Slide 1: Powering Change Together: Preliminary Results
POWERING CHANGE TOGETHER PRELIMINARY RESULTS FOR THE YEAR TO 31 MARCH 2022 25 May 2022 HIGHLY CONFIDENTIAL – PREPARED ON DRAFT BASIS TO AID DISCUSSION ONLY
Slide 2: Disclaimer
DISCLAIMER This presentation has been prepared by SSE plc solely for use on 25 May 2022 during the presentation of the company’s preliminary results for the year to 31 March 2022. This presentation may not be disclosed or published, nor used by any other person or entity, for any purpose other than
Slide 3: Agenda
AGENDA 25 May 2022 09:30 Preliminary Results to 31 March 2022 Part 1: Overview Part 2: Financial Results Part 3: Operating Review 10:15 Q&A 3
Slide 4: Powering Change Together
POWERING CHANGE TOGETHER Strong operational delivery whilst creating opportunities for further investment and growth DELIVERED ON FY22 RESILIENT BUSINESS MIX OPPORTUNITIES FOR RESULTS GUIDANCE IN VOLATILE MARKETS INVESTMENT AND GROWTH • Adjusted EPS growth of 9%1 to 95.4p • Good earnings inflation p
Slide 5: SSE plc: Net Zero Acceleration Programme
SSE PLC: 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 ~4
Slide 6: Driving Growth with Strategic Delivery
DRIVING GROWTH WITH STRATEGIC DELIVERY Progression of strategy has benefited from resilient, integrated business model Execution of Net Zero Acceleration Programme Upweighted 2030 Business Goals CUT CARBON INCREASE ✓ Financial targets delivered INTENSITY BY 80% RENEWABLE ENERGY OUTPUT FIVEFOLD ✓ Rec
Slide 7: Tracking Our Net Zero Transition
TRACKING OUR NET ZERO TRANSITION Setting out clear and ambitious targets to progress decarbonisation Short term Medium term Long term 2035 2022 2025 2035 2050 • Engage with 50% of • Reduce the carbon intensity of scope 1 • Net zero for SSE’s scope 1 and suppliers by spend to GHG emissions by 80% by
Slide 8: Providing Solutions with the Right Business Mix
PROVIDING SOLUTIONS WITH THE RIGHT BUSINESS MIX Electrification to drive decarbonisation, provide energy security and protect consumers SSE IS CONTRIBUTING ACROSS THE ELECTRICITY VALUE CHAIN PROVIDING ENERGY DECARBONISING GENERATION ENABLING ELECTRIFICATION SOLUTIONS - SSE Renewables - SSE Thermal -
Slide 9: The People Behind Our Purpose
THE PEOPLE BEHIND OUR PURPOSE Focus on safety and investment in people is a key enabler to delivering our strategy Safety Total Recordable Injuries TRIR1 60 0.2 40 0.1 20 0 0 FY22 FY21 FY22 FY21 Investing in a Just Transition • Net Zero Acceleration Programme will create more than 1,000 new jobs a y
Slide 10: Agenda
AGENDA 25 May 2022 09:30 Preliminary Results to 31 March 2022 Part 1: Overview Part 2: Financial Results Part 3: Operating Review 10:15 Q&A 10
Slide 11: Financial Results – Investment Summary
FINANCIAL RESULTS – INVESTMENT SUMMARY Group continuing to accelerate investment in low-carbon infrastructure projects Record Investment in FY22 On track with FY26 Investment Target SSEN Transmission SSE Renewables Adjusted Investment, Capital and Acquisition • Execution of RIIO-T2 • 2.4GW pipeline
Slide 12: Resilience of Business in Volatile Markets
RESILIENCE OF BUSINESS IN VOLATILE MARKETS Stable regulatory frameworks and balanced business mix helps mitigate volatility risks EARNINGS BALANCE SHEET Indexed linked revenues Stable debt profile • Renewables – ROC, CfD and REFIT • Adjusted Net Debt – 96% of £8.6bn prices, Capacity Market payments
Slide 13: Financial Results – Segmental Overview
FINANCIAL RESULTS – SEGMENTAL OVERVIEW Year to 31 March 2022 – Continuing Operations1 Adjusted (£m) FY22 FY21 Mvmt restated SSEN Transmission 380.5 220.9 72% Key movement in SSEN Distribution 351.8 275.8 28% adjusted results Regulated Networks Operating Profit 732.3 496.7 47% • Higher regulated netw
