CREATING VALUE THROUGH THE LOW CARBON TRANSITION FINANCIAL RESULTS FOR THE YEAR TO 31 MARCH 2019 22 MAY 2019
AGENDA Alistair Phillips-Davies - Introduction and safety Gregor Alexander ALISTAIR PHILLIPS-DAVIES - Financial overview CHIEF EXECUTIVE Alistair Phillips-Davies - Strategic overview Questions to: Alistair Phillips Davies Gregor Alexander Martin Pibworth
CREATING VALUE THROUGH THE LOW CARBON TRANSITION Delivering our five-year dividend plan ▪ Taking forward our strategic focus on regulated networks and renewables ▪ Enabling SSE’s key businesses to fulfil their huge opportunities ▪ Creating value through the low carbon transition ▪ Making £8.9bn contribution to the UK economy 3 3
DELIVERING AGAINST OUR STRATEGIC PRIORITIES ▪ Delivering the £1bn Caithness-Moray link ▪ Finishing the Stronelairg wind farm ▪ Completing the installation of Beatrice turbines ▪ Creating SSE Renewables ▪ Making progress on the new approach to hedging ▪ Disposing of a stake in telecoms and preparing to dispose of gas production ▪ Appointing Katie Bickerstaffe to SSE Energy Services ▪ Adopting four business goals for 2030 Creating value from developing and operating, as well as owning, energy assets and businesses 4
GIVING PEOPLE A SAFETY LICENCE Total Recordable Injury Rate 0.20 0.20 0.16 0.00 FY18 FY19 TRIR – per 100,000 hours worked Total Recordable Injuries 100 104 82 0 FY18 FY19 Combined SSE employees and contractors If it’s not safe, we don’t do it 5 5
AGENDA Alistair Phillips-Davies - Introduction and safety Gregor Alexander GREGOR ALEXANDER - Financial overview FINANCE DIRECTOR Alistair Phillips-Davies - Strategic overview Questions to: Alistair Phillips Davies Gregor Alexander Martin Pibworth 6
RESULTS TO 31 MARCH 2019 OVERVIEW Five year dividend plan SSE Plc FY19 FY18 % change 1,554.8 * 1,137.6 Adjusted Operating Profit - £m -27% 2018/19 Full-year dividend per share of 97.5p (375.5) * (411.9) Adjusted Net Finance Costs - £m +10% Full-year dividend per share of 80p 1,179.3 * 725.7 Adjusted Profit Before Tax - £m -38% 2019/20 (intend to recommend ) 864.4 * 1,370.6 Reported Profit Before Tax - £m +59% (82.5) * 2020/21 Annual increase of at least RPI Adjusted Current Tax Credit/(Charge) - £m 6.8 -108% 98.8 * Adjusted EPS - pence 67.1 -32% 2021/22 Annual increase of at least RPI Dividend - pence 97.5 94.7 +3% *Excluding SSE Energy Services Annual increase of at least RPI 2022/23 ▪ EPS within Q3 Trading Statement guidance range ▪ DPS in line with five-year dividend plan ▪ Gains on sale and fair value uplift totalling over £1bn 7 7
RESULTS TO 31 MARCH 2019 EXCEPTIONAL ITEMS Exceptional items Fair value uplift Total FY19 Exceptional items £m £m £m 438.0 369.2 807.2 Wind farm capacity sales Telecoms sale 116.1 119.3 235.4 54.3 - 54.3 Indigo Pipelines sale Total gains on sale 608.4 488.5 1,096.9 Net impairments/impairment reversals 0.2 - 0.2 (47.9) - (47.9) Retail separation and transaction costs Guaranteed minimum pension equalisation charge (9.3) - (9.3) Net exceptional charges (57.0) - (57.0) Total exceptional items 551.4 488.5 1,039.9 8
RESULTS TO 31 MARCH 2019 REMEASUREMENTS FY19 HY19 FY18 Remeasurements £m £m £m IFRS9 financing derivatives (loss)/gain (44.8) 39.6 (33.0) IFRS9 operating derivatives (loss)/gain (328.2) (565.4) (89.1) JV financing derivatives 1.2 1.2 2.7 Total remeasurements (371.8) (524.6) (119.4) ▪ IFRS9 values do not reflect all contracts but only those designated ‘held for trading’ ▪ IFRS9 movement in operating derivatives represents the position up to 31 March 2019, and does not reflect price movements and actions taken since that date 9
Image to be replaced RESULTS TO 31 MARCH 2019 ENERGY SERVICES (held for disposal) FY19 FY19 FY18 EBIT % Adjusted measures (£m) EBITDA EBIT EBIT change GB Domestic Supply* 119.6 84.0 260.4 -68% Energy Related Services 20.4 5.6 18.3 -69% Total SSE Energy Services 140.0 89.6 278.7 -68% *Adj. Op. Profit margin GB Domestic 2.4% 6.8% Key movements ▪ Default tariff cap between January and March 2019 ▪ Lower customer numbers Outlook ▪ Operating margin expected to fall to below 2% in FY20 ▪ Expected to be cash flow positive in FY20 (before working capital movements) 10 10 10 10 10
RESULTS TO 31 MARCH 2019 OTHER RETAIL BUSINESSES FY19 FY19 FY18 Adjusted measures (£m) % change EBITDA EBIT EBIT Business Energy 51.9 51.6 64.2 -20% Airtricity 46.2 38.6 33.0 +17% Enterprise 59.6 31.8 26.9 +18% Total Retail 157.7 122.0 124.1 -2% Key movements ▪ Business Energy : Lower volumes and higher costs including Supplier of Last Resort mutualisation charges ▪ Airtricity : better performance on bad debts and overheads ▪ Enterprise : improved performance in Contracting and Telecoms 11
