Sse Plc · LSE:SSE
Sse — FY2023/24 Earnings Presentation
61 slides from Sse's earnings presentation, May 22, 2024
Slide 1: Powering Sustainable Growth: 2023/24 Full Year Results
POWERING SUSTAINABLE GROWTH 2023/24 Full Year Results Presentation 22 May 2024
Slide 2: Disclaimer
DISCLAIMER This presentation has been prepared by SSE plc solely for use on 22 May 2024 during the presentation of the Company’s preliminary results for the period to 31 March 2024. This presentation may not be disclosed or published, nor used by any other person or entity, for any purpose other tha
Slide 3: Keeping People Safe
KEEPING PEOPLE SAFE Major investment in safety, working with partners as construction activity accelerates Safety performance Total recordable TRIR1 injuries 78 0.19 0.20 67 FY23 FY24 FY23 FY24 231 number of safe days 9% increase in contractor (vs 255 in FY23) working hours Immersive Training Facili
Slide 4: Agenda
AGENDA Full Year Results to 31 March 2024 Part 1: Overview Alistair Phillips-Davies Barry O’Regan Martin Pibworth Chief Executive Chief Financial Officer Chief Commercial Officer Part 2: Financial Results Part 3: Operating Review Part 4: Summary Q&A 3
Slide 5: A Year of Powering Sustainable Growth
A YEAR OF POWERING SUSTAINABLE GROWTH Full year financial performance towards top end of pre-close guided EPS range POWERING SUSTAINABLE GROWTH INVESTING IN NET ZERO DRIVING LONG-TERM EARNINGS COMMITTED TO CAPITAL DISCIPLINE £2.5bn +£1.4bn 158.5p 3.0x £20bn >15% capital networks gross FY24 adjusted
Slide 6: Delivering on the Five-Year Plan
DELIVERING ON THE FIVE-YEAR PLAN Reiterating FY27 adjusted EPS target of between 175 – 200p Delivering targeted adjusted EPS growth Index linked EBITDA with fixed rate debt 175 – 200p 13 – 16% ~15% 93% 158.5p debt at fixed CAGR rates1 ~35% ~45% 94.8p ~20% ~35% ~35% ~40% ~45% ~30% ~60% FY22a FY24a FY
Slide 7: SSE plc: Building a Better World of Energy
SSE PLC: BUILDING A BETTER WORLD OF ENERGY Delivering the electricity infrastructure that is essential to the future energy system >150p INVESTING £20.5BN1 WITH DISCIPLINE AND OPTIONALITY ACROSS BALANCED BUSINESS MIX RENEWABLES FLEXIBILITY NETWORKS DELIVERING HIGH QUALITY ASSETS OPTION VALUE THROUGH
Slide 8: Agenda
AGENDA 22 May 2024 Full Year Results to 31 March 2024 Part 1: Overview Part 2: Financial Results Part 3: Operating Review Part 4: Summary Q&A SSEN Transmission control room 7
Slide 9: Financial Results - Overview
FINANCIAL RESULTS - OVERVIEW Year ended 31 March 2024 Adjusted operating profit movement from prior year Adjusted capital investment +£208m net increase from networks and renewables ~90% invested in networks & renewables ~45% ~24% £2.5bn Adj. net capex investment ~4% ~21% ~6% 158.5p adjusted Earning
Slide 10: Financial Results – Adjusted & Reported
FINANCIAL RESULTS – ADJUSTED & REPORTED Year ended 31 March 2024 Reconciliation from adjusted to reported operating profit Other reconciling items IFRS 9 Fair Value movements reflects unwind of £260m derivative liability in FY23 to £33m derivative asset in FY24 Triton Power impairment reverses previ
Slide 11: Financial Results - SSEN Transmission
FINANCIAL RESULTS - SSEN TRANSMISSION Year ended 31 March 2024 SSEN Transmission adjusted EBIT Operating profit review 38% increase in operating profit after basis Normalising prior year1 difference introduced by stake sale is taken into account Higher TNUoS2 revenues in line with increased totex al
Slide 12: Financial Results – SSEN Distribution
FINANCIAL RESULTS – SSEN DISTRIBUTION Year ended 31 March 2024 SSEN Distribution adjusted EBIT Operating profit review Revenue net of pass-through costs for supplier failures reflects lower supplier failure payments in the period Under recovery1 as tariffs set in December 2021, before recent inflati
Slide 13: Financial Results – SSE Renewables
