TIDMSSE
RNS Number : 6095S
SSE PLC
17 November 2021
This announcement contains inside information under Article 7 of
the Market Abuse Regulation (EU) No 596/2014, as it forms part of
retained EU Law as defined in the European Union (Withdrawal) Act
2018 ("UK MAR").
SSE plc
interim results for the six months to september 2021
17 november 2021
Highlights - Progress and delivery
-- Strategy of the group remains clear , with the separate
standalone announcement today of 'Net Zero Acceleration Programme'
to accelerate clean growth, lead the energy transition and maximise
value for all stakeholders
-- Plans include enhanced, fully funded GBP12.5bn strategic
capital investment plans to 2026 alongside ambitious 2031 targets,
aligned with net zero and 1.5 degrees
-- The fully funded plan represents GBP1bn of additional capex
investment per year, over 2.5 times more capex allocated to
Renewables and - through a proposed minority interest disposal of
Transmission and Distribution - optimising capital allocation
between regulated and unregulated businesses.
-- Optimal pathway for UK's clean energy champion positions SSE
to enable delivery of over 25% of UK's 40GW offshore wind target
and over 20% of UK electricity networks investment, deploy
flexibility solutions and export renewables capabilities
overseas
-- Growth-enabling dividend plan paying at least GBP3.50 per
share across the five years, comprising a rebase to 60p in 23/24,
with attractive annual growth of at least 5% to March 2026.
-- Integral to the accelerated investment plan is the
announcement of renewed 2030 greenhouse gas emission targets,
aligned with a science based 1.5deg Celsius pathway for the power
sector.
-- In line with the Group's net zero-focused strategy, in the
period since reporting Full-year Results in May 2021, SSE has:
o Announced its entry into the Japanese offshore wind market
through a joint ownership company with Pacifico Energy, including
the 80% acquisition of a 10GW development platform.
o Amalgamated Berwick Bank and Marr Bank offshore wind farms,
into one single wind farm with a potential capacity of up to 4.1GW.
Berwick Bank wind farm would more than double the size of current
offshore wind either in construction or currently operational in
Scotland.
o Continued to make good progress on the construction of its
offshore wind projects, Seagreen and Dogger Bank, as well as the
Viking onshore wind farm on Shetland.
o Reached an agreement to sell down a 10% stake in Dogger Bank C
to Eni for an equity consideration of GBP70m.
o Submitted a pre-qualification application to the Bureau of
Ocean Energy Management (BOEM) to participate in the New York Bight
Auction in the US.
o Submitted a bid for the Thor offshore wind tender in
Denmark
o Submitted an Initial Needs Case under the RIIO-T2 Uncertainty
Mechanism for a proposed GBP400m replacement transmission line
between Fort Augustus and Skye and are finalising the submission
for upgrading the Argyll transmission network to 275kV
operation.
o Published and engaged with stakeholders on a comprehensive and
ambitious RIIO-ED2 business plan, ahead of final submission to
Ofgem in December.
o Used its Principal Partnership of COP26 to advance the case
for decarbonisation of the energy sector to go further and faster
to align with a 1.5C pathway.
-- Total Recordable Injuries during the year was 30 (Total
Recordable Injury Rate of 0.16), compared to 24 (0.19) in the same
period last year.(1)
(1) 2020/21 comparator restated to exclude SSE Contracting &
Rail and Neos Networks (formerly SSE Telecoms) to reflect current
business composition.
Financial Summary Adjusted Reported
============================= ========================== =========================
Sept Sept % mvmt Sept Sept % mvmt
2021 2020 2021 2020
============================= ======== ======= ======= ======== ====== =======
Operating profit (GBPm) 376.8 328.9 15% 1,904.4 939.9 103%
============================= ======== ======= ======= ======== ====== =======
Profit before tax (GBPm) 174.2 133.9 30% 1,686.1 779.4 116%
============================= ======== ======= ======= ======== ====== =======
Earnings per share (p) 10.5 7.3 44% 103.6 62.9 65%
============================= ======== ======= ======= ======== ====== =======
Investment and capital
expenditure (GBPm) 1,042.8 434.5 140% 1,056.6 723.4 46%
============================= ======== ======= ======= ======== ====== =======
Net Debt and Hybrid Capital
(GBPbn) (9.6) (10.6) (9%) (8.9) (9.6) (6%)
============================= ======== ======= ======= ======== ====== =======
* Unless otherwise started, excludes results from discontinuing
operations: Scotia Gas Networks and Gas Production assets which
were held for sale at 30 September 2021.
Financial Summary for the six months to september 2021
-- Adjusted EPS up 44% to 10.5p, just above SSE's guided range
of between 7.5p and 10p and reflecting improved performance across
a number of businesses in the second half of September.
-- Reported EPS up 65% to 103.6p, mainly due to mark-to-market
revaluation gains on operating derivatives of cGBP1.2bn in the
period, a result of recent market volatility.
-- As previously announced, Renewables profitability in the
first half was adversely impacted by exceptionally unfavourable
weather conditions (25% or 1.1TWh below the comparative period),
and the associated requirement to buy back hedges in volatile
markets.
-- This was more than offset by higher volumes and revenue
allowances in regulated networks, and a strong performance from
non-core businesses, notably gas storage
-- Adjusted investment and capital expenditure up 140% to
GBP1,042.8m reflecting the strong progression of the Group's
capital investment strategy following coronavirus, and the impact
from one-off project finance development expenditure refunds in the
prior period.
-- Adjusted net debt and hybrid capital at GBP9.6bn, reflecting
increased investment and capital expenditure.
-- Intention to recommend an interim dividend of 25.5p per share
- in line with five year dividend plan to 2023 - for payment on 10
March 2022, reflecting an assumed average annual RPI rate of 5%. As
announced in the accompanying Strategy Update, the scrip dividend
will be capped at 25% each financial year.
Financial outlook for 2021/22 and Beyond
-- SSE is focused on long-term, sustainable financial
performance, and remains confident about delivery of solid
financial performance for the full year.
-- The group has enjoyed a strong start to the second half of
the year, with renewables volumes above plan in October, and
thermal and hydro plant in particular achieving strong prices in
the market.
-- Subject to normal weather, plant availability and similar
levels of commodity prices over the coming winter months, SSE
currently expects to report full year adjusted earnings per share
at a level which is at least in line with consensus of analysts'
forecasts of 83p (Bloomberg 15 November 2021). SSE intends to
provide further guidance later in the financial year.
-- The Group remains committed to its five-year dividend plan to
March 2023 and expects to recommend a full-year dividend of 81
pence plus RPI inflation in line with that plan.
-- Capital expenditure and investment is now expected to total
in excess of GBP2bn in 2021/22 (net of project finance development
expenditure refunds).
-- Disposal of SSE's entire 33.3% investment in gas distribution
operator Scotia Gas Networks Ltd (SGN) is expected to complete
within the 2021/22 financial year.
-- Targeting a ratio of net debt to EBITDA of around 4.5 times at 31 March 2022.
The enhanced GBP12.5bn Net Zero Acceleration Programme, also
announced today, further outlines SSE's plans to accelerate growth
and maximise value for all stakeholders for the five years to March
2026, as well as outlining longer term targets to 2031 and a
rebased dividend with attractive growth for post 2023.
Further Information
Investor Timetable
Interim ex-dividend date 13 January 2022
Record date 14 January 2022
Scrip reference pricing days 13 - 19 January
2022
Scrip reference price confirmed and released via 20 January 2022
RNS
Final date for receipt of scrip elections 10 February 2022
Interim dividend payment date 10 March 2022
Q3 Trading Statement 8 February 2022
Notification of Closed Period By 31 March 2022
Preliminary results for the year months ended 25 May 2022
31 March 2022
AGM and Q1 Trading Statement 21 July 2022
Contact Details
+ 44 (0)345 0760
Institutional investors and analysts ir@sse.com 530
+ 44 (0)345 143
Shareholder services SSE@linkgroup.co.uk 4005
+ 44 (0)345 0760
Media media@sse.com 530
+ 44 (0)7885 224
MHP Communications, Oliver Hughes oliver.hughes@mhpc.com 532
+ 44 (0)7709 496
MHP Communications, Simon Hockridge simon.hockridge@mhpc.com 125
Management presentation webcast and teleconference
SSE will present its interim results for the six months to 30
September 2021, immediately followed by a strategic and capital
investment update on Wednesday 17 November at 08:30am GMT. You can
join the webcast by visiting www.sse.com and following the links on
either the homepage or investor pages; or directly using
https://edge.media-server.com/mmc/p/en9mbrvc . This will also be
available as a teleconference, details below. Both facilities will
be available to replay.
Confirmation Code:
2573869
Location Phone Type Phone Number
United Kingdom Toll free 0800 279 6619
United Kingdom, Local Local +44 (0) 2071 928338
United States, New
York Local +1 646 741 3167
United States/Canada Toll free +1 877 870 9135
Online Information
News releases and announcements are made available on SSE's
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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
forward-looking 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
The financial information set out in these interim statements
has been prepared in accordance with the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority and UK
adopted International Accounting Standard 34 Interim Financial
Reporting. The interim financial information is unaudited but has
been formally reviewed by the Group's statutory auditor and its
report to the Company is set out on page 102.
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 before the Interim Financial Statements. SSE continues to
prioritise the monitoring of developing practice in the use of
Alternative Performance Measures, ensuring the financial
information in its results statements is clear, consistent, and
relevant to the users of those statements.
For the purpose of calculating the 'Net Debt to EBITDA' metric,
'adjusted EBITDA' is further adjusted to remove the proportion of
adjusted EBITDA from equity-accounted joint ventures relating to
project financed debt.
Important note: Discontinued Operations - Gas Production and
Scotia Gas Networks
At 30 September 2021 SSE has assessed that its Gas Production
assets should continue to be classified as held for sale (see note
9 of the Interim Financial Statements) and the Group's interest in
gas distribution operator Scotia Gas Networks Limited ('SGN')
should also be classified as held for sale following agreement
reached to dispose of the entire 33.3% stake to a consortium (see
note 2(v) of the Interim Financial Statements). Both businesses
have been classified as discontinued operations. The Group's
adjusted measures therefore exclude the contribution from both of
these businesses in all periods presented.
Important note: Other disposals
In the period to 30 September 2021, SSE disposed of its
Contracting and Rail business (see note 6.1 of the Interim
Financial Statements) and has assessed that a 10% stake in the
Dogger Bank C offshore wind farm development should be classified
as held for sale (see note 9 of the Interim Financial Statements).
Furthermore, in the prior period to 30 September 2020, SSE assessed
that its investment in Multifuel Energy, Contracting and Rail
business and a 10% stake in the Dogger Bank A&B offshore wind
farm development should be classified as held for sale, in addition
to disposals in that period of a 50% stake in Slough Multifuel on 2
April 2020, a 51% stake in Seagreen Wind Farm on 3 June 2020, its
investment in Walney offshore wind farm on 2 September 2020 and its
investment in MapleCo smart-metering on 23 September 2020.
As these businesses do not individually constitute a separate
major line of business for SSE, they have not been classified as
discontinued operations, and their result continues to be included
within the Group's adjusted profit-based measures to the point of
disposal.
Important note: Presentation of Reporting Segments
Following the Group's sale of its Contracting and Rail business
during the period, the primary retained activities of the
Enterprise business is Distributed Energy which will develop and
provide the Group's solar and battery storage operations and focus
on distributed generation, heat and cooling networks, smart
buildings and EV charging. Accordingly, the result from the Group's
out of areas networks business and Neos Networks Limited joint
venture will now be reported within SSEN Distribution and Corporate
Unallocated respectively. Comparative information has been
re-presented to reflect the change to these segments (see note 2(v)
of the Interim Financial Statements).
Impact of discontinued operations on the Group's Alternative
Performance Measures ('APM')
The following Alternative Performance Measures have been
adjusted in all periods presented to exclude the contribution of
the Group's Gas Production operations and Scotia Gas Networks
Limited which have been presented as discontinued operations as at
30 September 2021:
-- Adjusted EBITDA;
-- Adjusted operating profit;
-- Adjusted net finance costs;
-- Adjusted profit before tax;
-- Adjusted current tax charge; and
-- Adjusted earnings per share.
'Adjusted net debt and hybrid capital', and 'investment and
capital expenditure' have not been adjusted as the Group continues
to fund the discontinued operations until the date of disposal.
Key Performance Indicators
- six months to 30 September
at a glance
Key Financial Indicators Adjusted Reported
========================================================== ========================== ==========================
Sept 2021 Sept 2020 Sept 2021 Sept 2020
========================================================== ============== ========== ============== ============
Operating profit / (loss) by core business GBPm
========================================================== ============== ========== ============== ============
- SSEN Transmission 181.7 115.2 181.7 115.2
========================================================== ============== ========== ============== ============
- SSEN Distribution 153.3 114.3 153.3 114.3
========================================================== ============== ========== ============== ============
- SSE Renewables 25.4 141.6 (33.6) 318.6
========================================================== ============== ========== ============== ============
Operating profit / (loss) for other businesses GBPm 16.4 (42.2) 1,603.0 391.8
========================================================== ============== ========== ============== ============
Operating profit from continuing operations GBPm 376.8 328.9 1,904.4 939.9
========================================================== ============== ========== ============== ============
EBITDA from continuing operations GBPm 700.2 664.3 2,247.2 1,293.5
========================================================== ============== ========== ============== ============
Profit before tax from continuing operations GBPm 174.2 133.9 1,686.1 779.4
========================================================== ============== ========== ============== ============
Earnings per share (EPS) pence on continuing operations 10.5 7.3 103.6 62.9
========================================================== ============== ========== ============== ============
Interim dividend per share (DPS) pence 25.5 24.4 25.5 24.4
========================================================== ============== ========== ============== ============
Full year dividend per share (DPS) pence Exp. 81 + RPI 81.0 Exp. 81 + RPI 81.0
========================================================== ============== ========== ============== ============
Investment and capital expenditure by core business,
before refunds GBPm
========================================================== ============== ========== ============== ============
- SSEN Transmission 291.0 224.4 291.0 224.4
========================================================== ============== ========== ============== ============
- SSEN Distribution 171.3 167.9 201.4 197.3
========================================================== ============== ========== ============== ============
- SSE Renewables 417.5 17 6.4 116.0 206.8
========================================================== ============== ========== ============== ============
Investment and capital expenditure for other businesses,
before refunds GBPm 1 63.0 111.8 448.2 341.0
========================================================== ============== ========== ============== ============
Project finance development expenditure refunds GBPm - (246.1) - (2 46.1)
========================================================== ============== ========== ============== ============
Investment and capital expenditure, after refunds GBPm 1,042.8 434.4 1,056.6 723.4
========================================================== ============== ========== ============== ============
Net debt and hybrid capital GBPm 9,611.4 10,662.1 8,877.7 9,639.6
========================================================== ============== ========== ============== ============
* Comparative information has been re-presented to reflect the
classification of Scotia Gas Networks as a discontinued operation
and the changes to segmental disclosures made in the period (see
note 2(v) of the Interim Financial Statements).
Operational Key Performance Indicators Sept 2021 Sept 2020
================================================= ========== ==========
Thermal generation - GWh 7,812 9,438
================================================= ========== ==========
Renewable generation - GWh (inc. pumped storage
and constrained off)(1) 2,901 4 ,008
================================================= ========== ==========
Total generation output - all plant - GWh(2) 10,763 13,481
================================================= ========== ==========
SSEN Transmission RAV - GBPm 3,875 3,643
================================================= ========== ==========
SSEN Distribution RAV - GBPm 3,862 3,825
================================================= ========== ==========
SSE Total RAV(3) - GBPm 7,737 7,468
================================================= ========== ==========
Business Energy Electricity Sold - GWh 6,161 6,301
================================================= ========== ==========
Business Energy Gas Sold - mtherms 73 65
================================================= ========== ==========
Airtricity Electricity Sold - GWh 2,485 3,739
================================================= ========== ==========
Airtricity Gas Sold - mtherms 66 74
================================================= ========== ==========
Notes:
(1) Renewable generation excludes SSE's small biomass capability
which is managed by Distributed Energy and which generated 37GWh
HY2021/22 and 22GWh in HY2020/21
(2) Includes biomass output referred to in Note 1 above plus an
additional 13GWh in HY2021/22 and 13GWh HY2020/21 generated by
other Distributed Energy assets.
