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FINANCIAL RESULTS FOR THE YEAR TO 31 MARCH 2020

17 JUNE 2020

PROVIDING ENERGY TODAYBUILDING VALUE FOR TOMORROW

SSE Financial Results for the Year to 31 March 2020

Presenter: Alistair Phillips-Davies2

PROVIDING ENERGY TODAY, BUILDING VALUE FOR TOMORROW2019/20 Results Presentation

Part One

• 2019/20 – a year of progress

Part Two

• Responding to coronavirus –positioning the business well for the long term

Part Three

• Contributing to green recovery, creating value through transition to net zero

Alistair Phillips-DaviesChief Executive

Gregor AlexanderFinance Director

Martin PibworthEnergy Director

SSE’s vision is to be a leading energy company in a net zero world

Clear objectives

• Sustaining dividend payments on which pensioners and savers depend

• Promoting long term success of company for benefit of all stakeholders

Focus on regulated electricity networks and renewables

• Achieving excellence

• Contributing to green economic recovery

• Delivering growth

• Creating value through transition to net zero

SUSTAINING DIVIDENDS AND PROMOTING LONG-TERM SUCCESS

3SSE Financial Results for the Year to 31 March 2020

Presenter: Alistair Phillips-Davies

Supporting electricity supplies

• Maintaining reliability of electricity networks

• Ensuring availability of power generation

Being a responsible employer

• Working closely with trade unions

• No employees furloughed

Committing to C-19 Business Pledge

• Focus on customers, communities, suppliers and employees

FULFILLING OUR CORE PURPOSE

4

Responding to coronavirus

New photo?



A YEAR OF PROGRESS

Part One

5

RESULTS TO 31 MARCH 2020



6

Increases in adjusted operating profit, adjusted profit before tax and adjusted earnings per share

A solid recovery from the previous year

SOLID FINANCIAL RESULTS

RESULTS TO 31 MARCH 2020A year of progress

Success in CfD auctions and quality RIIO T2 business plan

Completed Energy Services sale to focus on the core

STRATEGIC EXECUTION

Total recordable injuries down to 71 in 2019/20 from 86 in 2018/19

Best ever year for safety performance, wellbeing and environmental care

OPERATIONAL DELIVERY



RESULTS TO 31 MARCH 2020Coronavirus and related impacts

7

2019/20 Income Statement £m

Adjusted EBIT impact (18.2)

Exceptional charge (33.7)

Total estimated impact (51.9)

• Demand impacts

• Increased provision

within customer

businesses for bad

debts

Main components

2019/20 Adjusted EPS Pence

March 27 forecast (pre-coronavirus impact) 83-88

Adjusted EPS 83.6


Presenter: Gregor Alexander

RESULTS TO 31 MARCH 2020Overview

Income statement – continuing operations* FY20 FY19

Adjusted Operating Profit - £m 1,488.4 1,088.7

Adjusted Profit Before Tax - £m 1,023.4 685.1

Reported Profit Before Tax - £m 587.6 1,300.3

Adjusted EPS - pence 83.6 61.8

8

Key movements

• Restoration of GB Capacity Market payments

• Reduction in EPM-related loss

• Strong performance in SSE Renewables

* 2019/20 discontinued operations: SSE Energy Services adjusted operating profit £32.7m; Gas Production Assets

adjusted operating profit £25.8m



IFRS9 Movements

RESULTS TO 31 MARCH 2020Exceptional items

FY20 Exceptional items (£m)Cont.

Operations

Discont.

