to look at how you manage the others. Our credit rating, I'm quite comfortable with where we are now. I think with regards to an investment-grade rating, we get value out of it in our business model at the moment. Ultimately, this all comes down to what is the most efficient balance sheet construct that we have for our growth-forward business, and that's something that we're looking at keenly at the moment. As of today, the current credit rating that we have, I think suits us well. Thank you. The next question comes from the line of Pawan Mahbubani with JP Morgan. Please go ahead. Hi. I have a few questions, please. Firstly, looking at British Gas Energy. I note that at the interim, the results were sort of flat year-on-year, yet at the full year results, which were restated for the reallocation of direct energy costs, the evolution of the full year was down. Would you mind walking us through what the big drivers of that decrease was in the second half? Is it just one-offs due to COVID, bad debt provisions, or were there difference in the cost allocations from direct energy between 2019 and 2020? That's my first question. Secondly, looking at the legacy gas contract, this time last year, we were expected in the commodity environment to sort of think about GBP 50 million-GBP 100 million of losses out till 2025. Is this still the case in the current commodity environment? One more. Looking at CBS and CHS going forward, should we continue to expect operating losses going forward? How should we think about that? Last quick one from me. In isolation, the move in 30-year yields, sort of moved from 75 to 143 now. How should we think about the impact in the pension deficit? I know you don't want to quantify it, but in terms of the magnitude of the moves between the end of December and today, is that in the tens of millions, hundreds of millions? Would you be willing to give an idea of how big that would be? Thanks. Pawan, thanks very much. Let me take the CBS, CHS question, and I'll try and give you something on the gas asset with the legacy gas contract. As I pass over to Kate for the question on energy and pension, she will correct any mistakes I make. CBS, CHS. Now, these will not in perpetuity make a loss. Centrica Home Solutions, this is not a standalone business. It's part of our British Gas Services and Solutions business. It's a good product, and it gives us some optionality in terms of home energy management going forward, but not at the price that we've been paying for it. We've taken further steps to reduce the cost of carrying that, and therefore, you should see a reduction there. Centrica Business Solutions, slightly different. You can see obviously we had big impact in what used to be called UK business. The energy supply business flipped from a profit of about GBP 55 in 2019 to a loss of about the same. About GBP 110 million swing. There's about a GBP 10 million reduction, I think, in what was traditionally Centrica Business Solutions, so I think from GBP 75 to GBP 85 of a loss. Again, that's disappointing. However, during COVID, companies did pull back clearly on spend. I think that was the same across the piece. Centrica Business Solutions is something which has technology which helps to enable the energy transition, and it's therefore got to be attractive. However, it's not attractive at any price. Rest assured that business is being managed to get to profit. Probably your follow-on question would be when. I wouldn't want to be drawn on that. I would say there is not infinite patience for us to keep loss-making businesses, and we are managing these businesses very actively as we look to move forward. On the gas asset book, I think the assumptions that we had are pretty much the same, and Kate will be able to speak more knowledgeable about this. It's a very complicated contract. I actually worked on this 20 years ago when I worked for Shell. I was on the other side of this contract. It's very complicated. There are some indices that are calculated only for the purposes of pricing this contract. You're looking at carbon heavy fuel pricing and therefore it's the spread, but it's not just the spread between oil and gas. There are other spreads in there. I think by and large, the assumptions of 50 to 100 until the end of this contract that we gave last year remain good. With that, I'm straying outside my territory. I'll pass you over to Kate and ask if I've made a mistake there, Kate, and don't be shy in correcting me. This legacy contract, I think what we said before was we expect it to be over the range of GBP 50-GBP 100. In 2020, it was at the lower end of that range. At some point in time, just given the dynamics of that contract, it'll get to the higher end of that range. With commodity prices priced where they are, the dynamics rounded up, oil is bad for the contract when it goes up. Gas, when it goes down, is bad for the contract. When you have a delink between oil and gas is when the pricing dynamics of that contract go out of our favor. We still hold to that GBP 50 million-GBP 100 million assumption that we provided before. That's still within the