(3) SSE agreed the sale of its stake in gas distribution
operator SGN in August 2021 and it has been presented as a
discontinued operation in the Interim Financial Statements. The RAV
attributable to SGN totalled 2,024 at HY22 and 1,957 at HY21.
ESG Key Performance Indicators Sept 2021 March 2021 Sept 2020
============================================= ========== ============ ==========
Carbon emissions (scopes 1&2) MtCO(2) - 7.64 -
e
============================================= ========== ============ ==========
Carbon intensity of generation gCO(2)
e/kWh 292 255 275
============================================= ========== ============ ==========
Total water consumed (million cubic meters) - 3.6 -
============================================= ========== ============ ==========
Total recordable injury rate per 100,000
hours worked(1) 0.16 0.14 0.19
============================================= ========== ============ ==========
Total economic contribution - UK/Ireland - 5.21/439 -
(GBPbn/EURm)(2)
============================================= ========== ============ ==========
Jobs supported - UK/Ireland (headcount)(3) - 41,400/2,160 -
============================================= ========== ============ ==========
Total taxes paid UK/Ireland (GBPm/EURm) - 379/20.4 -
============================================= ========== ============ ==========
Employee retention/turnover rate (%)(4) 92.1/7.9
============================================= ========== ============ ==========
Employee engagement index (%)(5) 82 82 82
============================================= ========== ============ ==========
Average board tenure - years(6) 3.3 5.0 4.6
============================================= ========== ============ ==========
Female board members (%) 50 36 33
============================================= ========== ============ ==========
Independent board members (%)(7) 73 70 73
============================================= ========== ============ ==========
Total number of board members 12 11 12
============================================= ========== ============ ==========
Notes:
March 2021 figures relate to 12 months to 31(st) March 2021
(1) Comparators restated to exclude impact of Contracting and
Neos Networks
(2) Direct, indirect and induced Gross Value Added, from PwC
analysis
(3) Direct, indirect and induced jobs supported, PwC
analysis
(4) Includes voluntary and involuntary turnover, excludes end of
fixed term contracts and internal transfers.
(5) Results from SSE's annual employee engagement survey.
(6) Non-Executive directors including non-Executive Chair
(7) Excludes non-Executive Chair. March 2021 figure restated to
exclude non-Executive Chair.
strategic overview
a platform for growth
The strategic progress made by SSE in the half-year to 30
September 2021 further consolidates our leadership of the energy
transition in the UK and Ireland and marks the beginning of our
international expansion. With our transformational Net Zero
Acceleration Programme published alongside these results and
containing fully funded strategic investment plans out to 2026 with
bold new targets for the decade to 2031, SSE is clearly very
well-placed strategically to grow over the short, medium and long
term.
In the period since reporting Full-year Results in May, whilst
developing our Net Zero Acceleration Programme, we have not been
distracted from our purpose of providing energy today while
building a better world of energy for tomorrow. We have met our
responsibilities as a critical service provider and delivered on
significant strategic milestones. Indeed, the strong operational
delivery of recent months has helped provide an exciting platform
from which SSE can seize the enormous growth opportunities being
created across the Group.
Delivery at SSE is attributable to the capabilities of a highly
skilled and increasingly diverse workforce, and I am grateful for
our employees' ongoing commitment to a purpose and a strategy that
have clear business and societal benefits. Their capabilities,
resilience and ingenuity are integral to SSE's bright future.
strategic progress
SSE's strategy is to create value for shareholders and society
in a sustainable way by developing, building, operating and
investing in the electricity infrastructure and businesses needed
in the transition to net zero and I'm pleased to report that we
made good progress across the Group in the first half of the
year.
In SSE Renewables, plans to export our developer capabilities to
overseas markets gained momentum with our acquisition of an 80%
interest in an offshore wind development platform in Japan. We have
also lodged a pre-qualification application in the New York Bight
Auction as an initial step into the emerging US offshore market,
and we have submitted a bid to the Thor auction in Denmark. Closer
to home, good progress was made with installation of the first
turbine jacket foundations at Seagreen, the world's deepest,
fixed-bottom wind farm, and offshore construction due to start at
Dogger Bank, currently the world's biggest offshore wind farm,
early in 2022. We have consent for the UK's largest pumped storage
hydro project at Coire Glas and have seen material progress in the
policy and regulatory environment for such vital long-duration
storage schemes.
SSE sees a crucial role for lower-carbon thermal generation in
the transition to net zero and we welcomed the Track 1 status
awarded to the East Coast Carbon Capture and Storage Cluster, which
is the site of three SSE Thermal development projects in
partnership with Equinor. While the 'Acorn' Scottish Cluster, site
of our Peterhead CCS project, was not given Track 1 status, it was
confirmed as a backup option and we continue to engage with
government on the long-term importance of such technologies to the
North East of Scotland.
In our electricity networks businesses, we have had mixed
success in our appeal to the CMA over certain elements of Ofgem's
RIIO-T2 price control settlement. There are nonetheless options for
substantial growth over and above capital expenditure plans
approved under RIIO-T2 and we have submitted Needs Cases under the
Uncertainty Mechanism for major projects that will enable further
renewables growth.
SSEN Distribution could see a trebling of demand in its network
areas by 2050, and the likely load expenditure required to keep
pace will inform the submission of our final business plan for the
RIIO-ED2 price control next month. The business has also recently
become the first UK Distribution Network Operator to set
1.5degC-aligned targets validated by the Science Based Targets
initiative.
SSEN Transmission and SSEN Distribution are not only key to a
1.5C pathway, they are also engines of growth for the SSE Group.
Under our new capex plan we will extend the successful SSE
Renewables partnering model to electricity networks in order to
maximise their growth potential, while retaining strategic and
operational control.
strength and resilience
The achievements of the first half come against a backdrop of
significant energy market volatility, variable weather and ongoing
uncertainty over the trajectory of the coronavirus pandemic. Once
again, the resilience of SSE's business model, with its efficient
mix of regulated and market-exposed income streams and the valuable
linkages between them, has stood us in good stead.
Following a highly successful GBP2.8bn non-core asset disposals
programme, expected to be completed with the disposal of our stake
in SGN by the end of this financial year, strategic focus is now on
renewables and regulated electricity networks, supported by
carefully chosen complementary businesses. This very deliberate
business mix - and the world-class assets within it - has a
compelling and growing strategic logic.
The renewables and networks businesses are key to net zero, they
have significant growth options and they fit together. With their
shared skills and capabilities, they form SSE's low-carbon
electricity core. We will only retain other businesses that are
complementary to that core and contribute to achieving net
zero.
Thermal offers flexible capacity to balance renewables'
variability. Our customer-facing businesses are a route to market
and a platform to grow in the distributed energy sector, where we
are developing battery storage projects that will also provide
flexibility to support renewables. And, lastly, our Energy
Portfolio Management business creates commercial synergies and
manages risk across all of our market-based operations.
Ultimately, SSE has been transforming into the optimal
combination of electricity infrastructure businesses. Our business
mix allows specialisation in electricity assets, such as in
renewables, networks and low carbon power stations, alongside the
ability to create value right across the electricity value chain as
new opportunities emerge in hydrogen, batteries and distributed
energy.
a national energy champion
SSE has placed itself on the right side of the climate debate,
with the capabilities, businesses and assets to create value from
efforts to slow global warming. We have established ourselves as
the UK's national clean energy champion, delivering for
shareholders and society as we pursue a Just Transition to net
zero.
There are favourable political and societal tailwinds behind us.
We welcomed the UK Government's net zero strategy, which gives
confidence to low-carbon investors and developers like us to keep
investing at the scale needed to achieve net zero by 2050. And we
take the support received at our 2021 AGM for an annual vote on our
net zero plan as a clear signal of ongoing shareholder support for
our decarbonisation efforts.
As the UK's national clean energy champion, the Net Zero
Acceleration Programme announced alongside today's results
positions SSE to enable over a quarter of the UK's 40GW offshore
wind target by 2030, over 20% of upcoming UK electricity networks
investment, whilst leading investments in flexibility and exporting
our renewables capabilities overseas.
The urgency of the climate emergency from COP26 is clear. We
believe that decarbonisation of the energy system could go further
and faster and as a Principal Partner at the summit we were able to
make that case on the world stage. This was an opportunity for us
to engage with global decision-makers and we have come away with an
increased sense of purpose.
long-term ambitions
SSE is currently building more offshore wind than anyone else in
the world; we see substantial RAV growth potential above and beyond
current networks price controls; and our complementary businesses
have options to create lasting value through net zero. This growth
potential and our underlying capabilities, backed up by a strong
balance sheet and a fully funded accelerated investment plan that
optimises capital allocation across the Group, give us the
confidence to set the new bold targets for the rest of the decade
too.
The 2031 ambitions outlined in the separate Strategic Update
today aim to drive significant earnings growth and maximise total
shareholder returns. The tightening of carbon targets, meanwhile,
is just the latest step in a long commitment to decarbonisation
that builds on our reputation as an ESG-aligned investment
opportunity.
creating lasting value
SSE is at its best in execution mode, and that is our priority
over the remainder of the financial year. We have projects to
develop and build and opportunities to take at home and abroad. Our
financial focus is always on the full-year and we are confident
about delivery of solid performance for 2021/22. We are also
committed to our five-year dividend plan to 2023 and expect to
recommend a full-year dividend of 81 pence plus RPI inflation for
2021/22.
Together, the interim results we are posting today, our
accompanying plans to 2026 and our ambitions to 2031 set the
optimal pathway to sustainable long-term value for all stakeholders
- taking the growth opportunities that are right for SSE, and
optimising the sources of funding needed to underpin our
contribution to net zero.
Alistair Phillips-Davies
Chief Executive
group financial review
- six months to 30 September 2021
This Group Financial Review sets out the financial performance
of the SSE Group for the six months ended 30 September 2021. See
also the separate sections on Group Financial Outlook 2021/22 and
beyond and Supplemental Financial Information.
The definitions SSE uses for adjusted measures are consistently
applied and are explained in the Alternative Performance Measures
section of this document, before the Interim Financial
Statements.
Key Financial Metrics Adjusted Reported
===================================================================== ====================== ======================
GBPm Sept 2021 Sept 2020 Sept 2021 Sept 2020
===================================================================== ========== ========== ========== ==========
Operating profit 376.8 328.9 1,904.4 939.9
===================================================================== ========== ========== ========== ==========
Net Finance costs 202.6 195.0 218.3 160.5
===================================================================== ========== ========== ========== ==========
Profit before Tax 174.2 133.9 1,686.1 779.4
===================================================================== ========== ========== ========== ==========
Current Tax charge 12.7 11.6 542.3 79.3
===================================================================== ========== ========== ========== ==========
Effective current tax rate (%) 7.3 8.7 32.2 10.2
===================================================================== ========== ========== ========== ==========
Profit after Tax on continuing operations 161.5 122.3 1,143.8 700.1
===================================================================== ========== ========== ========== ==========
Profit / (Loss) from discontinued operations, net of tax - - (93.8) 46.0
===================================================================== ========== ========== ========== ==========
Profit / (Loss) after Tax 161.5 122.3 1,050.0 746.1
===================================================================== ========== ========== ========== ==========
Less: hybrid equity coupon payments 50.7 46.6 50.7 46.6
===================================================================== ========== ========== ========== ==========
Profit / (Loss) after Tax attributable to ordinary shareholders (1) 110.8 75.7 999.3 699.5
===================================================================== ========== ========== ========== ==========
(1) After distributions to hybrid capital holders
===================================================================== ========== ========== ========== ==========
EPS (including discontinued operations)(pence) 10.5 7.3 94.7 67.3
===================================================================== ========== ========== ========== ==========
Number of shares for basic/reported and adjusted EPS (million) 1,054.7 1,039.6 1,054.7 1,039.6
===================================================================== ========== ========== ========== ==========
Shares in issue (million) 1,065.5 1,048.2 1,065.5 1,048.2
===================================================================== ========== ========== ========== ==========
* Comparative information has been re-presented to reflect the
classification of Scotia Gas Networks as a discontinued operation
and the changes to segmental disclosures made in the period (see
note 2(v) of the Interim Financial Statements).
D ividend per Share Sept 2021 Sept 2020
============================ ================== ==========
Interim Dividend (pence) 25.5 24.4
============================ ================== ==========
Full Year Dividend (pence) Expected 81 + RPI 81.0
============================ ================== ==========
Recent Market Volatility
Whilst the Group reduces direct exposure to short term commodity
price volatility through its business mix, its disciplined
application of clearly defined hedging policies and low VAR trading
limits, the recent relatively high and volatile gas and power
market prices have had varying degrees of impact upon several of
SSE's businesses in the six months to 30 September which can be
summarised as follows:
Within SSE Renewables, significantly lower than expected volume
output has meant that excess forward sale contracts have had to be
'bought back' in the market at higher prices, further reducing the
trading result.
For SSE Thermal and Gas Storage, higher market prices and
volatility is generally positive for these businesses albeit this
is dependent upon plant availability and plant merit order during
the period in SSE Thermal's case.
Both EPM and Gas Storage, through their respective exposure to
unsettled commodity contracts and physical gas inventory, have
experienced significant positive unrealised mark-to-market
remeasurement gains in the period. However, these businesses are
not expected to realise significant gains upon settlement of these
contracts, as c.GBP(1.3)bn of adverse 'own use' operating
derivatives are excluded from remeasurement under IFRS 9 and will
largely offset the unrealised gains.
SSE's Business Energy and Airtricity businesses are not subject
to a regulated price cap and therefore variable tariffs are
adjusted dynamically and fixed tariff rates are reset for new
acquisitions as wholesale costs increase or decrease. Although the
businesses are insulated against gas price rises insofar as they
are fully hedged, there are external circumstances that would
result in hedge adjustments such as weather, supplier failures and
post-coronavirus economic impacts. A dynamic forecasting approach
has been in place to quickly respond to volume changes. In relation
to Airtricity, vertical integration of generation and customer
businesses in the Irish market limits commodity exposures.
Finally, the number of retail energy suppliers failing since
early September has increased collateral requirements of the SSE
Group. High energy prices and market volatility has resulted in a
significant increase in the collateral requirements required to
allow EPM to continue to trade with counterparties and on exchanges
as required - to date these increased collateral requirements have
been managed by issuing new Letters of Credit, Guarantees and
Performance Bonds with no significant cash amounts required to
date.
