SSE Financial Results. 6 months to 30 September 2017

Transcription

1 SSE Financial Results 6 months to 30 September 207

2 Richard Gillingwater Chairman 2

3 The SSE Team Gregor Alexander Finance Director Alistair Phillips-Davies Chief Executive Richard Gillingwater Chairman Martin Pibworth Wholesale Director 3

4 Safety comes first Total Recordable Injury Rate HY7 HY8 Total Recordable Injuries HY7 HY8 Combined SSE employees and contractors. TRIR per 00,000 hours worked 4

5 Creating a new independent energy supplier. SSE contributes GB retail business to Retail Holdco 2. SSE contributes Retail Holdco to CRC in consideration for CRC issuing shares to SSE shareholders 3. innogy contributes npower to CRC and CRC issues shares to innogy 4. CRC is listed on the London Stock Exchange SSE Shareholders 65.6% 34.4% innogy SSE Plc CRC Other businesses SSE retained companies SSE Retail Holdco (& subsidiaries) npower CRC Combined Retail Company 5

6 Renewing SSE: Commitment to customers and shareholders Responding decisively to evolution and change in Retail markets Combining to create a new independent energy supplier Right response to trends in GB energy supply Building NEW business focused on building, operating and investing in assets Focusing on building, owning and operating energy and infrastructure assets Focus on lower carbon future and in line with SSE s core competencies 6

7 Gregor Alexander Finance Director Financial Overview Networks 7

8 Continuing commitment to the dividend Targeting at least RPI increases in FY dividend in 7/8 and 8/9 Creating best platform for businesses future success from 9/20 onwards SSE dividend and dividend policy to reflect quality & nature of assets, operations, earnings and financial outlook Following demerger SSE expects annual DPS increase target to be at least RPI inflation CRC will benefit from combination of resources, being a stronger competitor, and efficiencies Separating businesses gives greater opportunity to earn returns for investors 8

9 Delivering a dividend with sustainable cover HY7 m HY8 m % change Adjusted Earnings per Share 34.2p 3.2p -8.8% Interim Dividend 27.4p 28.4p +3.6% Well placed for full-year dividend increase that at least keeps pace with RPI inflation Expect full-year adjusted EPS to be at least in line with consensus As at November, SSE collated analyst consensus EPS was 6p for FY7/8 9

10 Earning Operating Profit to Support Dividend Growth Business-by-business Adjusted operating profit HY7 m HY8 m % change Wholesale % Networks % Retail % Corporate unallocated (0.2) 0.9 Total operating profit % due to previously highlighted phasing of regulatory revenue in Transmission and reduction in SGN stake full year impact expected to be 50m on an absolute basis 0

11 Delivering value from re-shaping SSE SGN disposal 2005: 505m paid for 50% SGN stake 206: 62m received for 6.7% SGN stake Clyde disposal 207: 67.8m received for 5% Clyde stake, implied extension valuation c. 3m/MW Option agreement for sale of a further 4.9% Re-investing and returning value Recycling c. 00m proceeds through investment in Stronelairg Returning c. 500m to shareholders through buyback, 400m completed to date

12 Range of Options Disciplined investment in building, owning and operating assets that deliver earnings () Disciplined investment decision making Wholesale Wind (offshore, onshore, island) CCGT & Multi-fuel E&P Networks Retail EV Network upgrades Island links Smart grids Business intelligence and analytics Digitisation Connected Home Returns > Cost of Capital Value Creation Earnings Support Dividend Growth Enterprise Telecoms Rail Contracting Excellence in construction and operation 2

13 FY0 FY FY2 FY3 FY4 FY5 FY6 FY7 HY8 FY FY2 FY3 FY4 FY5 FY6 FY7 Disciplined investment in building, owning and operating assets that deliver earnings (2).7bn Capex since 200 5% 4% 72% Retail & Other Wholesale (excl. renewables) Electricity Networks & Renewables bn Growth in RAV and renewables Electricity RAV ( bn) Renewable Capacity (GW) GW 2,000,800,600,400,200, Growth in index linked earnings 0 EBIT.7bn Retail & Other Wholesale (excl. renewables) Networks and Renewables 3