OperationsTotal

Reshaping the SSE Group (176.0) (237.7) (413.7)

Market conditions (291.3) (291.3)

Coronavirus impact (33.7) (33.7)

Total exceptional items (209.7) (529.0) (738.7)



Main components

• Loss on disposal of Energy

Services is £231m lower then

reported at HY due to novation of

out-the-money derivatives

• Loss on closure of final coal plant

• Telecoms and onshore wind

gains

• Gas Production impairment

For a full description of exceptional charges see note 7 of the summary financial statements

RESULTS TO 31 MARCH 2020Regulated networks businesses

10

Adjusted EBIT (£m) FY20 FY19

Electricity Transmission 218.1 252.1

Electricity Distribution* 356.3 401.3

Investment in SGN 202.3 176.8

Total Networks 776.7 830.2

RAV

• Combined RAV £9.1bn at 31 March 2020



*September 2019 forecast was £375m; variance due to lower than expected volumes in 2H20

Year on year movement

• Phasing of allowed revenue

• Increased depreciation

Net increase in costs including

• Increased depreciation

• Higher costs associated with

supplying Shetland

• Increased Totex outperformance

• Additional commercial income

11

RESULTS TO 31 MARCH 2020SSE Renewables


Hydro (inc. pumped storage) 191.1 178.7

Onshore wind 201.4 188.3

Offshore wind 174.8 88.9

Total SSE Renewables 567.3 455.9


• Net increase in wind energy capacity, mainly Beatrice

• Total renewable output 11.4 TWh including 0.7TWh constrained off wind



12

RESULTS TO 31 MARCH 2020Core Businesses

SSE Renewables and regulated networks (SSEN and SGN) contributed around 90% of Group EBIT and 85% of Group EBITDA in FY20



Adjusted EBITDA (£m) FY20 FY19

SSE Renewables 803.3 694.0

SSEN Electricity Networks 798.9 850.9

Total Core Businesses 1,602.2 1,544.9


Total Renewables and Networks 1,861.3 1,779.2


SSE Renewables 567.3 455.9

SSEN Electricity Networks 574.4 653.4

Total Core Businesses 1,141.7 1,109.3



RESULTS TO 31 MARCH 2020Energy Businesses

13



Thermal Generation 152.7 (22.3)

Gas Storage 3.7 (5.7)

Gas Production contracts 77.1 n/a

EPM (137.4) (284.9)

Total Energy Businesses 96.1 (312.9)

Total Customer Businesses 66.1 122.0

Corporate unallocated (17.8) (6.5)

SSE Group 1,488.4 1,088.7




• Capacity market reinstatement

• Increased multifuel profits

• Benefitting from merchant

operation in volatile markets

• Reflecting split of assets and

contracts pursuant to sale

Variance to guidance

• OVO transaction impact

• Weaker Sterling

RESULTS TO 31 MARCH 2020Customer Businesses

14



Total Energy Businesses 96.1 (312.9)

Business Energy 9.2 51.6

Airtricity 48.8 38.6

Enterprise 8.1 31.8

Total Customer Businesses 66.1 122.0

Corporate unallocated (17.8) (6.5)

SSE Group 1,488.4 1,088.7




• Higher bad debts and other

indirect costs

• Non-commodity costs

• Slightly improved margins

• Reflects reduced earnings due to

50% disposal of Telecoms

RESULTS TO 31 MARCH 2020Pension schemes

Contributing to employees’ pension schemes FY20 FY19

Net pension scheme asset - £m 341.7 287.1

15

• Net accounting surplus across SSE’s two pension schemes

• SHEP conversion of swap covering £800m of liabilities to ‘buy-in’

• Significantly reducing exposure to fluctuations in valuation of scheme obligations



