SSE Financial Results Year Ended 31 March 2013

Transcription

1 SSE Financial Results Year Ended 31 March

2 Lord Smith of Kelvin Chairman Continuing the 4 Ds 2

3 Today s SSE team Lord Smith of Kelvin Chairman Gregor Alexander Finance Director Ian Marchant Chief Executive Alistair Phillips-Davies Deputy Chief Executive Jim McPhillimy MD Group Services Jim Smith MD Renewables Alan Young MD Corporate Affairs 3

4 Safety comes first Total Recordable Injury Rate* Working days lost , Road traffic collisions^ *TRIR per 100,000 hours worked ^ RTCs class 1 blameworthy incidents per 100 vehicles

5 Consistent management and governance (1) Alistair Phillips-Davies Deputy Chief Executive Gregor Alexander Finance Director Mark Mathieson MD Networks Will Morris MD Retail Rob McDonald MD Regulation Jim McPhillimy MD Group Services Jim Smith MD Renewables Paul Smith MD Generation Alan Young MD Corporate Affairs Martin Pibworth MD EPM Brandon Rennet MD Finance Total combined service of Alistair Phillips-Davies and Gregor Alexander 39 years Alistair Phillips-Davies and Gregor Alexander on SSE plc Board since 2002 Total combined service of SSE Management Board over 160 years 5

6 Consistent management and governance (2) 6

7 Responding to headline-making events Over 500 SSE engineers and staff mobilised 16,000 hot meals and 30,000 hot drinks served Accepted Ofgem penalty immediately Actions taken to deal with breaches of licence conditions 7

8 Ian Marchant Chief Executive Delivering the dividend 8

9 Delivering a 14th successive real dividend increase DPS (p) Building on dividend record remains top financial priority Targeting annual above-rpi increases in the dividend from 2013/14 onwards 9

10 Delivering a 14th successive adjusted PBT increase Year ended 31 March Increase in adjusted PBT, m 2013 m 2012 m Change % 2011 m Adjusted profit before tax 1, , % 1,310.1 Fair value re-measurements (IAS 39) (199.7) (509.0) 1,423.3 Exceptional items (584.7) (551.6) (625.0) Tax on JCEs and associates (25.4) (6.6) 3.3 Reported profit before tax ,111.7 Adjusted effective tax rate 15.9% 16.0% 20.5% Adjusted earnings per share 118.0p 112.7p 4.7% 112.3p Increase in adjusted EPS, pence Dividend cover of 1.4 times Dividend cover averaged 1.5 times over last 4 years 1,500 1,400 1,300 1, , , , Exceptional charge reflects tough operating environment 1, , ,

11 Delivering good financial performance in Networks Year ended 31 March 2013 m 2012 m Change % 2011 m Electricity Transmission Electricity Distribution Gas Distribution* Other networks Networks segment operating profit Movements in Networks operating profit 49% of SSE adjusted operating profit Electricity Transmission operating profit up increase in asset base from capital invested Electricity Distribution operating profit up timing of allowed revenue recovery Gas Distribution operating profit flat Networks operating profit split Other Networks 4% Electricity Transmission 11% Gas Distribution* 27% Electricity Distribution 58% Other Networks achieved operating profit similar to that achieved in *SSE share

12 Earning a sustainable profit in Retail Year ended 31 March 2013 m 2012 m Change % 2011 m Energy supply Energy-related services Retail segment operating profit Movements in Retail s operating profit 23% of SSE adjusted operating profit Expect profit margin in Energy Supply business to average 5% over medium term Retail s operating profit split Energy-related Services 11% In 2012/13 it was 4.2% due to colder than average weather in UK throughout the year Energy-related Services operating profit fell 8% reflecting difficult economic conditions Energy Supply 89% 12