14 Disciplined investment in building, owning and operating assets that deliver earnings (3) Gross Capex Disposals (exc SGN) Net Debt and Hybrid Capital.7bn m 30 September 206 8,995 3 March 207 8, September 207 9,248 5/6 6/7 7/8 8/9 9/20 c. 6bn capex 3 March 208 (forecast) 9,300 4

15 Maintaining SSE s financial strength Credit Rating Financial Strength, demonstrated through A-/A3 Ratings, helps SSE to secure competitively priced funding allowing investment in the right assets Green Bond 600m: Largest green bond issued by a UK company; first green bond issuance by a UK energy company; coupon at 0.875% Average cost of debt now consistently below 4% pa Pensions 63.3m IFRS surplus across defined benefit company schemes Current funding levels the highest seen for over 0 years before deferred tax 5

16 Looking ahead Focusing on the dividend Expected Full-Year adjusted EPS at least in line with analysts consensus of around 6p Dividend cover within expected range of around.2.4 times Expected FY7/8 and FY8/9 dividend increase at least in line with RPI inflation Dividend for FY9/20 onwards to reflect quality & nature of assets, operations, earnings (including index link) and financial outlook As at November, SSE collated analyst consensus EPS was 6p for FY7/8 6

17 Networks central to SSE s strategy Operating Profit HY7 HY8 % change Electricity Distribution % Transmission % Gas Distribution (SGN) % Networks Operating Profit % due to previously highlighted phasing of regulatory revenue in Transmission and reduction in SGN stake full year impact expected to be 50m on an absolute basis Relatively stable returns Index-linked RAV & revenues Underpin the dividend Networks RAV growth ( bn, net) Transmission Electricity Distribution SGN sale of stake in SGN 7

18 Continuing to invest in gas distribution SGN RAV ( bn) Operating Profit ( m) HY7 HY8 HY7 HY8 Construction of 700km network west of Belfast Launch of new meter asset provider business Delivery of innovation programme SSE share; 6.7% SGN sold October 206 Robotic technology to monitor and repair live gas mains 8

19 Powering communities through Electricity Distribution Continuing to adapt to the RIIO-ED framework Distribution RAV ( bn) HY7 HY8 Ofgem RIIO 2 aim to: Operating profit ( m) 8 76 HY7 HY8 Customer Interruptions (CI) HY7 HY8 SHEPD SEPD allow companies to earn returns that are fair and represent good value for customers SSE confident of playing constructive part to help achieve that aim Customer Minutes Lost (CML) HY7 HY8 SHEPD SEPD 9

20 Getting ready for the DNO/DSO transition Technology driven change Transition to DSO to facilitate connection of energy resources in cost efficient, reliable manner SSEN delivering and operating a highly decarbonised and decentralised network Supporting a Smarter Electricity System provides principles putting customers interests at centre of DSO transition 20

21 Increasing the asset base in Transmission: RAV Transmission RAV ( bn) Operating Profit ( m) HY7 HY8 Transmission development: key projects HY7 HY8 Completed 205 Completed 206 Beauly- Mossford Completed 206 Beauly- 68m Denny Ongoing Kintyre- 665m Hunterston Beauly- Kintore 94m 20m Stronelairg Connection 40m Estimated completion 208 Ongoing Caithness- Moray.bn Estimated completion 208 2

22 Increasing the asset base in Transmission Caithness-Moray.bn project 826m investment to date Projected completion late m forecast regulatory allowances no longer required/claimed 203/4 prices excluding interest cap 22

23 Alistair Phillips-Davies Chief Executive Wholesale Retail Outlook 23

24 Responding to sector change Committed to taking decisions necessary to secure the right outcomes for customers and shareholders Combined Retail Company (CRC) A new independent GB energy supply business Combining resources of two established suppliers Focus and agility of an independent supplier Right response to GB energy supply trends SSE Plc A balanced and diverse range of related businesses Efficiently builds, operates and invests in energy and infrastructure assets Activities which support the transition to a lower carbon world/smarter sustainable future 24

25 Focusing on operations and investment Keep sustainability at the heart of decision-making Focus on efficient operations Drive returns from disciplined investment Work to deliver dividend growth 25

