providing energy today building value for tomorrow … · 2020. 7. 22. · providing energy today...
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PROVIDING ENERGY TODAYBUILDING VALUE FOR TOMORROW
SSE’S INVESTMENT CASE • UK-listed energy group focused on regulated electricity networks and renewables sources of electricity
• Strategy to create value in the transition to net zero through developing, operating and owning green infrastructure
• Commitment to remunerate shareholders' investment through dividends, with annual DPS targets set to 2023
• Strategy underpinned by strong environmental, social and governance focus
SSE.LNJuly 2020
STRATEGIC FOCUS ON REGULATED NETWORKS AND RENEWABLES
Regulated networksRenewablesOther
£1.5bn
FY20 Adj. EBIT
£9.1bnNetworks RAV
c. 4GWRenewable Capacity
EXECUTING OUR STRATEGY
• Developing, operating, owning, applying world-class skills and experience to the low-carbon infrastructure needed now and in the future
• Creating value for shareholders and society, earning profit from successful development, operation and responsible ownership of low-carbon assets; while delivering inclusive services, contributing to inclusive economic growth and sustainable jobs
• Delivering in a sustainable way, being purpose-led, adopting four fundamental business goals aligned to the UN’s SDGs
OPPORTUNITIES THROUGH THE LOW CARBON TRANSITION
UK legislation for ‘net zero’ emissions by 2050UK is the first major economy to legislate for ‘net zero’ emissions
• Electrification of transport and heat
• Maximising renewable energy sources key to achieving target
• Central enabling role for electricity networks
Irish Climate Action PlanIrish Government supports adoption of a net zero target by 2050
• Aim for >70% of Irelands electricity from renewables by 2030
• Commitment to carbon pricing as a core policy measure to
reduce greenhouse gasses
£7.5bn
Investment Programme£7.5bn capex plan across the five years
to 2025*
*Net of project finance devex refunds
Electricity NetworksRenewablesOther
Electricity NetworksTransmission
• Business Plan includes £2.4bn Totex
across the RIIO-T2 price control (FY21
– FY26)*
• Could take RAV from £3.5bn to £5bn
by 2025/26, excluding island links
Distribution
• Leadership position in innovation
• Aiming for strong finish to RIIO-ED1
(to FY23)*subject to Ofgem final determinations
RenewablesOffshore
• 1,075MW Seagreen Wind Farm
(SSE share 49%)
• 3,600MW Dogger Bank Wind Farm
(SSE share 50%)
£1.5bn equity investment net of project
finance refunds across both projects
Onshore
• 443MW Viking Wind Farm
• 100% owned, £580m investment
SIGNIFICANT INVESTMENT OPPORTUNITIES IN THE FIVE YEARS TO FY25
FINANCIAL STRENGTH
£2bn Disposals ProgrammeSharpening focus on core business
In progress
• Gas Production Assets
• Contracting
To be initiated
• Walney Offshore Wind Farm
• Multifuel
Further options
Partnering in Networks and Renewables
Sustainable financial frameworkNet debt/EBITDA range
• Maintain net debt/EBITDA ratio at the
lower end of a 4.5 to 5 times range
from 2021-2025
Credit rating
• Maintain credit ratios comfortably
above those required for investment
grade
Good liquidity position• New debt issued in April & June 2020
• Average debt maturity 6.5 years
• £1.5bn cash and committed facilities
Refinancing requirements
• No new financing requirement within
the next two years, assuming £2bn
disposals
SUSTAIN DIVIDENDS
Sustain SSE’s ability to pay
dividends on which pensioners
and savers depend for income
PROMOTE LONG TERM SUCCESS
Contribute to green economic
recovery and create value
through the transition to net zero
KEY OBJECTIVES
2020/21 AND BEYOND
Plan to invest £7.5bn net in five years to 2025
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
*Assuming RPI inflation of 1.5%
£7.5bn
REGULATED NETWORKSEARNING FAIR RETURNS
SSE’S REGULATED NETWORKS BUSINESSES
• Combined Regulated Asset Value (RAV) of £9.1bn at 31 March 2020
• Expected to reach £10bn by 2023; net zero trajectory means it could reach £12bn by 2026 (excl. island links)
• Economically regulated by Ofgem
• Diversified across Electricity Transmission, Electricity Distribution and Gas Distribution
ElectriticyTransmission
ElectricityDistribution
Gas Distribution
RAV
£9.1bn
SSE.LNJuly 2020
SSEN DISTRIBUTION
• 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
SSEN TRANSMISSION
• Strong record in enabling decarbonisation
• Renewable capacity connected to the grid increased to 6.3GW in FY20