16

RESULTS TO 31 MARCH 2020Investment and Capital Expenditure

FY20 Summary

Transmission

• Total £329.0m

• New substations

Distribution

• Total £364.9m

• Subsea reinforcement

Renewables

• Total £342.7m

• Seagreen contribution

Thermal

• Total £177.0m

• Keadby 2 and multifuel

Capital Recycling

• 19MW Sleive Divena II at £2,700/kW

0

200

400

600

800

1000

1200

1400

1600

FY20 FY19 FY18

Investment and CapEx

Networks Renewables Other



£m

RESULTS TO 31 MARCH 2020Managing net debt

FY20 HY20 FY19

Adjusted net debt and hybrid capital - £m 10,466 10,339 9,437

Average cost of debt at period end, incl. hybrid capital 3.51% 3.60% 3.70%

Adjusted net finance costs - £m 465.0 403.6



Adjusted net finance cost movement

• Higher net debt

• Higher JV interest costs

• Lower capitalised interest

• Impact of IFRS 16

RESULTS TO 31 MARCH 2020Dividend

18

• Dividends provide vital income for pensions and savings

• 2019/20 was a year of progress

• Quality and nature of core businesses



* recommended

56p*

FULL YEAR DIVIDEND 2019/20FINAL DIVIDEND 2019/20Payment 18 September

80p

Part Two

19

2020/21 AND BEYOND



SUSTAIN DIVIDENDS

20

2020/21 AND BEYONDOverview



• Quality and nature of SSE’s businesses and assets and their potential for sustainable value creation transcends the financial impact of coronavirus in 2020/21

• Coronavirus impact on the wider economy is expected to have short term adverse effects on SSE’s business; substantial in context of one year, largely temporary in duration

KEY OBJECTIVES

PROMOTE LONG TERM SUCCESS

Sustain SSE’s ability to pay dividends on which pensioners and savers depend for income

Contribute to green economic recovery and create value through the transition to net zero

21

Main expected adverse effects resulting from economic impact of coronavirus

2020/21 AND BEYONDPotential impact of coronavirus

1. Reduced demand for electricity affecting DUoS

2. Reduced demand from customers for electricity and related services

3. Excess electricity hedges with negative mark-to-market valuations

4. Higher level of customers bad debt



EPS guidance to be provided later in the year

Coronavirus impact modelling

2020/21 Estimated impact

Electricity Distribution EBIT* £50m - £90m

Customer Solutions EBIT £60m - £110m

Enterprise EBIT £30m - £35m

SGN EBIT £10m - £15m

Total £150m - £250m

*at least 80% of which expected to be recoverable under the price control

Expect Transmission, Renewables and Thermal to see no net material impact

22

2020/21 AND BEYONDA comprehensive plan



KEY OBJECTIVES

SUSTAIN DIVIDENDS




EFFECTIVE FINANCIAL MANAGEMENT

MANAGING CASH OUTFLOW

SECURING VALUE FROM DISPOSALS

COMPREHENSIVE PLAN

23

2020/21 AND BEYONDFinancial management and liquidity



Good liquidity position

• Moved quickly to issue new debt in April 2020

• Average debt maturity 6.5 years

• Cash and committed facilities of over £2bn, after planned redemption of €600m Eurobond today

Refinancing requirements

• Only financing requirement over the next two years relates to around £1.2bn hybrid bond, assuming £2bn disposals

24

2020/21 AND BEYONDManaging cash outflow



Reducing 2020/21 cash outflow by c£250m

• Prioritising and deferring capital expenditure (90%)

• Execution of options to extend renewables internationally deferred

• Reducing and deferring operational expenditure plans (10%)

Strategic investment projects unaffected

• Designed to earn sustainable returns to support earnings

No new share buy-back programmes in 2020/21

• No buy-back of shares irrespective of scrip uptake

25

2020/21 AND BEYONDSecuring value of over £2bn



Targeting proceeds of over £2bn by the autumn of 2021

• Sustains dividends

• Sharpens focus on core business

• Supports financial management

• Underpins future investment

Timing subject to market conditions, but confident of significant interest in assets and securing over £2bn