Slide 14: Financial Results – Overview
FINANCIAL RESULTS - OVERVIEW Year to 31 March 2022 Adjusted Reported Continuing operations1 FY22 FY21 FY22 FY21 restated restated Operating Profit - £m 1,536.8 1,333.5 3,755.4 2,654.9 Net Finance Costs - £m (372.8) (384.6) (273.2) (236.9) Profit Before Tax - £m 1,164.0 948.9 3,482.2 2,418.0 Taxation
Slide 15: Financial Results – Adjusted & Reported
FINANCIAL RESULTS – ADJUSTED & REPORTED Year to 31 March 2022 RECONCILIATION FROM ADJUSTED TO REPORTED FAIR VALUE REMEASUREMENTS Continuing Operations - £m FY22 • Through its established hedging strategy, the Group enters into forward commodity contracts Adjusted PBT 1,164.0 • ‘Own use’ contracts –
Slide 16: Financial Results – SSEN Transmission
FINANCIAL RESULTS – SSEN TRANSMISSION Year to 31 March 2022 Operating profit • Higher allowed revenues in first year of RIIO-T2 plus timing impact • Operating costs increased as business positions to deliver growth • Increased depreciation on higher asset base £m Investment • £614m (+41%) as network
Slide 17: Financial Results – SSEN Distribution
FINANCIAL RESULTS – SSEN DISTRIBUTION Movement Year to 31 March 2022 Operating profit • Recovery in volumes and higher allowed revenues • Over-recovery versus allowed revenues £m • Higher operating expenses including storm costs of around £40m Investment • £365m (+4%) as ED1 investment continues to
Slide 18: Financial Results – SSE Renewables
FINANCIAL RESULTS – SSE RENEWABLES Year to 31 March 2022 SSE Renewables Adjusted EBIT Operating profit 800 • Developer profits of £64m on 10% 731.8 stake sale of Dogger Bank C 700 Developer • Output down c.7%/0.7TWh year on 600 Profits 55 568.1 year due to exceptional weather (162) Developer 500 (49
Slide 19: Financial Results – SSE Thermal & Gas Storage
FINANCIAL RESULTS – SSE THERMAL & GAS STORAGE Year to 31 March 2022 Operating profit • Volatile power market resulted in higher achieved spark spread and Balancing Market income. • Gas Storage operating on merchant basis, and able to capture positive gas price spreads. Investment • £131m (+21%) main
Slide 20: Financial Results – Other Businesses
FINANCIAL RESULTS – OTHER BUSINESSES Year to 31 March 2022 Operating profit Adjusted EBIT (£m) FY22 FY21 • Business Energy bore higher non- Movement commodity & mutualisation costs Business Energy (21.5) (24.0) • Airtricity profits driven by legacy Airtricity 60.4 44.0 REFIT generation receipts • EP
Slide 21: Financial Results – Hedging Update
FINANCIAL RESULTS – HEDGING UPDATE Hedging approach is an important component to successfully navigating volatile markets Established hedging strategy is locking in significant value for coming years • Hedging expected output well in advance of delivery reduces exposure to short term volatility • Av
Slide 22: Financial Results – Balance Sheet
FINANCIAL RESULTS – BALANCE SHEET As at 31 March 2022 – Adjusted net debt, defined benefit pension schemes and credit ratings Business mix provides financial stability Strong Investment Grade Credit Metrics • Successfully managing credit limits and • S&P - BBB+ with stable outlook (Nov 21) collatera
Slide 23: SSEN – Minority Stake Sale
SSEN – MINORITY STAKE SALE Update on timings for stakes in high quality, core businesses Minority stake sale announced in November 2021 • Ensures optimum balance of capex allocation between regulated and unregulated businesses • Demonstrates value of electricity networks • Non-controlling stake prov
Slide 24: Remunerating Shareholders
REMUNERATING SHAREHOLDERS Year to 31 March 2022 Dividend certainty to 2026 • Strong operational and strategic delivery in current year • FY22 Adjusted EPS in line with pre-close guidance at 95.4p • Reiterate commitment to existing dividend plan to March 2023 and rebase thereafter: FY22 Dividend FY23