26 Focusing on diversity and flexibility in Wholesale Gas- and oil-fired output (TWh) HY4 HY5 HY6 HY7 HY8 Coal-fired output (TWh) HY4 HY5 HY6 HY7 HY8 Renewable output (TWh) HY4 HY5 HY6 HY7 HY8 Gas production output (m therms) HY4 HY5 HY6 HY7 HY8 Improved financial performance of thermal plant Peterhead review complete Major, evolving role for CCGT generation Potential for development of multi-fuel generation 26

27 Generating value from investment in Generation: Renewables () Wind project development Additional generation as capacity comes online (GWh/pa) Tievenameenta 34MW Dunmaglass 94MW Slieve Divena 2 8MW Clyde ext. 73MW 4 Galway 20MW 2 Bhlaraidh 0MW Leanamore 8MW Stronelairg 228MW Beatrice 235MW 2 Additional options a further minority stake sold to UKW & GLIL August SSE share 3 See slide 27 0,000 2,000 3,000 4,000 4 SSE share Delivered In construction 27

28 Generating value from investment in Generation: Renewables (2) Around 2TWh annual output from renewables sources by 2020 c750mw Conventional Hydro c400mw Fast Flexible Hydro 300MW Pumped Storage c2200mw Onshore Wind c600mw Offshore Wind In an average year; subject to weather conditions in any one year 28

29 Generating value from investment in Generation: Renewables (3) Dogger Bank 50:50 Joint Venture with Statoil 3.6GW of potential capacity Examining in detail the outcome of the most recent CfD auction Arklow Bank Development options Viking Beatrice Seagreen Dogger Bank FBMF Slough 29

30 FY2 FY3 FY4 FY5 FY6 FY7 FY8 FY9 FY20 FY2 FY22 FY23 FY24 FY25 FY26 FY27 FY28 Securing Output from Gas Production Assets Significant output from Greater Laggan Assets E&P gas production profile (mth) Volumes expected to average around 500 mm th of gas per year in the three years to March Long term investment in Shetland Gas Plant 0 Existing Assets Greater Laggan Area Assets 30

31 Building our B2B Businesses: Business Energy and Enterprise Business Energy and Enterprise contributed greater than 50m operating profit Aiming to build greater presence in key markets: - Business Energy offers energy contracts, energy management services, quality service and sustainable approach - Enterprise focused on key business areas of Contracting, Utilities, Telecoms and Rail; aiming to develop larger projects and capacity to build, own and operate assets 3

32 Renewing SSE s businesses RE Retail A new independent GB energy supply business Capable of realising significant synergies Focus on the changing needs of energy customers NEW Networks Enterprise Wholesale Clear focus on creating value Building, owning and operating assets Playing part in the transition to a lower carbon energy and infrastructure future 32

33 Creating a new energy supply business in GB Combining resources and independence to focus on the needs of customers - SSE Plc household energy supply and services - innogy household and business energy supply and services Securing costs savings to become a strong competitor Adopting best of both - Helping vulnerable customers - Deploying new technologies 33

34 Continuing to focus on priorities in Energy Supply Operating profit ( m) HY7 HY8 % change Energy Supply % Energy Related Services % Enterprise % Total Retail % Priorities. Simplify operations 2. Retain and gain customers 3. BI and analytics 4. Responding to customers expectations Energy Customer Accounts (m) Aged Debt ( m) Domestic energy was loss-making in the 6 months to 30 September

35 Renewing other parts of SSE for the future Focusing on assets and infrastructure - More aligned to core competencies and investor base Ability to be agile and responsive - More focused corporate overheads Clearer investment profile - Greater visibility of assets and earnings - Regulated/quasi-regulated assets and inflation link 35

36 Looking ahead Focus on efficient operations Keep sustainability at the heart of decision making Drive returns from disciplined investment Deliver the dividend 36

37 Delivering dividend growth Dividend Per Share (p) RPI HY99 HY00 HY0 HY02 HY03 HY04 HY05 HY06 HY07 HY08 HY09 HY0 HY HY2 HY3 HY4 HY5 HY6 HY7 HY8 HY9 forecast, at least RPI 37