SUSTAIN DIVIDENDS

KEY OBJECTIVES




26

2020/21 AND BEYONDSecuring value from sales



Disposal of non-core assets

• SSE not main operator

• Less aligned with transition to net zero

• Slough Multifuel sold April 2020

IN PROGRESS TO BE INITIATED

• Gas Production Assets

• Contracting

• Walney Offshore Wind Farm

• Multifuel

27

2020/21 AND BEYONDSecuring value from partnering



RENEWABLES SGN

• Further SSER project partnering

• Option to sell remaining stake

SSEN

• Consider sale of minority stakes*

*enabling SSE to retain the lead role in relation to governance and operational control

28

2020/21 AND BEYONDCapital and investment spend



• Capital and investment to focus on core strategic

projects:

• Making greatest early contribution to transition

to net zero

• Contributing to wider green economic recovery

• Helping achieve our 2030 goals on renewable

energy and electrification

• Earning sustainable returns in the years ahead

2020/21 Capex (net of project finance refunds)

expected to be around £1bn*

Forecast CAPEX to FY2025

Transmission

Distribution

Renewables

Thermal Energy

Other

£7.5bn

* Before mitigation

29

2020/21 AND BEYONDA sustainable financial framework



EFFECTIVE FINANCIAL

MANAGEMENT


SECURING VALUE FROM

DISPOSALS

FINANCIAL FRAMEWORK

NE

T D

EB

T/E

BIT

DA

RA

NG

EC

RE

DIT

RA

TIN

G

NET DEBT/EBITDA RANGE

• Maintain net debt/EBITDA ratio at the lower end of a 4.5 to 5 times rangefrom 2021-2025

CREDIT RATING

• Maintain credit ratios comfortably above those required for an investment grade credit rating

30

2020/21 AND BEYONDDividend



*assuming 1.5% RPI for 2020/21

EFFECTIVE FINANCIAL

MANAGEMENT


SECURING VALUE FROM

DISPOSALS

FINANCIAL FRAMEWORK

NE

T D

EB

T/E

BIT

DA

RA

NG

EC

RE

DIT

RA

TIN

G

Full year dividend of 80p for

2019/20

Target full year dividend of 80p

+ RPI for 2020/21

KEY OBJECTIVES

SUSTAIN DIVIDENDS


Sustain SSE’s ability to

pay dividends on

which pensioners and

savers depend for

income

Contribute to green

economic recovery

and create value

through the transition

to net zero

Expected interim dividend of

24.4p* for 2020/21

Confident SSE can deliver

2018-23 dividend plan

31

2020/21 AND BEYONDDividend



EFFECTIVE FINANCIAL

MANAGEMENT


SECURING VALUE FROM

DISPOSALS

FINANCIAL FRAMEWORK

NE

T D

EB

T/E

BIT

DA

RA

NG

EC

RE

DIT

RA

TIN

G

KEY OBJECTIVES

SUSTAIN DIVIDENDS


Sustain SSE’s ability to

pay dividends on

which pensioners and

savers depend for

income

Contribute to green

economic recovery

and create value

through the transition

to net zero

Plan to invest £7.5bn net in five

years to 2025

Full year dividend of 80p for

2019/20

Target full year dividend of 80p

+ RPI for 2020/21

Expected interim dividend of

24.4p* for 2020/21

Confident SSE can deliver

2018-23 dividend plan

Part Three

32

CREATING VALUE THROUGH NET ZERO

SSE Financial Results for the Year to 31 March 2020Presenter: Alistair Phillips-Davies

33

CREATING VALUE THROUGH NET ZEROStrategy and capability


• Urgent need to secure green economic recovery

• SSE ‘Greenprint’ for a cleaner, more resilient economy

• Strategic focus on networks and renewables

• Ambitious goals for 2030

• Commitment to having right credentials for ESG investors

34

CREATING VALUE THROUGH NET ZEROStrategy and capability



Alignment of strategy demonstrated by:

• Ambitious goals for 2030 relating to decarbonisation and electrification

• Options for new opportunities, using capital discipline in selecting investments

• Skills in development, build and operation of electricity infrastructure

35

CREATING VALUE THROUGH NET ZEROSSE Renewables – Offshore wind – Seagreen



• Seagreen to be Scotland’s largest offshore wind farm

• 51% stake sold to Total

• SSE Renewables gross equity contribution around £850m

• £320m investment to date repaid through equity divestment and project finance

• Capacity of 1,075MW; typical annual output around 5TWh

• c40% under CfD; c30% under contract with SSE Group

SEAGREEN EXPECTED TIMELINE

• FID reached June 2020

• Targeting first export Dec 2021; completion Dec 2022

NEW MAPS IN DEVELOPMENT.