Operating performaNce for Six Months to September 2021
Business-by-business segmental Adjusted Reported
============================================================== ====================== ========================
GBPm Sept 2021 Sept 2020 S ept 2021 S ept 2020
============================================================== ========== ========== =========== ===========
Operating profit/(loss)
============================================================== ========== ========== =========== ===========
SSEN Transmission 181.7 115.2 181.7 115.2
============================================================== ========== ========== =========== ===========
SSEN Distribution 153.3 114.3 153.3 114.3
============================================================== ========== ========== =========== ===========
Electricity networks total 335.0 229.5 335.0 229.5
============================================================== ========== ========== =========== ===========
SSE Renewables 25.4 141.6 (33.6) 318.6
============================================================== ========== ========== =========== ===========
Thermal Generation 36.1 49.6 215.6 58.1
============================================================== ========== ========== =========== ===========
Gas Storage 28.7 (17.9) 263.9 4.5
============================================================== ========== ========== =========== ===========
Thermal Energy Total 64.8 31.7 479.5 62.6
============================================================== ========== ========== =========== ===========
Business Energy (GB) 2.4 (27.4) 2.4 (15.5)
============================================================== ========== ========== =========== ===========
SSE Airtricity (NI and Ire) (2.9) 16.6 (2.9) 20.4
============================================================== ========== ========== =========== ===========
Energy Customer Solutions Total (0.5) (10.8) (0.5) 4.9
============================================================== ========== ========== =========== ===========
Energy Portfolio Management 5.7 (1.5) 1,209.7 319.8
============================================================== ========== ========== =========== ===========
Distributed Energy ( 7.3) (37.8) (24.8) (37.8)
============================================================== ========== ========== =========== ===========
Corporate Unallocated (46.3) (23.8) (60.9) 42.3
============================================================== ========== ========== =========== ===========
Total operating profit from continuing operations 376.8 328.9 1,904.4 939.9
============================================================== ========== ========== =========== ===========
Net finance costs 202.6 195.0 218.3 160.5
============================================================== ========== ========== =========== ===========
Profit before tax from continuing operations 174.2 133.9 1,686.1 779.4
============================================================== ========== ========== =========== ===========
Discontinued operations:
============================================================== ========== ========== =========== ===========
Gas Production Assets 77.7 (3.0) (16.2) (3.0)
============================================================== ========== ========== =========== ===========
Scotia Gas Networks 21.0 89.4 (81.1) 45.2
============================================================== ========== ========== =========== ===========
Total operating profit / (loss) from discontinued operations 98.7 86.4 (97.3) 42.2
============================================================== ========== ========== =========== ===========
* Comparative information has been re-presented to reflect the
classification of Scotia Gas Networks as a discontinued operation
and the changes to segmental disclosures made in the period (see
note 2(v) of the Interim Financial Statements).
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 a reconciliation of adjusted operating profit by
segment to reported operating profit by segment can be found in
Note 5(b) to the Interim Financial Statements.
Segmental EBITDA results are included in Note 5(c) to the
Interim Financial Statements.
Operating profit
Adjusted and reported operating profit/losses in SSE's business
segments for the six months to 30 September 2021 are as set out
below; comparisons are with the same period to 30 September 2020
unless otherwise stated.
SSEN Transmission: Adjusted and reported operating profit
increased by 58% to GBP181.7m, compared with GBP115.2m, mainly due
to phasing of allowed revenue as the business enters the first year
of the RIIO-T2 price control, partially offset by increases in
operating costs and depreciation charges as capital investment
progresses.
SSEN Distribution: Adjusted and reported operating profit
increased by 34% to GBP153.3m in HY22, compared to GBP114.3m which
includes the effects of coronavirus in HY21. In HY22, higher
allowed revenues and a recovery in volumes were partially offset by
an increase in operating costs.
SSE Renewables: Adjusted operating profit reduced by 82% to
GBP25.4m, compared with GBP141.6m, reflecting lower output which
was around 25% or 1.1TWh below the comparative period and around
30% or 1.2TWh below current year plan. The financial impact of this
reduction in output includes the adverse impact from buying back
hedged volume in volatile markets. The shortfall was driven by
unfavourable weather conditions over the summer, which was one of
the least windy across most of the UK and Ireland and one of the
driest in SSE's Hydro catchment areas in the last seventy years.
Comparable output was further impacted by the divestment of Walney
offshore wind farm in September 2020. Furthermore, adjusted
operating profit in HY21 included a GBP23.3m developer gain on the
sale of a 51% stake in Seagreen Offshore Wind farm with no
equivalent gain the current period.
Reported operating loss was GBP33.6m compared to operating
profit of GBP318.6m. In addition to the factors noted above, the
prior period saw one-off exceptional gains totalling GBP214.5m with
no similar gains recognised in HY22 which accounted for the
majority of the movement. In the current year, an exceptional tax
charge totalling GBP24.0m was recognised in joint ventures due to
the substantive enactment of a UK tax rate change impacting
deferred tax balances. Depreciation on historic fair value uplifts
remained constant at GBP9.4m, with joint venture share of interest
and tax charges decreasing slightly from GBP28.1m to GBP25.6m in
the current period.
Thermal Generation: Adjusted operating profit reduced by 27% to
GBP36.1m from GBP49.6m in the prior period. Reductions due to
GBP20.4m of non-recurring developer profits on the disposal of a
50% stake in Slough Multifuel in HY21, and lower profit
contribution following divestment of Ferrybridge Multifuel, were
compensated by stronger balancing market performance and higher
market prices. However, performance in HY22 was constrained by
plant availability due to scheduled and unscheduled outages, with
total output down 1.6TWh on prior period.
Reported operating profit was GBP215.6m compared to GBP58.1m in
the prior period. In addition to the factors noted above, the
current period saw a reversal of historic impairment charges
totalling GBP181.6m, reflecting higher estimated power prices
forecasted for the near future. Other movements included a
non-recurring fair value gain recognised in the prior period
totalling GBP24.8m and joint venture share of interest and tax
charges which decreased by GBP11.6m in the period to GBP4.7m.
Gas Storage: Adjusted operating profit of GBP28.7m, compared
with an operating loss of GBP(17.9)m. SSE continues to operate the
plant on a merchant basis, with the ability to capture gas price
spreads during periods of heightened market volatility. Recent
market volatility has enabled Gas Storage to realise currently
higher gas price spreads earlier than the usual summer / winter
seasonality for the business, resulting in a profit for the
period.
Reported operating profit was GBP263.9m compared to GBP4.5m in
the prior period. The aforementioned heightened market volatility
has resulted in a GBP235.2m positive mark-to-market movement,
compared to GBP22.4m in the prior period. However, whilst this
reflects the positive movement in fair value of physical gas
inventory held at the period end, it does not reflect the negative
mark-to-market movement on forward contracted sales for the second
half of the current financial year which are not recognised under
IFRS. Therefore, similar to the unsettled commodity contracts held
by EPM at fair value, we do not expect the majority of this
valuation movement will be realised by the business.
SSE Business Energy: Adjusted operating profit was GBP2.4m,
compared with an adjusted operating loss of GBP(27.4)m in the same
period last year, with higher volumes through a reduced impact from
coronavirus being partially offset by higher non-commodity
costs.
Reported operating profit was also GBP2.4m, compared to an
operating loss of GBP(15.5)m in the prior year which also included
a GBP11.9m release of excess bad debt provisioning originally
expected to arise from coronavirus impact.
SSE Airtricity: Adjusted operating loss of GBP(2.9)m compares to
an adjusted operating profit of GBP16.6m in the prior period,
mainly due to an adjustment of GBP25m in relation to historic use
of system costs offset by GBP8m prior year revision of estimates
which were recognised in HY22.
Reported operating loss was also GBP(2.9)m, compared to an
operating profit of GBP20.4m in the prior year which also included
a GBP3.8m release of excess bad debt provisioning originally
expected to arise from coronavirus impact.
Energy Portfolio Management (EPM): Adjusted operating profit was
GBP5.7m, compared to an adjusted operating loss of GBP(1.5)m, as
EPM continues to generate a low level of operating earnings through
service provision to those SSE businesses requiring access to the
energy markets.
Reported operating profit was GBP1,209.7m, compared to
GBP319.8m, reflecting a significantly higher net re-measurement
gain in the current period on unsettled, previously out of the
money, fair value forward commodity contracts. As in prior years,
the reported result does not include remeasurement of adverse 'own
use' hedging agreements which total c.GBP(1.3)bn at HY22 and are
excluded from IFRS 9 but in practice largely offset the IFRS 9
remeasurement.
Distributed Energy: Adjusted operating loss was GBP(7.3)m,
compared to a prior period adjusted operating loss of GBP(37.8)m.
This reporting segment result includes the result from the
Contracting and Rail business, which remains reported within this
segment up to the point of disposal on 30 June 2021. The prior
period result reflected the impact coronavirus had on activity
within the Contracting and Rail business, combined with a
non-exceptional impairment charge of GBP14.9m relating to
Contracting and Rail assets and liabilities following
classification as held for sale in that period. The current year
loss reflects a reduced impact from coronavirus, but also includes
losses incurred in the Contracting and Rail business to the date of
its disposal.
Reported operating loss was GBP(24.8)m, compared to a loss of
GBP(37.8)m, reflecting the factors noted above but also including a
GBP18.1m exceptional loss on disposal recognised on completion of
the sale of Contracting & Rail business.
Corporate Unallocated: Adjusted operating loss increased to
GBP(46.3)m, compared with GBP(23.8)m, following a decrease in
external income as transition service agreements with SSE Energy
Services and Neos Networks continue to unwind. This reporting
segment now also includes the contribution from the Group's
investment in the Neos Networks joint venture, with operating
losses totalling GBP(5.8)m in the period.
Reported operating loss was GBP(60.9)m, compared to a prior
period operating profit of GBP42.5m, mainly due to the factors
noted above as well as a GBP6.2m adverse adjustment recognised in
the period on contingent consideration arising on the Neos Networks
part-disposal. The prior period also reflected an exceptional gain
on disposal of GBP72.0m recognised relating to the disposal of
MapleCo in September 2020.
Investment in Gas Production - held for sale (discontinued
operations): Adjusted operating profit totalled GBP77.7m compared
to an adjusted operating loss of GBP(3.0)m in the prior period.
These assets, which were held for sale at the period end and
subsequently disposed of on 14 October 2021, continue to be
excluded from SSE's adjusted results. Revenue has significantly
increased in the period as a result of higher gas prices.
The reported operating loss of GBP(16.2)m reflects an
exceptional impairment charge of GBP93.9m in the period as the cash
inflows recognised by the business in the period flow to the
purchaser under a locked box agreement.
Scotia Gas Networks - held for sale (discontinued operations):
Adjusted operating profit of GBP21.0m was recognised, compared to
GBP89.4m profit in the prior period. This investment has been
classified as held for sale from 11 June 2021 with equity
accounting - and recognition of operating result - ceasing from
that date.
A reported operating loss of GBP(81.1)m was recognised compared
to an operating profit of GBP45.2m in the prior period mainly due
to the factors above in combination with an exceptional tax charge
totalling GBP84.5m recognised due to the substantive enactment of a
UK tax rate change impacting deferred tax balances.
Adjusted Earnings per share
Adjusted earnings per share
To monitor its financial performance over the medium term, SSE
reports on its adjusted earnings per share measure. This measure is
calculated by excluding the charge for deferred tax, interest costs
on net pension liabilities, exceptional items, depreciation on fair
value adjustments and the impact of certain remeasurements.
SSE's adjusted EPS measure provides an important and meaningful
measure of underlying financial performance. In adjusting for
depreciation on fair value adjustments, non-recurring joint venture
refinancing costs, exceptional items and certain remeasurements,
adjusted EPS reflects SSE's internal performance management, avoids
the volatility associated with mark-to-market IFRS 9 remeasurements
and means that items deemed to be exceptional due to their nature
and scale do not distort the presentation of SSE's underlying
results. For more detail on these and other adjusted items please
refer to the Adjusted Performance Measures section of this
statement.
In the six months to 30 September 2021, SSE's adjusted earnings
per share on continuing operations was 10.5p. This compares to 7.3p
for the six months to 30 September 2020 and reflects the movements
in adjusted operating profit outlined in the section above.
financial outlook for 2021/22 and Beyond
Key points for outlook to 2021/22
-- SSE remains focused on long-term, sustainable financial
performance, and it remains confident about delivery of solid
financial performance for the full year.
-- The group has enjoyed a strong start to the second half of
the year, with renewables volumes above plan in October, and
thermal and hydro plant in particular achieving strong prices in
the market.
-- Subject to normal weather, plant availability and similar
levels of commodity prices over the coming winter months, SSE
currently expects to report full year adjusted earnings per share
at a level which is at least in line with consensus of analysts'
forecasts of 83p (Bloomberg 15 November 2021). SSE intends to
provide further guidance later in the financial year.
-- The Group remains committed to its five-year dividend plan to
March 2023 and expects to recommend a full-year 2021/22 dividend of
81 pence plus RPI inflation in line with that plan. As announced in
the accompanying Strategy Update, the scrip dividend will be capped
at 25% each financial year.
-- Capital expenditure and investment is now expected to total
in excess of GBP2bn in 2021/22 (net of project finance development
expenditure refunds).
-- Acquisitions:
o On 30 October 2021 SSE closed the agreement to form a new
joint ownership company in Japan. Within the total consideration of
US$208m is US$30m of deferred consideration subject to a number of
conditions.
-- Disposals:
o On 2 November 2021, SSE entered into an agreement to sell a
10% stake in Dogger Bank C to Eni for an initial equity
consideration of GBP70m. The transaction is expected to complete by
Q1 2022 and the project is expected to reach Financial Close by the
end of 2021.
o The disposal of SSE's entire 33.3% stake in gas distribution
operator Scotia Gas Networks Ltd to a consortium comprising
existing SGN shareholder Ontario Teachers' Pension Plan Board and
Brookfield Super-Core Infrastructure Partners is expected to
complete within the current financial year, conditional on certain
regulatory approvals, for consideration of GBP1,225m in cash.
-- Targeting a ratio of net debt to EBITDA of around 4.5 times at 31 March 2022
Key points for outlook beyond 2021/22
-- Alongside SSE's Results was the separate announcement today
of an enhanced five-year, GBP12.5bn strategic capital investment
plan to accelerate growth and maximise value for all
stakeholders.
-- The fully-funded Net Zero Acceleration Programme is focused
on net zero infrastructure investment:
o GBP12.5bn net capex investment to 2026, represents +65%
step-up in annual investment (GBP1bn additional capital investment
per year) on previous plans with over 2.5 times more capital now
allocated to renewables growth
o Investment will deliver 4GW net renewables capacity additions
(doubling renewables capacity) and grow electricity networks
underlying RAV to GBP9bn net of assumed 25% minority stake
sales.
o The plan is supported by further renewables partnering; and
minority stake sales in both SSEN Transmission and SSEN
Distribution (modelling assumption of early FY24) to unlock value
and optimise investment.
o Reshaped capital allocation to c40% Networks, c40% Renewables,
c20% Other flexible generation, distributed energy and customer
businesses
o Adjusted EPS CAGR of 5-7% forecast to March 2026(1) , after
assumed minority interest.
o Growth-enabling dividend, paying at least GBP3.50 per share
across the five years, comprising:
-- completion of current RPI linked dividend plan to March
2023
-- followed by a rebased dividend to 60p in 23/24, with an
attractive annual growth of at least 5% to March 2026
-- scrip dividend capped at 25%
o Net debt to EBITDA target of 4.5x, aligned with a strong
investment grade credit rating
-- Plan delivers accelerated growth at attractive returns into 2026:
o Renewables net installed capacity increasing by 4GW, doubling
existing capacity.
o Increases and maintains a sustainable development pipeline in
excess of 15GW.
o Networks businesses' RAV forecast to grow at c.10% gross
CAGR.
-- Compelling returns targeted, focusing on high quality assets
with common Group capabilities:
o Renewables offshore: at least 10% equity returns (excluding
developer profits) with onshore: WACC plus 100-400 bps project
returns.
o New technologies WACC plus 300-500 bps given expected
technology risk and construction risk specific to each project.
o Networks 7-9% return on equity, assuming a level of
outperformance and CPI inflation of 2% p.a.