13 Delivering profits in Wholesale in challenging market conditions Year ended 31 March 2013 m 2012 m Change % 2011 m EPM* and electricity generation Gas storage Gas production Wholesale segment operating profit Movements in Wholesale operating profit Thermal portfolio review Difficult commodity and generation market conditions 28% of SSE adjusted operating profit Lack of seasonality in gas price resulted in difficult year for gas storage Most of 584.7m exceptionals relate to write downs in thermal generation plant, carbon portfolio and Medway Closure of units one and two at Ferrybridge Deep mothballing at Keadby Reduced capacity at Uskmouth Reduced TEC** at Peterhead Medway will return to service Changes at Slough 13 *EPM: Energy Portfolio Management ** Transmission Entry Capacity

14 Business diversity delivering for our stakeholders 1 April 2003, SSE s market cap was 5.5bn Declared dividends of 5.6bn over last 10 years Paid 3.5bn in tax over last ten years* Employee numbers Capex and acquisitions, bn 14 *Including corporation tax, rates, and NI **Capex ^Acquisitions

15 Disciplined investment to deliver dividend growth Capex as a platform for dividend growth A changing capex programme, m Capex for the year ended 31 March ,800 1,600 1,400 1,279 1,444 1,315 1,707 1,486 Retail 5% Other 6% Other Wholesale 3% 1,200 1, Generation 41% Networks 45% Total capex of 1,486m ACQUISITIONS-LED GROWTH INVESTMENT-LED GROWTH SWALEC Hornsea Medway SGN Fiddlers Ferry Ferrybridge Airtricity Marchwood Glendoe Aldbrough Greater Gabbard North Sea Assets Clyde Sean Griffin Dunmaglass Walney Beauly-Denny Phoenix Endesa Ireland 15

16 Delivering sustained real dividend growth DPS (p) One of only five FTSE100 companies to achieve greater than RPI growth in dividend every year since 1999 TSR of over 360% Building on dividend record remains top financial priority Targeting annual above-rpi increases in the dividend from 2013/14 onwards 16

17 Gregor Alexander Finance Director Funding, Investment and Networks 17

18 Making sure SSE is well-financed Mar 2013 Mar 2012 Adjusted net debt and hybrid capital - m (7,347.7) (6,755.8) Capital expenditure and investment 1, ,706.9 Average interest rate 5.26% 5.06% Diverse sources of funding US Private Placement 6% Other loans 9% Hybrid securities 28% EIB 6% Index-linked debt 3% Eurobonds 48% Debt influenced by Three main acquisitions ( 358m) 33% Scrip uptake Wind asset sale ( 131m net) Private US $ placement ( 450m) Hybrid capital issued ( 1.025bn) Interest cover of 5.4 times* c 5.4bn of medium to long-term borrowings** Average debt maturity of 10.6 years Secured 650m of additional bank facilities in March 2013 Remain committed to current criteria for single A credit rating 18 *Excludes SGN **Excluding hybrid capital, also 1.5bn matures in next 12 months

19 Well-financed for future investment Annual capex spend, m 1,800 1,600 1,400 1,200 1, Other Retail Networks Wholesale Forecasting spend of c 1.5bn in 2013/14 Electricity networks and generation main components Economically regulated networks likely to require biggest proportion 19

20 Networks underpinning the dividend 2,000 % Operating profit split 1,600 1, % 62% 63% 61% 57% 61% 62% 54% 58% 39% 42% 46% 38% 38% 37% 39% 43% 47%* Economically-regulated Market-based Stable Adds diversity Index-linked revenues 20 *49% including market-based Other Networks

21 Delivering in the next Gas Distribution Price Control Investment in SGN SGN s efficiency and value has increased SGN well placed to deliver even more efficiency and value in future Strong cash returns received 413m of 505m equity purchase price SGN RAV growth, bn* Looking to this next Price Control Provides certainty for period Targeting returns in excess of 5% post-tax real 4.6bn of cost allowances to deliver outputs efficiently 2.8bn to cover new investment Investment will allow SGN to deliver a safe and reliable network 21 *SSE has 50% stake in SGN

22 Maintaining an innovative approach in Gas Distribution The new way to repair a joint The coring device Making the repair using long handled tools Original core goes back in and whole process takes <5 hours 22 Successful trials carried out in partnership with: Royal Borough of Kingston Croydon Council Glasgow City Council Approval from Transport for London and Glasgow City Council SGN now aim to use technique in all areas of operations