• Forecast to reach 10GW by FY26
• SSE’s RIIO-T2 Business Plan includes Totex of close to £2.4bn over the five years to FY26 – subject to Ofgem’s Final Determination
• Potentially taking Transmission RAV to over £5bn
• A Net Zero trajectory would point to at least £3.5bn Totex over the course of RIIO-T2
1. RIIO T2
2. RIIO GD2
3. RIIO ED2
4. Combined Networks RAV could reach £12bn
0
2
4
6
8
10
12
14
FY20 FY21 FY22 FY23 FY24 FY25 FY26
NETWORKS RAV FORECAST ASSUMING £2.4BN TRANSMISSION TOTEX
Transmission Distribution SGN
£bn
1, 2 3
£2.4bn Transmission Totex (excl. Island links) subject to Ofgem Final Determination
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GAS DISTRIBUTION
• RAV £3.5bn
• 100% owned
• Capex intensive
• Growth opportunity
• RAV £1.9bn
• 33% owned
• Regulatory frontier
• Option to sell
ELECTRICITY DISTRIBUTION
• RAV £3.7bn
• 100% owned
• Predictable returns
• DSO opportunity
ELECTRICITY TRANSMISSION
• RAV £3.5bn
• 100% owned
• Capex intensive
• Growth opportunity
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REGULATED NETWORKSEARNING FAIR RETURNS SSE.LN
July 2020
SSEN DISTRIBUTIONSSE’s electricity distribution networks in the north of Scotland and central southern England use Overhead
lines and Underground cables to deliver electricity to around 3.8 million homes and workplaces. They are
economically regulated by Ofgem. The RIIO-ED1 Price Control runs until March 2023 and the RIIO-ED2
Price Control will run from April 2023 to March 2028.
KEY SOURCES OF VALUE
• Stable earnings stream supporting the dividend
• ED1 Price Control runs to March 2023
• Targeting improvements in incentives performance
• Preparing the ground for Distribution System Operator (DSO) role
40
50
60
70
80
90
2010 2015 2020 2025 2030 2035 2040 2045 2050
GW
History Community Renewables
Two Degrees Steady Progression
Consumer Evolution
NATIONAL GRID DEMAND FORECAST SCENARIOS
Electric Vehicles
Batteries
Demand Side
Response
OPPORTUNITIES IN ELECTRIFYING
TRANSPORT AND HEAT
SSEN TRANSMISSION
SSE’s electricity transmission network in the north of Scotland uses high voltage overhead lines and
underground and subsea cables to carry electricity from the mainly renewable generating plant to the
distribution network. It is economically regulated by Ofgem. The RIIO-T1 Price Control runs until March
2021, and the RIIO-T2 Price Control will run from April 2021 to March 2026.
KEY SOURCES OF VALUE
• RAV expected to grow to around £3.6bn by FY21
• Based on SSEN’s formal plan submission, powerful case for investment
which could grow RAV to over £5bn by FY26
RIIO-T2A NETWORK FOR NET-ZERO
Ofgem is in the process of setting the next price control for
Transmission, RIIO-T2, which will run April 2021 to March 2026. As
part of this process, in December 2019 SSE published its Business
Plan entitled ‘A Network for net Zero’. It sets out SSE’s analysis that a
minimum total expenditure (totex) of £2.4bn is required over the five
year period to maintain and grow the north of Scotland transmission
network to meet the certain needs of current and future electricity
generators and customers.
The £2.4bn totex includes £1.1bn of growth-driven investment
including East Coast upgrades; Argyll refurbishment and upgrade;
Tummel SVC; projects started in RIIO-T1 and pre-construction works.
The remainder covers projects investing in assets, including c£50m in
Beauly-Kintore; along with resilience, IT and data investment.
Five clear goals
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SSE RENEWABLESLEADING IN RENEWABLE ENERGY SSE.LN
July 2020
ON
SH
OR
EO
FF
SH
OR
E
MW
GB Onshore 1,247
NI Onshore 122
ROI Onshore 567
Total 1,936
OPERATIONAL
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
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
10
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
10. Dogger Bank B Completion
11. Dogger Bank C first power
12. Dogger Bank C Completion
GW
2
1 3
4
5
6
7
8, 9
11
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SSE Renewables brings together the development and operation of all of SSE’s renewable energy assets under a
single management team, creating the leading renewable energy company across the UK and Ireland, with ambitions
beyond those two countries. It has a sector-leading management team with the focus, specialisation and innovation
needed in a distinct part of the energy sector, in which SSE has a large pipeline of opportunities.