Slide 25: Outlook for FY23 and Beyond
OUTLOOK FOR FY23 AND BEYOND Increased confidence of delivery, combined with inflation and commodity price impacts Outlook for FY23 SSE Thermal & Gas SSEN Transmission SSE Renewables Storage Expect c20% Planned output SSE Group Adjusted EBIT increase in revenues of 11.4TWh, Adjusted EPS at least £337
Slide 26: Agenda
AGENDA 25 May 2022 09:30 Preliminary Results to 31 March 2022 Part 1: Overview Part 2: Financial Results Part 3: Operating Review 10:15 Q&A Seagreen offshore windfarm jackets 26
Slide 27: SSE Renewables – New Operating Model
SSE RENEWABLES – NEW OPERATING MODEL Technology based structure designed to set the business up for long-term growth Teams with end-to-end accountability for project development, construction and operations Barry O’Regan Finance Director Stephen Wheeler Managing Director Strategy & Route to Market a
Slide 28: SSE Renewables – Delivery
SSE RENEWABLES – DELIVERY Executing on flagship projects key in coming year Seagreen Dogger Bank Viking • 21 turbines installed, currently expect • Installing offshore cable at Dogger • Focus on completing ground and civil first power in July and full commercial Bank A and onshore converter station
Slide 29: SSE Renewables – Hydro & Pumped Storage
SSE RENEWABLES – HYDRO & PUMPED STORAGE Tried and tested technologies have increasingly important grid-stabilisation role Flexible dispatchable generation Coire Glas – could be UK’s largest natural battery • Intermittent wind on system requires flexible • Long Duration Energy Storage policy progress
Slide 30: SSE Renewables – Europe Acquisition
SSE RENEWABLES – EUROPE ACQUISITION Long established development platform allows entry to Southern European markets Strategic acquisition provides attractive projects in key markets and greenfield development • ~0.5GW operational by FY26 ~3.9GW onshore France portfolio • Platform for up to 3GW by FY
Slide 31: SSE Renewables – ScotWind
SSE RENEWABLES – SCOTWIND Secured preferred lease area that benefits from strong economics • 2.6GW E1 site (1GW net) suited to deployment of floating technology • Benefits from strong economies of scale and has extension opportunities • Construction and operation synergies expected from proximity to
Slide 32: SSE Renewables – Pipeline and Prospects
SSE RENEWABLES – PIPELINE AND PROSPECTS Strategic wins in the period and increasing high quality options available Major progress towards >15GW FY26 pipeline ambition Abundance of opportunities to grow pipeline further 17 Great Crown Estate’s proposed Celtic 16 Britain Seas leasing for floating wind
Slide 33: SSE Renewables – Capacity Additions
SSE RENEWABLES – CAPACITY ADDITIONS Newly-secured pipeline provides confidence in delivering capacity targets Potential further Net capacity additions organic growth: 14 • Greenfield >13GW development 12 • Site optimisation • Extensions 10 > 13 Targeting Capacity (GW) 8 ~8GW fivefold 6 output to 50T
Slide 34: SSE Thermal – Flexibility in a Net Zero World
SSE THERMAL – FLEXIBILITY IN A NET ZERO WORLD Current portfolio of 6.2GW of Flexible Generation providing critical system balancing role Existing fleet providing vital flexibility and Peterhead CCGT (1,180 MW) fast response in volatile markets • Own and operate five of the most flexible and efficien
Slide 35: SSE Thermal – Value in an Intermittent System
SSE THERMAL –VALUE IN AN INTERMITTENT SYSTEM Energy system is exposed to daily wind speed and demand variability, with event risk Thermal Generation key to risk management, with profitability driven by flexible plant response to market changes Achieved Spark Spreads Balancing Market Strategic Value
