Sse Plc · LSE:SSE
Sse — H1 2023/24 Earnings Presentation
56 slides from Sse's earnings presentation, Nov 15, 2023
Slide 1: Delivery, drive and discipline: 2023/24 Interim Results
Delivery, drive and discipline 2023/24 Interim Results 15 November 2023
Slide 2: Disclaimer
DISCLAIMER This presentation has been prepared by SSE plc solely for use on 15 November 2023 during the presentation of the Company’s interim results for the period to 30 September 2023. This presentation may not be disclosed or published, nor used by any other person or entity, for any purpose othe
Slide 3: Today's presenters
Today’s presenters Group Executive Director team Alistair Phillips-Davies Gregor Alexander Martin Pibworth Barry O’Regan Chief Executive Finance Director Chief Commercial Officer CFO Designate 3
Slide 4: Putting safety first
Putting safety first Additional measures implemented to address rise in minor incidents Measures implemented include: Safety performance • Significant investment in innovative immersive training Total recordable injuries TRIR1 • Implementation of the Group-wide contractor safety strategy 60 0.3 50 0
Slide 5: Agenda
Agenda 15 November 2023 Interim Results to 30 September 2023 Part 1: Overview Part 2: Results to 30 September 2023 Part 3: Operating Review Part 4: Financial Outlook Part 5: Summary Q&A SSE Renewables engineer at Seagreen O&M Base, Montrose 5
Slide 6: Delivery, drive and discipline
Delivery, drive and discipline Highly confident in earnings growth through capital discipline and optionality Delivering on capital Guidance driven by visibility Capital discipline and optionality investment programme of earnings across balanced business mix • Major progress on delivering • Currentl
Slide 7: Delivering on our capital investment
Delivering on our capital investment Focused on execution of NZAP Plus investment plan Delivering flagship construction projects SSEN Transmission-driven capex upgrade Seagreen offshore Dogger Bank A Capital investment plan FY23-27 wind farm commercial offshore wind farm £20.5bn operations reached f
Slide 8: Guidance driven by visibility of earnings
Guidance driven by visibility of earnings Projects already secured, indexed EBITDA and fixed-rate debt underpin EPS growth Delivering FY27 adjusted EPS target Defence against macro environment through ~200p index-linked EBITDA and fixed rate debt 13 - 16% CAGR to ~175p 166.0p >150p ~60% 91% ~95% of
Slide 9: Capital discipline and optionality
Capital discipline and optionality Balanced business mix provides options to invest across the clean energy value chain SELECTIVE, DISCIPLINED INVESTMENT CONTINUING TO UPWEIGHT INVESTMENT IN RENEWABLES IN REGULATORY NETWORKS SSE Renewables installed capacity (net) ~£12.5bn ~£18bn ~£20.5bn ~2.5GW ~0.
Slide 10: Agenda
Agenda 15 November 2023 Interim Results to 30 September 2023 Part 1: Overview Part 2: Results to 30 September 2023 Part 3: Operating Review Part 4: Financial Outlook Part 5: Summary Q&A Dive boat Green Isle, Weisdale Voe, Shetland 10
Slide 11: Financial results – Segments
Financial results – Segments Six months ended 30 September 2023 Adjusted Operating Profit (£m) HY24 HY23 SSEN Transmission 215.6 208.4 SSEN Distribution 120.1 174.6 Key movements in adjusted results Regulated Networks 335.7 383.0 • Networks continuing to see current under- recovery of inflation in c
Slide 12: Financial results – Overview
Financial results – Overview Six months ended 30 September 2023 Adjusted Reported Continuing operations1 HY24 HY23 HY24 HY23 Operating Profit / (Loss) - £m 693.2 716.0 602.3 (635.1) Net Finance (Costs) / Income - £m (128.0) (156.6) (29.0) 124.1 Profit / (Loss) Before Tax - £m 565.2 559.4 573.3 (511.