range of what we're seeing. If I just move on to the first question that you had, which was with regards to British Gas performance, particularly in H2. There were a few dynamics going on in H2 that were different from H1. Firstly, from a COVID perspective, because we had absolutely, we had impacts of COVID in H1, but also the majority of the mitigations came through as H1. You had more sort of if I call them naked COVID impacts coming through in H2. I may regret the use of that word. Certainly, the increase of bad debt provision was higher in H2 because that's when we kind of trued up our position at the end of the year in terms of what we were looking at. Also, that sort of rather pesky allocation cost dynamic that we've got for group functions, that is a call that we made in H2 following the disposal announcement, as opposed to something that would have impacted H1. There were just a few things that were distorting the H2 versus H1 performance there. Just looking at the pension deficit impact, and I think this is probably following on from a question that I answered a little bit earlier. All else being equal, with an increase in gilt rates, certainly the size of increase that we've seen, we would expect that technical deficit to come in lower. There are a lot of other factors that come into play when stating what that technical deficit is. That is why I'm being a bit cagey. It would be disingenuous of me to kind of give you a number as to where I think it is now, given we are about to embark on the negotiation with the scheme trustees. Okay. That's all very clear. Thanks, guys. The next question now comes from the line of Dominic Nash with Barclays. Please go ahead. Good morning. Three questions from me as well, please. The first one is on buying back the debt. What parameters will you be looking at in deciding which debt to come back, i.e. what's the most EPS accretive or which is going to have the most exceptional finance charging? Do you have a plan B if the cost of debt becomes too rich? What are you going to do with your cash in plan B? The second question is on Rough. There's obviously been a couple of stories that you're potentially looking at repurposing this to a hydrogen storage facility. I hope you could give some color on the state of play and sort of timetables there. Finally, just coming back to sort of your overall story. You talk about it being a long story. It seems to me that you're sorting out your troubles one by one. Your balance sheet is going to slowly sort of get it back into place. Is it unreasonable that we will have a dividend policy announced by the end of the year going forward? Do we have to potentially wait into 2022 or beyond for that? Thank you. Dom, thanks very much. Let me take the rough question. Kate obviously will take the debt buyback, and I'll try on the dividend, but I suspect it will be unsatisfactory. Look, on Rough, where we are just now, the U.K. has got the capacity to store about 1% of its annual gas demand. If you leave aside whether this is hydrogen or not, we have not got enough storage in the U.K. I have raised with government the fact Germany's got 31%, we've got 1%. Some discussions there as to whether or not we need more gas storage. Rough, we believe has unique geological characteristics which make it uniquely positioned to store, or the best store for gas. We then also have been part of what's called the H2H, the Hydrogen to Humberside project, with a number of other companies, and is looking to create an industrial cluster to use hydrogen. Obviously part of the production of hydrogen, it's better if you can have some storage as well because if you've got this industrial cluster that's running off hydrogen, you have a production problem, and it can only run off hydrogen, you've got a real issue because you've got nowhere else to get it. We started to look at it for that. We've had some conversations with government, which is around saying reconverting Rough to storage requires, and we've said about GBP 650 million of investment. That's about GBP 300 or so to redo the wells. The wells are old, and they wouldn't take another 40 years of storage. You need to spend about GBP 300 million on the wells, and if you wanted to go for hydrogen, you probably need some new kit on it, and that's probably another GBP 300-350 million or so. Just with the methane storage, it's probably GBP 300 million. To go to hydrogen, it's probably GBP 650 million. What we said is that the merchant model of injecting in the summer and withdrawing in the winter doesn't work anymore. Therefore, some kind of regulated support, like maybe a Regulated Asset Base model or a cap and floor type model could be useful. We said to government, we've got this asset. We think that it could be a useful strategic asset for the U.K. We'd be keen to develop ideas with that. We're at a relatively early stage. I am really encouraged by how we are able to work with government on a number of areas. The government, the Ten Point Plan for the energy transition presents us with huge opportunities, as does this issue on hydrogen. I wouldn't say that it's not