Slide 36: SSE Thermal – Delivering on Lower Carbon
SSE THERMAL – DELIVERING ON LOWER CARBON State-of-the art Keadby 2 CCGT commissioning at important time for GB generation World-leading CCGT efficiency and response time • 893MW TEC capacity should displace older, less efficient plant • Commissioning started in October 2021 • Full commercial operati
Slide 37: SSE Customers – Cleaner, Greener Energy
SSE CUSTOMERS – CLEANER, GREENER ENERGY Providing clean, zero-carbon energy solutions for customers using SSE wind farms Helping communities and businesses making cleaner, greener energy supply choices • Business Energy’s fixed tariff offerings include 100% renewable electricity sourced from SSE’s o
Slide 38: SSE Distributed Energy – Opportunities
SSE DISTRIBUTED ENERGY - OPPORTUNITIES 380MW solar and battery pipeline secured with >1GW more sites under assessment SSE in strong position to deploy solar and battery storage at scale and pace • Acquired 30MW solar and 50MW battery developments in FY22 • Assessing >1GW additional opportunities • G
Slide 39: SSEN Transmission: A Network for Net Zero
SSEN TRANSMISSION A Network for Net Zero Critical to delivery of UK’s decarbonisation targets • Frontier UK Transmission operator • One of the fastest growing regulatory Networks in Europe • Likely to see accelerated growth as momentum behind net zero builds Tower construction at Alyth 60 Cumulative
Slide 40: SSEN Transmission: Delivery in First Year of RIIO-T2
SSEN TRANSMISSION Delivery in the first year of RIIO-T2 Progressing key projects and delivering RAV growth • Shetland cable installation due to commence summer 2022 • North-East 400kV overhead line reinforcement • World’s first SF6 free substation at Kintore Progressing needs cases Shetland, Boulder
Slide 41: SSEN Transmission: Supportive Backdrop for Growth
SSEN TRANSMISSION Highly supportive backdrop to drive mid- long- term growth Pipeline of policy releases underpinning accelerated growth expectations Networks Options British Energy Holistic Network Centralised Assessment (NOA) Security Strategy Design (HND) Strategic Network (BESS) Plan (CSNP) • Ja
Slide 42: SSEN Transmission Network 2026
SSEN SSEN TRANSMISSION NETWORK 2026 Transmission by 2026 A clearer path for growth to 2026 Upside potential to NZAP 2026 forecast • RAV now expected to reach £6.5-7bn by 2026, accounting for: • Reflection of Ofgem inflation forecast1 • Increased view of spend, existing NZAP Uncertainty Mechanism pro
Slide 43: SSEN Transmission Network 2030
SSEN Transmission by 2030 SSEN TRANSMISSION NETWORK 2030 Transmission by 2030 A clearer path for growth to 2031 Key 2026 Projects: Upside potential to NZAP 2031 target NOA7 Projects: Island links: • Mainly towards end RIIO-T3 and underpinned by supportive policy UPDATE – MAY 2022 Main network in 203
Slide 44: SSEN Distribution: Managing Extreme Weather Events
SSEN DISTRIBUTION Managing extreme weather events Significant storm disruption • Dec 2021: Storm Arwen, just under 1000 HV faults in Scotland • Jan 2022: Storms Malik and Corrie, over 800 HV faults in Scotland • Feb 2022: Storms Eunice and Franklin, over 650 HV faults on southern network • Total of
Slide 45: SSEN Distribution: Accelerating Electrification
SSEN DISTRIBUTION Energy affordability crisis demonstrates need to accelerate electrification for consumers Forecast load spend vs EV and heat pump POWERING COMMUNITIES TO NET ZERO capacity (SSEN Distribution area, FES20201) Load expenditure (Line, £bn) 2 55 Capacity (Bar, GW) 1.8 Ambitious business
Slide 46: Summary
SUMMARY 46
Slide 47: Continuing to Lead on Climate Action