TO BE SUPPLIED BY CALLUM TOSH. 15/06/20

36

CREATING VALUE THROUGH NET ZEROSSE Renewables – Offshore wind – Dogger Bank

• Dogger Bank to be world’s largest wind farm

• Using world’s largest turbine GE Haliade-X 12+MW

• 50:50 JV with Equinor, three 1,200MW sites each expected to generate around 5.5TWh annually

• Each project has secured a CfD, with prices ranging from £39.65/MWh to £41.61/MWh at 2012 prices



DOGGER BANK EXPECTED TIMELINE

• Dogger Bank A & B FID Q4 2020, targeting first export Q3 2023

• Dogger Bank C progressing to FID Q3 2021



37

CREATING VALUE THROUGH NET ZEROSSE Renewables – Onshore wind – Viking

• Decision to invest around £580m in Viking wind farm, subject to final outcome of Ofgem consultation

• 443MW project with estimated load factor of 48%

• Largest onshore wind farm in the UK in output terms

VIKING WIND FARM EXPECTED TIMELINE

• FID reached subject to Ofgem consultation

• First export expected Q2 2024





38

CREATING VALUE THROUGH NET ZEROSSE Renewables – Growth



0

1

2

3

4

5

6

7

Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 Mar-25 Mar-26

Renewables Growth from Core Projects (before any sell-downs)

Hydro Onshore Offshore

GW

5

1

1. Dogger Bank A/B FID

2. Gordonbush ext completion

3. Dogger Bank C FID

7. Dogger Bank A Completion

8. Dogger Bank B first power

9. Viking Completion

4. Seagreen first power

5. Seagreen Completion

6. Dogger Bank A first power

4 6

3

811

10. Dogger Bank B Completion

11. Dogger Bank C first power

12. Dogger Bank C Completion

12108, 9

2

7

39

CREATING VALUE THROUGH NET ZEROSSE Renewables – Future wind development


Presenter: Martin Pibworth

ON

SH

OR

EO

FF

SH

OR

E

MW

GB Onshore 1,247

NI Onshore 122

ROI Onshore 567

Total 1,936

SSE has a further 1.6GW of offshore options being explored in Ireland

OPERATIONAL DUE FID OR IN CONSTRUCTION CONSENTED REQUIRING CONSENT

MW

Greater Gabbard 252

Beatrice 235

Walney 92

Total 579

MW

Viking 443

Gordonbush Ext. 38

Total 481

MW

Dogger Bank A 600

Dogger Bank B 600

Dogger Bank C 600

Seagreen 1 (42% CfD) 526

Total 2,326

MW

Yellow River 105

Tangy 57

Lenalea 15

Galway Wind Park 14

Total 192

MW

Arklow Bank 2 520

Total 520

MW

Strathy South 208

Cloiche 155

Doraville 138

Other circa. 300

Total 801

MW

Seagreen 2 & 3 3,200

Gabbard Extension 250

Total 3,450

TOTAL: 2.5GW TOTAL: 2.8GW TOTAL: 0.7GW TOTAL: 4.3GW

• Largest electricity storage capacity in the UK

• 400MW of ‘run-of-river’

• 750MW flexible hydro

• 300MW pumped storage

• Uniquely placed to deliver large-scale flexible zero-

carbon power

• Total hydro output of 3,870GWh in 2019/20 vs

3,543GWh in 2018/19 (including pumped storage)