something that's imminent. I think it's relatively early stage, but I am sensing from government a real commitment to driving the energy transition and an ability potentially to work at pace. We'll continue to engage with them, and work, and I'm hopeful, but that's because I think that we do need something in the U.K. and this is a fantastic asset. On the overall story, sorting out the troubles one by one, we are trying to get ourselves to a situation where we can really focus on what we're good at and bring stability to the business, to the earnings, and then have a clear trajectory for growth. When we have that, then that's when we'd want to obviously have a dividend policy. I wouldn't want to commit to having something this year, but by the same token, I do recognize that as we want to lay out our longer-term strategy in the second half of the year, people will expect us to say more. As I say, and you heard the chairman say earlier on, it is something that we talk about a fair amount. I really don't want to be pinned down, in case something else happens. It is something that we recognize we need to give clarity on. We need to restore the shareholder value that has been lost over the past several years. With that, I'll ask Kate to take on the really difficult question, which is how do you think about buying back the debt, and how do you prioritize it? Thanks, Chris. Thanks, Dominic. Without doubt, that's a tricky question, right? In an environment where interest rates are really low and the debt portfolio is quite long dated, it has the potential to be really expensive to buy back. We wouldn't buy back at any appetite, at any price. It needs to be value accretive. I do look at it through the lens of EPS, and one has to balance sort of the short term and the long term essence of that, and also making sure that we're assessing what are the other uses of cash that, with the appropriate amount of risk would provide a better return. Ultimately, we have said that the proceeds are about stabilizing the balance sheet, ensuring that we have a strong net debt position. That's why this is a process that's ongoing as to what the best outcome is. The next question is a follow-up from the line of Mark Freshney with Credit Suisse. Please go ahead. Hello. Yes. Two questions. Firstly, on distributable reserves, there's the capital gain coming through on the disposal of Direct Energy, but potentially other one-time items such as debt buybacks, and any capital losses on future disposals. Can you talk about the options around paying a dividend if your distributable reserves are not sufficient? That's my first question. Just secondly, I think it's not possible to accurately predict what the book value or the equity book value of Spirit is in Centrica's books just now. Would you be able to give some color as to what the impairments take that value to? Thank you. Mark, let me have a go on the distributable reserves thing and then Kate will be able to correct me. Look, obviously we have distributable reserves in the parent company, and your question is what happens if you have no distributable reserves, can you pay a dividend? As you know, there are many, many different ways to restructure a company. I've done that myself in previous companies, whereby sometimes you have to go to the high court to have a recapitalization, a capital reduction. I would not have that as a worry at all. That's not really something that's in our issues for dividends. In terms of the book value of Spirit, that's probably something that Kate is going to tell you in about 10 seconds that she's not going to give you. I'll pass you on to Kate on that. If I remember right, there's probably more detail in the annual report than there is in the prelims. The annual report's due out in April. On that, if I was in Kate's shoes, I'd be saying, "I'm really sorry, you can't figure it out. I'm not going to give you a number," but maybe you'll find Kate more reasonable. Chris, that is mean. If you look at the annual report and you look at the allocation to minority shareholders, you can back calculate it to about GBP 1.3 billion, is the book value that we have on Spirit right now. That's the GBP 425 non-controlling interests divided by 0.31 is the equity book value for Spirit. Presumably the impairment that you undertook, and the impairment testing is partially informed by the discussions with potential buyers. Can we take comfort that the book value is not a million miles away from the market value, or should I disregard that? You should disregard that, Mark. There are ways, I think, to value these things from accounting purposes and very clear rules. There's what somebody, this is worth what somebody's willing to pay for it. Yeah, I would disregard that. Got you. Okay. Thank you very much. The next question is from the line of Elchin Mammadov with Bloomberg Intelligence. Please go ahead. Hi there. I apologize if you answered these questions correctly. I had to juggle between several results today. I have two questions, they're quite broad, high level. The first one is on the fact that some of your other utility peers