SSE PLC · LSE:SSE
SSE — FY2017 Earnings Presentation
38 slides from SSE's earnings presentation, May 2017
Slide 1: SSE Financial Results Full year to 31 March 2017
SSE Financial Results Full year to 31 March 2017
Slide 2: Richard Gillingwater, Chairman
Richard Gillingwater Chairman 2
Slide 3: The SSE team
The SSE team Alistair Phillips-Davies Richard Gillingwater Gregor Alexander Chief Executive Chairman Finance Director Colin Nicol Will Morris Martin Pibworth Sally Fairbairn Alan Young MD, Networks MD, Retail MD, Wholesale Company Secretary MD, Corporate Affairs and Director of IR 3
Slide 4: Safety comes first
Safety comes first Total Recordable Injury Rate* 0.40 0.20 0.23 0.22 0.00 FY16 FY17 Total Recordable Injuries 150 100 113 102 50 0 FY16 FY17 Combined SSE employees and contractors *TRIR – per 100,000 hours worked 4
Slide 5: Being focused, resilient and adaptable
Being focused, resilient and adaptable Affordability Security of Decarbonisation supply Industrial Strategy 5
Slide 6: Gregor Alexander, Finance Director
Gregor Alexander Finance Director ₋ Financial Overview ₋ Networks 6
Slide 7: Focusing on the key financial results
Focusing on the key financial results FY16 £m FY17 £m % change Adjusted profit before tax 1,513.5 1,545.9 +2.1% Movement on derivatives (14.5) 255.7 Net exceptional items (889.8) (8.2) Interest on net pension liabilities (22.3) (3.1) Tax on JVs and associates 6.4 (13.7) Reported profit before tax 59
Slide 8: Managing performance across the SSE group
Managing performance across the SSE group Business by business Adjusted operating profit FY16 £m FY17 £m % change Retail 455.2 422.3 -7.2% Wholesale 442.5 514.6 +16.3% Networks 926.6 936.5 +1.1% Corporate unallocated 0.1 0.6 Total operating profit 1,824.4 1,874.0 +2.7% 8
Slide 9: Managing performance across the SSE group: Exceptional items
Managing performance across the SSE group Exceptional items Exceptional Net exceptional charges and derivative movements (charges)/credits £m Thermal Generation 31.6 Gas Production (227.5) Gas Storage (23.8) Retail and IT developments (120.3) Other (34.6) Total exceptional charges, impairments and p
Slide 10: Delivering value from re-shaping SSE
Delivering value from re-shaping SSE Sale of stake in SGN Delivering value for shareholders − 2005: £505m paid for 50% SGN stake − 2016: £621m received for 16.7% SGN stake Re-investing and returning value − Recycling c.£100m proceeds through investment in Stronelairg − Returning c.£500m to sharehold
Slide 11: Delivering value from re-shaping SSE
Delivering value from re-shaping SSE £1.1bn programme 2014 2014-2016 SSE Gas Recycle capital Pipelines Non-core 2015 businesses: 2016 Simplify and streamline PFI street Langhope Rig - Ventures and Blue 2016-17 lighting 49.9% in Clyde contracts 1 - Property wind farm - Development PFI street PFI Stre
Slide 12: Disciplined investment in building, owning and operating assets
Disciplined investment in building, owning and operating assets Delivery since 2010 Almost £11bn capex since 2010 Growth in Networks and Renewables 4 14% 8 Electricity Networks & £1.7bn 3 Renewables 6 14% Wholesale (excl. renewables) 2 4 2 1 Retail & Other 72% 0 0 £bn FY10 FY11 FY12 FY13 FY14 FY15 F
Slide 13: Disciplined investment: Investment to 2020
Disciplined investment in building, owning and operating assets Investment to 2020 Disposals (excl. SGN) Investment programme - Returns greater than cost of capital £1.7bn - Meaningful contribution to earnings - Supportive of SSE’s dividend policy - c.£6bn capex to 2020; two-thirds from Networks and
Slide 14: Maintaining SSE's financial strength
Maintaining SSE’s financial strength Commitment to financial discipline Credit rating agency Rating Current criteria Date of Issue Moody’s A3 Stable outlook ‘Mid-teens’ RCF/Net Debt October 2016 Standard and Poor’s A- Negative outlook 23% FFO/Net Debt October 2016 As at 31 March FY15/16 HY16/17 FY16
