Investor Presentation

Transcription

1 Investor Presentation November 2017 LSE SSE.L ADR SSEZY

2 Disclaimer This financial report contains forward-looking statements about financial and operational matters. Because they relate to future events and are subject to future circumstances, these forwardlooking 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. Definitions These financial results for the six months to 30 September 2017 are reported under IFRS, as adopted by the EU. In order to present the financial results and performance of the Group in a consistent and meaningful way, SSE applies a number of adjusted accounting measures throughout this financial report. These adjusted measures are used for internal management reporting purposes and are believed to present the underlying performance of the Group in the most useful manner for ordinary shareholders and other stakeholders. The definitions SSE uses for adjusted measures are consistently applied and are explained in the Alternative Performance Measures section of the Interim Results Statement, before the Condensed Interim Statements. In preparing this financial report SSE has been mindful of the commentary issued in May 2016 by the Financial Reporting Council on the European Securities and Markets Authority s Guidelines on Alternative Performance Measures. SSE will monitor developing practice in the use of Alternative Performance Measures and will continue to prioritise this, ensuring the financial information in its results statements is clear, consistent and relevant to the users of those statements. 2

3 The SSE Team Alistair Phillips-Davies Chief Executive Gregor Alexander Finance Director Sally Fairbairn Company Secretary & IR Director Wendy Pringle-MacIntyre Investor Relations 3

4 Table of Contents Page Proposed GB Retail Demerger 5 Renewing SSE HY 2017/18 Results at a glance 12 Outlook for 2017/18 13 Capex & Financing 14 Networks 19 Wholesale 22 4

5 The SSE Group of businesses FY16/17 SSE Group EBIT FY16/17 SSE Group EBIT excluding GB Domestic and Energy Related Services 15% GB Domestic and Energy Related Services c80% Networks and Renewables Customer requirements along with political and regulatory direction requires new energy supply model that combines resources and agility Asset business closest to SSE s core competencies Opportunity to create value through building, owning and operating assets, including adjacent markets Separating businesses gives investors greater opportunity to secure returns than would otherwise be the case 5

6 Creating a new independent energy supplier 1. SSE contributes GB retail business to Retail Holdco 2. SSE contributes Retail Holdco to Combined Retail Company (CRC) in consideration for CRC issuing shares to SSE shareholders 3. innogy contributes npower to Combined Retail Company (CRC) and CRC issues shares to innogy 4. Combined Retail Company is listed on the London Stock Exchange SSE Shareholders 65.6% 34.4% innogy SSE Plc Combined Retail Company (CRC) Other businesses SSE retained companies SSE Retail Holdco (& subsidiaries) npower 6

7 Creating best platform for future success SSE targeting at least RPI increases in dividend in 2017/18 and 2018/19 Combined Retail Company (CRC) CRC will benefit from combination of resources and increased efficiencies, making it a stronger competitor Dividend policy will be set by the Board of CRC SSE (Post demerger) SSE s dividend policy will reflect the quality and nature of its assets and operations, the earnings derived from them and the longerterm financial outlook. Following the demerger, SSE expects that its target for annual dividend increase will be at least RPI inflation Separating businesses gives investors greater opportunity to secure returns than would otherwise be the case 7

8 Combined Retail Company (CRC) SSE GB domestic customer accounts (m) SSE GB Household Energy Supply c6.5m customer accounts Npower Household Energy Supply c5m customer accounts Npower B2B Energy supply. c400k customers Npower Recovery programme Mar11 Mar12 Mar13 Mar14 Mar15 Mar16 Mar Enhanced value proposition for investors Enhanced value proposition for customers CRC provides opportunity for Economies of scale Agility and focus The best of both organisations: Technology, Competencies, Talent Separating businesses gives investors greater opportunity to secure returns than would otherwise be the case 8

9 Creating a new energy supply business in GB Combining resources with the independence to focus on the needs of customers - SSE 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 9

10 Continuing to focus on priorities in Energy Supply Operating profit ( m) HY17 HY18 % change Energy Supply % Energy Related Services % Enterprise % Total Retail % Energy Customer Accounts (m) Simplify operations Retain and gain customers Business Intelligence and analytics Responding to customers expectations Aged Debt ( m) Domestic energy was loss-making in the 6 months to 30 September

11 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 11

12 HY 2017/18 Results at a glance HY17 HY18 % Adjusted earnings per share 34.2p 31.2p -8.8% Interim Dividend 27.4p 28.4p +3.6% Adjusted profit before tax 475.8m 409.6m -13.9% Capex 782.4m 779.5m Adjusted Net Debt & Hybrids 9.0bn 9.2bn Adjusted Operating Profit by Business m m m Wholesale % Networks % Retail % Corporate unallocated (0.2) 0.9 Total operating profit % Consistent with SSE s previously stated expectations that EPS and other financial results would be lower than 2016/17. Networks fall due to phasing of capex in Transmission, along with a reduced share of SGN 1 Wholesale improved financial performance & higher output from renewables and thermal Retail reduced customers numbers & improved performance in Energy Related Services & Enterprise Dividend increased in line with RPI inflation 1 full year impact expected to be 150m on an absolute basis 12