are either exiting or reducing their exposure to energy supply and services. Why do you think it's a good business to be in the medium to long term? This is the question number one. Again, as a part of that, some of your utility peers, even those that are expecting to remain in retail and services, they're preserving the status quo and maybe letting their market share to come down by 1% or 2% a year. It's clearly not a growth area for them. The second question related to that, who do you think your main competitors are going to be five years from now? There used to be Big Six in the U.K. Now that number is shrinking, as in the market is becoming more fragmented. Who do you see your biggest competitors in five years' time? Be that oil and gas companies or smaller, new entrants that will become big by then, or do you think the market is going to be as fragmented as it is today? Thanks a lot. Thanks, Arjun. Let me try that quite quickly. In terms of it, if you'd asked five years ago who we'd see our competitors were today, we never would have answered. We wouldn't have thought the market would look like it is at the moment. I wouldn't want to be drawn on that. Shell is in the market in the U.K. just now. They're a relatively big player with, they bought First Utility, and they've changed the name of it. Other companies are in the market. The thing I think about rather than trying to figure out who our competition is to figure out how do we beat the competition. Everything that we're doing just now is to make sure that we are the most competitive in the market, and we beat the competition no matter who it is, whether it's small companies, whether it's large companies. I think that the market has become more fragmented over the last five years. Over the last year, it's become more concentrated as companies are exiting the market. I expect that absent any change in regulation, that will continue because my earlier answer about the fact that a market in which there is no profit means that companies will have to leave. What this will drive the market towards, in my view, is that scale is very important. We are the largest player in this market. We have a position I think that a lot of our competitors envy, but there are things we need to do to improve our business, and that's what we're really focused on. Our focus is on making sure that we are the most competitive in the market. In terms of what you'd call other peer utilities, if you've got companies, I think you're seeing are split between upstream generation, whether it's wind farms, whether it's gas-fired power stations, whether it's oil and gas production, and energy retail. We think the energy retail market in the U.K. is undoubtedly challenged, but it's a market that we hope will become more attractive, and that will happen as we improve our performance in that market. We're focused on what we can do ourselves and also influencing how the market moves. In terms of services, there is a huge opportunity through decarbonization, and we are very well-placed to partially drive that, but to definitely benefit from it. As you think about if hydrogen comes in, for example, you either will need new boilers or you might need to retrofit existing boilers. British Gas Services business was built off the convert of to natural gas in the 1970s. Every single gas appliance in the U.K. had to be converted. Now, I'm not saying that would happen with hydrogen. It depends how much hydrogen goes into the system. There is a huge opportunity there. The opportunities for us are twofold. One is in the decarbonization of energy, and another one is in making sure that our customers manage their energy as efficiently as possible through home energy management, electric vehicles integration, demand side response, all areas that we've got technology. Also making sure their homes are more energy efficient. Again, that's an area that we work with our customers. There is huge opportunity in this area, and it's something that with our improvements and our simplification, we should be able to focus on and hopefully capture. We've got a lot to do, but we've got really very strong positions here, and I'm confident that we can make those work for us, for our colleagues, for our communities, and for our shareholders. Thanks a lot, Chris. In the interest of time, this concludes our question and answer session. I would like to turn the conference back over to Chris O'Shea for any closing remarks. Thanks very much, Emma. I'd just like to say thank you very much everyone for joining us today. Just to leave you with, we have made, I think, a lot of progress in 2020, but there's a lot more for us to do. We have the people to deliver, the market positions. We have a division. You have a team with the determination to turn this company around and to become a force again in all of our key markets and to restore the shareholder value which we've lost over the past several years. With that, I'd like to just say thank you. Look forward to seeing some of you in the coming weeks and to talking to you again in July when we have our interims. Thank you very much.