CREATING VALUE THROUGH THE LOW CARBON TRANSITION SSE RENEWABLES OVERVIEW OCTOBER 2019
SSE RENEWABLES Onshore operational Offshore operational LEADING IN RENEWABLE ENERGY Hydro operational Offshore Awarded SSE Renewables brings together the development and operation of all of SSE’s Cfd Contracts Sept 2019 renewable energy assets under a single management team, creating a leading renewable energy company across the UK and Ireland, with ambitions beyond those two countries. It has a sector-leading management team with the focus, specialisation and innovation needed in a distinct part of the energy sector, in which SSE has a large pipeline of opportunities. KEY SOURCES OF VALUE • Biggest renewable energy portfolio across UK & Ireland • Technology diversity (flexible hydro, run-of-river hydro, pumped storage, onshore wind, offshore wind) • Semi regulated income • Operational excellence • Development and construction expertise Page 2
RENEWABLE ENERGY GENERATING RETURNS KEY FACTS • Owned capacity in operation of around 4GW in UK and Ireland • Operate a further 1.2GW of onshore and offshore wind on behalf of partners • Awarded over 2.2 GW of CfD contracts in recent Round 3 auction • Aligned to geo-political low carbon transition CAPACITY REMUNERATION Status (MW) SCHEME 2,254 CfD £/MWh Awarded in Round 3 • Capacity • Capacity • Capacity 1,450MW 1,955MW 579MW 2,235 ROC £/MWh Operational • FY19 Adj. EBIT OFFSHORE WIND ONSHORE WIND • FY19 Adj. EBIT • FY19 Adj. EBIT £179m 235 CfD £/MWh Operational £188m £89m • Efficiency • 1GW+ • 7GW+ investment 375 REFIT €/MWh Operational pipeline pipeline HYDRO opportunities Capacity Mechanism 850 Operational £/MW Page 3
RENEWABLE ENERGY – SSE HYDRO SSE effectively owns UK’s Biggest Battery MW Hydro Technologies 750 Flexible Hydro Perfect compliment to wind intermittency • Flexible running 400 Run of River • Capture peak prices 300 Pumped Storage • Retained storage 1,450 SSE Total Hydro Capacity Page 4
RENEWABLE ENERGY - SSE ONSHORE Generating Returns 2GW OF CAPACITY PLUS 1.2GW PIPELINE OF ONSHORE WIND PROJECT OPTIONS OPERATIONAL WORKING TO DELIVER CONSENTED REQUIRING CONSENT MW MW MW MW 457 Strathy South 133 GB Onshore Viking (Island Wind ) Doraville 1,247 139 38 NI Onshore Gordonbush Consented New wind 215 141 49 ROI Onshore Extension Other extensions 186 567 ONSHORE Tangy 28 Central to progress is Ofgem’s consultation on the new Other 248 1,955 540 transmission link for Shetland Page 5
RENEWABLE ENERGY - SSE OFFSHORE GENERATING RETURNS 0.6GW OF CAPACITY PLUS 7GW PIPELINE OF OFFSHORE WIND PROJECT OPTIONS IN PROGRESS AWARDED OPERATIONAL CONSENTED REQUIRING CONSENT 2019 CFD CONTRACTS MW MW MW MW 600 OFFSHORE Dogger Bank Teeside A 3,200 Arklow Bank (ROI) 800 Seagreen – Ph2 /3 252 Greater Gabbard 600 Dogger Bank Creyke Beck A 250 Greater Gabbard 92 Walney 600 Dogger Bank Creyke Beck B Ext. 235 Beatrice 454 Seagreen Phase 1 3,450 2,254 579 Seagreen Phase 1* 621 * No CfD but planning to build Page 6
SSE RENEWABLES Awarded CfD Contracts in Sept 2019 Round (3) MW (SSE Share) SSE Ownership Price £/MWh Delivery Year Dogger Bank Creyke Beck A 600 50% 39.65 2023/24 Dogger Bank Creyke Beck B 600 50% 41.61 2024/25 Dogger Bank Creyke Teeside A 600 50% 41.61 2024/25 Seagreen 454 100% 41.61 2024/25 Total 2,254 • Auction contracts to be signed • Financial Investment Decisions on Doggerbank and Seabank to be taken in 2020 • SSE continue to monitor the Judicial Review application to BEIS by a third party • Remaining 50% Doggerbank owned by Equinor Page 7 • In 2012 prices which will be inflated by CPI
CFD AUCTION AUCTION PROCESS Contracts Run Allocation and CfD Notification Sign contracts and processed and Sealed bid window Independent Audit (results go out) return to LCCC distributed process 07 Oct -18 Oct 20 Sep 20 Sep 23 Sep -04 Oct 30 Aug -16 Sep 09 Aug -29 Aug 30 Aug -16 Sep Page 8
SSE RENEWABLES FINANCIAL PERFORMANCE EBITDA £m 2019 2018 2017 2016 Hydro 220 214 231 266 Onshore 318 342 208 251 Offshore 156 137 142 131 Total 694 693 581 648 • Consistently strong performance underpinned by growth pipeline • Total renewable adj. EBIT of around £525m expected for FY20 * * inc. £26m of suspended capacity mechanism payments relating to contracts for the period after suspension 18/19 and all of 19/20 Page 9