23 Taking the Transmission RAV past 1bn Operating profit growth, m SHE Transmission RAV growth, m 1,250 1, c36% 1,

24 Building a modern Transmission network Beauly-Denny Project update Project is now well under way At 30 April, 173 pylons now in place North Section almost complete Project summary 536 pylons strung with 201km of cable* 40 SSE staff and 830 contractors** Added capacity up to 2GW of generation 24 *SSE share **Based on April 2013 and will fluctuate depending on construction circumstances

25 A greener, more efficient future in Electricity Distribution Price Control Submitting RIIO ED1 business plan to Ofgem by July 2013 Future priorities include: safe and reliable supply of electricity good customer service value for money Published Innovating for a Greener, More Efficient Future: Our Second Consultation in February 2013 RAV growth, bn

26 Dealing with storms Kintyre and Arran 26

27 Managing Other Networks in a competitive market environment Street Lighting Utility Solutions Telecoms New contract in Cornwall Operating over 50 contracts with local authorities Secured 4 large development contracts to provide heat, electricity and water services to over 5,000 homes Delivery of ten year 30m JaNet contract to provide 6,500km of fibre network to UK s research and education community Success depends on customer service and deployment of new technology 27

28 Networks underpinning the dividend Economically-regulated Networks really matter Operational focus on delivery Demand operational and financial discipline Lend real diversity to SSE s balanced group of businesses Total Regulated Networks RAV, m Dividend, pence 7, ,000 5,000 4,000 3,000 2,000 1, Distribution Transmission SGN* Underpin financial principles and long-term commitment to the dividend 28 *SSE share

29 Alistair Phillips-Davies Deputy Chief Executive Retail and Wholesale 29

30 SSE is a customer-focused company Core purpose to provide the energy people need in a reliable and sustainable way 30

31 Rebuilding trust in Energy Supply (1) Sales Guarantee Only one of its kind in the industry Received 14,000 claims since Ofgem announcement Paid an average of 80 to over 5,000 customers Balance of the 5m to be given to energy related charities 31

32 Rebuilding trust in Energy Supply (2) Customer Service Guarantee Goes significantly beyond existing industry-wide standards Promise to meet new set of customer service commitments or give customers 20 off next bill Three core objectives of Helping customers save money Making life easier for customers Helping customers when they need it most Payments being made where standards not met 32

33 Supplying energy to customers in GB and Ireland Gain customers in the right way and retain them for the long term Customer accounts, million 80,000 net loss in account numbers ,000 gas customer accounts from Phoenix acquisition 8 Underlying fall of 210,000 accounts Customer base only 3% smaller than peak two years ago Total GB energy accounts Total Irish energy accounts Mix of fair prices, simple products and excellent service resilient Energy Supply business Energy Supply about gaining customers in right way and retaining them for long term 33

34 Earning a fair and reasonable profit Earning the right to make a profit in Energy Supply Energy Supply profit margin Profit margin comparison 6% 10% * 5% 8% 4% 6% 3% 2% 4% 1% 2% 0% * 0% Energy Supply (2013) Supermarkets High Street Retail Telecoms Source: Ofgem Ofgem s Retail Market Reform another significant regulatory intervention in GB energy supply market SSE Energy Supply business is well placed to succeed under RMR Building Trust programme anticipated RMR s key features 34 *Expect margin to average c5% over medium term

35 Transforming our Retail business Building on the solid foundations we have through Strong track record on Customer Service Broad range of energyrelated services Providing financial support for low income customers Maintaining partnerships with key organisations like Citizens Advice Practical steps to make vulnerable customers lives easier Careline Extensive product portfolio and high-potential customer base Developing and deploying central proposition to households and businesses Enabling customers to receive services from SSE Value Convenience Choice Quality 35

