Sse Plc · LSE:SSE
Sse — FY2011/12 Earnings Presentation
39 slides from Sse's earnings presentation, May 2012
Slide 1: Financial Results to 31 March 2012
Financial Results to 31 March 2012
Slide 2: Delivering the Dividend
DELIVERING THE DIVIDEND Lord Smith of Kelvin Kelvin, Chairman 2
Slide 3: The SSE Team
The SSE Team Lord Smith of Kelvin Chairman Gregor Alexander Alistair Phillips-Davies Ian Marchant Finance Director Generation and Supply Chief Executive Officer Director Mark Mathieson Alan Young John Morea MD Networks MD Corporate Affairs SGN CEO 3
Slide 4: Safety comes first
Safety comes first Total Recordable Injury j y Rate* Working g Days y Lost 3 Year Average 2011/12 824 0.20 0.15 419 339 351 0.10 171 0.05 73 53 0.00 2006 2007 2008 2009 2010 2011 2012 ct l n b pr p ar ay ug n ec ov Ju Fe Ju Se Ja O M A M D A N *TRIR – per 100,000 hours worked Road Traffic Collisions
Slide 5: Delivering a thirteenth successive real dividend increase
Delivering a thirteenth successive real dividend increase 75.0 80.1 DPS (p) 70 0 70.0 66.0 60.5 55.0 46.5 42 5 42.5 35.0 37.7 30.0 32.4 25.7 27.5 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 A target to increase the full-year dividend per share by at least 2% more than Retail Price Inde
Slide 6: Delivering a thirteenth successive PBT increase
Delivering a thirteenth successive PBT increase Dividend Cover Despite Tough Operating Environment 1 68 1.68 1.50 1.41 Higher wholesale gas prices Low ‘spark’ spreads Falling g energy gy consumption p 2007 2011 2012 Adjusted PBT, £m Adjusted EPS, pence 1 310 1 1,310.1 1,335.7 ,335 +2% 112.3 11
Slide 7: Maintaining a balanced range of businesses
Maintaining a balanced range of businesses 12 mont months hs to March March 2012 2011 £m £m Adjusted Profit Before Tax 1,335.7 1,310.1 Fair value re-measurements (IAS 39) (509.0) 1,423.3 Exceptional Items (551.6) (625.0) Tax on JCEs and Associates (6.6) 3.3 Reported Profit Before Tax 268.5 2,111.7 A
Slide 8: Investing in new assets to sustain dividend growth
Investing in new assets to sustain dividend growth 2011/12 Capex totalled £1.7bn Capex Programme to March 2015, £m 1800 Retail Other 5% 3% 1500 1200 900 Networks 31% 600 Wholesale 300 61% 0 2011 2012 2013 2014 2015 Retail Other Networks Wholesale Committed Electricity networks and renewables conti
Slide 9: Making sure SSE is well-financed
Making sure SSE is well-financed 12 months to March 2012 2011 £m £m Adjusted net debt and hybrid capital Cash from operating activities 1,947.0 2,368.5 increased to £6.76bn Movement in outstanding liquid funds 91.8 (80.6) Size and phasing of capex programme Capital expenditure and investments (1
Slide 10: Maintaining a clear way forward for SSE
Maintaining a clear way forward for SSE Clear Capital p Investment Policy y Clear Credit Policy y 1800 Commitment to the criteria for a 1500 single ‘A’ credit rating; 1200 Moody’s A3/Stable, S&P A-/Stable; 900 Strong liquidity Quality of investment decisions 600 designed to support earnings
Slide 11: Networks
NETWORKS Gregor Alexander, Finance Director 11
Slide 12: Managing Networks in a fast-moving environment
Managing Networks in a fast-moving environment New RIIO model for economic regulation being tested for the first time in Transmission and Gas Distribution Knocknagael substation Transmission upgrades to accommodate renewable energy Beauly Denny Beauly-Denny Leading the way on the move to upgra
Slide 13: Increasing Networks' operating profit
Increasing Networks’ operating profit 12 mont months hs to March March 2012 2011 Change Cha nge £m £m % Transmission 73.7 47.7 54.5% Distrbution 396.5 418.9 -5.3% Gas Distribution 234.8 186.8 25.7% Other Networks 32.1 37.1 -13.5% g Networks Segment Operating p g Profit 737.1 690.5 6.7% Movements in
Slide 14: Making investments in Networks
Making investments in Networks Growth in Regulated Asset Networks, £bn Knocknagael 5.9 5.3 4.9 4.7 4.5 4.2 2007 2008 2009 2010 2011 2012 2012/13 Capex Substation, overhead lines and Transmission capex forecast to be over £350m underground cables built Electricity Distribution capex forecast to
