Sse Plc · LSE:SSE
Sse — HY 2018/19 Earnings Presentation
40 slides from Sse's earnings presentation, Nov 14, 2018
Slide 1: Focus on the Core, Visibility on Value
FOCUS ON THE CORE, VISIBILITY ON VALUE FINANCIAL RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2018 14 NOVEMBER 2018
Slide 2: Alistair Phillips-Davies, Chief Executive
ALISTAIR PHILLIPS-DAVIES CHIEF EXECUTIVE
Slide 3: Giving People a Safety Licence
GIVING PEOPLE A SAFETY LICENCE Total Recordable Injury Rate 0.20 0.19 0.20 0.00 HY18 HY19 TRIR – per 100,000 hours worked Total Recordable Injuries 60 40 51 51 20 0 HY18 HY19 Combined SSE employees and contractors If it’s not safe, we don’t do it 3
Slide 4: Focus on the Core, Visibility on Value
FOCUS ON THE CORE, VISIBLITY ON VALUE Energy Portfolio Management ▪ A new approach to managing commodity price exposure SSE Energy Services ▪ Working to achieve the formation and listing of the new company ▪ Interests of customers, employees and shareholders will be paramount ▪ Continue to believe t
Slide 5: Focusing on the Five Year Dividend Plan
FOCUSING ON THE FIVE YEAR DIVIDEND PLAN Interim Dividend Per Share (pence) Five year dividend commitment 2018/19 Full-year dividend per share of 97.5p* 30 25 2019/20 Full-year dividend per share of 80p* 28.4 29.3 20 15 2020/21 Annual increase in full-year DPS of at least RPI 10 2021/22 Annual increa
Slide 6: Gregor Alexander, Finance Director
GREGOR ALEXANDER FINANCE DIRECTOR
Slide 7: Results to 30 September 2018 - Overview
RESULTS TO 30 SEPTEMBER 2018 - OVERVIEW HY 2018/19 HY19 - £m HY18* - £m Adjusted Profit Before Tax 246.4 416.7 Adjusted EPS 19.6 32.6 *Represented to exclude the contribution of discontinued operations Exceptional items HY19 - £m Total 21.3 Gain on sale of Clyde wind farm 74.2 Gain relating to the u
Slide 8: Results to 30 September 2018 - Networks Businesses
RESULTS TO 30 SEPTEMBER 2018 NETWORKS BUSINESSES Adjusted Operating profit (£m) HY19 HY18 Electricity Distribution 166.9 176.0 Transmission 127.4 97.9 Gas Distribution 85.4 81.2 Total Networks 379.7 355.1 Key movements ▪ Distribution: decrease due to phasing of income recovery and higher weather- re
Slide 9: Results to 30 September 2018 - Retail Businesses
RESULTS TO 30 SEPTEMBER 2018 GB Domestic impacted by: RETAIL BUSINESSES ▪ Lower demand ▪ Higher energy costs Adjusted Operating profit (£m) HY19 HY18 ▪ Decisions to minimise the impact of those costs Business Energy 41.6 42.5 on customers through smaller tariff increases Airtricity 12.0 22.6 ▪ Expec
Slide 10: Making Progress with the Planned SSE Energy Services Transaction
MAKING PROGRESS WITH THE PLANNED SSE ENERGY SERVICES TRANSACTION Hive down MergeCo Board CMA Approval ▪ Energy ▪ Key ▪ Final report Services appointments confirmed no business made competition hived down concerns Continuing to work towards achieving the formation and listing of the new company 10 10
Slide 11: Working to Achieve Formation and Listing of New Company
WORKING TO ACHIEVE FORMATION AND LISTING OF NEW COMPANY ▪ Issues in Energy Portfolio Management have no bearing on the transaction ▪ Believe that creating a new, independent energy supplier has potential to deliver benefits for customers and the market ▪ Interests of customers, employees and shareho
Slide 12: Results to 30 September 2018 - Wholesale Businesses
RESULTS TO 30 SEPTEMBER 2018 WHOLESALE BUSINESSES TWh Mboe Adjusted Operating profit (£m) HY19 HY18 12 6 Renewable Generation 10 5 74.8 149.4 8 4 Thermal Generation (2.2) 2.0 6 3 EPM (85.9) 9.3 4 2 Gas Production 19.3 4.5 2 1 Gas Storage (3.7) (5.3) 0 0 Total Wholesale 2.3 159.9 HY16 HY17 HY18 HY19
Slide 13: Results to 30 September 2018 - Remeasurements
RESULTS TO 30 SEPTEMBER 2018 - REMEASUREMENTS ▪ Adjusted operating loss of £85.9m in Energy Portfolio Management ▪ IFRS9 adverse movement of £565.4m mainly due to deterioration in the fair value of forward gas contracts ▪ IFRS9 values: ▪ Do not reflect all derivative contracts, only those ‘held for
Slide 14: Reducing Short Term Exposure to Variations in Value of Energy Commodities
REDUCING SHORT TERM EXPOSURE TO VARIATIONS IN VALUE OF ENERGY COMMODITIES RENEWABLES FLEXIBLE THERMAL BUSINESS ENERGY GAS PRODUCTION ▪ Generally seek to hedge broad exposure 12 months in advance Asset Proposed targets ▪ Transition towards approach being in place from April 2020 Wind 85% hedged at 12