FINANCIAL RESULTS – SSE RENEWABLES Year ended 31 March 2024 SSE Renewables adjusted EBIT Operating profit review Lower onshore wind volumes year on year due to lower wind speeds in Scotland, offset by benefit from higher hedged prices Increase in offshore wind volumes year on year due to 527MW (net)
Slide 14: Financial Results - SSE Thermal
FINANCIAL RESULTS - SSE THERMAL Year ended 31 March 2024 SSE Thermal adjusted EBIT Operating profit review Full year of financial contribution from Keadby 2 (893 MW capacity) Lower market income reflects lower spark spread market environment Lower volumes year on year largely due to £m (34) unplanne
Slide 15: Financial Results – Customers
FINANCIAL RESULTS – CUSTOMERS Year ended 31 March 2024 Energy Customer Solutions adjusted EBIT Operating profit review 250.0 Profitability in prior years impacted by pandemic and extreme energy market (11) volatility combined with extensive customer 46 200.0 190.8 support schemes. 135 Supply profit
Slide 16: Financial Results - Other Businesses
FINANCIAL RESULTS - OTHER BUSINESSES Year ended 31 March 2024 Adjusted EBIT (£m, continuing operations) Operating profit review Movement FY24 FY23 Lower profits from the limited trading optimisation activities conducted in SSE SSE Energy Markets (formerly EPM) 38.9 80.4 Energy Markets given lower en
Slide 17: Financial Results – Net Income
FINANCIAL RESULTS – NET INCOME Year ended 31 March 2024 Adjusted net income (£m, continuing operations) Net income review FY24 FY23 Lower finance costs reflect refinancing of debt accounted hybrid with equity accounted Total operating profit 2,426.4 2,529.2 hybrid, and higher capitalised interest Ne
Slide 18: Financial Results – Balance Sheet
FINANCIAL RESULTS – BALANCE SHEET A strong and stable balance sheet reflecting fully-funded investment plan STRENGTH STABLILITY Adjusted Net Debt and Hybrid Capital bridge 12 10 £9.4bn £8.9bn Fixed Floating 8 Indexed £bn 6 £10.6bn1 Loans and 4 Hybrid Equity 2 9 FY23 Cash flow Working Net Dividend Fi
Slide 19: Looking Forward to FY25
LOOKING FORWARD TO FY25 Operating profit expectations for each business for the next financial year FY25 FY25 EARNINGS GUIDANCE Adjusted EBIT FY24a Expectations Less than FY24 - “Full-expensing” tax relief benefiting FY24 is In line with historic practice, no EPS Transmission £419.3m passed through,
Slide 20: Updating Medium-Term Guidance
UPDATING MEDIUM-TERM GUIDANCE Diverse business mix compensating for changing external environment Updated Medium Term 80% OF INVESTMENT COMMITTED2 Adjusted EBIT Change v previous guidance Guidance to FY27 7 More than £500m p.a. average Significantly higher, reflecting Transmission Over five-year pla
Slide 21: Reiterating FY27 Earnings Growth
REITERATING FY27 EARNINGS GROWTH Balanced business mix combined with capital investment provides earnings resilience Projected earnings bridge from FY24 to FY27 FY27 earnings plan adapts to changing market environment >3x growth in annualised Capex 175 – 200p Delivery of Capital investment spend alr
Slide 22: Agenda
AGENDA 22 May 2024 Full Year Results to 31 March 2024 Part 1: Overview Part 2: Financial Results Part 3: Operating Review Part 4: Summary Q&A Turbine blade at Viking onshore windfarm 21
Slide 23: Operating Review – A Balanced Business Mix
OPERATING REVIEW – A BALANCED BUSINESS MIX All parties aligned on key pillars required to deliver energy security and clean energy Increasing Peak Demand Increasing Installed Capacity Increasing Renewable Energy Route to net zero requires increased electrification under every future energy scenario1
Slide 24: Operating Review – Maximising Value
OPERATING REVIEW – MAXIMISING VALUE Business mix can react to price environment changes and maximise generation value Strong future value secured through hedging Updating assumptions on long term power prices GB Renewables merchant volumes and prices hedged1 100 GB baseload power price for renewable
Slide 25: Operating Review – Renewables Output