CONTINUING TO LEAD ON CLIMATE ACTION Leading capabilities and investment pipeline position SSE as UK’s clean energy champion Positive policy progression with +20 GW low-carbon stable regulatory frameworks flexibility needed by 2030 UK AMBITION to ensure security of supply3 FULLY DECARBONISED POWER S
Slide 48: Powering Change Together
POWERING CHANGE TOGETHER Strong operational delivery whilst creating opportunities for further investment and growth DELIVERED ON FY22 RESILIENT BUSINESS MIX OPPORTUNITIES FOR RESULTS GUIDANCE IN VOLATILE MARKETS INVESTMENT AND GROWTH • Adjusted EPS growth of 9%1 to 95.4p • Strong earnings inflation
Slide 49: Thank You
49 THANK YOU @sse| For a better world of energy
Slide 50: Appendix
APPENDIX \ i \ 50
Slide 51: SSE plc – ESG Credentials
SSE PLC – ESG CREDENTIALS Aiming for leading ESG performance ESG Score: 67/100 ESG Rating: AAA Score: A- 66/100 In the top 8% of 139 global Scored as ‘Leadership’ for 79th percentile - Electric Utilities Scored as ‘Advanced’ utilities climate change industry Oct 2021 Sep 2021 Feb 2022 Nov 2021 ESG R
Slide 52: 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 53: 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 54: 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 Seagreen 1A Construction Up to 500MW1 Key SEABED SECURED – Development Construction SEEKING CONSENT Berwick Bank Up to 4,10
Slide 55: SSE Renewables – Pipeline and Prospects
SSE RENEWABLES –PIPELINE AND PROSPECTS High quality pipeline options, with opportunities to sustainably grow into the next decade IN CONSTRUCTION CONSENTED REQUIRING CONSENT SECURED PIPELINE FUTURE PROSPECTS1 2.0GW operational ONSHORE MW MW MW MW MW Viking 443 Strathy South 208 Cloiche 155 GB 987 Ot
Slide 56: SSE Renewables – Project Assumptions
SSE RENEWABLES – PROJECT ASSUMPTIONS Assumed future ownership percentages used as basis for slide 33 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 South 208 100% 10
Slide 57: SSE Renewables – Europe Pipeline Acquisition
SSE RENEWABLES – EUROPE PIPELINE ACQUISITION ~3.9GW onshore wind development portfolio with ~1GW solar hybridisation potential National Targets for Generation Capacity - Spain (GW) National Targets for Generation Capacity - France (GW) 150 150 SPAIN 100 ~2x FRANCE 100 ~2.5x ~3.3GW 50 ~0.4GW 50 0 0 2
Slide 58: SSE Renewables – Leader in Offshore Wind
SSE RENEWABLES – LEADER IN OFFSHORE WIND Leading construction of more offshore wind than anyone else in the world 504MW 504MW 588MW 1,075MW 3,600MW Operational: 2012 In development Operational: 2019 In construction In construction Development, construction & operations lead Development, construction
Slide 59: SSE Renewables – EBIT and EBITDA Breakdown
SSE RENEWABLES – EBIT AND EBITDA BREAKDOWN Split by technology, on SSE adjusted basis Adjusted EBITDA FY22 FY21 Conventional hydro 268.2 235.9 Foyers pumped storage 56.5 33.4 Onshore wind 224.6 271.1 Offshore wind 181.9 194.6 Developer profits 64.4 226.1 Total SSE Renewables 795.6 961.1 Adjusted EBI
Slide 60: SSEN Transmission: RIIO-T2 Forecast Revenue and Inflation
SSEN TRANSMISSION RIIO-T2 forecast revenue and inflation (Ofgem PCFM, November 20211) Revenue Price base FY22 FY23 FY24 FY25 FY26 Total revenue1 £m nominal 572.1 688.4 730.2 820.1 778.3 Inflation FY22 FY23 FY24 FY25 FY26 Index RPI/CPIH CPIH CPIH CPIH CPIH Annual movement 4.050% 3.563% 2.442% 2.053%
Slide 61: SSEN: Year on Year RAV Movement
SSEN Year on year RAV movement Regulated Asset Value - £m (nominal) Distribution Transmission FY20 Closing Balance 3,692 3,412 Slow money 377.6 396.5 Inflation 44.8 41.4 Depreciation (331.6) (191.9) FY21 Closing Balance 3,783 3,658 Slow money 412.8 582.5 Inflation 218.5 124.4 Depreciation (361.0) (2