Slide 15: Maintaining SSE's financial strength: hybrids
Maintaining SSE’s financial strength Commitment to strong financial management Issue Date Currency Value Maturity All in GBP Rate 18 Sep 2012 EUR €750m Perpetual **5.60% 18 Sep 2012 USD $700m Perpetual 10 Mar 2015 GBP £750m Perpetual **4.02% 10 Mar 2015 EUR €600m Perpetual 16 Mar 2017 USD $900m 16 S
Slide 16: Looking ahead to 2017/18
Looking ahead to 2017/18 Focusing on the dividend Dividend (pence) 1.6 Dividend cover (times) * 1.5 1.4 1.3 1.40 1.38 1.34 1.2 1.1 1.0 FY13 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY14 FY15 FY16 FY17 FY18e FY15 FY16 FY17 FY18e - Underlying financial strength - 2017/18 i
Slide 17: Looking ahead to 2020
Looking ahead to 2020 Focusing on the dividend Dividend commitment EBIT from Networks & Renewables - Focused on delivering dividend that at least keeps pace with RPI inflation - Targeting dividend cover in the 1.2 times to 1.4 times range* Networks and renewables Wholesale (excl. renewables) Retail
Slide 18: Networks central to SSE's strategy
Networks central to SSE’s strategy Operating Profit FY16 FY17 % change Networks RAV growth (£bn, net) 9 Electricity Distribution 370.7 433.4 +16.9 8 * Transmission 287.2 263.7 -8.2 7 Gas Distribution (SGN) 268.7 239.4 6 Networks Operating Profit 926.6 936.5 +1.1 5 4 3 2 1 0 FY11 FY12 FY13 FY14 FY15
Slide 19: Continuing to invest in gas distribution
Continuing to invest in gas distribution Operating Profit* (£m) SGN RAV* (£bn) 400 3 300 2.5 2 200 269 239 1.7 1 100 0 0 FY16 FY17 FY16 FY17 - Construction of 700km network west of Belfast - Launch of new meter asset provider business - Delivery of innovation programme * SSE share; 16.7% SGN sold Oc
Slide 20: Powering communities through Electricity Distribution
Powering communities through Electricity Distribution Distribution RAV (£bn) Operating profit (£m) 4 500 3 400 433 3.2 3.3 371 300 2 200 1 100 0 0 FY16 FY17 FY16 FY17 Customer Minutes Lost (CML) Customer Interruptions (CI) 60 80 55 60 60 40 66 68 41 43 40 47 48 20 20 0 0 FY16 FY17 FY16 FY17 SHEPD SE
Slide 21: Powering communities in the future
Powering communities in the future Innovative Networks projects are helping to inform the emerging DSO role New Thames Valley Vision NINES NINES My Electric Avenue (NTVV) Meeting demand growth Trialled large scale batteries, Tested the impact of real-life without network reinforcement domestic deman
Slide 22: Increasing the asset base in Transmission
Increasing the asset base in Transmission RAV Transmission RAV (£bn) Operating Profit (£m) 3 300 2.7 287 264 2 2.3 200 1 100 0 0 FY16 FY17 FY16 FY17 Transmission development: key projects Completed 2015 Completed 2016 Beauly- Mossford Completed 2016 Beauly- £68m Denny Ongoing Kintyre- Beauly- £665m
Slide 23: Increasing the asset base in Transmission: Caithness-Moray
Increasing the asset base in Transmission Caithness-Moray - £1.1bn project - £771m investment to date - Projected completion late 2018 Transmission well placed to build on its significant development and construction capability 23
Slide 24: Alistair Phillips-Davies, Chief Executive
Alistair Phillips-Davies Chief Executive ₋ Wholesale ₋ Retail ₋ Outlook 24
Slide 25: Responding to policy developments
Responding to policy developments Politics and Market Regulation intervention Constructive Response to engagement change 25
Slide 26: Focusing on operations and investment
Focusing on operations and investment Maximising efficiency for benefit of customers Delivering value through Improving customer Responding positively to portfolio of Wholesale service and efficiency in change in Retail markets assets Networks Creating long term value through investment of around £1
Slide 27: Maintaining operating profit in key areas in Wholesale