Slide 15: Putting Transmission on the fast-track
Putting g Transmission on the fast-track RAV in Transmission Should Reach £1bn in the Next Year Returns SHETL earned a 9% RORE in 2010/11 per Ofgem’s report issued March 2012 RIIO Fast track SHETL fast-tracked under the RIIO-T1 process for the Transmission Price Control period April 2013 – March
Slide 16: Keeping Electricity Distribution at the efficiency frontier
Keeping Electricity Distribution at the efficiency frontier 2010/11 Ofgem information published in March 2012 Efficiency indicates that we remain at efficiency frontier RORE of over 13% earned in 2010/11 Equivalent of 3 months repair work carried out in just 4 Responsiveness d days f ll i the
Slide 17: Delivering efficiency and value in Gas Distribution
Delivering g efficiency y and value in Gas Distribution Biomethane project in Oxfordshire, Oxfordshire distributing biogas to Innovation 200 homes Next project at Poundbury to supply biogas to almost , 4,000 homes SGN external net debt at £3.27bn £3 27bn Efficiency SGN RAV at £4.54bn SGN s
Slide 18: Offering an efficient, responsive and innovative multi-utility solution
Offering an efficient, responsive and i innovative ti multi-utility lti tilit solution l ti B i Business Customers C t Electricity 44 out-of-area electricity networks – total now stands at 118 Gas 14,000 new gas connections – total now stands at 92,000 W t Water 6 new water inset appointments – tota
Slide 19: Maintaining commitment to the dividend
Maintaining commitment to the dividend Economically-Regulated Networks Really Matter Give an operational focus Provide significant investment opportunities With index-linked revenue, they underpin our financial principles and our commitment to the dividend 75.0 80.1 DPS (p) 70.0 66.0 60.5 55.0
Slide 20: Retail
RETAIL Alistair Phillips-Davies, Generation and Supply Director 20
Slide 21: Managing Retail in a political environment
Managing Retail in a political environment Contemporary Issues in Energy Supply Price – the need for transparency Tariffs – too much complexity Fairness – lack of it between customer groups Service – inadequate standards Asked A k d th the right i ht question… ti But its answer (RMR) has bee
Slide 22: Earning a sustainable profit in Retail
Earning a sustainable profit in Retail 12 months th tto M March h 2012 2011 Change Ch £m £m % Energy Supply 271.7 347.7 -21.9% Energy related Services Energy-related 49 9 49.9 52 8 52.8 -5.5% 5 5% Retail Segment Operating Profit 321.6 400.5 -19.7% Movements in Retail’s Operating Profit Retail’s Oper
Slide 23: Managing the impact on energy customer accounts
Managing the impact on energy customer accounts Main loss in GB accounts occurred between July and December 2011 Led the industryy on trust – first to stop pdoorste psales Rate of losses in GB in 2012 under half of that sustained in H2 2011 Agreed to acquire 130,000 gas customers in NI Ins
Slide 24: Building trust in Energy Supply
Building g trust in Energy gy Supply pp y Our sector leading customer service Winner of the uSwitch customer satisfaction awards for the 8th time running Only supplier to achieve a 5 star rating in Consumer Focus league table Top rankings in both JD Power and ICS customer satisfaction survey
Slide 25: Building trust in Energy Supply
Building trust in Energy Supply Price pledge – despite rising wholesale costs The Telegraph we will not increase our domestic prices until at least October Market transparency – helped transform “SSE breaks volumes in the day-ahead electricity market ranks with Tariff ff overhaul – from f over
Slide 26: Preparing for the Green Deal and Smart Meters
Preparing for the Green Deal and Smart Meters Green Deal Smart Meters The Challenge Roll-out not a profit driver Obligations we must meet as an energy supplier Our Smart Meter installation programme has to collect Green Deal payments through extended to 2,500 homes electricity bills This com
Slide 27: Maintaining our commitment to the dividend