SSE RENEWABLES ONSHORE DEVELOPER CREDENTIALS ONSHORE BUILD COST POST 2015 £1.4m/MW Average cost of SSE onshore build Project Cost £m Completion Capacity Build Cost Date MW £/MW Strathy North 119.2 Nov 2015 67.6 1.8 Tievenameenta 52.3 Mar 2017 34.5 1.5 Slieve Divena II 28.0 May 2017 18.8 1.5 West Galway 94.4 May 2017 66.0 1.4 Dumnaglass 210.0 July 2017 94.1 2.2* Bhlaraidh 134.1 Oct 2017 108.0 1.2 Leenamore 33.0 Feb 2018 20.7 1.6 Stronelairg 343.8 Dec 2018 227.6 1.5 *Dumnaglass includes acquisition costs Page 10
CASE STUDY STRONELAIRG ONSHORE WIND FARM OWN & OPERATE STAKE SALE DEVELOP & BUILD Developer - SSE Renewables Ownership £450.4m 66 Vestas turbines 50.1% 227.7MW 31.6 KM2 site ROC accredited Price for 49.9% stake sold in March 2019 Retained ownership stake, will benefit from Planning consented in June 2014 earnings and dividends form the windfarm Build time 18 months to Dec 2018 3.96 £/MW Contractor – RJ McLeod Operated under MSA Cost - £343.8m Delivery ahead of time and underbudget Highest ever multiple for onshore windfarm disposal in Europe Currently operates 2.6GW of onshore wind for wholly owned, 3rd party and partner assets PPA agreement with Market rate PPA with SSE Page 11
CASE STUDY BEATRICE OFFSHORE WIND FARM HIGHLIGHTS • SSE Renewables lead developer • 40% owned • Financed off balance sheet • 88 Siemens turbines • 588MW • Underpinned by 15 year Cfd - £151/MW in 2016 prices • Build time 36 months to May 2019 • Cost - £2.5bn • Delivery ahead of time and £100m underbudget SUCCESSFUL REFINANCING PARTNERS • Refinanced in May 2019 • 15 year term • Gearing increased post construction allowing equity release via dividends • 29 banks subscribed 24 hedging banks • Commercial banks and institutional investors Page 12
LOAD FACTORS HYDRO ONSHORE OFFSHORE TECHNOLOGY 25% -33% 35% Load Pre 2015 40% to 50% Based on 8 year Factor 40 – 45% average Post 2015 1,150 MW Page 13 Capacity* 1,955 MW 579 MW Exc. pumped storage • Based on typical year • Wind is gross of constrained off volumes which can be in the range of 1-3% *as at September 2019 Page 13
NEW SEABED LEASING TIMETABLE The Crown Estate – bidding process Key characteristics: -2+ -1 0 1 2 3-10 Agreement for Lease Year • Option fee auction based (likely to be higher than in Scotland) • Initial deposit of 1 years’ lease payment is 1x annual £0.5m + next x2 Payment at risk while Habitats Regulation payment AfL annual payment Milestones/Option Assessment (HRA) is undertaken (min 3yr to break at Yr 3 commitment) Outcome determined by: • Price bid into auction Habitats Regulation Assessment (HRA)* • Full detailed technical analysis *Environmental consultation undertaken after sites awarded • Potential breach of lease if milestones As a result , the deposit of 1 year’s lease payment is at risk not met HRA may extend beyond 12 months Crown Estate Scotland – bidding process Key characteristics Option agreement year -2+ -1 0 1 2 3-10 • Auction process with bids capped • Paid in full at the outset of the lease • Financial risk owing to environmental considerations is limited to the application Fee/km 2 for the Payment Various fee (£20k) <=10 year period milestones Outcome determined by: Habitats Regulation • Qualitative characteristics Assessment* • Health & Safety • Environmental • Project delivery *Environmental consultation undertaken in parallel to the bidding process • Technical experience Risk of bidding for site which is not included in the adopted plan (but negligible financial risk) • Quality assurance Page 14
MAJORITY OF ROCs IMPACT NOT UNTIL 2032 SSE ROCS EXPIRY PROFILE - MW 3000 • Hydro ROCs expire from March 2027 • 2500 Double ROCs on offshore wind mean impact delayed to 2032 2000 • Newer onshore wind receives 0.9 ROCs out to March 2037 1500 1000 POST ROCS: • 500 Significant repowering potential • Replace with larger turbines 0 • Existing ground works reduce costs • Supply chain efficiencies hydro onshore wind offshore wind offshore double roc ROCs year April to March Page 15
SSE RENEWABLES LEADING IN RENEWABLE ENERGY HIGHLIGHTS • A leading renewable energy company across the UK and Ireland • Aligned to geo-political low carbon transition • The UK needs a lot of renewables to meet its 2030 and 2050 targets – and we can be part of the solution • Over 800 staff • Overseas ambitions KEY SOURCES OF VALUE • Biggest renewable energy portfolio across UK & Ireland • Technology diversity (flexible hydro, run-of-river hydro, pumped storage, onshore wind, offshore wind) • Semi regulated income • Operational excellence • Development and construction expertise Page 16
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