-- Provides the platform for ambitious new 2031 targets including:
o Maintaining a sustained >15GW renewables pipeline,
delivering >1GW net additions p.a. and increasing renewable and
other low-carbon generation capacity to >16GW
o Fivefold increase in renewables output to 50TWh p.a.
o 8-9% gross RAV CAGR, to reach GBP11-13bn net RAV
o Meeting revised 1.5 degree Celsius science-based carbon
targets by 2030.
supplemental financial information
Investment and capital expenditure
Adjusted Investment and Capex Summary Sept 2021 Sept 2021 Sept 2020
Share % GBPm GBPm
============================================================= ========== ========== ==========
SSEN Transmission 28 291.0 224.4
============================================================= ========== ========== ==========
SSEN Distribution 16 171.3 167.9
============================================================= ========== ========== ==========
Electricity networks total 44 462.3 392.3
============================================================= ========== ========== ==========
SSE Renewables 40 417.5 176.4
============================================================= ========== ========== ==========
SSE Thermal 10 93.3 39.8
============================================================= ========== ========== ==========
Gas Storage - 0.8 2.1
============================================================= ========== ========== ==========
Thermal Energy Total 10 94.1 41.9
============================================================= ========== ========== ==========
Customer Solutions 2 24.8 14.8
============================================================= ========== ========== ==========
E nergy Portfolio Management - 0.9 0.9
============================================================= ========== ========== ==========
Distributed Energy 1 7.3 28.7
============================================================= ========== ========== ==========
Gas Production (Discontinued Operation) 1 11.6 12.5
============================================================= ========== ========== ==========
Corporate Unallocated 2 24.3 13.0
============================================================= ========== ========== ==========
Adjusted investment and capital expenditure, before refunds 1,042.8 680.5
============================================================= ========== ========== ==========
Project finance development expenditure refunds - (246.1)
============================================================= ========== ========== ==========
Adjusted investment and capital expenditure 1,042.8 434.4
============================================================= ========== ========== ==========
* Comparative information has been re-presented to reflect the
classification of Scotia Gas Networks as a discontinued operation
and the changes to segmental disclosures made in the period (see
note 2(v) of the Interim Financial Statements).
Progress of capital expenditure programme
During the six months to 30 September 2021, SSE's investment and
capital expenditure totalled GBP1,042.8m, including GBP879.8m in
its core renewables and regulated electricity networks
businesses.
Investment and capital expenditure across the period included
the following:
-- Major investment within electricity networks totalling
GBP462.3m, or 44% of SSE's total investment and capital
expenditure:
- SSEN Transmission has made significant progress on its capital
investment programme, having entered the first year of the RIIO-T2
price control period on 1 April 2021. The largest proportion of
spend in the period was focused on reinforcement on the east coast
of Scotland, with a total of around GBP51.7m covering several major
projects including work on substations at Peterhead and Kintore, as
well as reinforcement of the existing 275kV overhead line
connecting the substations Blackhillock, Keith, Kintore and
Peterhead to enable operation at an increased voltage of 400kV.
Elsewhere, replacement works of the Port Ann to Crossaig line
commenced in May and progress also continues to be made on the
Shetland HVDC link, which remains on track for energisation in
2024.
- SSEN Distribution continued to progress its capital investment
programme across both of its networks, with a total spend of
GBP171.3m over the period. As well as material investments in
resilience and IT, the business successfully concluded a GBP28m
subsea cable replacement between Skye and Harris. The project
involved significant offshore works using specialist marine vessels
to successfully install and protect the 33kV cable between Ardmore,
Skye and Beacravik, Harris.
-- The construction of SSE's flagship renewable energy projects
continues to progress well, with investment during the period
totalling GBP417.5m across a number of key projects including:
- Around GBP249.3m equity contribution towards Seagreen, as the
project progresses towards the final stages of construction. First
energy continues to be expected in early 2022;
- Around GBP110.9m of development expenditure on Dogger Bank C,
which is expected to be reimbursed to SSE by the project once it
reaches financial close by the end of 2021;
- Around GBP57.3m on Viking, which will be among the
highest-yielding onshore wind farms in Europe; and
-- Investment in SSE's Thermal Energy division amounted to
GBP94.1m in the period, including GBP37.8m on Slough Multifuel, and
GBP42.4m on Keadby 2, as the project progresses towards
commissioning in 2022.
SSE's Hedging Position at 30 September 2021
SSE has an established approach to hedging through which it
generally seeks to reduce its broad exposure to commodity price
variation in relation to electricity generation and supply at least
12 months in advance of delivery. As market conditions change, SSE
may be required to vary its hedging approach to take account of any
resultant new or additional exposures. SSE will continue to provide
a summary of its current hedging approach, including details of any
changes in the period, within its Interim and Full-year Results
Statements.
A summary of the hedging position for each of SSE's market-based
businesses at 30 September 2021 is set out below.
SSE Renewables - GB wind and hydro:
As part of its Full-year and Interim Results, SSE reports the
hedge position in relation to its GB Wind and Hydro generation. The
following table provides an update as at 30 September 2021, showing
the hedged position for full years 2022/23, 2023/24 and 2024/25
alongside the previously disclosed 2021/22 position.
2021/22 2022/23 2023/24 2024/25
======= ======================= ======== ======== ======== ========
Wind Expected volume - TWh 4.2 5.3 6.8 8.3
======= ======================= ======== ======== ======== ========
Volume hedged - % 85% 83% 57% 3%
=============================== ======== ======== ======== ========
Hedge price - GBPMWh GBP48 GBP55 GBP53 GBP55
======= ======================= ======== ======== ======== ========
Hydro Expected volume - TWh 3.6 3.7 3.7 3.8
======= ======================= ======== ======== ======== ========
Volume hedged - % 83% 76% 48% 3%
=============================== ======== ======== ======== ========
Hedge price - GBP/MWh GBP50 GBP54 GBP54 GBP55
=============================== ======== ======== ======== ========
Volumes are based on average expected output, and the contracted
hedge price is at the beginning of each financial year. The table
excludes additional volumes and income for BM activity, ROCs,
ancillary services, pre-commissioning, capacity mechanism and shape
variations. It also excludes volumes and income relating to Irish
wind output, pumped storage and CfDs.
SSE's established approach to hedging seeks to account for the
effect of the 'wind capture price' by targeting a hedge of less
than 100% of its anticipated wind energy output for the coming 12
months. Following an assessment of market conditions and wind
capture percentages for the relevant wind assets in May 2021, the
targeted hedge percentage will be at least 90% across the year and
will be adjusted as necessary going forward to reflect the changes
in future market and wind capture information.
Prior to FY22, target hedge levels were achieved solely through
the forward sale of electricity. Following the change in hedging
approach outlined in the May 2021 Results Statement, target hedge
levels are now achieved through the forward sale of either
electricity, or gas and carbon equivalent (assuming a constant 1
MWh : 69.444 th and 1MWh : 0.3815 te/MWh conversion ratio between
commodities). This approach aims to reduce the exposure of these
wind assets to volatile spot power market outcomes whilst still
providing a hedge for the vast majority of the anticipated energy
and carbon commodity price exposure 12 months in advance of
delivery. This updated approach has been introduced for incremental
volumes as they naturally come into the hedging window, i.e.
historic hedge positions were not unwound.
The approach to hedging hydro energy output remains unchanged at
approximately 85% of its anticipated energy output for the coming
12 months.
UK Business Energy: The business supplies electricity and gas to
business and public sector customers. Sales to contract customers
are 100% hedged: at point of sale for fixed contract customers;
upon instruction for flexi contract customers; and on a rolling
hedge for tariff customers.
Business Energy's sales demand volumes continue to be impacted
by the economic uncertainty created by ongoing coronavirus
restrictions and recovery, as well as current market price
volatility for flexi customers. The extent to which this will
impact customers' consumption in the medium term remains uncertain.
As a result of this uncertainty, Business Energy has adopted a more
dynamic forecasting approach by adjusting volumes hedged as nearer
term economic and consumption signals become clearer.
GB Thermal: In the six months prior to delivery, SSE aims to
hedge all of the expected output of its CCGT assets, having
progressively established this hedge over the preceding 24 months.
Hedging activity depends on the availability of sufficient market
depth and liquidity, which can be limited, particularly for periods
further into the future.
As stated in its Q3 Trading Update on 2 February 2021, due to
the uncertainty surrounding UK carbon pricing, SSE temporarily
suspended forward hedging of the expected generation profiles of
its CCGTs in GB. Hedging of the Thermal assets in the conventional
manner recommenced during FY22 following establishment of the UK
emission auction process and growth in volume UK emissions tickets
traded. SSE will continue to monitor market developments, in
particular developments surrounding UK carbon pricing, and will
adjust its hedging approach to take account of any resultant change
in exposures.
Gas Storage: The annual auction to offer gas storage capacity
contracts from Atwick, held in April 2021, resulted in no
third-party contracts being secured. As such the assets are being
commercially operated and the business continues to manage its
commodity exposure arising from the storage of physical gas to
changes in the spread between summer and winter prices, market
volatility and plant availability.
Gas Production: As the Gas Production business was held for sale
on an unhedged basis at 30 September 2021, no forward hedge
activity is currently being undertaken for the likely production
profiles of the business. The disposal of the Gas Production
business was concluded on 14 October 2021.
Energy Portfolio Management (EPM): EPM provides the route to
market and manages the execution for all of SSE's commodity trading
outlined above (spark spread, power, gas, and carbon). This
includes managing market conditions and liquidity and reporting and
monitoring net Group exposures. The business operates under strict
position limits and VAR controls. There is some scope for small
position-taking to permit EPM to manage around liquidity and shape
but this is contained within a VAR limit of GBP3m (GBP2m for the
curve period and GBP1m for the prompt).
Ireland: Vertical integration of the generation and customer
businesses in Ireland limits the Group's commodity exposure in that
market which includes an exposure to the level of wind
production.
Summarising movements on exceptional items and certain
remeasurements
Exceptional items
In the six months to 30 September 2021, SSE recognised a net
exceptional gain within continuing operations of GBP160.2m before
tax. The following table provides a summary of the key components
making up the net gain position:
Exceptional Gains / (Charges) within continuing operations Total
GBPm
============================================================ =======
Disposals of non-core assets:
============================================================ =======
Contracting & Rail business (18.1)
============================================================ =======
Impairments and other exceptional (charges) / credits
============================================================ =======
SSE Thermal GGCT Impairment reversal 181.6
============================================================ =======
Neos Networks (formerly SSE Telecommunications) adjustment
to consideration (6.2)
============================================================ =======
Other historic true-up credits 2.9
============================================================ =======
178.3
============================================================ =======
Total exceptional items 160.2
============================================================ =======
Notes:
- The definition of exceptional items can be found in Note
2(iii) of the Interim Financial Statements.
- Non-core assets are defined as being assets in which SSE is
not the principal operator or are less aligned with the transition
to net-zero emissions.
In addition to the above exceptional items from continuing
operations, a net exceptional loss within discontinued operations
of GBP183.2m after tax was recognised. This predominantly related
to the Gas Production asset impairment of GBP93.9m and the effect
of the UK deferred tax rate change in SGN of GBP85.5m. The final
exceptional result on sale of the Gas Production assets and the SGN
investment will be recognised following completion expected in the
second half of the 2021/22 financial year.
For a full description of exceptional items, see Note 6.1 of the
Interim Financial Statements.
Operating derivatives
SSE enters into forward purchase contracts (for power, gas and
other commodities) to meet the future demands of its energy supply
businesses and to optimise the value of its generation assets. Some
of these contracts are determined to be derivative financial
instruments under IFRS 9 and as such require to be recorded at
their fair value as at the date of the financial statements.
SSE shows the change in the fair value of these forward
contracts separately as this mark-to-market movement does not
reflect the realised operating performance of the businesses. The
underlying value of these contracts is recognised as the relevant
commodity is delivered, which for the large majority of the
position at 31 March 2021 is expected to be within the next 12-18
months.
The balance sheet movement in the operating derivative
mark-to-market valuation was a GBP1,204.0m increase from a small
"in-the-money" position at 31 March 2021 into a significantly
"in-the-money" position at 30 September 2021. This movement
consisted of:
-- Settlement during the year of GBP380.1m of previously
"out-of-the-money" contracts in line with the contracted delivery
periods; and
-- Mark-to-market gains of GBP1,584.1m on unsettled contracts
entered into during the course of 2020/21 and 2021/22 in line with
the Group's stated hedging policy. These mark-to-market gains
reflect the significant volatility in commodity markets during the
period.
As in prior years, the reported result does not include
remeasurement of 'own use' adverse hedging agreements which total
c.GBP(1.3)bn at 30 September 2021 and are excluded from recognition
under IFRS 9 but largely offset the IFRS 9 remeasurement noted
above.
Commodity stocks held at fair value
Gas inventory purchased by the Gas Storage business for
secondary trading opportunities is held at fair value with
reference to the forward month market price. The GBP235.2m positive
movement in the year arose from the significant increase in the
fair value of gas held over historic cost at the period end.
However, whilst this reflects the positive movement in fair
value of physical gas inventory held at the period end, it does not
reflect the negative mark-to-market movement on forward contracted
sales for the second half of the current financial year which are
not recognised under IFRS (and are included in the c.GBP(1.3)bn of
'own use' adverse hedging agreements noted above). Therefore,
similar to derivative contracts held at fair value, we do not
expect the majority of this valuation movement will be realised by
the business.
Financing derivatives
In addition to the positive movements above, a negative movement
of GBP55.9m was recognised on financing derivatives in the period
to 30 September 2021, including SSE's share of joint venture
financing derivative remeasurements, and related to mark-to-market
movements on cross-currency swaps and floating rate swaps that are
classed as hedges under IAS 39. These hedges ensure that any
movement in the value of net debt is predominately offset by a
movement in the derivative position. The adjustment was primarily
driven by weaker Sterling against the Euro and Dollar.
These remeasurements are presented separately as they do not
represent underlying business performance in the period. The result
on financing derivatives will be recognised in adjusted profit
before tax when the derivatives are settled.
Reported profit before tax and earnings per share
Taking all of the above into account, reported results for the
period to 30 September 2021 are significantly higher than the
previous period. In addition to the GBP1,383.3m cumulative net gain
on forward commodity, gas inventory and financing derivative fair
value remeasurements noted above, reported results also reflect the
reversal of historic SSE Thermal impairment charges of GBP181.6m as
well as other pre-tax exceptional items totalling GBP(21.4)m as
detailed within Note 6.1 of the Interim Financial Statements.
Reported results in the prior period reflected pre-tax
exceptional gains of GBP653.7m recognised which were driven by a
combination of progression with the Group's GBP2bn plus non-core
asset disposal programme and IFRS 9 remeasurements on operating
derivatives.
Financial management and balance sheet
Debt metrics Sept 21 March 21 Sept 20
GBPm GBPm GBPm
================================================================================= ========== ========== ===========
Net Debt / EBITDA* N/A 4.6 N/A
================================================================================= ========== ========== ===========
Adjusted net debt and hybrid capital (GBPm) (9,611.4) (8,898.9) (10,622.1)
================================================================================= ========== ========== ===========
Average debt maturity (years) 7.2 7.4 6.9
================================================================================= ========== ========== ===========
Adjusted interest cover (times) 1.6 3.5 1.5
================================================================================= ========== ========== ===========
Average interest rate for the period (excluding JV/assoc. interest and all
hybrid coupon payments) 3.35% 3.12% 3.15%
================================================================================= ========== ========== ===========
Average cost of debt at period end (including all hybrid coupon payments) 3.89% 3 .75% 3.58%
================================================================================= ========== ========== ===========
* Note: Net debt represents the group adjusted net debt and
hybrid capital. EBITDA represents the full year group adjusted
EBITDA, less GBP311.8m (at March 2021) for the proportion of
adjusted EBITDA from equity-accounted Joint Ventures relating to
project financed debt.