36 A challenging GB Generation Market (1) Purpose of Wholesale is to secure the energy people and businesses need 6 Y-O-Y GDP growth, % 24,000 Weather adjusted fuel demand**, kwh ,000 16, Spark spreads, /MWh 12,000 8,000 4, Electricity consumption Gas consumption Diversity* Renewable capacity 25% Coal-fired/solid fuel capacity 33% Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr *Including Irish capacity **Average per customer Gas- and oilfired capacity 42%

37 A challenging GB Generation Market (2) Gas- and oil-fired output, TWh Coal-fired output, TWh Renewable output, TWh Generation output changes in response to prevailing market conditions EMR Emissions legislation Carbon Price Support Uncertainty making investment decisions in thermal almost impossible to take Legislation tightening leading to closure of coal and other capacity Leading to lack of liquidity in UK power markets beyond two years 37

38 The 12/12/12 problem GRAIN OIL Fawley...partially Didcot A Littlebrook Kingsnorth Cockenzie...partially Tilbury 38 Uskmouth

39 Securing certainty in GB generation SSE long advocated need for market-wide capacity payment Market and country needs clarity SSE still comfortable with political and policy commitment to protecting value Won t be taking any definitive decisions on new investment unless comfortable with policy position Abernedd Coal/Solid Fuel CCGT Renewables Use diverse fleet to fulfil purpose of sourcing and producing energy for customers, while earning a return for our shareholders 39

40 Optimising SSE s thermal assets Areas of ongoing investment Cleaner Gas Great Island CCGT CCGT to support security of supply Need right market signals Valuable options in Abernedd 1, Keadby 2, Seabank 3 No investment decision on these until 2015 at earliest Fiddlers Ferry Nox Abatement Ferrybridge Multifuel 40

41 Continuing to deliver renewable energy 4,500 3,500 2,500 1,500 Hydro output, GWh 2,558 4,262 2,836 Invested 383m in renewables 138MW new onshore wind 162MW net offshore wind 87% of availability at Greater Gabbard expected to be over 90% in 2013/ Wind farm output, GWh 5,000 4,281 4,200 3,199 3,400 2,600 1,653 1,800 1, Renewable generation capacity, MW 3,500 3,020 3,000 2,450 2,500 2,000 1,500 3,240 * Renewable portfolio Now have total of 3,240MW* Capacity generating electricity includes Glendoe returned to service last August Priorities for 2013/14 Onshore wind developments at Calliachar, Keadby, Strathy North and Dunmaglass Capex spend expected to be similar in 2013/ , *Net of 79.6MW wind sale

42 SSE has options Solid fuel with NO X abatement Renewables in GB and Ireland CCGT in GB and Ireland Diversity will be the hallmark of our generation portfolio 42

43 Continuing to build up a good position in gas Sean gas field Purchased Sean gas field ( 117m) Total portfolio of gas production assets represents approximately 3bn therms of 2P reserves Expect volume/production profile of assets to provide secure and fixed-price supply of gas to meet c25% of forecast demand from domestic customers over next three years Gas production operating profit, m Long-term fuel supply contracts Will cover significant portion of future gas needs with fair pricing structure and minimal risk Have further opportunities to build on asset base and will do so provided value can be secured

44 Sticking to SSE s four Ds (1) Diversity Balance between three segments Discipline Strong financial management Diversity within segments through different assets, customer bases and different markets Sale of non-core assets and close cost control whether they are revenue or capital 84.2p RPI +2% increase Delivery 44 Delivered biggest increase in adjusted PBT for five years Unbroken record of annual profit increases against difficult background

45 Sticking to SSE s four Ds (2) Core purpose is to provide the energy people need in a reliable and sustainable way Maintain clear, simple strategy Stick to established financial principles Adopt value-based approach to company operations and investments Financial Principles Strength Rigour Discipline Measurement Core Values Safety Service Efficiency Sustainability Excellence Teamwork Strategy to deliver sustained real dividend growth in dividend payable to shareholders Disciplined in delivering the dividend through diversity 45

46 All delivering dividend growth for the long-term DPS (p) Forecast 84.2p + RPI plus Building on dividend record remains top financial priority Targeting annual above-rpi increases in the dividend from 2013/14 onwards 46