Slide 15: Putting the New Hedging Approach in the Right Framework
PUTTING THE NEW HEDGING APPROACH IN THE RIGHT FRAMEWORK Risk management measures £10m daily limit to restrict trading activity to that necessary to hedge optionality in SSE’s generation portfolio and to Value at Risk manage periods when liquidity is limited - ensuring that trading positions cannot h
Slide 16: Ensuring Visibility over SSE's New Hedging Approach
ENSURING VISIBILITY OVER SSE’S NEW HEDGING APPROACH Proportion of hedged volumes and average hedge price achieved will be published each half- and full-year from May 2020 RENEWABLES FLEXIBLE THERMAL GAS PRODUCTION BUSINESS ENERGY Framework Disclosure • 12 months in No major short advance • Board ter
Slide 17: Results to 30 September 2018 - The Core of the New SSE
RESULTS TO 30 SEPTEMBER 2018 – THE CORE OF THE NEW SSE – Adjusted Operating Profit (£m) HY19 HY18 Total (excl. SSE Energy 448.3 593.3 Services) Networks Operating Profit 379.7 355.1 Renewables Operating Profit 74.8 149.4 ▪ Greater focus on infrastructure and related services ▪ Greater visibility of
Slide 18: Investing to Earn Returns 2018/19
INVESTING TO EARN RETURNS 2018/19 Investment and Capital Expenditure HY19 Caithness-Moray Transmission link • Good progress continues to be made • On course for delivery within the next few weeks 15% 9% 45% Stronelairg onshore wind farm £783.5m • On course for completion in Spring 2019 • 57 of the 6
Slide 19: Creating and Securing Value from Existing and Planned Assets
CREATING AND SECURING VALUE FROM EXISTING AND PLANNED ASSETS SSE’S OFFSHORE WIND ASSETS ‘Recycling’ Capital Value Options Proceeds Options to date Clyde Wind Stronelairg Debt Farm and management Divestments Dunmaglass SGN Stake E&P and Share Seagreen buyback Non-core Partnership Growth businesses in
Slide 20: Investing to Earn Returns 2018-2023
INVESTING TO EARN RETURNS 2018-2023 Pipeline of investment opportunities Capex and investment forecast to 2023 to support earnings and dividend 2000 1500 1000 ~£6bn Total ~80% committed 500 0 FY19 FY20 FY21 FY22 FY23 Networks Wholesale Other Enterprise Committed Inclusive of multifuel plant and Kead
Slide 21: Being Agile in Financing SSE
BEING AGILE IN FINANCING SSE £m 1,800 Maturity Profile as at 30 September 2018 1,600 1,400 1,200 ▪ Total fund raising over the past 5 year is £5.8bn 1,000 ▪ Average debt maturity excluding hybrids 7.3 years 800 ▪ €650m for nine years at a coupon of 1.375%, swapped 600 back into Sterling with the all
Slide 22: Managing Net Debt
MANAGING NET DEBT ▪ Forecast capex and net debt levels may change through investments/disposals ▪ Net debt and hybrid capital expected to be around £9.8bn at 31 March 2019 As at 30 September HY19 HY18 Investment and capital expenditure, £bn 783.4 779.5 Adjusted net debt and hybrid capital, £bn 9,892
Slide 23: Focusing on Financial Strength
FOCUSING ON FINANCIAL STRENGTH ▪ Committed to robust ratios for RCF and FFO to net debt ▪ Credit Ratings help illustrate the resilience and quality of the SSE businesses, rather than being fundamental to it ▪ Engaging constructively with the rating agencies, following their September announcements C
Slide 24: Outlook for 2018/19
OUTLOOK FOR 2018/19 Networks ▪ Adjusted operating profit expected to increase by a mid-single digit percentage Wholesale ▪ Performance continues to be dependent on the range of factors set out at the start of the financial year ▪ EPM expected to incur an adjusted operating loss of around £300m EPS ▪
Slide 25: Delivering the Five Year Dividend Plan
DELIVERING THE FIVE YEAR DIVIDEND PLAN Likely to be at least c£4.25 Dividend per share, pence 94.7 97.5* 86.7 88.4 89.4 91.3 +RPI +RPI 84.2 80.1 80.0* +RPI 75.0 66.0 70.0 60.5 55.0 42.5 46.5 32.4 35.0 37.7 30.0 25.7 27.5 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14
Slide 26: Alistair Phillips-Davies, Chief Executive
ALISTAIR PHILLIPS-DAVIES CHIEF EXECUTIVE
Slide 27: Getting Ready for a New SSE
GETTING READY FOR A NEW SSE Strategic themes ▪ Focus on core businesses ▪ Visibility of assets and earnings ▪ Platforms for success Ensuring each business ▪ Has a part in helping SSE be a leading energy provider in a low carbon world ▪ Makes a meaningful contribution to the achievement of SSE’s divi