• Increasing in value as the electricity system adjusts

• Total EBITDA £223m for FY20 (vs £220m in FY19)

40

CREATING VALUE THROUGH NET ZEROSSE Renewables – Hydro



• High levels of availability, operating efficiently with low levels of operational spend

• Proactive long term capital investment programme

• Consent for new pumped storage at Coire Glas

• Continuing to explore business case

41

CREATING VALUE THROUGH NET ZEROSSE Renewables – Hydro



Hydro profitability FY20 FY19

Conventional hydro EBITDA - £m 207.8 195.6

Foyers EBITDA - £m 15.1 24.4

Total EBITDA - £m 222.9 220.0

Conventional hydro EBIT - £m 177.9 157.0

Foyers EBIT - £m 13.2 21.7

Total EBIT - £m 191.1 178.7

Conventional hydro volumes - GWh 3,743 3,318

Foyers gross volumes - GWh 127 168

• Older high-carbon stations at end of useful lives

• Keadby 2 to be Europe’s cleanest and most efficient CCGT

• Expected to achieve 63% gross efficiency

• On target for commissioning 2021

• 15 year capacity contract expected to be worth £17.29/kW by 2024

• Low carbon pathway

SSE Thermal Energy participating in the world’s first ‘zero-carbon cluster’ by 2040

42

CREATING VALUE THROUGH NET ZEROLow carbon thermal



• SSE’s vision is to be a leading energy company in a net zero world

• Delivered 50% reduction in carbon intensity between 2006 and 2018

• In 2018 set a new target to achieve another 50% reduction by 2030

New science based target

• Targeting a 60% reduction in carbon intensity of electricity generated by 2030, compared with 2018 levels

• Strategic commitment to creating value through transition to net zero

43

CREATING VALUE THROUGH NET ZERONew emissions targets



• Vital role in the transition to net zero

• Electrification of heat and transport create long term growth opportunity

• Heavily focused on delivering change and modernising operations, infrastructure and work practices

• Aiming for strong finish to RIIO-ED1

• Working with stakeholders to prepare for RIIO-ED2

44

CREATING VALUE THROUGH NET ZEROSSEN Distribution



45

CREATING VALUE THROUGH NET ZEROSSEN Transmission


• Strong record in enabling decarbonisation

• Renewable capacity connected to the grid

• Increased to 6.3GW in 2019/20

• Forecast to reach 10GW by 2025/26

• RIIO-T2 minimum Totex of close to £2.4bn over the five years to 2025/26

• Net zero points to £3.5bn Totex

• Potentially taking Transmission RAV to over £5bn

46

CREATING VALUE THROUGH NET ZEROSSEN Transmission


• £2.4bn Totex excludes any island links

• 600MW HVDC Shetland link required by Viking

• Approximate cost £600m

• Subject to final approval from Ofgem, work could begin in late summer

• Longer term strategic opportunities

• E.g. Peterhead to Drax HVDC

0

2

4

6

8

10

12

14

FY20 FY21 FY22 FY23 FY24 FY25 FY26

Networks RAV forecast

Transmission Distribution SGN

47

CREATING VALUE THROUGH NET ZEROSSE Regulated Networks Growth



£bn

1. RIIO T2

2. RIIO GD2

3. RIIO ED2

4. Combined Networks RAV could reach £12bn

1, 2 3 4

£2.4bn Transmission Totex (excl. Island links)

48

CREATING VALUE THROUGH NET ZEROSummary



SSE’s vision is to be a leading energy company in a net zero world

Clear objectives

• Sustaining dividend payments on which pensioners and savers depend

• Promoting long term success of the company for the benefit of all stakeholders

Focus on regulated electricity networks and renewables

• Achieving excellence

• Contributing to a green economic recovery

• Delivering growth

• Creating value through the transition to net zero

THANK YOU Questions

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