Maintaining operating profit in key areas in Wholesale Gas- and oil-fired output (TWh) Renewable output (TWh) Operating profit (£m) FY16 FY17 % change 20 10 8 9.0 9.7 15 17.4 8.5 8.0 6 7.3 10 11.9 8.9 10.1 9.8 4 EPM and Generation 436.3 501.2 14.9% 5 2 0 0 FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY1
Slide 28: Managing our generation portfolio
Managing our generation portfolio Generation capacity 10.6GW* Development options Viking 3% 3% 14% Gas and oil-fired Coal-fired Beatrice Conventional hydro 50% Seagreen 11% Onshore wind Offshore wind Dogger Bank Other Renewables 19% Arklow Bank FBMF Slough * March 2017 Maintaining a diverse and flex
Slide 29: Maintaining investment momentum
Maintaining investment momentum On and off-shore wind farms in construction Slieve Divena 2 19MW Dunmaglass 94MW Bhlaraidh 108MW Clyde ext. 173MW* Tievenameenta 34MW** Galway 120MW* Leanamore 18MW Stronelairg 225MW Beatrice construction Beatrice 235MW* 2014 2015 2016 2017 2018 2019 2020 225MW *SSE S
Slide 30: Maintaining Gas Production assets
Maintaining Gas Production assets Gas production output (m therms) 2P reserves* FY15 FY16 FY17 800 Total E&P - bn th 1.7 3.6 2.5 600 618 Total E&P - Mboe 28 59 43 400 414 398 403 *Estimate as per independent audit 200 177 184 E&P gas production profile (mth) 0 FY12 FY13 FY14 FY15 FY16 FY17 500 − Dis
Slide 31: Managing issues in Household Energy Supply
Managing issues in Household Energy Supply Operating profit (£m) FY16 FY17 % change Energy Supply 398.9 389.5 -2.4% Energy Related Services 15.4 16.1 4.5% Enterprise 40.9 16.7 -59.2% Total Retail 455.2 422.3 -7.2% Energy Customer Accounts (m) 8.21 8.00 -2.6% Aged Debt (£m) 103.2 80.2 -22.2% 31
Slide 32: Doing the right thing for customers
Doing the right thing for customers Customer supply accounts (m) Energy Related Services accounts (m) 0.5 8.0 8.2 8.0 0.4 0.47 6.0 0.3 0.40 4.0 0.2 2.0 0.1 0.0 0 FY16 FY17 FY16 FY17 Engaging customers Enhancing digital services 32
Slide 33: Managing our regulatory obligations
Managing our regulatory obligations Taking the right decisions - Over £300m invested in Smart Meter roll out - PPM price cap revenue impact c.£40m/year - Focus on costs - No replacement billing system for foreseeable future - Potential price cap on GB energy supply Work constructively with policy ma
Slide 34: Building a business energy supply business
Building a business energy supply business Business Energy customer accounts (m) Business Energy developments - New leadership 0.47 0.45 - Contracts to suit customers’ needs - Advice to manage energy usage - Ranked No.1 non-domestic energy supplier for handling complaints from small business custome
Slide 35: Putting Enterprise on a firm footing for future growth
Putting Enterprise on a firm footing for future growth Operating profit (£m) Utilities 50 40 40.9 30 20 10 16.7 0 FY16 FY17 Challenging conditions in Contracting Telecoms New management driving the business forward 35
Slide 36: Looking ahead to 2020
Looking ahead to 2020 Focus is on: RAV and Renewable capacity growth 10 5 - Delivering dividend growth at least in line with RPI 8 4 - Achieving dividend cover within a range of around 1.2x to 1.4x 6 3 - Continuing investment, weighted towards networks 4 2 and renewables 2 1 - Increasing RAV to c£9b
Slide 37: Looking to the long term
Looking to the long term Focused Operational efficiency and financial discipline Resilient Adaptable Strong pipeline of Continuously evolving in investments in energy response to industry assets change Working in the interests of consumers and investors 37
Slide 38: Delivering dividend growth for the long term
Delivering dividend growth for the long term RPI* Dividend Per Share (p) 88.4 89.4 91.3 86.7 84.2 80.1 75.0 70.0 66.0 60.5 55.0 46.5 42.5 37.7 35.0 32.4 30.0 25.7 27.5 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18e *forecast, at least RPI 38