Slide 13: Financial results – Adjusted & reported
Financial results – Adjusted & reported Six months ended 30 September 2023 Other reconciling items • IFRS 9 movements reflect minimal movement in the net operating derivative mark-to-market valuation with £(308)m derivative liability recognised at HY24. • IFRS 17 provision increase in respect of gua
Slide 14: SSEN Transmission
SSEN Transmission Six months ended 30 September 2023 Operating profit • Higher TNUoS2 revenues in line with increased totex allowances • In-year recovery broadly in line with allowances versus under-recovery £m last year3 • Higher operating costs including employee related costs as business position
Slide 15: SSEN Distribution
SSEN Distribution Six months ended 30 September 2023 Operating profit • Broadly flat allowed DUoS1 revenues year on year • Under-recovery in the period to £m September versus a lower under- recovery in the prior period • Increased operating costs including inflationary impact • Higher depreciation o
Slide 16: SSE Renewables
SSE Renewables Six months ended 30 September 2023 Operating profit • Volumes flat YoY but remain 7% behind full year plan (19% relative to YTD plan), mainly due to adverse weather conditions • Onshore and offshore benefited from higher £m average hedge prices combined with lower hedge buy-backs requ
Slide 17: SSE Thermal
SSE Thermal Six months ended 30 September 2023 Operating profit • Additional capacity contributions from Keadby 2 and Triton Power • Lower YoY volumes (-29%) offset by continued strong capture prices achieved by efficient flexible fleet • Lower YoY impact from outages as Great Island CCGT returned,
Slide 18: Other businesses
Other businesses Six months ended 30 September 2023 Operating profit • Business Energy – reflects phasing Adjusted EBIT (£m, continuing operations) HY24 HY23 Movement of customer contract margins, expected to partially reverse for the Business Energy 88.0 59.4 financial year Airtricity 5.8 14.9 • Ai
Slide 19: Financial results – Capital investment
Financial results – Capital investment Maintaining expected progress within five-year capital investment plan SSEN Distribution £116m North Network £128m South Network 23% SSEN Transmission £59m Shetland HVDC Link £11m Kintore Substation £1.1bn 42% Six months to 30 Sept 2023 23% SSE Renewables £53m
Slide 20: Financial results – Balance sheet
Financial results – Balance sheet Robust to inflation and capacity for increasing investment Balance Sheet remains strong… …with 91% debt1 paying fixed rate… …and strong credit ratings. • €750m 8-year Green Bond issued at Fixed • S&P: BBB+ with positive outlook 4.0% fixed coupon Floating • Moody’s:
Slide 21: Agenda
Agenda 15 November 2023 Interim Results to 30 September 2023 Part 1: Overview Part 2: Results to 30 September 2023 Part 3: Operating Review Part 4: Financial Outlook Part 5: Summary Q&A 21
Slide 22: SSEN Transmission – delivery in 1H
SSEN Transmission – delivery in 1H Buildout of transmission infrastructure in the North of Scotland progressing at pace RIIO-T2 Business Plan • North East Upgrade: Kintore Phase 1, first energised October 2023 • Inverary-Crossaig tower installation complete Shetland Island Link • Entire 260km of HVD
Slide 23: SSEN Transmission – Uncertainty Mechanisms
SSEN Transmission – Uncertainty Mechanisms Refined cost estimates as projects progress through large capital project process Latest estimate of gross nominal investment to deliver total LOTI and ASTI projects ~£20bn2 Total project cost estimates Project3 2021 2022 2023 2024 2025 2026 2027 2028 2029
Slide 24: SSEN Transmission – FY27 RAV target upgrade
SSEN Transmission – FY27 RAV target upgrade Increased investment in Transmission within NZAP Plus period ~£7.5bn SSE adjusted capex for Gross SSEN Transmission RAV Growth SSEN Transmission Forecast1 - £bn (nominal) (illustrative phasing)1 12 NZAP+ 10 >£10bn, Nov 2023 Nov 2023 Update £8-9bn, May 2023
Slide 25: SSEN Transmission – Exponential growth potential
SSEN Transmission – Exponential growth potential Upside risk to investment requirements into the 2030s Highly supportive policy environment continues to evolve 2 Pathway to 2030 (inc. Scotwind sites) • ASTI: based on system operator plan to 2030 (HND) which delivers 11GW of 28GW ScotWind offshore wi
Slide 26: SSEN Distribution: Strategic progression
SSEN Distribution: Strategic progression Ramping up investment and operational capability as the platform for long-term growth Focus on growing the RAV Delivery of £3.6bn1 baseline plan • On track for delivery of and underpinning net zero to enable up to £0.7bn1 in additional increased investment tr