Net finance costs reconciliation Sept 21 Sept 20
GBPm GBPm
======================================================= ======== ========
Adjusted net finance costs 202.6 195.0
======================================================= ======== ========
Add/(less):
======================================================= ======== ========
Lease interest charges (16.2) (17.6)
======================================================= ======== ========
Notional interest arising on discounted provisions (1.6) (1.9)
======================================================= ======== ========
Hybrid equity coupon payment 50.8 46.6
======================================================= ======== ========
Adjusted finance costs for interest cover calculation 235.6 222.1
======================================================= ======== ========
SSE Principal Sources of debt funding Sept 21 March 21 Sept 20
=================================================== ======== ========= ========
Bonds 58% 58% 51%
=================================================== ======== ========= ========
Hybrid debt and equity securities 22% 24% 23%
=================================================== ======== ========= ========
European investment bank loans 7% 8% 11%
=================================================== ======== ========= ========
US private placement 9% 8% 8%
=================================================== ======== ========= ========
Index -linked debt & short-term funding 4% 2% 7%
=================================================== ======== ========= ========
% of total SSE borrowings secured at a fixed rate 100% 98% 93%
=================================================== ======== ========= ========
Rating Agency Rating Criteria Date of Issue
==================== ======================== ========================================= ===============
Moody's Baa1 'negative outlook' 'Low teens' Retained Cash Flow/Net Debt September 2020
==================== ======================== ========================================= ===============
Standard and Poor's BBB+ 'outlook stable' About 18% Funds From Operations/Net Debt September 2020
==================== ======================== ========================================= ===============
Maintaining a strong balance sheet
While there may be short-term fluctuations, a key objective of
SSE's approach to managing cash outflow and securing value and
proceeds from disposals is its target of a net debt/EBITDA ratio of
around 4.5 times.
As well as promoting the long-term success of the Company, this
approach is also designed to ensure that SSE maintains credit
rating ratios (Retained Cash Flow (RCF)/Net Debt and Funds From
Operations (FFO)/Net Debt) that are comparable with private sector
utilities across Europe and comfortably above those required for an
investment grade credit rating.
SSE's S&P credit rating remains at BBB+ 'stable outlook' and
its Moody's rating remains at Baa1, albeit on negative outlook,
following review in September 2020. The annual ratings review
meetings have taken place in September 2021 with both agencies
expected to announce their ratings update following the
announcement of the updated Strategy and Investment Plan today.
Adjusted net debt and hybrid capital
SSE's adjusted net debt and hybrid capital was GBP9.6bn at 30
September 2021, up from GBP8.9bn at 31 March 2021, reflecting the
ongoing capital investment programme, phasing of UK carbon auctions
and 22/23 ROC cashflows, debt revaluations and various other
working capital movements.
Debt summary as at 30 September 2021
No medium or long term debt was issued during the period,
however EUR120m (GBP103m) of 3-month commercial paper with an
annual coupon of 0.425% was issued by SSE plc in September
2021.
A debt revaluation adjustment of GBP49m was recognised at 30
September 2021, up from GBP3.2m at 31 March 2021, and related to
mark-to-market movements on cross-currency swaps and floating rate
swaps that are classed as hedges under IAS 39. These hedges ensure
that any movement in the value of net debt is predominately offset
by a movement in the derivative position. The adjustment was
primarily driven by weaker Sterling against the Euro and
Dollar.
In addition to the hybrid bond called in April 2021 as outlined
below, GBP450m of debt matured in September 2021 with a further
GBP415m due to mature in February 2022.
Hybrid bonds summary as at 30 September 2021
Hybrid bonds are a valuable part of SSE's capital structure,
helping to diversify SSE's investor base and most importantly to
support credit rating ratios, with their 50% equity treatment by
the rating agencies being positive for SSE's credit metrics.
In April 2021, the EUR600m (GBP440m) March 2015 Hybrid Bond was
called and redeemed in accordance with the first call date.
A summary of SSE's Hybrid Bonds as at 30 September 2021 can be
found below:
Issued Hybrid Bond Value* All in rate First Call Date Accounting Treatment
=========== =================== ============ ================ =====================
March 2017 GBP300m 3.73% September 2022 Debt accounted
=========== =================== ============ ================ =====================
March 2017 $900m (GBP749m) 2.72% September 2022 Debt accounted
=========== =================== ============ ================ =====================
July 2020 GBP600m 3.74% April 2026 Equity accounted
=========== =================== ============ ================ =====================
July 2020 EUR500m (GBP454m) 3.68% July 2027 Equity accounted
=========== =================== ============ ================ =====================
Note: Sterling equivalents shown reflect the fixed exchange rate
where proceeds have been swapped to Sterling and where proceeds
remain in Euros the Sterling equivalent is revalued each period
Further details on each hybrid bond can be found in Notes 13
& 14 to the Interim Financial Statements however a table noting
the amounts, timing and accounting treatment of coupon payments is
shown below:
Hybrid coupon payments 2021/22 2020/21
=============================== ================ ================
HYe FYe HYa FYa
=============================== ======= ======= ======= =======
Total equity (cash) accounted GBP51m GBP51m GBP47m GBP47m
=============================== ======= ======= ======= =======
Total debt (accrual) accounted GBP15m GBP31m GBP15m GBP30m
=============================== ======= ======= ======= =======
Total hybrid coupon GBP67m GBP82m GBP62m GBP77m
=============================== ======= ======= ======= =======
SSE's July 2020 hybrid bonds are perpetual instruments and are
therefore accounted for as part of equity within the Financial
Statements but, as in previous years, have been included within
SSE's 'Adjusted net debt and hybrid capital' to aid comparability.
The remaining March 2017 hybrid bonds have a fixed redemption date
and are therefore debt accounted and included within Loans and
Other Borrowings; as such they are already part of SSE's adjusted
net debt and hybrid capital.
The coupon payments relating to the equity accounted hybrid
bonds are presented as distributions to other equity holders and
are reflected within adjusted earnings per share when paid. The
coupon payments on the debt accounted hybrid bonds are treated as
finance costs under IFRS 9.
Managing net finance costs
SSE's adjusted net finance costs - including interest on debt
accounted hybrid bonds but not equity accounted hybrid bonds - were
GBP202.6m in the six months to 30 September 2021 reflecting a
slight increase in average cost of debt.
Reported net finance costs were GBP218.3m compared to GBP160.5m
which, in addition to the movements above, reflected the higher
movement on financing derivatives slightly offset by a lower share
of joint ventures and associates' interest costs.
Summarising cash and cash equivalents
At 30 September 2021, SSE's adjusted net debt included cash and
cash equivalents of GBP0.2bn, down from GBP1.6bn at March 2021
reflecting redemption of the March 2015 Hybrid and repayment of
maturing debt. The GBP1.6n of cash and cash equivalents at 31 March
2021 was higher than normal, following proceeds from disposals
received prior to 31 March 2021 and the issuance of the GBP500m
dual tranche green bond in March 2021.
Cash collateral may be provided or received on exchange traded
contracts, depending on whether they are in an "out of the money"
or "in the money" position for the Group. At 30 September 2021,
GBP87.4m of cash was held as collateral from third parties on "in
the money" contracts, compared to GBP36.1m at 31 March 2021.
Revolving Credit Facility
SSE has GBP1.5bn of committed bank facilities in place to ensure
the Group has sufficient liquidity to allow day-to-day operations
and investment programmes to continue in the event of disruption to
Capital Markets preventing SSE from issuing new debt for a period
of time. These facilities, noting any options to extend, are set
out in the table below.
Date Issuer Debt type Term Value
======= ======== ================================================================ ===== =========
Mar 19 SSE plc Syndicated Revolving Credit Facility with 10 Relationship Banks 2026 GBP1.3bn
======= ======== ================================================================ ===== =========
Oct 19 SSE plc Revolving Credit Facility with Bank of China 2026 GBP200m
======= ======== ================================================================ ===== =========
The facilities can also be utilised to cover short-term funding
requirements; however, they remain undrawn for most of the time and
at 30 September 2021 they were both undrawn.
Both facilities are classified as sustainable facilities with
interest rate and fees paid dependant on SSE's performance in
environmental, social and governance matters, as assessed
independently by Vigeo Eiris.
Maintaining a prudent Treasury policy
SSE's treasury policy is designed to be prudent and flexible. In
line with that, cash from operations is first used to finance
regulatory and maintenance capital expenditure and then dividend
payments, with investment and capital expenditure for growth
generally financed by a combination of cash from operations,
non-core asset disposals, partnerships and project financing, bank
borrowings and bond issuance.
As a matter of policy, a minimum of 50% of SSE's debt is subject
to fixed rates of interest. Within this policy framework, SSE
borrows as required on different interest bases, with financial
instruments being used to achieve the desired out-turn interest
rate profile. At 30 September 2021, 100% of SSE's borrowings were
at fixed rates.
Borrowings are mainly in Sterling and Euros to reflect the
underlying currency denomination of assets and cash flows within
SSE. All other foreign currency borrowings are swapped back into
either Sterling or Euros.
Transactional foreign exchange risk arises in respect of
procurement contracts, fuel and carbon purchasing, commodity
hedging and energy portfolio management operations, and long-term
service agreements for plant.
SSE's policy is to hedge any material transactional foreign
exchange risks through the use of forward currency purchases and/or
financial instruments. Translational foreign exchange risk arises
in respect of overseas investments; hedging in respect of such
exposures is determined as appropriate to the circumstances on a
case-by-case basis.
Ensuring a strong debt structure through medium- and
long-term borrowings
The ability to raise funds at competitive rates is fundamental
to investment. SSE's fundraising over the past five years,
including senior bonds, hybrid capital and term loans, totals
GBP5.2bn and SSE's objective is to maintain a reasonable range of
debt maturities. Its average debt maturity, excluding hybrid
securities, at 30 September 2021 was 7.2 years, down from 7.4 years
at 31 March 2021. This reflects SSE's maturing debt during the six
months to September 2021. SSE's average cost of debt is now 3.89%,
compared to 3.75% at 31 March 2021.
Going Concern
The Directors regularly review the Group's funding structure and
have assessed that the Interim Financial Statements should be
prepared on a going concern basis.
In making their assessment the Directors have considered
sensitivities on the forecast future cashflows of the Group for the
period to 31 December 2022; the current market volatility in power
and gas prices and the increased collateral requirements, the
Group's credit rating; the success of the Group's disposal
programme through 2020/21; and the successful issuance of GBP2.5bn
of medium to long term debt and hybrid equity during the year to 31
March 2021.
The Directors have also assessed that the Group remains able to
access Capital Markets, as demonstrated by the GBP2.5bn of debt
issued over the last 18 months via the dual tranche Euro bond
issuance in April 2020, the dual tranche hybrid issuance in July
2020 and the dual tranche green bond issuance in March 2021. There
is also an expectation of future available liquidity in the
commercial paper market in addition to the Group's existing
liquidity with GBP1.5bn of undrawn committed borrowing
facilities.
SSE's principal joint ventures and associates
SSE's financial results include contributions from equity
interests in joint ventures ("JVs") and associates, all of which
are equity accounted. The details of the most significant of these
are included in the table below. This table also highlights SSE's
share of project financed debt associated with its equity interests
in JVs, which, excluding SGN which has been reclassified as a
discontinued operation, is under GBP1.9bn as at 30 September
2021.
SSE principal JVs and Asset type SSE holding SSE share of external SSE Shareholder loans as
associates debt as at 30 September at 30 September 2021
2021
========================= ======================== ============ ======================== =========================
Seabank Power Ltd 1,234MW CCGT 50% No external debt No loans outstanding
========================= ======================== ============ ======================== =========================
Marchwood Power Ltd 920MW CCGT 50% No external debt GBP44m
========================= ======================== ============ ======================== =========================
Clyde Windfarm 522MW onshore wind farm 50.1% No external debt GBP127m
(Scotland) Ltd
========================= ======================== ============ ======================== =========================
Dogger Bank A Wind Farm 1,200MW offshore wind 40% GBP380m Project financed
farm.
========================= ======================== ============ ======================== =========================
Dogger Bank B Wind Farm 1,200MW offshore wind 40% GBP210m Project financed
farm.
========================= ======================== ============ ======================== =========================
Dogger Bank C Wind Farm Up to 1,200MW offshore 50% No external debt GBP136m
wind farm.
========================= ======================== ============ ======================== =========================
Seagreen Windfarm Ltd 1,075MW offshore wind 49% GBP529m GBP53m
farm
========================= ======================== ============ ======================== =========================
Seagreen 1a Ltd Offshore wind farm 50% No external debt GBP5m
extension
========================= ======================== ============ ======================== =========================
Scotia Gas Networks Ltd Gas distribution 33.3% GBP1,645m GBP119m
network
========================= ======================== ============ ======================== =========================
Beatrice Offshore 588MW offshore wind 40% GBP746m Project financed
Windfarm Ltd farm
========================= ======================== ============ ======================== =========================
Cloosh Valley Wind Farm 105MW onshore windfarm 25% GBP27m Project financed
(part of Galway Wind
Park)
========================= ======================== ============ ======================== =========================
Neos Networks Ltd Private telecoms 50% No external debt GBP78m
network
========================= ======================== ============ ======================== =========================
Slough Multifuel Ltd 50MW energy-from-waste 50% No external debt GBP49m
facility
========================= ======================== ============ ======================== =========================
Stronelairg Windfarm Ltd 228MW onshore wind farm 50.1% No external debt GBP88m
========================= ======================== ============ ======================== =========================
Dunmaglass Windfarm Ltd 94MW onshore windfarm 50.1% No external debt GBP47m
========================= ======================== ============ ======================== =========================
Notes:
1. Greater Gabbard, a 504MW offshore windfarm (SSE share 50%) is
proportionally consolidated and is reported as a Joint Operation
with no loans outstanding.
2. Scotia Gas Networks Ltd has been reclassified as a
discontinued operation from 11 June 2021, following the agreement
to sell SSE's 33.3% stake to a consortium comprising existing SGN
shareholders Ontario Teachers' Pension Plan Board and Brookfield
Super-Core Infrastructure Partners for cash consideration of
GBP1,225m. The agreement is conditional on certain regulatory
approvals and is expected to complete by 31 March 2022.
taxation
SSE considers being a responsible taxpayer a core element of
being a responsible member of society. SSE seeks to pay the right
amount of tax on its profits, in the right place, at the right
time, and was the first FTSE 100 company to have been awarded the
Fair Tax Mark.
While SSE has an obligation to its customers and shareholders to
manage its total tax liability efficiently, it does not seek to use
the tax system in a way it does not consider it was meant to
operate, or use "tax havens" to reduce its tax liabilities.
SSE understands it also has an obligation to the society in
which it operates, and from which it benefits - for example, tax
receipts are vital for the public services SSE relies upon.
Therefore, SSE's tax policy is always to operate within both the
letter and spirit of the law.
For reasons already stated above, SSE's focus is on adjusted
profit before tax, and in line with that, SSE believes that the
adjusted current tax charge on that profit is the tax measure that
best reflects underlying performance. SSE's adjusted current tax
rate for the period to 30 September 2021, based on adjusted profit
before tax, is 7.3%, as compared with 8.7% (restated) for the same
period last year on the same basis, and after discrete items. The
reduction in rate year-on-year is primarily due to the impact of
capital allowances available on the Group's capital investment
programme.
The UK Budget in March 2021 introduced a "super-deduction" for
qualifying capital expenditure incurred during the two year period
from 1 April 2021 to 31 March 2023. Capital allowances rates of
130% and 50% replace the existing rates of 18% and 6% respectively
for qualifying capital expenditure in that period, significantly
increasing the amount of capital allowances available on the
Group's capital investment programme.