OPERATING REVIEW – RENEWABLES OUTPUT Volumes driven by weather in short term and project delivery in long term Wind speeds (m/s)1 Year-on-year output2 Breakdown of contracted output 11.2 TWh +2% 10.2 TWh ~2x 7.2 -4% Fully 7.0 ~20% merchant 6.8 6.6 Merchant 6.4 nose3 ~50% 6.2 ultimately CfD/ fixed-pr
Slide 26: Operating Review – Renewables Delivery
OPERATING REVIEW – RENEWABLES DELIVERY Driving renewables capacity growth with delivery on large capital projects Seagreen Viking Delivery +5GW Seagreen Viking Dogger Bank 35% Onshore Wind HOLDING IMAGE HOLDING IMAGE S&B Merchant 1.2 FY24 FY25 FY26 FY27 Full commercial operations Full commercial ope
Slide 27: Operating Review – Dogger Bank in Focus
OPERATING REVIEW – DOGGER BANK IN FOCUS Progress update on building the world’s largest offshore wind farm Dogger Bank A: construction progress to date Dogger Bank A: expected pathway to operations 95 100% ~70% Oct 2023 Q4 2024 Commence first H1 2025 Full commercial operations June 2023 First power
Slide 28: Operating Review – Renewables Growth
OPERATING REVIEW – RENEWABLES GROWTH Securing future growth with a strong development pipeline Offshore Wind Pipeline by Technology Seagreen 1A (245MW net) eligible for UK 5% Technology mix Allocation Round 6 and 4.1GW Berwick Bank 20% provides consent decision expected this year Taken FID investmen
Slide 29: Operating Review – Flexibility Delivery
OPERATING REVIEW – FLEXIBILITY DELIVERY Delivering efficient capacity and storage and optionality for growth Salisbury Slough Optionality 35% HOLDING IMAGE HOLDING IMAGE Merchant 4 30% ROCs Full commercial operations ‘First fire’ achieved on 55MW 1.3GW pumped storage option reached on SSE’s first BE
Slide 30: Operating Review – Distribution
OPERATING REVIEW – DISTRIBUTION Investment accelerating and required into the 2040s to deliver future energy system Transforming to improve performance and Accelerating RAV growth driven by long-term deliver the future energy system strategic investment in electrifying GB economy Streamlined contrac
Slide 31: Operating Review – Transmission
OPERATING REVIEW – TRANSMISSION Execution of baseline plan sets the foundation for accelerated growth STRONG FY24 OPERATIONAL DELIVERY • 95% of the available reward through the ‘Energy Not Supplied’ incentive despite period with ten named storms PROGRESS ON KEY RIIO-T2 PROJECTS & BUILDING CAPACITY T
Slide 32: Operating Review – ASTI & LOTI in Focus
OPERATING REVIEW – ASTI & LOTI IN FOCUS Extensive supply chain and community engagement programme under way Need for all ASTI and LOTI projects approved by Ofgem1 Peterhead-Humber (EGL2) • Pre-construction spend already being recovered through allowed revenues and RAV growth in line with regulatory
Slide 33: Operating Review – Networks Growth
OPERATING REVIEW – NETWORKS GROWTH Line of sight on rapid growth in high-quality asset base Highly-visible asset base growth in medium term SSEN Transmission: Pathway to 2030 and beyond2 • Need for all material SSEN Transmission investments to 2030 Ofgem-approved 2 • Working to embed strategic, ‘net
Slide 34: Agenda
AGENDA 22 May 2024 Full Year Results to 31 March 2024 Part 1: Overview Part 2: Financial Results Part 3: Operating Review Part 4: Summary Q&A Power lines in Northeast Scotland 33
Slide 35: SSE plc: Building a Better World of Energy
SSE PLC: BUILDING A BETTER WORLD OF ENERGY Delivering the electricity infrastructure that is essential to the future energy system >150p INVESTING £20.5BN1 WITH DISCIPLINE AND OPTIONALITY ACROSS BALANCED BUSINESS MIX RENEWABLES FLEXIBILITY NETWORKS DELIVERING HIGH QUALITY ASSETS OPTION VALUE THROUGH
Slide 36: Powering Sustainable Growth
POWERING SUSTAINABLE GROWTH Delivering the electricity infrastructure that is essential to the future energy system POWERING SUSTAINABLE GROWTH INVESTING IN NET ZERO DRIVING LONG-TERM EARNINGS COMMITTED TO CAPITAL DISCIPLINE Strong record of Balanced business mix in Wealth of organic delivery, with