Slide 27: Continued supportive price environment
Continued supportive price environment Forward prices combined with integrated generation portfolio provides confidence CURRENT FORWARD PRICES ABOVE NZAP PLUS WITH CONFIDENCE FROM PORTFOLIO EFFECT GB baseload power price (£/MWh, nominal) 200 0.7GW of 180 Semi-flexible 160 capacity 140 6.5GW 120 Flex
Slide 28: SSE Renewables – Investment plan
SSE Renewables – Investment plan Accelerated earnings growth supported by project delivery and quality pipeline CONTINUING TO DELIVER AGAINST PLAN IN 1H ON TRACK TO DELIVER ~9GW TARGET BY FY27 Offshore Wind Hydro Solar Onshore Wind • Dogger Bank A first power ~1.5GW ~9GW (inc. hybridisation) • Seagr
Slide 29: SSE Renewables – Construction programme
SSE Renewables – Construction programme Expert delivery of projects with strong fundamentals, indexed revenues & stable costs STRONG INDEXED STABLE COST BASE FUNDAMENTALS CONTRACTS SEAGREEN OFFSHORE WIND FARM >90% of ~£2.5bn generation 42% CfD at 1.1GW with ~52% capex contracted at FID • Fully opera
Slide 30: SSE Renewables – Delivery driving growth
SSE Renewables – Delivery driving growth Profit underpinned by attractive power prices, indexed contracts and value of flexibility SSE Renewables target volumes … … of which Onshore wind, offshore wind and solar 30 Earnings growth driven by: 25 35% Merchant • Build-out of ~2.5GW of projects under co
Slide 31: SSE Thermal – Key investments
SSE Thermal – Key investments Efficient fleet provides strong portfolio risk management in volatile markets Keadby 2 CCGT (893MW) • Most flexible and efficient gas-fired power station in Europe has displaced older, more carbon-intensive plant across the UK • Since operational, delivered over £150m o
Slide 32: SSE Thermal – Constructive market trends
SSE Thermal – Constructive market trends Value of flexibility has increased as market tightens and transitions to renewables-led Continuing increase in Capacity Market value … … and intermittent renewables driving spark volatility. Summer 2020 Nearly £1bn auction 20.00 400 Uncontracted value already
Slide 33: SSE Thermal – New normal underpins profits
SSE Thermal – New normal underpins profits Value of flexibility has increased as market tightens and transitions to renewables-led Driving an expected average ~£500m1 EBIT to FY27 (unchanged) Building blocks for sustainable earnings >£750m1 Capacity Spark Ability to Future Market spread efficiently
Slide 34: Agenda
Agenda 15 November 2023 Interim Results to 30 September 2023 Part 1: Overview Part 2: Results to 30 September 2023 Part 3: Operating Review Part 4: Financial Outlook Part 5: Summary Q&A Glascarnoch Dam, Ullapool 34
Slide 35: Commitment to investment criteria
Commitment to investment criteria Maintaining attractive returns through world-class capabilities and high-quality assets Onshore Offshore Emerging tech Solar Networks wind wind Target 50-300 bps 100-300 bps >11% equity return 7-9% 300-500 bps returns Spread to WACC1 Spread to WACC1 excluding develo
Slide 36: FY24 financial outlook
FY24 financial outlook Reaffirming FY24 earnings guidance with EPS still expected to be >150p Adjusted FY24 FY23 Guidance Actual EPS guidance remains unchanged Adjusted EBIT (£m) Guidance takes into account: SSEN Transmission More than FY23 372.7 SSEN Distribution Less than FY23 382.4 • Strong perfo
Slide 37: Increasing visibility on medium-term outlook
Increasing visibility on medium-term outlook Contracted, indexed revenues and natural hedges provide predictable earnings ~75% of EBITDA indexed or contracted1 Reaffirming medium-term EBIT guidance FY23 FY24 FY25 FY26 FY27 Merchant Transmission More than £400m p.a. average ~25% Avg. adj. EBITDA Dist
Slide 38: Clear line of sight on FY27 EPS
Clear line of sight on FY27 EPS Key projects driving earnings are already built, being built or are contracted to build Strong visibility of assets underpinning FY27 EPS target Assumption on interest: Average cost of debt ~5% across the five year plan ~15% of 4.5%3 ~80% 200 Assuming 5.5% coupon on n
Slide 39: Dividend plan to FY27
Dividend plan to FY27 Balanced support of investment and growth • Strong delivery of investment plan and strategic progress • Financial performance in year to date broadly in line with Board’s expectations • Continue to reiterate 5-10% growth per annum to FY27 160p FY24 interim FY24 dividend FY25 to
Slide 40: Updating capital allocation
