Slide 1: We Power Change: 2022/23 Interim Results
WE POWER CHANGE 2022/23 Interim Results 16 November 2022
Slide 2: Disclaimer
DISCLAIMER This presentation has been prepared by SSE plc solely for use on 16 November 2022 during the presentation of the company’s interim results for the period to 30 September 2022. This presentation may not be disclosed or published, nor used by any other person or entity, for any purpose othe
Slide 3: Agenda
AGENDA 16 November 2022 08:30 Interim Results to 30 September 2022 Part 1: Overview Part 2: Financial Results Part 3: Operating Outlook and Growth Part 4: Summary 09:15 Q&A 3
Slide 4: Execution and Delivery on NZAP
EXECUTION AND DELIVERY ON NZAP Navigating market volatility and a changing energy landscape NZAP – One Year On Balance and Stability Investment and Jobs Creation • The right strategy at the right time • Integrated business provides • Investing more than we earn in balance sheet strength profits in l
Slide 5: The People Behind Delivery
THE PEOPLE BEHIND DELIVERY Putting safety and health first Safety performance Total recordable injuries TRIR1 35 0.2 30 30 0.16 26 0.15 25 0.15 20 0.1 15 10 0.05 5 0 0 HY22 HY23 HY22 HY23 Viking turbine base installation 33% increase in 130 number of safe days contractor working hours (vs 132 in H1
Slide 6: Navigating the Energy Landscape
NAVIGATING THE ENERGY LANDSCAPE Short-term interventions counterbalanced by accelerated longer-term ambition SHORT TERM MEDIUM TERM LONG TERM Review of Electricity Market 2035 clean Energy Prices Bill Arrangements (REMA) electricity target “Pathway to 2030” Holistic SSE’s market presence 7GW offshor
Slide 7: Resilient Business Mix
RESILIENT BUSINESS MIX Balanced mix of businesses remains uniquely positioned for the transition to net zero DECARBONISING GENERATION ENABLING ELECTRIFICATION HIGH 5.3GW (57%) Conventional thermal 178mTH Gas storage FLEXIBILITY 0.3GW (3%) Pumped storage hydro 1.2GW (13%) Conventional hydro 0.5GW (5%
Slide 8: Responding to the Cost-of-Living Crisis
RESPONDING TO THE COST-OF-LIVING CRISIS Playing our part today to deliver long term affordable, reliable and clean energy tomorrow Paying our Supporting fair share of tax communities Advocating Supporting for solutions consumers Over £300m community funds 9th year accredited to smooth and helping co
Slide 9: Agenda
AGENDA 16 November 2022 08:30 Interim Results to 30 September 2022 Part 1: Overview Part 2: Financial Results Part 3: Operating Outlook and Growth Part 4: Summary 09:15 Q&A 9
Slide 10: Financial Results – Navigating Volatility
FINANCIAL RESULTS – NAVIGATING VOLATILITY Resilient business mix helps manage risk whilst optimising value EARNINGS BALANCE SHEET Wind Hedge Book3 Hedges supporting business mix Collateral & Liquidity Strong balance sheet and liquidity 9 140 8 7 120 • Renewables hedging provides stable • Strong inve
Slide 11: Financial Results – Segmental Overview
FINANCIAL RESULTS – SEGMENTAL OVERVIEW Six months to 30 September 2022 ~ 10% Other Adjusted Operating Profit (£m) HY23 HY22 SSEN Transmission 208.4 181.7 ~ 50% Regulated SSEN Distribution 174.6 153.3 ~ 40% Networks Energy Regulated Networks 383.0 335.0 Generation & Gas Storage SSE Renewables 22.5 25
Slide 12: Financial Results – Overview
FINANCIAL RESULTS – OVERVIEW Six months to 30 September 2022 Adjusted Reported Continuing operations HY23 HY22 HY23 HY22 Operating Profit / (Loss) - £m 716.0 376.8 (635.1) 1,904.4 Net Finance (Costs) / Income - £m (156.6) (202.6) 124.1 (218.3) Profit / (Loss) Before Tax - £m 559.4 174.2 (511.0) 1,68
Slide 13: Financial Results – Adjusted & Reported
FINANCIAL RESULTS – ADJUSTED & REPORTED Six months to 30 September 2022 Reconciling Items • Unrealised fair value remeasurements on MTM contracts covered on Slide 14 • Impairment reversals in Gas Storage and Great Island CCGT reflecting higher forward prices • Net gain arising on acquisition of Trit
Slide 14: Financial Results – Commodity Contracts
FINANCIAL RESULTS – COMMODITY CONTRACTS Hedging approach secures value despite unrealised remeasurements GB wind volumes and prices hedged1 Expected Volumes (TWh) 10 140 Hedge price (£/MWh) Established hedging approach secures value … 8 120 £114 £118 100 • Reduces exposure to short term volatility 6