Slide 28: Securing Value in Telecoms
SECURING VALUE IN TELECOMS Network Increasing expansion customer Partnerships numbers ▪ EBITDA FY18 £35.2m ▪ Continue to invest in the business, with £17m capex in first half of 18/19 ▪ Partnerships in the interests of customers, employees and shareholders 28 28
Slide 29: Securing Value in Gas Production
SECURING VALUE IN GAS PRODUCTION ▪ Glendronach Discovery (SSE Share 20%) ▪ Important addition to SSE’s gas investment portfolio ▪ Estimated recoverable resources of around 10bn therms (gross) – not yet on 2P basis ▪ Existing infrastructure should allow quick development ▪ E&P Investment ▪ Continue t
Slide 30: Focusing on the Core: Creating a Separate Renewables Business (1)
FOCUSING ON THE CORE CREATING A SEPARATE RENEWABLES BUSINESS (1) Onshore Offshore Flexible Wind wind hydro SSE Renewables ▪ Good progress on construction of Run-of river Stronelairg and Beatrice hydro ▪ By 2020* ▪ 4.2GW capacity ▪ 12TWh output in a typical year Pumped storage ▪ EBITDA of around £800
Slide 31: Focusing on the Core: Creating a Separate Renewables Business (2)
FOCUSING ON THE CORE CREATING A SEPARATE RENEWABLES BUSINESS (2) SSE RENEWABLES Onshore Wind ▪ Specialist management team supported by skilled employees ▪ Enhanced ability to raise finance Offshore wind ▪ Greater scope to enter into strategic and financial partnerships Flexible hydro ▪ Greater visib
Slide 32: Benefiting from Flexible Thermal Generation
BENEFITING FROM FLEXIBLE THERMAL GENERATION CCGTs provide support to balance the market and are central for the transition to a low carbon economy Critical role in supporting electricity Balancing market and forward curve Value streams include ancillary market changes through end of coal risk premiu
Slide 33: Delivering Value in Complementary Businesses
DELIVERING VALUE IN COMPLEMENTARY BUSINESSES Gas Volumes sold BUSINESS ENERGY 100 80 60 40 ▪ Opportunity to build on strong competencies 20 ▪ Route to market for electricity output 0 (Mth) HY18 HY19 ▪ £41.6m adjusted operating profit in HY19 ▪ 25k customers added in the 6 months to 30 September 2018
Slide 34: Focusing on the Core: Investing in Electricity Transmission
FOCUSING ON THE CORE INVESTING IN ELECTRICITY TRANSMISSION ▪ Over 6GW of renewables connected to the network £bn Transmission RAV growth profile Capex within base case 4.5 SEP18 MAR21 MAR23 ▪ 3yr Capex pipeline to FY2021 of £0.9bn 4 ▪ Estimated RAV £3.6bn at Mar2021 3.5 3 ▪ 5yr Capex pipeline to FY2
Slide 35: Focusing on the Core: Delivering in Electricity Distribution
FOCUSING ON THE CORE DELIVERING IN ELECTRICITY DISTRIBUTION INCENTIVES INVESTMENT ▪ Supporting transition to a smart, flexible electricity system Target improvements Efficient delivery of in incentives capital investment ▪ Supporting the transition to low performance programme carbon transport OUTPU
Slide 36: Focusing on the Core - Preparing for RIIO-2
FOCUSING ON THE CORE - PREPARING FOR RIIO-2 Enabling transformation of the Framework decision published Views of all stakeholders to be electricity system and July 2018 considered decarbonisation of the economy Believe Ofgem should not Crucial that framework provides Extensive consultation effective
Slide 37: Delivering the Five Year Dividend Plan
DELIVERING THE FIVE YEAR DIVIDEND PLAN Likely to be at least c£4.25 Dividend per share, pence 94.7 97.5* 86.7 88.4 89.4 91.3 +RPI +RPI 84.2 80.1 80.0* +RPI 75.0 66.0 70.0 60.5 55.0 42.5 46.5 32.4 35.0 37.7 30.0 25.7 27.5 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14
Slide 38: Richard Gillingwater, Chairman
RICHARD GILLINGWATER CHAIRMAN
Slide 39: Focus on the Core, Visibility on Value: Key Messages
FOCUS ON THE CORE, VISIBILITY ON VALUE Key Messages ▪ Action on commodity exposures ▪ Focus on SSE Energy Services transaction ▪ Even more focused SSE Group ▪ Decisive step forward in Renewables ▪ Clear direction for Networks Taking forward the strategy we set out in May 2018 to position SSE as a le
Slide 40: First Step in Delivering the Five-Year Dividend Plan
FIRST STEP IN DELIVERING THE FIVE-YEAR DIVIDEND PLAN ▪ 29.3p Interim Dividend Five year dividend commitment ▪ Growing portfolio of valuable assets ▪ Opportunities in a sector focused on decarbonisation 2018/19 Full-year dividend per share of 97.5p* ▪ Confident about the long term outlook 2019/20 Ful