Updating capital allocation Business optionality the foundation for increasing long-term, consistent value creation ~£2.5bn increase in investment vs previous plan High proportion (~65%) of investment committed1 Illustrative phasing2 Revised capex split for five year plan capex FY23-27 7 Economicall
Slide 41: Strong balance sheet and credit ratings
Strong balance sheet and credit ratings Limited refinancing requirements expected in the near-term market environment NET DEBT / EBITDA RATIO EXPECTED TO REMAIN WITHIN 3.5 – 4.0X TARGET • Less than £1.5bn long-term debt refinancing required over the next 24 months1 • Average cost of debt remains low
Slide 42: Fully-funded investment plan
Fully-funded investment plan Upweighted NZAP Plus continues to be fully-funded whilst retaining credit headroom UPDATED SOURCES AND USES OF CASH FOR FIVE YEAR PLAN 30 ~£4.5bn ~£28bn ~£5bn FY24 – FY27 25 ~£3bn2 ~£15bn Forecast ~£20.5bn1 20 £bn 15 10 ~£1bn3 ~£7bn4 5 0 Net capex Dividends Interest, tax
Slide 43: Financial Outlook – Conclusion
Financial Outlook – Conclusion Solid financial framework provides the platform for strong growth Highly-visible growth opportunities Fully-funded investment plan which driving £2.5bn capex plan increase retains credit headroom Greater confidence in earnings outlook Sustainable dividend policy target
Slide 44: Agenda
Agenda 15 November 2023 Interim Results to 30 September 2023 Part 1: Overview Part 2: Results to 30 September 2023 Part 3: Operating Review Part 4: Financial Outlook Part 5: Summary Q&A 44
Slide 45: Steps to a sustainable future energy system
Steps to a sustainable future energy system Continued wealth of opportunities right across the net zero electricity value chain A compelling investment proposition FY27 Targets • Exposure across the clean energy chain and platform • Balance sheet strength for growth • Exceptional optionality and cap
Slide 46: On track to achieve NZAP Plus targets
On track to achieve NZAP Plus targets Strong start, market tailwinds and optionality mean on track to deliver NZAP Plus INVESTMENT NETWORKS RENEWABLES EARNINGS Regulated Updated >15% networks gross >5GW net renewable capacity Target Adjusted EPS ~55% 20 RAV CAGR ~9GW 13 - 16% CAGR 16 ~200p >2x 166.0
Slide 47: Delivery, drive and discipline
Delivery, drive and discipline Highly confident in earnings growth through capital discipline and optionality Delivering on capital Guidance driven by visibility Capital discipline and optionality investment programme of earnings across balanced business mix • Major progress on delivering • Currentl
Slide 48: Appendix
APPENDIX 48
Slide 49: SSE plc – recent updates to ESG ratings
SSE plc – recent updates to ESG ratings Aiming for leading ESG performance rating ♦ Score range Sector Rating provider SSE score (minimum to maximum) ranking1 CCC ♦ AAA AAA Top 13 percent (Oct 2023) Corporate sustainability Assessment 0 ♦ 100 72 89th percentile (Oct 2023) ESG Risk Rating Severe risk
Slide 50: 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 51: Leverage Calculation - Net Debt / EBITDA
Leverage Calculation - Net Debt / EBITDA Consistent methodology best reflects SSE’s activities and commercial structure £m FY23 FY22 Adjusted Net Debt & Hybrid Capital 8,894 8,598 Adjusted EBITDA 3,382 2,251 Beatrice (@99% gearing) (122) (123) Seagreen (@66% gearing) 2 (25) - Cloosh (@55% gearing) 3
Slide 52: 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 762 England 252 Total Offshore Wind 1,014 Scotland 1,217 England 68 Northern Ireland 122 Republic of Ireland 567 Total Onshore W
Slide 53: SSE Renewables – Leader in Offshore Wind
SSE Renewables – Leader in Offshore Wind 504MW 504MW 588MW 1,075MW 3,600MW Operational: 2012 In development Operational: 2019 Operational: 2023 In construction 1In 2012 prices Capex and funding detail accurate as at FID 53
Slide 54: SSE Renewables – Pipeline and Prospects
SSE Renewables – Pipeline and Prospects LATE-STAGE EARLY-STAGE IN CONSTRUCTION DEVELOPMENT DEVELOPMENT SECURED PIPELINE FUTURE PROSPECTS MW MW MW MW MW Viking 443 Strathy South 208 Cloiche 125 GB 1,047 Other GB ~450 ONSHORE Yellow River 101 Bhlaraidh Ext. 99 Other GB & Ire 319 Ireland 400 Other Ire
Slide 55: 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) Total Onshore Wind (see breakdown on previous slide) - 100% for mos
Slide 56: SSE Renewables – EBIT and EBITDA
SSE Renewables – EBIT and EBITDA Breakdown by technology, on SSE adjusted basis Adjusted EBITDA HY24 HY23 HY22 Conventional hydro 55.8 48.0 37.3 Foyers pumped storage 25.6 29.3 15.2 Onshore wind 89.0 51.1 32.1 Offshore wind1 59.7 9.1 53.4 Solar & battery storage (11.5) (7.5) - Developer profits - -