SSE : Half-year Results Presentation Transcript 2021/22

WE POWER CHANGE

SSE Interim Results for the six months to 30 September 2022

• 1. TITLE SLIDE
  2. DISCLAIMER
     ALISTAIR PHILLIPS-DAVIES
  3. AGENDA
• Good morning everyone and welcome to our Interim Results presentation.
• I'm joined today by our Finance Director, Gregor Alexander, and Chief Commercial Officer, Martin Pibworth.
• By the end of this presentation three things will be clear:

1. Our strategy is more relevant than ever and is delivering results;

1. Recent market conditions have validated our diversified business mix enabling us

to create value for shareholders and society; and

• 1. We are delivering on our record capex programme, investing more in large capital projects than we are making in profit.

  4. EXECUTION AND DELIVERY

• Global and domestic events of the past 12 months would have tested any company's strategy, but our 'NZAP' (as we refer to it) and the strategy that underpins it have stood up very well.
• Our plans cement SSE's standing as a clean energy champion, positioning us to invest around £25bn in critical infrastructure this decade while delivering sustainable long-term value.
• Our diverse and well-balanced business mix is helping us navigate turbulence, with its natural hedges and synergies providing stability against a volatile backdrop.

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• And we are making good progress in executing our investment programme.
• This morning, you will hear updates on flagship projects at Dogger Bank, Viking, Seagreen, Keadby 2, and our Shetland link as well as progress on ED2.
• You will also hear how our acquisitions in Southern Europe, Japan and in the hydrogen space are creating further growth options, complementing our growing project pipeline in Transmission. We are accelerating into growth.
• And we will cover how all this, combined with strong operational performance has led to good financial performance, therefore benefiting shareholders as well as wider society.
• 1. THE PEOPLE BEHIND DELIVERY
• People are our most important asset, and our first priority is to ensure everyone gets home safe each working day.
• Our record investment programme comes with increased construction activity so we are pleased to have had 4 less injuries than the same period last year and a small decrease in our Total Recordable Injury Rate.
• But, of course, devastatingly, in June we saw the death of a BAM Nuttall Contractor, Liam Macdonald, and this loss remains very much front of mind.
• 1. NAVIGATING THE ENERGY LANDSCAPE
• The future energy landscape has electricity at its core and brings decades of opportunity.
• Clearly in the short term, this year's energy crisis has led to market and policy uncertainty but we are hoping for clarity on some of the key issues in the Chancellor's statement tomorrow.
• However, for our part we have proactively proposed interventions that help households whilst not damaging investor confidence or impacting energy security.
• But over the medium term, we see real opportunity for market reforms that will encourage investment and benefit consumers. We called for the BEIS REMA process

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and have advocated for evolving successful existing mechanisms to accommodate more renewables whilst breaking the link between wholesale gas and electricity prices.

• And over the longer-term UK policy ambition remains high which plays to SSE's strengths and Britain's comparative advantage, most obviously in offshore wind and CCS, where seabed and storage options are the envy of much of Europe.
• And in Europe long term policy has strengthened too. The REPowerEU package has inspired an upping of clean and renewable energy ambitions in Ireland, the Netherlands, Germany, and other markets.
• While challenges clearly exist in the short term, our NZAP looks even better than it did a year ago because it is geared firmly at tackling the critical long term issues of energy security and climate change.
• 1. RESILIENT BUSINESS MIX
• Our business mix enables our strategy. Following significant reshaping we have created an ESG-aligned group comprising an attractive blend of regulated and market-based businesses, offering optionality across the electricity value chain.
• Our core businesses share common capabilities in the financing, development, building and operation of highly technical electricity assets. Our assets enable electrification and decarbonisation, containing huge flexibility critical to energy security.
• We are diversifying via technologies and markets, while adapting to change. In the last six months we have strengthened this business mix via the acquisition of an onshore renewables pipeline in Southern Europe and the Triton Power portfolio.
• 1. RESPONDING TO THE COST-OF-LIVING CRISIS
• The political, economic, and social context has led to a genuine cost-of-living crisis, underlining the criticality of energy to society.
• However, cheaper energy is on the way. Had the UK's 2030 renewable targets been met in 2022, Britain would have saved approximately £30bn of spend on gas this year alone.

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• Our primary role is investing in the infrastructure needed to prevent a repeat of the energy crisis. We are doing this as fast as we can and will invest more if we can.
• We have taken immediate action too: advocating for solutions to smooth energy costs and supporting Airtricity customers by freezing prices and helping the vulnerable.
• And we ensure our approach to sustainable development has a social impact, whether through paying fair tax; investing into communities; increasing local content; or creating 1,000 new jobs a year.
• These are just some of the ways we create growth and value for both shareholders and society.
• I'll now hand over to Gregor to cover financial results

GREGOR ALEXANDER

• 1. AGENDA
• Thanks Alistair and good morning everyone.
• 1. FINANCIAL RESULTS - NAVIGATING VOLATILITY
• Unprecedented energy commodity price volatility, combined with inflationary pressures, interest rate increases and currency fluctuations have made this one of the most challenging operating environments I have seen as Finance Director. But we have performed well and delivered a solid set of results.
• Our balanced portfolio means our regulated networks businesses are insulated from energy price movements whilst our thermal and renewables generation fleet, and our gas storage and customer businesses, provide offsets that help manage volatility.
• Our strong balance sheet with high levels of available liquidity have enabled us to navigate fluctuating collateral positions without affecting our commercial strategy.
• Our business mix is also better placed than many to manage inflationary pressures. Networks RAV and revenues are index-linked and so too are our renewables CfDs and generation capacity payments.

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• Our stable debt profile and ongoing careful financial management - supported by our disposals programme - mean the Group expects minimal refinancing or funding requirements until FY25.
• These factors, alongside our established approach to hedging and our risk management procedures, have helped limit short-term volatility exposure, whilst maintaining the strong balance sheet and liquidity required to execute on our NZAP.
• 1. FINANCIAL RESULTS - SEGMENTAL OVERVIEW
• In terms of our results, around 50% of adjusted operating profit was driven from our regulated networks businesses, with around 35% from energy generation and gas storage.
• Whilst Renewables profitability was hit by hedge buybacks in a higher price environment and lower volumes against plan, Thermal and Gas Storage have responded to system demands well, proving their value after a period of limited returns.
• Our Networks businesses have also performed well as they build-out and reinforce the networks for net zero.
• And whilst our Customer Solutions businesses have generated a profit, this is largely due to phasing and we expect these businesses to be near break-even for the full year.
• 1. FINANCIAL RESULTS - OVERVIEW
• Overall, at the Group level:

• o Adjusted operating profit increased by 90% to £716m; o Adjusted profit before tax increased by 221% to £559m;

  o And adjusted EPS was 41.8p, in line with pre-close guidance

  13. FINANCIAL RESULTS - ADJUSTED & REPORTED

• In these volatile times, it is no surprise that unrealised fair value remeasurements are driving the reported loss before tax at 30 September, and I will discuss these shortly.
• However, there were a number of other items reflected in that reported number.

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