Slide 37: Appendix
APPENDIX 36
Slide 38: ESG ratings
rating Score range Sector Rating provider SSE score (minimum to maximum) ranking1 Top 13 percent CCC AAA AAA (Oct 2023) 91st percentile Corporate sustainability 0 100 72 (Mar 2024) Assessment Severe Negligible 20.4 90th percentile risk risk (medium risk) (Aug 2023) ESG Risk Rating Advanced 0 100 71
Slide 39: 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 38
Slide 40: Sustainability at SSE
SUSTAINABILITY AT SSE SSE's sustainability hierarchy Framework to share value: aligned to UN's Sustainable Development ‘SE's 2030 Goals (SDGs) Goals ‘SSE's Environment Strategy | EBA) emreorens mason 39
Slide 41: SSE's Carbon Performance
SSE’S CARBON PERFORMANCE A strong year of carbon performance means SSE remains on track to achieve its series of interim Science Based Targets Initiative- verified carbon targets, having exceeded its supplier engagement SSE’s GHG emissions by scopes between target since 2022/23. 2017/18 and 2023/24
Slide 42: Powering a Just Transition
POWERING A JUST TRANSITION Moving from principles to action SSE’s economic contribution in the UK and Ireland 2023/24 SSE’s worker transition in action SSE deliberately seeks to manage the social impacts of the transition to net zero in a way that is fair to working people, communities and consumers
Slide 43: Financial Results - Overview
FINANCIAL RESULTS - OVERVIEW Twelve months ended 31 March 2024 Adjusted Reported Continuing operations1 FY24 FY23 FY24 FY23 Operating Profit / (Loss) - £m 2,426.4 2,529.2 2,608.2 (146.3) Net Finance (Costs) / Income - £m (251.7) (345.6) (113.1) (59.3) Profit / (Loss) Before Tax - £m 2,174.7 2,183.6
Slide 44: Financial Results - Segments
FINANCIAL RESULTS - SEGMENTS Twelve months ended 31 March 2024 Adjusted Operating Profit (£m) FY24 FY23 SSEN Transmission 419.3 372.7 SSEN Distribution 272.1 382.4 Regulated Networks 691.4 755.1 SSE Renewables 833.1 561.8 SSE Thermal 736.1 1,031.9 Gas Storage 82.8 212.5 Energy Generation & Gas Stora
Slide 45: Financial Results – Balance Sheet
FINANCIAL RESULTS – BALANCE SHEET Twelve months ended 31 March 2024 LONG TERM DEBT MATURITY PROFILE1 3.5 3.5 Hybrid Capital (First Call Date) Bonds and Private Placements 3.0 2.5 2.0 £bn 1.5 1.5 1.3 1.2 1.0 1.0 0.6 0.5 0.4 0.2 0.0 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32+ 1. Excludes short term comme
Slide 46: Fully-Funded Investment Plan
Checked FULLY-FUNDED INVESTMENT PLAN £20.5bn NZAP Plus investment is fully-funded whilst retaining credit headroom UPDATED SOURCES AND USES OF CASH FOR FIVE YEAR PLAN 30 ~£4bn ~£27.5bn ~£8.5bn3 FY25 – FY27 25 ~£3bn2 Forecast ~£20.5bn1 20 ~£11bn £bn 15 10 ~£1bn4 ~£7bn5 5 0 Net capex Dividends Interes
Slide 47: Reconciliation – Income Statement FY24
RECONCILIATION – INCOME STATEMENT Reconciliation between Reported and Adjusted Income Statement metrics for FY24 2023/24 EBITDA (£m) EBIT (£m) EPS (p) Comments Reported 3,333.1 2,608.2 156.7 In line with UK adopted IAS Movement on derivatives (522.7) (522.7) (36.5) Not relevant to CY performance Exc
Slide 48: Reconciliation – Income Statement FY23
RECONCILIATION – INCOME STATEMENT Reconciliation between Reported and Adjusted Income Statement metrics for FY23 2023/23 EBITDA (£m) EBIT (£m) EPS (p) Comments Reported 557.9 (146.3) (14.7) In line with UK adopted IAS Movement on derivatives 2,514.3 2,514.3 172.2 Not relevant to CY performance Excep
Slide 49: Reconciliation – Net Debt
RECONCILIATION – NET DEBT Reconciliation between Unadjusted Net Debt and Adjusted Net Debt and Hybrid Capital £m 31 March 2024 31 March 2023 Comments Unadjusted Net Debt 8,097.8 8,168.1 In line with UK adopted IAS Add: Hybrid Equity 1,882.4 1,882.4 100% of Hybrids included within SSE metric, compare
Slide 50: Leverage Calculation - Net Debt / EBITDA