Pensions
Contributing to employees' pension schemes - IAS 19 Sept 21 March 21 Sept 20
====================================================================== ======== ========================== ========
Pension scheme asset recognised in the balance sheet before deferred
tax GBPm 501.7 543.1 528.5
====================================================================== ======== ========================== ========
Pension scheme liability recognised in the balance sheet before
deferred tax GBPm (63.7) (186.1) (382.0)
====================================================================== ======== ========================== ========
Net pension scheme asset recognised in the balance sheet before
deferred tax GBPm 438.0 357.0 146.5
====================================================================== ======== ========================== ========
Employer cash contributions Scottish Hydro Electric scheme GBPm 0.5 1.1 0.5
====================================================================== ======== ========================== ========
Employer cash contributions Southern Electric scheme GBPm 30.7 55.2 27.4
====================================================================== ======== ========================== ========
Deficit repair contribution included above GBPm 20.4 37.9 17.7
====================================================================== ======== ========================== ========
In the 6 months to 30 September 2021, the surplus across SSE's
two pension schemes increased by GBP81.0m, from GBP357.0m to
GBP438.0m.
At 30 September 2021, the deficit for the Southern Electric
Pension Scheme ('SEPS') reduced by GBP122.4m mainly due to scheme
assets outperforming the discount rate, which resulted in a net
gain on scheme assets of GBP111.6m. Movements in scheme liabilities
due to changes in financial assumptions and experience adjustments
were offset by contributions in the period.
The Scottish Hydro Electric Pension Scheme ('SHEPS') has insured
against volatility in its deferred and pensioner members through
the purchase of 'buy-in' contracts meaning that the Group only
retains exposure to volatility in active employees. During the year
the SHEPS surplus decreased by GBP41.4m, due to changes in
financial assumptions and experience adjustments. The scheme
remains on a contribution holiday, following finalisation of the
triennial valuation during the period.
Additional information on employee pension schemes can be found
in Note 17 to the Interim Financial Statements.
business unit operating review
SSE's strategy of developing, building, operating and investing
in the electricity infrastructure and businesses needed in the
transition to net zero is delivered through a focused mix of core
and complementary Business Units.
The networks and renewables businesses form SSE's low-carbon
electricity core. These businesses are key to enabling a net zero
economy, have significant growth potential and, importantly, fit
together. With common skills and capabilities in the development,
construction, financing and operation of world-class, highly
technical electricity assets, there is a strong strategic logic to
them forming the low carbon electricity core of SSE. The other
businesses SSE retains are highly complementary to that renewables
and networks core and all contribute towards delivery of SSE's net
zero strategy. SSE's business mix is very deliberate, highly
effective, fully focused and well set to prosper on the journey to
net zero and beyond.
The review of the Business Units that follows provides
visibility of performance and future priorities.
Economically-regulated networks
SSE owns and operates an electricity transmission network in the
north of Scotland and two electricity distribution networks in the
north of Scotland and in central southern England. SSE is in the
process of a sales process to dispose of its current 33.3%
financial stake in Scotia Gas Networks. Owners of energy networks
in Great Britain are remunerated according to the RIIO (Revenue =
Incentives + Innovation + Outputs) framework set by Ofgem, under
which the regulator determines an annual allowed level of required
capital expenditure and operating costs, in order to meet required
network outputs. These are added together to form total expenditure
or 'totex', which is split by defined capitalisation rates which
differ between networks.
Regulatory operational expenditure ('fast money') flows into
licensee revenue, whereas regulatory capex ('slow money') is added
to the regulatory asset value ('RAV') for each network. Licensees
earn a return on regulatory equity and receive an allowance for the
cost of debt, both of which are calculated based on a notional
split of their RAV.
Each licensee has the opportunity to earn above its base return
on equity through delivering efficiency savings on totex.
Additionally, if service levels improve against targets, there is
an opportunity to earn additional income through incentives. In the
event that service levels fall below targets set out in the price
control, a penalty will be incurred which reduces network revenue
and therefore customer bills. This ensures that customers only
compensate networks for improving service levels. Further,
customers benefit from reduced bills when network providers achieve
efficiency savings on totex expenditure.
Charges per MWh ('tariffs') are set by licensees 15 months in
advance of the regulatory year and are based on forecasts of: (a)
revenue which licensees are entitled to collect in respect of the
regulatory year ('allowed revenue'); (b) the incentives and totex
outperformance for the last three months of the year in which the
tariffs are set; and (c) the level of volumes which will be
distributed within the regulatory year. Differences in collected
versus allowed revenue (referred to as 'over- or under-recovery')
are accommodated in allowed revenue two years after the year in
which they occur.
SSEN Transmission
SSEN Transmission key performaNce indicators
SSEN Transmission September 21 September 20
====================================== ============= =============
Transmission adjusted and reported
operating profit - GBPm 181.7 115.2
====================================== ============= =============
Regulated Asset Value (RAV) - GBPm 3 ,875 3,643
====================================== ============= =============
Renewable Capacity connected to SSEN
Transmission Network - MW 7,850 6,400
====================================== ============= =============
Transmission adjusted investment and
capital expenditure - GBPm 291.0 224.4
====================================== ============= =============
SSEN Transmission overview
SSEN Transmission owns, operates and develops the high voltage
electricity transmission system in the North of Scotland and its
islands.
Over the duration of the five-year RIIO-T2 price control, which
began in April 2021, investment and capital expenditure by SSEN
Transmission is expected to total at least GBP2.8bn (the Certain
View), including GBP291.0m in the first half of 2021/22. Taking the
Certain View alone, Transmission RAV would exceed GBP5bn by the end
of RIIO-T2.
This investment plays a pivotal role in providing the critical
national infrastructure required to facilitate the transition to
net zero and to maintain network reliability for the communities
SSEN Transmission serves as it delivers a network for net zero.
Operational delivery
SSEN Transmission has made a strong start to RIIO-T2. Building
on a proud track record of keeping the lights on for the homes and
businesses SSEN Transmission serves, in the six months to 30
September 2021, there have been no faults on the transmission
network resulting in a loss of supply for demand users, in line
with SSEN Transmission's RIIO-T2 goal to aim for 100% transmission
network reliability for homes and businesses. This strong
operational performance also means SSEN Transmission remains on
track for the full reward through the annual Energy Not Supplied
Incentive.
The RIIO-T2 period is expected to deliver significant growth in
the volume of renewables connected to SSEN Transmission's network,
which is forecast to increase from just under 7GW at the start of
RIIO-T2 to between 10GW and around 13GW. This includes growth of
1.1GW in the six months to 30 September 2021, primarily driven by
the connection of Moray East offshore windfarm (900MW). This brings
the total installed capacity connected to the North of Scotland
transmission network to 9.1GW, of which 7.85GW is from renewable
sources, supporting SSEN Transmission's RIIO-T2 goal to transport
the renewable electricity that powers 10m homes, which will be met
once the installed capacity of renewables reaches 10GW.
Connecting the forecast growth in renewables will be underpinned
by a series of strategic investments in new and upgraded
infrastructure across the North of Scotland. Excellent progress is
being made on the Shetland transmission link, which has now been in
construction for over 12 months and will see Shetland connected to
the GB transmission system for the first time, enabling the
connection of renewables and supporting Shetland's future security
of supply. The substation and convertor station sites at Kergord
(Shetland) and Noss Head (Caithness) are now taking shape, with
most building structures now erected. Work to install the land
cable on both shore ends is also under way, with cable duct works
progressing well. Subsea boulder clearance works are due to begin
before the end of 2021 in advance of the subsea cable installation
works which will follow from 2022/23 with the project on track for
completion in 2024.
The first phase of the Inveraray to Crossaig overhead line
replacement project in Argyll was fully energised in July 2021,
with work now under way on the second phase from Port Ann to
Crossaig, which remains on track for completion by summer 2024.
Excellent progress continues to be made to incrementally
increase the capacity of the north east and east coast transmission
network to 275kV then to 400kV, with new substations at New Deer
(May) and Rothienorman (July) now energised at 275kV, to be
subsequently upgraded to 400kV in 2023. The 400kV overhead line
(OHL) upgrade works between Peterhead, Rothienorman and
Blackhillock are also under way, due for completion in 2023. The
overall upgrade of the east coast network to 400kV remains on track
for completion in 2026
At Alyth, construction of a new substation, including specialist
voltage control devices, has commenced with good progress also
being made at Peterhead substation and an upgrade to Tealing
substation, which will help
facilitate the connection of the Seagreen offshore wind farm in early 2022.
To support SSEN Transmission's 1.5C science-based target
emissions reduction commitments, including its RIIO-T2 goal to
deliver a one third reduction in greenhouse gas emissions, the
business remains at the forefront of industry efforts to remove
harmful SF6 gases from its infrastructure, working with its supply
chain to develop and deliver innovative alternatives to SF6. This
includes the world's largest installation of GE's g3 gas-insulated
substation at New Deer substation and the world's first g3 400kV
substation at Kintore.
For financial performance commentary please refer to the Group
Financial Review.
cma RIIO-T2 appeal
The Competitions and Markets Authority (CMA) published its final
determination on SSEN Transmission's appeal against certain
elements of Ofgem's RIIO-T2 price control settlement on 28 October.
The business welcomed the upholding of appeals against the assumed
'Outperformance Wedge', and for changes to the Licence Modification
Process. SSEN Transmission was disappointed, however, that the CMA
did not uphold appeals on the flawed Cost of Equity, or on changes
to how Transmission Network Use of System Charges are recovered and
the associated risk of under recovery this presents.
Nonetheless, the business remains committed to working
constructively with Ofgem and other stakeholders as it continues to
take forward ambitious plans to deliver a network for net zero.
growth opportunities
During the RIIO-T2 period, SSEN Transmission expects to progress
a number of investments over and above its GBP2.8bn Certain View to
put the North of Scotland on a pathway to net zero. SSEN
Transmission expects to unlock these additional investments through
Ofgem's Uncertainty Mechanisms. Good progress has been made in
progressing these additional investments in the first half of
2021/22, including:
In October, Ofgem published its decision on the Initial Needs
Case (INC) for two HVDC links connecting Scotland to England,
recognising the clear need for these investments. Work on each of
the 2GW links, with a combined estimated cost of GBP3.4bn, will now
be split into two projects. The Peterhead to Selby link will be
progressed jointly by SSEN Transmission and National Grid
Electricity Transmission (NGET); and the Torness to Hawthorn Pit
link will be progressed jointly by SP Energy Networks and NGET. A
Final Needs Case (FNC) remains on track for submission before the
end of 2021. With an energisation date of 2029, development and
early construction activity and expenditure would take place during
RIIO-T2, with delivery taking place in RIIO-T3.
The Initial Needs Case (INC) for the replacement of the
Fort-Augustus to Skye transmission line, at an estimated total
investment of around GBP400m, was submitted to Ofgem in August
2021. The replacement line is required to maintain security of
supply and to enable the connection of renewable electricity
generation.
Work to prepare the INC to upgrade the Argyll transmission
network to 275kV operation is progressing well, with the INC due to
be submitted before the end of 2021. The Argyll 275kV strategy is
required to support the forecast growth in renewables in the
region.
Further expenditure to connect new renewable generation, rail
electrification and system security is also expected throughout the
RIIO-T2 period and beyond when the need for this investment becomes
certain. These investments could see the total installed generation
capacity increase to around 14GW by the end of RIIO-T2, with around
13GW of this from renewable sources. Subject to regulatory
approval, combined, these investments, alongside the Certain View,
could bring the total expenditure across the RIIO-T2 period to over
GBP4bn, with SSEN Transmission RAV increasing to over GBP6bn by the
end of RIIO-T2.
growth beyond riio-t2
Beyond RIIO-T2, the ScotWind leasing round, the outcome of which
is expected in January 2022, is set to unlock up to 10GW of new
offshore wind in Scotland which will require significant
transmission upgrades both onshore and offshore.
To support the connection of ScotWind and the UK Government's
40GW by 2030 offshore wind target, the National Grid ESO, in
collaboration with the three GB Transmission System Operators, is
developing a Holistic Network Design (HND) which will set out the
onshore and offshore network requirements to deliver 2030 targets.
The HND is expected to include a second HVDC link from Peterhead to
England, alongside several other major reinforcements required to
deliver 2030 offshore wind targets, supporting future earnings and
RAV growth.
In addition to the opportunities outlined above, SSEN
Transmission continues to work with stakeholders in Orkney and the
Western Isles to develop and take forward proposals to enable
mainland transmission connections. Changes to the structure of the
forthcoming Contracts for Difference auction, with offshore wind
now in a separate pot to remote island wind, may increase the
competitiveness of remote island wind which in turn, could support
the investment case for the proposed transmission links. The
outcome of the CfD auction is expected in the first half of
2022.
SSEN Distribution
SSEN distribution key performance indicators
SSEN Distribution September 21 September 20
======================================= ============= =============
Distribution adjusted and reported
operating profit - GBPm 153.3 114.3
======================================= ============= =============
Regulated Asset Value (RAV) - GBPm 3,862 3,825
======================================= ============= =============
Distribution adjusted investment and
capital expenditure - GBPm 171.3 167.9
======================================= ============= =============
Electricity Distributed - TWh 17.2 15.8
======================================= ============= =============
Customer minutes lost (SHEPD) average
per customer 23 24
======================================= ============= =============
Customer minutes lost (SEPD) average
per customer 24 23
======================================= ============= =============
Customer interruptions (SHEPD) per
100 customers 26 29
======================================= ============= =============
Customer interruptions (SEPD) per 100
customers 25 25
======================================= ============= =============
SSEN Distribution overview
SSEN Distribution, operating under licence as Scottish Hydro
Electric Power Distribution plc (SHEPD) and Southern Electric Power
Distribution plc (SEPD), is responsible for safely and reliably
maintaining the electricity distribution networks supplying over
3.8m homes and businesses across central southern England and the
North of Scotland.
There are 18 months remaining of the RIIO-ED1 Price Control
period and SSEN Distribution is focusing on:
-- Improved performance in relation to customer and network
incentives available within RIIO-ED1.
-- Efficient delivery of capital investment.
-- Focused delivery of regulatory outputs.
-- Maintaining a leadership position in innovation.
In July 2022, SSEN Distribution published its draft GBP4.1bn
RIIO-ED2 business plan for 2023 to 2028. Powering Communities to
Net Zero sets out how improvements will be delivered for customers
and network investment accelerated to power communities to net
zero. Informed by engagement with over 21,000 stakeholders, the
draft plan sets out six goals built around SSEN Distribution's
strategic outcomes. It proposes GBP900m of additional potential
investment under regulatory Uncertainty Mechanisms to help protect
customers and provide the necessary flexibility as opportunities
and policy evolves. SSEN Distribution has been engaging extensively
with stakeholders following the publication of the draft plan to
support, inform and prepare a finalised plan to be submitted to
Ofgem on 1 December 2021.
Operational delivery
SSEN Distribution continues to undertake a major capital
investment programme across both its networks, delivering
significant improvements for customers and increasing its Regulated
Asset Value.
In the six months to 30 September 2021, the business invested
GBP171.3m, bringing the total invested since the beginning of the
RIIO-ED1 price control to around GBP2.1bn. This is part of a
forecast GBP2.6bn investment throughout the RIIO-ED1 period,
supporting future earnings through RAV growth.
SSEN Distribution invests to ensure the communities it serves
thrive today and to create a net zero tomorrow. In the first half
of 2021/22 this included over GBP155.5m of investment in projects
and network infrastructure, comprised of GBP88.6m in SEPD and
GBP66.9m in SHEPD. This included works beginning in April 2021 on a
GBP7.9m project to upgrade equipment and future-proof the network
for around 114,000 west London customers, to be completed in March
2023; and a GBP5.6m investment to upgrade a substation in Hampshire
to be completed in July 2023. In August 2021, SSEN Distribution
successfully concluded a GBP28m subsea cable replacement between
Skye and Harris. The project involved significant offshore works
using specialist marine vessels to successfully install and protect
the 33kV cable between Ardmore, Skye and Beacravik, Harris.