Slide 15: Networks – Minority Disposals on Track
NETWORKS – MINORITY DISPOSALS ON TRACK Progressing Transmission transaction, with Distribution to follow SSEN Transmission growth to 2031 (stylised) 25% minority disposal of Networks • Unlocks premium value within the Networks 14 Regulated Asset Value (£bn) businesses 12 • Rebalances mix of regulate
Slide 16: Financial Results – Transmission
FINANCIAL RESULTS – TRANSMISSION Six months to 30 September 2022 Operating profit • Higher allowed revenues in line with RIIO-T2 expenditure profile • Under-recovery on lower than expected volumes • Operating costs increased as £m business continues expansion • Increased depreciation on higher asset
Slide 17: Financial Results – Distribution
FINANCIAL RESULTS – DISTRIBUTION Six months to 30 September 2022 Operating profit • Higher FY23 allowed revenues including £40m under-recovery from impact of coronavirus in FY21 • Under-recovery on lower than £m expected volumes1 Investment • £176m (+3%) in the final year of RIIO-ED1 1 Estimated ove
Slide 18: Financial Results – Renewables
FINANCIAL RESULTS – RENEWABLES Six months to 30 September 2022 Operating profit • Output up 28% / 0.8TWh year on year due to exceptionally still and dry weather in prior year • Hedge buy-backs at very high market prices due to weather and Seagreen construction delay Investment1 • £943m in period inc
Slide 19: Financial Results – Thermal
FINANCIAL RESULTS – THERMAL Six months to 30 September 2022 Operating profit • Higher YoY volumes (+27%) and ongoing volatility in power market resulted in higher market income • Higher impact from outages – most notably for Great Island CCGT – in period due to higher power prices Investment1 • £212
Slide 20: Financial Results – Gas Storage
FINANCIAL RESULTS – GAS STORAGE Six months to 30 September 2022 Operating profit • Spread capture increase driven by continued gas price volatility – H1 saw an inversion of summer / winter spreads from norms • Depreciation increase driven by FY22 historic impairment reversal • 149.7 mTh gas inventor
Slide 21: Financial Results – Other Businesses
FINANCIAL RESULTS – OTHER BUSINESSES Six months to 30 September 2022 Operating profit Adjusted EBIT (£m) HY23 HY22 • Business Energy reflects phasing of Movement customer contract margins, which is Business Energy 60.5 2.4 expected to reverse to a near break- even position for the financial year Air
Slide 22: Financial Results – Balance Sheet (1)
FINANCIAL RESULTS – BALANCE SHEET (1) Net debt, credit ratings and pension schemes SSE adjusted net debt bridge Strong investment grade ratings (issued Nov 2021) >90% fixed S&P BBB+ with stable outlook rate Moody’s Baa1 with stable outlook Low levels of LDI leverage in pension schemes DB Pension sch
Slide 23: Financial Results – Balance Sheet (2)
FINANCIAL RESULTS – BALANCE SHEET (2) Funding and cash collateral Opportunistic funding means At Sept 2022 £m Cash 289 minimal long-term debt refinancing required over next two years1 Undrawn commercial paper 147 Cash collateral Revolving credit facilities 1,500 requirements remain comfortably withi
Slide 24: Guidance and Dividend Plan
GUIDANCE AND DIVIDEND PLAN Six months to 30 September 2022 • HY23 adjusted EPS in line with pre-close guidance – 41.8p • FY23 adjusted EPS guidance reiterated – at least 120p • Adjusted EPS outlook to FY26 reiterated – CAGR of 7 – 10%1 • Reiterate commitment to existing dividend plan to March 2023 a
Slide 25: Agenda
AGENDA 16 November 2022 08:30 Interim Results to 30 September 2022 Part 1: Overview Part 2: Financial Results Part 3: Operating Outlook and Growth Part 4: Summary 09:15 Q&A 1 Picture: Seagreen offshore wind farm 25
Slide 26: SSE Renewables: Flagship Construction Projects
SSE RENEWABLES Delivery of flagship construction projects continues at pace • Achieved first power at Seagreen in August with 65 of 114 turbines now installed and full power expected summer 20231 • 15 of 277 foundations at Dogger Bank now in place1 • Viking secured CfD contract for 50% of capacity a