LEVERAGE CALCULATION - NET DEBT / EBITDA Consistent methodology best reflects SSE’s activities and commercial structure £m FY24 FY23 Adjusted Net Debt & Hybrid Capital 9,436 8,894 Adjusted EBITDA 3,296 3,382 Beatrice (at 96% gearing) (101) (122) Seagreen (at 39% gearing) 2 (79) (25) Dogger Bank A (a
Slide 51: SSE Networks – RAV Bridge
SSE NETWORKS – RAV BRIDGE Year on year RAV movement Regulated Asset Value - £m (nominal) Distribution Transmission FY22 Closing Balance 4,053 4,155 FY22 Timing Adjustment 38 (38) Slow money 458 602 Inflation 527 361 Depreciation (355) (243) FY23 Closing RAV 4,720 4,836 FY23 Timing Adjustment (13) (2
Slide 52: Regulatory Finance Framework
REGULATORY FINANCE FRAMEWORK Well-established framework underpins index-linked, regulated revenues Allowed Revenues Regulatory Tax Fast money Return on capital Incentives Depreciation allowance Total 1– Regulated Expected Regulated expenditure Allowed capitalisation Asset Value useful life of Asset
Slide 53: Timing of Regulated Revenues
TIMING OF REGULATED REVENUES Illustrative example of revenues over time from expenditure on a regulated asset Regulated spend immediately starts to be remunerated and earn returns, rather Regulated Asset than once asset is Value depreciates commissioned over time, reducing Revenue the return earned
Slide 54: RIIO-2 Price Controls - Parameters
RIIO-2 PRICE CONTROLS - PARAMETERS Key parameters under the current five-year agreements with Ofgem SSEN Transmission SSEN Distribution Comment RIIO-T2 Agreement RIIO-ED2 Agreement Apr 2021-Mar 2026 Apr 2023-Mar 2028 Cost of Equity (real) 4.25% (2021); 4.76% (2024) 5.23%(2021); 5.49% (2024) Adjusted
Slide 55: RIIO-T2 Price Control - Revenues
RIIO-T2 PRICE CONTROL - REVENUES Revenue profiles published by Ofgem in latest Price Control Financial Model As per 30 January 2024 published PCFM “Recovered Revenue “Allowed Revenue” SSEN Transmission Revenue Price base FY22 FY23 FY24 FY25 FY26 Fast money £m 18/19 - - - 244.0 344.8 Depreciation £m
Slide 56: RIIO-ED2 Price Control - Revenues
RIIO-ED2 PRICE CONTROL - REVENUES Revenue profiles published by Ofgem in latest Price Control Financial Model As per 26 January 2024 published PCFM “Recovered Revenue” “Allowed Revenue” SSEN Distribution Revenue Price base FY24 FY25 FY26 FY27 FY28 Fast money £m 20/21 - - 299.2 276.4 259.7 Depreciati
Slide 57: SSEN Transmission – ASTI and LOTI
SSEN TRANSMISSION – ASTI AND LOTI Projects progressing 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 2030 2031 Skye ~£3bn Argyll LOTI
Slide 58: SSE Renewables – Current Operations
SSE RENEWABLES – CURRENT OPERATIONS Diversity of key assets across geographies and technologies Technology Geography Net Capacity (MW) Location of operational clusters Scotland 762 England 252 Total Offshore Wind 1,014 Scotland 1,217 England 68 Northern Ireland 117 Republic of Ireland 582 Total Onsh
Slide 59: SSE Renewables – Leading in Offshore Wind
SSE RENEWABLES – LEADING IN OFFSHORE WIND History of successfully delivering complex projects with strong fundamentals 2012 2019 2023 2026 Greater Gabbard Beatrice Seagreen Dogger Bank • 504 MW(gross) • 588MW (gross) • 1,075MW (gross) • 3,600MW (gross) • ~1.5bn investment • ~2.5bn investment • ~3bn
Slide 60: SSE Renewables – Pipeline and Prospects
SSE RENEWABLES – PIPELINE AND PROSPECTS LATE-STAGE EARLY-STAGE IN CONSTRUCTION SECURED PIPELINE FUTURE PROSPECTS DEVELOPMENT DEVELOPMENT MW MW MW MW MW Viking 443 Cloiche 125 GB 81 GB 1,100 GB ~500 Yellow River 101 Strathy South 231 Ireland 795 Ireland 932 Ireland ~300 ONSHORE Chaintrix 28 Bhlaraidh
Slide 61: SSE Renewables – EBIT and EBITDA Breakdown
SSE RENEWABLES – EBIT AND EBITDA BREAKDOWN Split by technology, on SSE adjusted basis Adjusted EBITDA FY24 FY23 Conventional hydro 340.7 257.6 Foyers pumped storage 58.3 118.5 Onshore wind 390.8 368.8 Offshore wind1 328.4 88.8 Solar & Battery (10.6) (18.2) Developer profits - - Total SSE Renewables