Incentive performance remains a key revenue driver and SSEN
prioritises improving reliability of network performance and to
support a positive customer experience. Under the RIIO regulatory
regime, and the Interruptions Incentive Scheme (IIS), SSEN
Distribution is incentivised on its performance against the loss of
electricity supply through the recording of Customer Interruptions
(CI) and Customer Minutes Lost (CML) which includes both planned
and unplanned supply interruptions. These incentives will typically
be collected two years after they are earned.
SSEN has continued to drive improvements in network performance
and resilience through investment in automation. In SHEPD CML
reduced from 28.5 to 26.1 and CI from 23.9 to 23.5 in comparison to
the 2020/21. In SEPD CI remained broadly flat in the first six
months of 2021/22, in comparison to the first six months of 2020/21
(24.8 to 24.9). CML rose from 22.5 to 23.6 in comparison to the
same period in 2020/21, due to two significant 132kV faults.
SSEN has successfully secured improvement in customer
satisfaction levels based on initial RIIO-ED1 Broad Measure
incentive scores. The current year-end target is GBP4m. Whilst
performance in SHEPD remains strong, SEPD has had a challenging
first half of the year with demand increasing as the economy
reopened following the lifting of coronavirus restrictions,
resulting in a reduction in customer satisfaction. There is a full
improvement plan in place for each Broad Measure category in SEPD
to improve customer satisfaction scores. Building on last year's
increased revenue, SSEN Distribution secured an improved score from
its Stakeholder Engagement and Customer Vulnerability (SECV)
submission leading to an indicative income increase from GBP1.1m to
GBP1.6m.
For financial performance commentary please refer to the Group
Financial Review.
Growth opportunities
The UK's net zero ambitions will lead to a trebling of demand on
electricity networks, according to the Climate Change Committee
forecasts. Two key drivers behind the increase in demand will be
the electrification of heating and transport which currently
account for up to 23% and 27% respectively of annual UK carbon
emissions.
The UK Government is targeting 600,000 heat pump installations a
year by 2028 and its ambition is to phase out the installation of
new gas boilers from 2035. These measures will be supported by its
target of reducing heat pump cost by up to 50% by 2025.
SSEN Distribution's ED2 draft (July 2021) Business Plan's
proposed investment and utilising of flexibility to optimise the
network will support an increase in heat pump numbers from around
20,000 to 800,000 by 2028, aligned with SSEN Distribution's 2020
Future Energy Scenario (DFES) forecasts. SSEN Distribution applies
a 'flexibility first' approach to satisfying demand requirements,
recognising that the decarbonisation of heat will require a range
of solutions and technologies, whilst also ensuring that the
network needs to be ready to accommodate rapid heat pump uptake
efficiently and at the time needed.
The UK Government's Net Zero Strategy commits to decarbonising
the power system by 2035 and highlights that electricity networks
will require up to GBP30bn of investment by 2037 in maintenance and
reinforcement. It also announced a Zero Emission Vehicle mandate
for car manufacturers, requiring an increasing percentage of
zero-emission vehicle sales each year from 2024. In SSEN
Distribution's network areas, according to the 2020 DFES, electric
vehicle charging capacity could increase from less than 500MW today
to 9GW by 2030.
Throughout its strategies both the UK and Scottish governments
have emphasised support, and the necessity, for strategic
investment in electricity networks to accommodate significant
increases in demand. As part of SSEN's commitment to considering
flexibility prior to network reinforcement it is part of CrowdFlex,
the UK's largest ever domestic flexibility trial. Announced in June
2021, SSEN is working alongside National Grid ESO, Octopus Energy
and Ohme. CrowdFlex will include 25,000 UK households and inform
innovative approaches to managing low-carbon technology uptake.
SSEN Distribution's RIIO ED2 draft business plan proposed
GBP4.1bn in baseline investment, which represents an increase of
around 36% on an equivalent ED1 period. Translating that into the
Group's new five-year capital and investment expenditure capex plan
to FY26 would see c.GBP2bn of capex as SSEN Distribution moves into
the ED2 price control period from 2023. This equates to a >15%
increase on annual investment from the previous capex plan and
therefore incorporates just part of the ambitious distribution
investment plans out to 2028.
While significant and extensive electrification is required put
the UK on the path to realising its net zero target, the pace of
change that will take place is not certain. SSEN Distribution has
proposed GBP900m of potential investment under regulatory
Uncertainty Mechanisms to help protect customers and provide the
necessary flexibility as positions and policy evolves during
RIIO-ED2. This flexibility allows SSEN Distribution to respond when
greater clarity is available for years 3-5 of the ED2 plan and to
avoid committing customers to paying for investment before we know
what is fully efficient.
The final RIIO ED2 Business Plan will represent a further
refinement of the draft, taking account of feedback and updated
through extensive stakeholder engagement on the draft plan.
SSE Renewables
sse Renewables key performance indicators
SSE Renewables September 21 September 20
========================================= ============= =============
Renewables adjusted operating profit
- GBPm 25.4 141.6
========================================= ============= =============
Renewables reported operating profit
- GBPm (33.6) 318.6
========================================= ============= =============
Renewables adjusted investment and
capital expenditure before refunds
- GBPm 417.5 176.4
========================================= ============= =============
Generation capacity - MW
========================================= ============= =============
Onshore wind capacity (GB) - MW 1,285 1,247
========================================= ============= =============
Onshore wind capacity (NI) - MW 122 122
========================================= ============= =============
Onshore wind capacity (ROI) - MW 567 567
========================================= ============= =============
Total onshore wind capacity - MW 1,974 1,936
========================================= ============= =============
Offshore wind capacity (GB) - MW 487 487
========================================= ============= =============
Conventional hydro capacity (GB) -
MW 1,159 1,159
========================================= ============= =============
Pumped storage capacity (GB) - MW 300 300
========================================= ============= =============
Total renewable generation capacity
(inc. pumped storage) -
MW 3,920 3,882
========================================= ============= =============
Contracted capacity 2 ,792 2 ,792
========================================= ============= =============
Generation output - GWh
========================================= ============= =============
Onshore wind output (GB) - GWh 805 970
========================================= ============= =============
Onshore wind output (NI) - GWh 76 103
========================================= ============= =============
Onshore wind output (ROI) - GWh 405 533
========================================= ============= =============
Total onshore wind output - GWh 1,286 1,606
========================================= ============= =============
Offshore wind output (GB) - GWh 563 792
========================================= ============= =============
Conventional hydro output (GB) - GWh 907 1,319
========================================= ============= =============
Pumped storage output (GB) - GWh 97 68
========================================= ============= =============
Total renewable generation (inc. pumped
storage) - GWh 2,853 3,785
========================================= ============= =============
Total renewable generation (also inc.
constrained off) - GWh 2,901 4,008
========================================= ============= =============
Note 1: Capacity and output based on 100% of wholly owned sites
and share of joint ventures
Note 2: Contracted capacity includes sites with a CfD, eligible
for ROCs, or contracted under REFIT
Note 3: Onshore wind output excludes 44GWh of constrained off
generation in HY2021/22 and 223GWh in HY2021/22; Offshore wind
output excludes 4GWh constrained off generation in 2021/22 and nil
in 2020/21
Note 4: Onshore wind capacity in GB reflects the commissioning
of Gordonbush Extension in August 2021
Note 5: Biomass capacity of 15MW and output of 37GWh in
HY2021/22 and 22GWh HY2020/21 is excluded, with the associated
operating profit or loss reported within Distributed Energy
SSE Renewables overview
SSE Renewables comprises the Group's existing operational assets
and those under development in onshore wind, offshore wind,
flexible hydro electricity, run-of-river hydro electricity and
pumped storage. Its operational offshore wind installed capacity is
487MW with its onshore wind and hydro electric installed capacity
at 1,936MW and 1,459MW respectively.
SSE Renewables is currently building more offshore wind capacity
than any other company in the world - the Seagreen and Dogger Bank
projects will be the largest in Scotland and in the world
respectively when completed. SSE Renewables is on track to have
enabled over a quarter of the UK's 40GW offshore wind target by
2030.
Operational delivery
In terms of operational maintenance and plant availability, it
was a strong first half year with overall availability high across
onshore and offshore wind and hydro operations.
SSE Renewables' hydro assets continue to play an important role
in providing cost-effective, low carbon flexibility to the system,
which is providing additional diversified income streams. Over the
spring and summer, assets were successful in the newly established
STOR (Short Term Operating Reserve) auctions run by the ESO.
Additional value has been realised through the ongoing hydro
optimisation programme, which has identified further value creation
opportunities within the asset base, including increased
digitisation and automation of its operations.
The business continues to make progress with its programme of
capital investment focusing on extending the life of large flexible
hydro assets and improving reliability and efficiency. Grudie
Bridge (18.7MW) is in final commissioning and slightly ahead of
programme. Civil works on Tummel Bridge (34MW) have started and the
replacement turbines have been ordered. Works are well under way at
Loch Mhor, the headwater reservoir for Foyers pumped storage power
station (300MW), to add 1GWh of storage and enhance the operational
capability and flexibility of the asset. The works are anticipated
to be completed in Spring 2022.
SSE Renewables has brought the maintenance of more of its
onshore wind fleet in-house. It now wholly maintains 454 turbines
totalling 847MW equating to 62% of SSE Renewables' wholly-owned
fleet.
For financial performance commentary please refer to the Group
Financial Review.
Construction programme
The first two phases of the world's largest offshore wind farm
at Dogger Bank (each 1,200MW, SSE Renewables share 40%) remain on
track with onshore works for cables and substation continuing and
offshore construction commencing in Q2 2022 with installation of
the HVDC export cables for Dogger Bank A. Dogger Bank C (1,200MW)
remains on track to reach financial close by the end of this
calendar year. SSE has sold down a 10% share of Dogger Bank C to
Eni for an equity consideration of GBP70m. A consistent combination
of equity partners across all three phases of the project will
enable further synergies across both the construction and
operations phase of the Dogger Bank wind farm.
The first turbine jacket foundations have been installed at
Seagreen 1 (1,075MW, SSE Renewables share 49%), Scotland's largest
and the world's deepest, fixed-bottom offshore wind farm. Full
power is targeted at the end of 2022. With 621MW not currently
attached to a CfD, there is the potential to compete in the CfD
Allocation Round 4 auction opening at the end of 2021 for the
uncontracted part of the project.
Construction is progressing well on Viking (443MW) with 60km out
of 70km of the access roads completed and 47 out of the 103 turbine
foundations at various stages of construction. Work on the DC
substation is continuing. It is planned that turbines will be
installed in early 2023 and completion is planned for autumn 2024.
The wind farm will also have the option to enter the CfD auction
later this year. Viking will be among the highest-yielding onshore
wind farms in Europe, producing almost 2TWh annually.
At Lenalea wind farm (30MW, SSE Renewables share 50%) in
Ireland, construction is progressing and is to be commissioned in
late 2022/early 2023.
In July Beatrice Offshore Wind Farm Limited, a joint venture
owned 40% by SSE Renewables, agreed Offshore Transmission Owner
assets divestment worth an asset value of GBP437.9m and full asset
transfer took place on 5 August.
Gordonbush Extension (38MW), SSE's first merchant onshore wind
project, has now been fully commissioned and handed over to
operations following its official opening in August.
Growth opportunities - domestic
SSE has a c.10GW secured pipeline of opportunities either in
construction, consented or requiring consent. This superior
pipeline will deliver c.4GW of added capacity to FY26 with targets
to reach 13GW by 2031. Delivering on this pipeline will see, on
average, almost 1GW of renewables capacity added each year to 2031.
It expects to grow this pipeline to c.15GW by FY26, maintained
through the rest of the decade, which will in turn maintain the run
rate of at least 1GW of new assets a year. Delivery of this will
mean SSE expects to comfortably exceed its target for trebling its
renewable output by 2031.
Near-term growth opportunities will come from SSE Renewables'
consented offshore sites: Seagreen 1A (360MW, SSE Renewables share
49%), which is an extension to the Seagreen 1 site, and Arklow Bank
Wind Park 2 (520MW) in Ireland. As already mentioned, development
work on Seagreen 1A is ongoing with potential to be eligible for
CfD Auction Round 4 when it opens in December. The Arklow Bank
project will be well placed to take part in the first Irish
offshore auction to be scheduled in 2022, the details of which are
currently under consultation by the Irish Government. SSE
Renewables has a foreshore lease for Arklow Bank Wind Park 2 and is
engaged with the Department of Housing, Local Government and
Heritage regarding extension of the associated 'Long Stop Dates'.
If successful in respective auctions, both Seagreen 1A and Arklow
Bank Wind Park 2 projects could be operational by 2025/26.
In the medium term, SSE Renewables has combined the previous
Berwick and Marr Bank offshore wind projects located in the Firth
of Forth into a single, up to 4.1GW, Berwick Bank project which is
working towards a single consent application submission in Spring
2022 with the aim of securing consent in 2023. The project will
play a critical role in helping to deliver the 40GW UK offshore
wind target by 2030, as well as the Scottish Government's 11GW
target.
North Falls offshore wind farm (up to 504MW, SSE Renewables
share 50%), which is an extension to the Greater Gabbard wind farm
off the east coast of England, continues to progress with local
consultation under way for a potential grid connection in North
Essex. North Falls could also be operational by 2030.
SSE Renewables has submitted bids into Crown Estate Scotland's
ScotWind offshore wind seabed leasing process as part of a
consortium with Marubeni Corporation and CIP (Copenhagen
Infrastructure Partners). The Project Partners are combining their
unparalleled local experience and extensive global expertise in the
development of fixed and floating offshore wind farms. The results
of ScotWind are expected in early 2022.
SSE Renewables has stated its ambition to contribute a
significant amount of the capacity needed to meeting Ireland's 5GW
offshore wind target by 2030. A foreshore licence has been secured
for site investigations for the 800MW Braymore Wind Park project
off the north-east coast and an application has been submitted for
the 800MW Celtic Sea Array off the south-east coast. Celtic Sea
Array and Braymore Wind Park would both progress under the Maritime
Area Planning (MAP) Bill, which is currently progressing through
the Irish Parliament. This legislation will enable the
establishment of a new regulator that will run a process to manage
the allocation of leases for seabed. Braymore and Celtic will apply
for a Marine Area Consent once the process has been established,
which is expected in early 2023.
Future onshore wind growth can be delivered through SSE
Renewables' consented sites at Strathy South (consented for 133MW
and has submitted variation to increase to 208MW) and Tangy repower
(57MW) in Scotland and Yellow River (105MW) in Ireland. SSE
Renewables has submitted consent applications to the Scottish
Government for Bhlaraidh Extension (in excess of 100MW), and Achany
Extension (in excess of 80MW).
There continues to be positive progress on the Coire Glas pumped
hydro storage project (up to 1,500MW) which issued an Invitation To
Tender (ITT) to shortlisted civil engineering works companies at
the end of October. The UK Government published its updated Smart
Systems and Flexibility Plan in July, which set out the importance
of long duration energy storage technologies like pumped hydro in
providing the system flexibility needed to meet net zero. A call
for evidence was published on possible policy interventions, such
as cap and floor, to support such projects and the UK Government
will announce the outcome of that process in early 2022. Subject to
the outcome of these policy decisions, Coire Glas could progress to
an FID decision by 2023/24 with the objective of being completed
before the end of the decade.