Maintaining our commitment to the dividend Transparency Simplicity Fairness Service Meet the needs Support a reasonable of customers profit margin Support sustained real dividend growth 75.0 80.1 70.0 66.0 60.5 55.0 46.5 42.5 35.0 37.7 30.0 32.4 25.7 27.5 DPS (p) '99 9 '00 0 '01 1 '02 2 '03 3 '04 4
Slide 28: Wholesale
WHOLESALE Ian Marchant, CEO 28
Slide 29: Managing Wholesale businesses in a complex environment
Managing Wholesale businesses in a complex environment Purpose: to source and produce energy for our customers UK gross imports of natural gas now exceed gross production for first time since 1960s Greater integration of UK and global energy prices – macroeconomic and geopolitical factors increa
Slide 30: Increasing Wholesale's operating profit
Increasing Wholesale’s operating profit 12 months to March 2012 2011 Change £m £m % EPM* and Electricity Generation 541.5 543.4 -0.3% Gas Storage 23.8 23.5 1.3% Gas Production 42 6 42.6 46 4.6 826 1% 826.1% Wholesale Segment Operating Profit 607.9 571.5 6.4% EPM = Energy Portfolio Management Movemen
Slide 31: Building up a good position in gas
Building up a good position in gas Gas Storage and Production Operating Profit, £m 42.6 4.6 23.5 23.8 2011 2012 Gas Storage Gas Production Gas p production output p was 177m therms Provided a new source of primary fuel and a hedge for our gas generation and supply activities We have opportunitie
Slide 32: Preparing gas-fired power stations for change
Preparing gas-fired power stations for change Gas-Fired Output, TWh Gas-fired power stations likely to be critical during de-carbonisation 31.3 Role of gas-fired generation will change – 29.3 26.3 f focussing i on system t flexibility d stability fl ibilit and t bilit 21.6 Keadby and Medway Co
Slide 33: Preparing coal-fired power stations for change
Preparing coal-fired power stations for change Coal-Fired Output, TWh Coal-Fired Power Station Virtues Available and flexible 16 8 16.8 13.6 Reduce reliance on costly gas 10.7 Produced an additional 3.2TWh of 7.8 electricity during 2011/12 2009 2010 2011 2012 Tackling Coal-Fired Power Station
Slide 34: Delivering new assets for renewable energy
Delivering new assets for renewable energy Hydro Output, GWh Wind Farm Output, GWh 4,262 3 518 3,518 3,316 3,199 3,016 2,558 1,718 1,653 1,444 499 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Output from our hydro schemes and wind farms gave us the equivalent of 260mtherms of gas Over the y
Slide 35: Managing Issues at Glendoe and Greater Gabbard
Managing Issues at Glendoe and Greater Gabbard Gl d Glendoe G Greater Gabbard G bb d Commissioned and Not Disputed p Not Commissioned and Not Disputed Produced Power and Disputed Not Produced Power and Disputed Gabbard JV has issued a claim against Refilling should begin shortly Fluor, covering
Slide 36: Dealing with Electricity Market Reform (EMR)
Dealing with Electricity Market Reform (EMR) Capacity Mechanism Emissions Performance Standard Contracts for Difference EMR remains a ‘work in progress’ – the questions for SSE remain the same… 1. Will policy changes have any negative effect on investment decisions already made? 2. What will be the
Slide 37: Maintaining commitment to the dividend
Maintaining g commitment to the dividend 75.0 80.1 70.0 DPS (p) 66.0 60 5 60.5 55.0 46.5 42.5 35.0 35 0 37.7 30.0 32.4 25.7 27.5 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 Rigour – particularly important in Generation and Gas Production, where investment decisions can be more complex
Slide 38: Working to maintain profits and dividend growth
Working to maintain profits and dividend growth N t Networks k and d Wh Wholesale l l During the past five-years our asset base has expanded significantly, with the net addition of: 165mcm of 420MW of new CCGT c1,500MW , of new capacity p y £1.7bn added to the RAV of gas storage capacity capacity at
Slide 39: Maintaining commitment to the dividend
Maintaining commitment to the dividend 75.0 80.1 70.0 66.0 DPS (p) 60.5 Earnings growth over a year is far less 55.0 important than dividend growth over a 46 5 46.5 decade 42.5 35.0 37.7 Having the right financial principles 30.0 32.4 and sticking to them 25.7 27.5 A straightforward g strategy