KEY SOURCES OF VALUE• Biggest renewable energy portfolio across UK & Ireland
• Technology diversity (flexible hydro, run-of-river hydro,
pumped storage, onshore wind, offshore wind)
• Semi regulated income
• Operational excellence
• Development and construction expertise
CAPACITY (MW) REMUNERATION SCHEME
2,216 ROC £/MWh
235 CfD £/MWh
2,021 CfD £/MWh for offshore in construction
375 REFIT €/MWh
850 Capacity Mechanism £/MW
SSE RENEWABLES - FUTURE WIND DEVELOPMENT
SSE RENEWABLES – GROWTH OUTLOOK
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DUE FID OR IN CONSTRUCTION CONSENTED REQUIRING CONSENT
SSE RENEWABLESFOCUS ON KEY PROJECTS SSE.LN
July 2020
SEAGREEN OFFSHORE WIND FARM
DOGGER BANK OFFSHORE WIND FARM
VIKING ONSHORE WIND FARM
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SSE RENEWABLES1.5GW HYDRO CAPACITY SSE.LN
July 2020
750MW
FLEXIBLE HYDRO409MW
RUN OF RIVER
300MW
PUMPED STORAGE
Additional revenue streams
from flexible hydro
High levels of availability
Pro-active long-term capital investment programme
Option for new 600MW pumped storage at Coire
Glas
BUSINESS ENERGY• Supplies energy to over 0.5m GB
business and public sector
customers
• Important route to market for
renewable electricity generation
ENTERPRISE• Provides energy infrastructure and
services for business and public
sector customers
• SSE’s option for fast growing
distributed energy markets
EPM• Executes commodity trades for
each asset class on behalf of
SSE’s Business units
AIRTRICITY• Supplies energy to over 0.7m
household, business and public
sector customers across Ireland
GAS STORAGE• Provides and operates gas storage
facilities
GAS PRODUCTION*
• Investment in production and
processing of gas and oil from
UKCS*SSE is in a process to sell Gas Production assets
SSE THERMAL ENERGYPROVIDING FLEXIBILITY THROUGH LOW CARBON TRANSITION
FLEXIBLE GAS-FIRED
GENERATION• SSE owns and operates 5.3GW of gas-
fired generation, including five of the
most flexible and efficient gas-fired power
stations in the UK and Ireland
WASTE-TO-ENERGY• SSE currently owns 69MW of waste-to-
energy projects at Ferrybridge, and planning
for 44MW (100%) at Skelton Grange (Both
50/50JVs with Wheelabrator Technologies )
• 50MW Slough Multi-fuel in development
(SSE 50% stake with CIP)
HYDROGEN & CARBON CAPTURE• Actively looking at developing generation
assets with low carbon pathways
• Member of Humber Cluster, participating in
UK Government Industrial Strategy
Challenge Fund competition
KEADBY 2• Investing £350m to construct the new
840MW Keadby 2 project in
Lincolnshire
• Set to be cleanest and one of the
most efficient CCGTs in the world
OTHER BUSINESSESCONTRIBUTING TO THE SSE GROUP
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Nature’s Batteries
SSE.LNJuly 2020
ENGAGING WITH ESG PLATFORMSLAST TWO YEARS’ PERFORMANCE
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SSE’s strategic goal is to create value for shareholders and
society. SSE recognises that a sustainable company is
purpose-led; and that a purpose-led company is one that
offers profitable solutions to the world’s problems. The UN’s
Sustainable Development Goals (SDGs) are the blueprint for
addressing global challenges, including climate change, and
therefore SSE’s four 2030 business goals are aligned to the
UN’s SFGs more material to its business.
SSE.LNJuly 2020
SSE.LNJuly 2020
FY19/20 RESULTSFINANCIAL FRAMEWORK AND DIVIDEND
Disposal of non-core assets
• SSE not main operator
• Less aligned with net zero
Securing value from partnering
TARGETING PROCEEDS OF OVER £2BN BY AUTUMN 2021
MANAGING CASH OUTFLOW
Reducing 2020/21 cash outflow by c£250m
• Prioritising and deferring capital expenditure (90%)
• 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
FINANCIAL 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
redemption of €600m Eurobond
Refinancing requirements
• No refinancing requirements over the next two
years assuming £2bn disposals
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DisclaimerThis financial report contains forward-looking statements about financial and operational matters. Because they relate to future events and are subject to future circumstances, these forward-looking
statements are subject to risks, uncertainties and other factors. As a result, actual financial results, operational performance and other future developments could differ materially from those
envisaged by the forward-looking statements.
SSE plc gives no express or implied warranty as to the impartiality, accuracy, completeness or correctness of the information, opinions or statements expressed herein. Neither SSE plc nor its
affiliates assume liability of any kind for any damage or loss arising from any use of this document or its contents.
This document does not constitute an offer or invitation to underwrite, subscribe for, or otherwise acquire or dispose of any SSE shares or other securities and the information contained herein
cannot be relied upon as a guide to future performance.
The SSE Team
Sally FairbairnCompany Secretary & Director Investor Relations
+44 (0)1738 [email protected]
Wendy Pringle-MacIntyreInvestor Relations Manager
+44 (0)1738 [email protected]
Rory NewtonInvestor Relations Senior Analyst
+44 (0)1738 [email protected]
Marlon HallInvestor Relations Analyst
+44 (0)1738 [email protected]