Slide 27: SSE Renewables: Pipeline and Opportunities
SSE RENEWABLES Strong pipeline and numerous upcoming opportunities in core markets 2022/23 Medium term • Consent application imminent • Coire Glas targeting FID for 4.1GW Berwick Bank in 2024, subject to government policy • Consent received at up to • 5GW of seabed suitable 100MW Bhlaraidh for float
Slide 28: SSE Renewables: International Pipeline
SSE RENEWABLES Growing and diversifying existing international pipeline Acquisition of Southern Europe onshore portfolio 15 Secured pipeline growth • 2.2GW secured pipeline and ~3GW of prospects 14 14GW across four attractive markets1 13 Spain 12 France, Italy • 50-strong team with over 20 years’ of
Slide 29: SSE Renewables: Target of 13GW Installed by FY31
SSE RENEWABLES Increasing optionality to meet and exceed target of 13GW installed by FY31 • UK & Ireland remains core market but teams now Net capacity additions targeted to 2031 >13GW active in carefully selected countries across three Operational regions – Europe, APAC and North America Offshore w
Slide 30: SSE Thermal: Flexible Generation
SSE THERMAL Flexible generation supporting national energy security Investing in energy security for today … Lower-carbon thermal prospects2 2.5 Potential GW capacity Keadby 2 power station 2 ~70% Keadby 2 CCGT increase 1.5 • Provides 893MW 1 capacity 1 • Most efficient CCGT in Europe • Expected to
Slide 31: SSE Thermal: Gas Storage
SSE THERMAL Gas storage supporting security of supply and market liquidity across winter Represents ~40% of UK’s onshore underground gas capacity • Storage assets smooth volatility in gas prices for consumers • Operated on merchant basis, injecting gas when prices are low and releasing gas when cons
Slide 32: Customers: Cleaner, Greener Energy
CUSTOMERS Cleaner, greener energy ✓ Shopfront for green energy solutions ✓ Liquidity benefit from forward sales ✓ Natural hedge for generation output War in Ukraine and geopolitical tensions have created challenging environment for consumers • Sustained and unprecedented increases in wholesale energ
Slide 33: Distributed Energy, Solar and Battery
DISTRIBUTED ENERGY, SOLAR AND BATTERY Grid-scale solar and battery storage pipeline growing at pace • SSE’s experience of developing and operating renewable and flexible assets puts it in a strong position to exploit opportunities in this growth market Progress accelerating in FY22-23 • Secured pipe
Slide 34: SSEN Transmission
SSEN TRANSMISSION Progressing at pace in RIIO-T2 Skye Link Argyll Reinforcement Critical to UK decarbonisation targets • One of fastest growing regulatory networks in Europe • Supportive long-term policy backdrop continuing to evolve Delivering key infrastructure projects and RAV growth >£400m FNC s
Slide 35: SSEN Transmission Network in 2030
SSEN TRANSMISSION Transmission Network in 2030 HND Pathway to 2030 investments Investments separately in discussion with Ofgem Pathway to 2030 New infrastructure Significant growth potential out toward the end of the decade Upgrade of existing infrastructure • Continue to forecast gross RAV of betwe
Slide 36: SSEN Distribution: Local Electrification
SSEN DISTRIBUTION Local electrification is here now, accelerating growth in the distribution network 2019 NOW NEXT Connection of core low carbon 2019 Distribution Future Energy technologies (Wind/Solar/EV)1 on or 2022 DFES predicts continued rising Scenarios (DFES) set net zero complaint above forec
Slide 37: SSEN Distribution: RIIO-ED2 Determination
SSEN DISTRIBUTION Ensuring a positive final RIIO-ED2 determination on behalf of customers and stakeholders RIIO-ED2 process nearing conclusion • Stakeholder-led business plan submitted December 2021 • Draft Determinations in June represented: • An 18% uplift on ED1 average annual totex; but • A cut
Slide 38: Agenda
AGENDA 16 November 2022 08:30 Interim Results to 30 September 2022 Part 1: Overview Part 2: Financial Results Part 3: Operating Outlook and Growth Part 4: Summary 09:15 Q&A 38
Slide 39: Net Zero Acceleration Programme
