Centrica Investor Q&A Call Summary Company Overview - **Company**: Centrica (CPYY.Y) - **Event**: Investor Q&A Call regarding M&A Announcement - **Date**: July 22, 2025 Key Points Industry and Company Context - Centrica is involved in the energy sector, specifically focusing on nuclear power investments and regulated cash flows from energy projects [1][2][3] Financial Insights - Centrica plans to invest **£1,300,000,000** in equity CapEx, with an expected **£3,000,000,000** in Regulatory Asset Base (RAB) upon commissioning [7][10] - The growth in RAB is attributed to inflation accretion and returns on investment, with a net investment of **£500,000,000** after an **£800,000,000** cash payout pre-commercial operations [8][10] - The expected return on investment (IRR) is approximately **10.8%**, with inflation considered at around **13%** [10][24] - In a worst-case scenario of significant cost overruns and delays, the real return on equity (ROE) could drop to around **7% to 7.5%** [16][22] Regulatory Framework - The regulatory framework allows for a **50% addition to RAB** for costs below the lower regulatory threshold (LRT) of **£40,000,000,000** and only half of the excess investment is recognized above the higher regulatory threshold (HRT) of **£47,000,000,000** [21][22][24] - The allowed cost of debt is pass-through, meaning Centrica will not bear the risk of rising interest rates during the project [63][64] Project Financing and Structure - The project financing includes a **9% coupon** on shareholder loans, with a **6% cash return** expected, while the difference will be reinvested to grow the RAB [66][67] - Centrica maintains a strong liquidity position and plans to utilize treasury funds for investments without needing to break swaps on net debt [25][26] Strategic Considerations - Centrica is committed to a **£2,000,000,000** share buyback program and has a healthy investment pipeline beyond the nuclear transaction [49][50] - The company is focused on balancing risk and governance, opting for a **15% stake** in the project to maintain a significant influence without overexposure [80][81] Future Outlook - The company anticipates that the investment will lead to regulated cash flows, positively impacting credit ratings over time [54][55] - Centrica is exploring further lifetime extensions for existing nuclear assets, aiming for safe and economical operations [82][83] Additional Insights - The project is expected to deliver profitable activity for Centrica Energy, enhancing earnings through better pricing for electricity [75] - The IRR calculations consider both construction and commissioning phases, with expectations for returns to reflect the unique risks associated with nuclear assets [92][95] Conclusion Centrica's strategic investment in nuclear power is positioned to enhance its regulated cash flows and overall financial health, with a focus on maintaining a balanced risk profile while pursuing growth opportunities in the energy sector [107]