RESULTS TO 31 MARCH 2019 WHOLESALE BUSINESSES FY19 FY19 FY18 Adjusted measures (£m) Carbon Intensity % change EBITDA EBIT EBIT gCO 2 e/kWh Thermal Generation 32.3 (22.3) 107.8 -121% 350 Renewable Generation 694.0 455.9 475.9 -4% 300 EPM (284.9) (284.9) 46.0 250 Gas Production 150.5 48.9 34.0 +44% 200 Gas Storage (4.7) (5.7) (6.5) -12% 150 Total Wholesale 587.2 191.9 657.2 2019 2018 -71% Key movements ▪ EPM: adjusted operating loss slightly lower than the £300m forecast at November 2018 ▪ Thermal generation: cessation of in the money PPAs, coal plant losses and Great Island CCGT outage ▪ Gas Production: lower depreciation, higher achieved price and no exploratory write-offs Outlook ▪ EPM: expected to report an adjusted operating loss of around £115m with variation reduced to ± £15m in FY20 ▪ Renewable generation: should contribute around £525m EBIT (including capacity market income of £26m) in FY20 ▪ Thermal: should contribute £150m EBIT (including capacity market income of £122m) in FY20 12
ENHANCING VISIBILITY THROUGH A NEW APPROACH TO HEDGING Wind and Hydro volumes hedged 8 £60 Asset Proposed targets 7 £52 £52 Wind Hedge 85% of expected output 12 months in £49 £51 £51 £48 £50 £48 £49 advance of delivery £46 £47 6 £43 Expected output (TWh) £40 Hydro Hedge 85% of expected output 12 months in £39 5 Price £/MWh advance of delivery 4 £30 CCGT Hedge 100% of expected output 12 months in 3 advance of delivery £20 Gas Hedge 90% of expected output at 12 months 2 Production ahead of delivery £10 1 SSE Business On contract entry for fixed and flexi customers 0 £0 Energy Rolling hedge for tariff customers FY20 FY21 FY22 FY20 FY21 FY22 Gas Storage Annual Contract dependent on results of annual On and offshore wind auction Hydro (GB) (GB) excluding Beatrice ◼ % volumes hedged ⚫ Contracted hedge price ⚫ If hedged in March 19 13
RESULTS TO 31 MARCH 2019 NETWORKS BUSINESSES FY19 FY19 FY18 % Adjusted measures (£m) EBITDA EBIT EBIT change Electricity Transmission 318.6 252.1 195.6 +29% Electricity Distribution 532.3 401.3 402.2 -0% Gas Distribution 234.3 176.8 165.3 +7% Total Networks 1,085.2 830.2 763.1 +9% Key movements ▪ Transmission: increase due to phasing of income recovery ▪ Distribution : in line with previous year ▪ Gas Distribution : increase due to phasing of income recovery Outlook ▪ Distribution : Expected FY20 EBIT of around £400m ▪ Transmission: Expected FY20 EBIT of around £200m ▪ Gas Distribution : Expected FY20 EBIT closer to £200m 14 14
RESULTS TO 31 MARCH 2019 SSE FOCUSING ON REGULATED NETWORKS AND RENEWABLES FY19 % Adjusted Operating Profit (£m) Total (excl. SSE Energy Services 1,422.5 100% & EPM) Networks Operating Profit 830.2 58% 455.9 32% Renewables Operating Profit Total Renewables and 1,286.1 90% Networks Operating Profit Taking forward our strategic focus on developing, operating and owning assets in regulated networks and renewables 15 15
CREATING VALUE FROM ASSET DEVELOPMENT AND OPERATION 5Yr Disposals (£bn) Debt 3.5 management 3 Developing 2.5 Share 2 buybacks 1.5 Owning Operating 1 0.5 Future 0 investment Consideration Gain on sale Model Partnering 5 Year Disposals Use of proceeds Agile in creating value from developing and operating, as well as owning energy and related infrastructure assets 16 16
INVESTING TO EARN RETURNS Investment and Capital Expenditure FY19 Stronelairg Onshore Beatrice Offshore wind Caithness-Moray wind farm farm Transmission link £1.4bn * Completed 7 months On course for Completed on time ahead of schedule completion May 2019 and within budget SSE ownership 50% SSE ownership 40% Largest investment Renewables Thermal share of 228MW share of 588MW undertaken by SSE Networks Retail & Other *Adjusted for Stronelairg and Telecoms disposal Expect capital and investment spend to total around £6bn across five years to March 2023 (c. £1.5bn in FY20) 17
FINANCING SSE FOR THE FUTURE £6bn £1.3bn RCF Second Green Bond £5.8bn funds * with all-in cost refinancing between refinanced with ESG c. 2.6% pa raised in last 5 years 2020 and 2024 linked rate *revolving credit facility As at 31 March FY19 FY18 Investment and capital expenditure - £m 1,423 1,503 Adjusted net debt and hybrid capital - £m 9,385 9,222 Average debt maturity, excl. hybrid capital 7.0 years 7.9 years Average cost of debt at period end, incl. hybrid capital 3.70% 3.84% 18
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