NET ZERO ACCELERATION PROGRAMME The optimal pathway to maximise shareholder value and growth into the 2030s FULLY-FUNDED ENHANCED …DELIVERING ACCELERATED GROWTH …AND THE PLATFORM FOR INVESTMENT PLAN… AT ATTRACTIVE RETURNS INTO 2026… GROWTH TO 2031 & BEYOND RENEWABLES ELECTRICITY NETWORKS ~40% ~40% +
Slide 40: Investment in the Future System
INVESTMENT IN THE FUTURE SYSTEM Leading capabilities and investment pipeline are creating green jobs for the future 2030 BUSINESS GOALS FUTURE Cut Carbon intensity by 80% Increase renewable energy output fivefold ENERGY SYSTEM Enable low-carbon Champion a fair and generation and demand just energy t
Slide 41: Summary and Outlook
SUMMARY AND OUTLOOK Focused on execution and delivery of long-term strategic plan Resilient business mix Optimum strategy to facilitate investment in excess of profits Natural hedges provide stability in low carbon electricity infrastructure Creates options for long-term growth ~ 60% index linked EB
Slide 42: Thank You
THANK YOU 42
Slide 43: Appendix
Appendix 43
Slide 44: SSE plc – ESG Credentials
SSE PLC – ESG CREDENTIALS Aiming for leading ESG performance ESG Score: 67/100 ESG Rating: AAA Score: A 71/100 In the top 11% of 139 global SSE is on CDP’s climate 86th percentile - Electric Utilities Scored as ‘Advanced’ utilities change A list industry Oct 2022 Oct 2022 Feb 2022 Oct 2022 ESG Risk
Slide 45: Net Zero Transition Plan on a Page
NET ZERO TRANSITION PLAN ON A PAGE SSE’s short-, medium- and long-term carbon targets, alongside key actions to achieve them Short term (to 2025) Medium term (2025 - 2035) Long term (2035 - 2050) 2025 2035 2050 Target 2035 2050 Engage with 50% of suppliers Reduce the carbon intensity Reduce absolute
Slide 46: Targeted Returns in High Quality Assets
TARGETED RETURNS IN HIGH QUALITY ASSETS Common capabilities across the Group drive favourable project returns At least 10% 7-9% Equity returns on Joint Return on equity (RoE)1 Venture projects, excluding developer profits 100-400 bps 300-500 bps Spread to WACC on Spread to WACC on unlevered projects
Slide 47: SSE Renewables – Current Operations
SSE RENEWABLES – CURRENT OPERATIONS Diversity of key assets across geographies and technologies Technology Geography Net Capacity (MW) Map of operational clusters Scotland 235 England 252 Beatrice Total Offshore Wind 487 Scotland 1,217 England 68 Northern Ireland 122 Republic of Ireland 567 Total On
Slide 48: SSE Renewables – Southern Europe
SSE RENEWABLES - SOUTHERN EUROPE Strategic acquisition provides attractive projects in key markets and greenfield development Established and proven development platform Providing accelerated entry into growth markets ~3.8GW onshore wind Leading position as developer across platform key European mar
Slide 49: SSE Renewables – Offshore Development
SSE RENEWABLES – OFFSHORE DEVELOPMENT Offshore wind options under development and deliverable within the next 10 years Project 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Construction Seagreen 1A Key Up to 500MW Development phase Development Construction SEABED SECURED Berwick Bank Initial Fin
Slide 50: SSE Renewables – Pipeline and Prospects
SSE RENEWABLES – PIPELINE AND PROSPECTS High quality pipeline options, with opportunities to sustainably grow into the next decade LATE-STAGE EARLY-STAGE IN CONSTRUCTION SECURED PIPELINE FUTURE PROSPECTS DEVELOPMENT DEVELOPMENT 0.5GW operational 1.5GW operational 2.0GW operational MW MW MW MW MW ONS
Slide 51: SSE Renewables – Project Assumptions
SSE RENEWABLES – PROJECT ASSUMPTIONS Assumed future ownership percentages used as basis for net capacity additions Technology Project Gross Current SSE Assumed future SSE Net Capacity Capacity (MW) ownership ownership Additions (MW) Viking 443 100% 100% 443 Yellow River 104 100% 100% 104 Strathy Sou
Slide 52: SSE Renewables – EBIT and EBITDA
SSE RENEWABLES – EBIT AND EBITDA Split by technology, on SSE adjusted basis Adjusted EBITDA HY23 HY22 Conventional hydro 48.0 37.3 Foyers pumped storage 29.3 15.2 Onshore wind 51.1 32.1 Offshore wind1 9.1 53.4 Developer profits - - Total SSE Renewables 137.5 138.0 Adjusted EBIT HY23 HY22 Conventiona