13 Outlook for Full Year 2017/18 Expecting: Capex to be around 1.7bn Net debt to be around 9.3bn Full-Year adjusted EPS at least in line with analysts consensus of around 116p 1 1 As at 1 November, SSE collated analyst consensus EPS was 116p for FY17/18 Targeting at least RPI increase in the dividend 15/16 16/17 17/18 18/19 19/20 Gross Capex Disposals (exc SGN) Investment to 2020 c. 6bn capex RPI* FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18e * Forecast 13

14 SSE s view of cashflow management Net operating cash flow Maintenance Capex 1 st Cash Dividend Payments 2 nd Growth Capex may be financed by increased debt 3 rd *stylised Debt / Equity fungible 14

15 Range of Options Disciplined investment in building, owning and operating assets that deliver earnings (1) 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 15

16 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 HY18 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Disciplined investment in building, owning and operating assets that deliver earnings (2) 11.7bn Capex since % 14% 72% Retail & Other Wholesale (excl. renewables) Electricity Networks & Renewables bn Growth in RAV and renewables Electricity RAV ( bn) Renewable Capacity (GW) GW 2,000 1,800 1,600 1,400 1,200 1, Growth in index linked earnings 0 EBIT 1.7bn Retail & Other Wholesale (excl. renewables) Networks and Renewables 16

17 Delivering value from re-shaping SSE Sale of stake in SGN 1.1bn disposal and debt reduction programme Delivering value for shareholders 2005: 505m paid for 50% SGN stake 2016: 621m received for 16.7% SGN stake Re-investing and returning value Recycling c. 100m proceeds through investment in Stronelairg 2014 SSE Gas Pipelines PFI street lighting contracts Non-core businesses: - Ventures - Property - Development assets 2015 Langhope Rig and Blue PFI street lighting contracts % in Clyde wind farm (Part 1) PFI Street lighting contracts 3 Returning c. 500m to shareholders through on market buyback Clyde disposal (Part 2) Aug 2017: a further 5% sold, 26.1MW for 67.8m. Option agreement for sale of a further 14.9% 17

18 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 163.3m 1 IFRS surplus across defined benefit company schemes Current funding levels the highest seen for over 10 years 1 before deferred tax 18

19 Networks central to SSE s strategy Operating Profit HY17 HY18 % change Electricity Distribution ( m) % Transmission ( m) % Gas Distribution (SGN) ( m) % Networks Operating Profit ( m) % 1 due to previously highlighted phasing of regulatory revenue in Transmission and reduction in SGN stake full year impact expected to be 150m 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 19

20 Increasing the asset base in Transmission: RAV Caithness-Moray 1.1bn project 826m investment to date 1 Projected completion late m forecast regulatory allowances no longer required/claimed Transmission development: key projects Completed 2015 Completed 2016 Beauly- Mossford Completed 2016 Beauly- 68m Denny Ongoing Kintyre- 665m Hunterston Beauly- Kintore 94m 210m Stronelairg Connection 140m Estimated completion 2018 Ongoing Caithness- Moray 1.1bn Estimated completion /14 prices excluding interest cap 20

21 Getting ready for the DNO/DSO transition Ofgem RIIO 2 aim to: 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 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 center of DSO transition 21

22 Focusing on diversity and flexibility in Wholesale Gas- and oil-fired output (TWh) Renewable output (TWh) Improved financial performance of thermal plant Peterhead review complete Major, evolving role for CCGT generation Potential for development of multi-fuel generation 0 HY14 HY15 HY16 HY17 HY18 0 HY14 HY15 HY16 HY17 HY18 Coal-fired output (TWh) HY14 HY15 HY16 HY17 HY18 Gas production output (m therms) HY14 HY15 HY16 HY17 HY18 Operating Profit HY17 HY18 % change EPM & Generation ( m) % Gas Production ( m) % Gas Storage ( m) (4.3) (5.3) -23% Wholesale Operating Profit ( m) % 22

23 Generating value from investment in Generation: Renewables (1) Wind project development Additional generation as capacity comes online (GWh/pa) Tievenameenta 34MW Dunmaglass 94MW Slieve Divena 2 18MW Clyde ext. 173MW 1 4 Galway 120MW 2 Bhlaraidh 110MW Leanamore 18MW Stronelairg 228MW Beatrice 235MW 2 Additional options a further minority stake sold to UKW & GLIL August SSE share 3 See slide ,000 2,000 3,000 4,000 4 SSE share Delivered In construction 23

24 Generating value from investment in Generation: Renewables (2) Around 12TWh annual output from renewables sources by c750mw Conventional Hydro c400mw Fast Flexible Hydro 300MW Pumped Storage c2200mw Onshore Wind c600mw Offshore Wind 1 In an average year; subject to weather conditions in any one year 24

25 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 25

26 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 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 26

27 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 27

28 Looking ahead Keep sustainability at the heart of decision making Focus on efficient operations Drive returns from disciplined investment SSE targeting at least RPI increases in the dividend in 17/18 and 18/19 Separating businesses into SSE and CRC from 19/20 gives greater opportunity to earn overall returns for investors Creating best platform for businesses future success Deliver the dividend 28

29 Notes 29

30 Notes 30

31 Notes 31

32 Notes 32