SSE Renewables Project Pipeline
Project Location Technology Capacity (MW) SSE Share (MW)
------------------------------- ---------- ---------------- -------------- ---------------
Due FID or in Construction
=============================== ========== ================ ============== ===============
Dogger Bank A GB Offshore wind 1,200 480
=============================== ========== ================ ============== ===============
Dogger Bank B GB Offshore wind 1,200 480
=============================== ========== ================ ============== ===============
Dogger Bank C GB Offshore wind 1,200 600(5)
=============================== ========== ================ ============== ===============
Seagreen 1 GB Offshore wind 1,075 527
=============================== ========== ================ ============== ===============
Viking GB Onshore wind 443 443
=============================== ========== ================ ============== ===============
Lenalea ROI Onshore wind 31 31
=============================== ========== ================ ============== ===============
Consented
=============================== ========== ================ ============== ===============
Arklow Bank 2(1) ROI Offshore wind 520 520
=============================== ========== ================ ============== ===============
Seagreen 1A GB Offshore wind 360 176
=============================== ========== ================ ============== ===============
Yellow River ROI Onshore wind 105 105
=============================== ========== ================ ============== ===============
Tangy GB Onshore wind 57 57
=============================== ========== ================ ============== ===============
Coire Glas(2) GB Pumped storage Up to 1,500 Up to 1,500
=============================== ========== ================ ============== ===============
Requiring consent
=============================== ========== ================ ============== ===============
Berwick Bank(3) GB Offshore wind Up to 4,100 Up to 4,100
=============================== ========== ================ ============== ===============
North Falls GB Offshore wind 504 252
=============================== ========== ================ ============== ===============
Strathy South GB Onshore wind 208 208
=============================== ========== ================ ============== ===============
Cloiche GB Onshore wind 155 155
=============================== ========== ================ ============== ===============
Other - Onshore wind c200 c200
=============================== ========== ================ ============== ===============
Future prospects(4)
=============================== ========== ================ ============== ===============
Braymore Point ROI Offshore wind 800 800
=============================== ========== ================ ============== ===============
Celtic Sea Array ROI Offshore wind 800 800
=============================== ========== ================ ============== ===============
Japanese development projects Japan Offshore wind 10,000 8,000
=============================== ========== ================ ============== ===============
Future auctions - Offshore wind TBC TBC
=============================== ========== ================ ============== ===============
Other GB GB Onshore wind c250 c250
=============================== ========== ================ ============== ===============
Other NI NI Onshore wind c50 c50
=============================== ========== ================ ============== ===============
Other ROI ROI Onshore wind c250 c250
=============================== ========== ================ ============== ===============
Other GB GB Hydro 75 75
=============================== ========== ================ ============== ===============
Note 1: Partially consented
Note 2: Expected to require revenue stabilisation mechanism
Note 3: Berwick Bank and Marr Bank offshore wind farms were
combined into one wind farm in September 2021, known as Berwick
Bank Wind Farm
Note 4: Reflects named development areas where some form of
development activity is underway and therefore excludes any future
or in-flight auction processes such as ScotWind, Thor or NY
Bight
Note 5: Dogger Bank C 600MW reflects SSE's current 50% equity
stake. A 10% equity stake sale is expected to complete by Q1 2022,
which would reduce share to 480MW.
Growth opportunities - international
SSE Renewables has progressed in exporting its capabilities
overseas with the creation of a new joint ownership company, SSE
Pacifico (80% stake), which includes the acquisition of an interest
in an offshore development platform for US$208m. The new company
will develop the 10GW gross portfolio acquired, comprising a number
of early development stage offshore wind projects in Japan. It
includes a mix of fixed bottom and floating sites with the most
advanced projects expected to be constructed by the end of this
decade.
In the US, via its newly incorporated entity SSE Renewables
North America, SSE Renewables has successfully prequalified for the
New York Bight Auction for seabed. The auction is expected to lead
to 7GW of offshore wind projects with the Final Sale Notice
expected before the end of this calendar year ahead of the auction
in Q1/Q2 2022.
In Europe, the tender process for the 800-1000MW Thor offshore
wind site in Denmark will conclude by the end of 2021. SSE
Renewables is partnering with CIP and local energy company Andel
Holding.
Following formation of a partnership with Acciona Energia, SSE
Renewables will be submitting an application for Offshore Location
Licenses (OLL) for the allocation of development rights for
offshore wind farms in Poland. The process is expected to run until
Q2 2022.
SSE Renewables also continues to work with Acciona Energia on
offshore wind opportunities in Spain. The Spanish government
published its draft offshore wind roadmap in August which set out
an ambition to target up to 3GW by 2030.
SSE Renewables is also assessing other growth options across
Europe, including the potential to bid into the next offshore wind
auction in the Netherlands due to take place in 2022.
SSE thermal
sse thermal key performaNce indicators
SSE Thermal September 21 September 20
========================================= ============= =============
Thermal adjusted operating profit -
GBPm 36.1 49.6
========================================= ============= =============
Thermal reported operating profit -
GBPm 215.6 58.1
========================================= ============= =============
Thermal adjusted investment and capital
expenditure - GBPm 93.3 39.8
========================================= ============= =============
Generation capacity - MW
========================================= ============= =============
Gas- and oil-fired generation capacity
(GB) - MW 3,975 4,002
========================================= ============= =============
Gas- and oil-fired generation capacity
(ROI) - MW 1,292 1,292
========================================= ============= =============
Multifuel capacity - MW - 68
========================================= ============= =============
Total thermal generation capacity -
MW 5,267 5,362
========================================= ============= =============
Generation output - GWh
========================================= ============= =============
Gas- and oil-fired output (GB) - GWh 6,021 7,954
========================================= ============= =============
Gas- and oil-fired output (ROI) - GWh 1,791 1,233
========================================= ============= =============
Multifuel output - GWh - 251
========================================= ============= =============
Total thermal generation - GWh 7,812 9,438
========================================= ============= =============
Note 1: Capacity is wholly owned and share of joint ventures
Note 2: Output is based on SSE 100% share of wholly owned sites,
100% share of Seabank & Marchwood PPAs due to the contractual
arrangement and % share multifuel JVs
Note 3 : Decreased multifuel capacity relates to disposal of
Ferrybridge Multifuel in October 2020
Note 4: Decreased gas- and oil-fired capacity relates to the
transfer of 10MW small plant to Distributed Energy and closure of
17MW small diesel plant
SSE Thermal overview
SSE Thermal owns and operates conventional thermal generation in
the UK and Ireland. These assets play a key transitional role in
the SSE Group, and wider energy system, in balancing the system on
the journey to net zero. While providing much-needed system
flexibility to ensure stability and security of supply in the short
term, SSE Thermal is actively developing options to progressively
decarbonise its fleet.
Operational delivery
SSE Thermal's Combined Cycle Gas Turbine (CCGT) fleet continues
to play an important role in the UK and Ireland electricity
systems, with its flexibility providing system security and
stability. The SSE Thermal fleet has responded to the unprecedented
market conditions in the six months to 30 September, delivering
significant value to the system and demonstrating the role it plays
in ensuring a resilient transition to net zero. Periods of scarcity
have created value for SSE Thermal through increased spark spreads,
with the Balancing Mechanism continuing to act as an important
earnings stream.
Plant availability was lower in the six months to 30 September
2021, when compared to 30 September 2020, across the SSE Thermal
fleet. Reduced availability has been driven by a number of factors
including unplanned outages to respond to faults and maintenance
requirements, slight overrun of planned outages and the phasing of
outages to respond to system needs.
For financial performance commentary please refer to the Group
Financial Review.
SSE Thermal's assets have been awarded the following capacity
contracts in GB and Ireland through competitive auctions.
Station Asset type Station Capacity SSE share Capacity obligation
=================== ================== ================= ========== =================================
Medway (GB) CCGT 735MW 100% To September 2022
=================== ================== ================= ========== =================================
Keadby (GB) CCGT 755MW 100% To September 2022
=================== ================== ================= ========== =================================
Keadby 2 (GB) CCGT 840MW 100% 15-years commencing October 2023
=================== ================== ================= ========== =================================
Peterhead (GB) CCGT 1,180MW 100% To September 2025
=================== ================== ================= ========== =================================
Seabank (GB) CCGT 1,234MW 50% To September 2025
=================== ================== ================= ========== =================================
Marchwood (GB) CCGT 920MW 50% To September 2025
=================== ================== ================= ========== =================================
Slough Multifuel Energy from Waste 50MW 50% 15-years commencing October 2024
=================== ================== ================= ========== =================================
Great Island (Ire) CCGT 464MW 100% To September 2025
=================== ================== ================= ========== =================================
Rhode (Ire) Gas/oil peaker 104MW 100% To September 2025
=================== ================== ================= ========== =================================
Tawnaghmore (Ire) Gas/oil peaker 104MW 100% To September 2025
=================== ================== ================= ========== =================================
Tarbert (Ire) Oil 620MW 100% To September 2022
=================== ================== ================= ========== =================================
Capacity contracts are based on de-rating factors issued by the delivery body for each contract
year, therefore will not directly match SSE's published station capacity.
=========================================================================================================
Growth opportunities
Repurposing the SSE fleet remains a priority to make it fit for
a net zero world. The importance of bringing forward investment in
lower-carbon flexible generation has come to the fore in recent
months. While SSE closed its last remaining coal-fired power
station in March 2020, coal-fired generation continues to be relied
upon to meet electricity system demand, and has seen increased
usage in 2021. This development serves to highlight the urgent need
for the carbon capture and hydrogen technologies that SSE Thermal
is seeking to develop as alternative sources of flexible generation
that can provide lower-carbon back-up.
As set out at Full-year Results, with the exception of Keadby 2,
Marchwood, Great Island and potentially Seabank, SSE cannot
envisage any of its thermal plant running into the 2030s unabated.
Its focus remains on carbon capture and storage and hydrogen
technologies.
In May 2021, the UK Government launched its 'Cluster Sequencing
Process' to identify the industrial clusters which will be
supported to deploy shared carbon capture and storage
infrastructure by the middle of this decade. This is the shared
infrastructure which proposed low-carbon power stations jointly
developed by SSE and Equinor could plug into. Power station options
include:
-- Keadby Carbon Capture Power Station - a 900MW gas-fired power station with carbon capture.
-- Peterhead Carbon Capture Power Station - a 900MW gas-fired
power station with carbon capture.
-- Keadby Hydrogen - a 900MW low-carbon hydrogen-fired power
station, with a peak demand for hydrogen of 1,800MW. This could be
the world's first major hydrogen-fired power station.
In October 2021, the East Coast Cluster was identified as a
successful 'Track 1' cluster, which encompasses the Zero Carbon
Humber project, and will be one of those clusters supported to
deploy carbon pipelines and carbon storage. This includes SSE
Thermal and Equinor's Keadby-based projects in North
Lincolnshire.
This decision will allow Keadby Carbon Capture Power Station an
opportunity to submit an application to UK Government for a
Dispatchable Power Agreement, a revenue support scheme which has
been designed for power stations with carbon capture, and to
explore opportunities to further develop Keadby Hydrogen Power
Station. This process is anticipated to launch in autumn 2021.
The Scottish cluster was identified as a 'reserve Track 1'
cluster and remains in line to progress to deployment as a
'Track-2' cluster by the end of the decade. The Scottish cluster
includes the Acorn CCS infrastructure which Peterhead Carbon
Capture and Power Station could be a key early customer for.
These plans would support the UK's transition to net zero and
accelerate the decarbonisation of some of the UK's most carbon
intensive regions, underpinning investment in shared carbon and
hydrogen pipelines which other emitters in the region could plug
into.
Keadby 2, SSE Thermal's GBP350m 893MW CCGT brings Siemens'
first-of-a-kind, high efficiency, gas-fired generation technology
to the UK and is on track to be fully commissioned in 2022. Keadby
2 achieved its first generation when synchronised with the grid on
31 October. As part of its co-operation agreement with Equinor, SSE
Thermal is also developing options to blend hydrogen at Keadby
2.
gas storage
Gas storage key performance indicators
Gas Storage September 21 September 20
============================================== ============= =============
Gas Storage adjusted operating (loss)/profit
- GBPm 28.7 (17.9)
============================================== ============= =============
Gas Storage reported operating profit/(loss)
- GBPm 263.9 4.5
============================================== ============= =============
Gas storage adjusted investment and
capital expenditure - GBPm 0.8 2.1
============================================== ============= =============
Gas Storage overview
SSE Thermal holds around 40% of the UK's conventional
underground gas storage capacity. These assets can play an
important role in the transition to net zero, supporting security
of supply with the UK's continuing shift away from coal-fired
generation and the resulting loss of inherent energy storage in
coal stocks.
In the six months to 30 September, SSE's gas storage business
responded to market and demand changes resulting from volatility in
the gas price. Natural gas injections and withdrawals have been
re-optimised, delivering value in the first half of the year.
SSE Thermal remains committed to working with UK Government
departments and Ofgem to ensure the critical role of UK storage in
relation to security of supply and stability of gas price is
properly rewarded, as well as a future role for low-carbon hydrogen
storage.
In July 2021, SSE Thermal and Equinor announced plans to develop
a world-leading hydrogen storage project at Aldbrough, an existing
gas storage site on the east Yorkshire coast. Hydrogen storage is
expected to play an important role in a low-carbon hydrogen economy
balancing supply and demand with an ability store hydrogen produced
using carbon capture and electrolytic technologies, as identified
in the UK Government's inaugural Hydrogen Strategy published in
August 2021.
For financial performance commentary please refer to the Group
Financial Review.
SSE business energy
SSE Business energy key performaNce indicators
SSE Business Energy September 21 September 20
===================================== ============= =============
Business Energy adjusted operating
(loss)/profit - GBPm 2.4 (27.4)
===================================== ============= =============
Business Energy reported operating
profit/(loss) - GBPm 2.4 (15.5)
===================================== ============= =============
Electricity Sold - GWh 6,161 6,301
===================================== ============= =============
Gas Sold - mtherms 73.0 65.2
===================================== ============= =============
Aged Debt (60 days past due) - GBPm 72.6 76.9
===================================== ============= =============
Bad debt expense - GBPm 1.4 14.9
===================================== ============= =============
Energy customers' accounts - m 0.47 0.51
===================================== ============= =============
SSE Business Energy overview
SSE Business Energy provides a potential shopfront and route to
market for SSE's low-carbon energy solutions and green products to
non-domestic customers across GB. The business markets its products
under the SSE Energy Solutions brand alongside SSE Distributed
Energy.
Operational delivery
Business Energy continues to invest in digital and customer
service solutions to adapt and evolve its offerings in a highly
competitive market. May saw the launch of a new and simplified
Corporate Power Purchase Agreement product, which makes
traditionally-complex CPPAs accessible to more companies in Great
Britain. This was followed in July by the announcement that all
businesses signing up for a fixed contract with SSE Business Energy
will receive their electricity from renewable sources. SSE
previously offered 100% renewable electricity as an optional extra
to business customers. The electricity's green credentials are
independently verified by EcoAct, an Atos company, and customers
are provided with Renewable Energy Guarantees of Origin (REGOs)
certification.
Prioritising the safety and wellbeing of customer service
operations remains a priority and in response to coronavirus,
remote working continues to be successfully implemented across the
business. Physical services such as meter reading, smart meter
installation activities and field debt collections were paused but
are now operating effectively as lockdowns are eased. The second
half of 2021 has seen a gradual return to office working, where
possible and appropriate.
For financial performance commentary please refer to the Group
Financial Review.
Growth opportunities
In July, SSE Business Energy joined forces with SSE Distributed
Energy to create a new SSE Energy Solutions brand. The launch of
SSE Energy Solutions coincided with the announcement that all
businesses signing up for fixed contracts with SSE in Great Britain
will now receive all their electricity from renewable sources that
SSE operates. The move, which aims to make it easier for customers
to hit their climate change targets, saw the launch of a new
customer website which makes all of SSE's products and services
available via one shopfront for the first time. The SSE Energy
Solutions website offers an expanded product portfolio including
customer workplace EV charging solutions and flexible Corporate
Power Purchase Agreement offerings.
The past 12 months have also seen the launch of Business
Energy's renewable gas tariff 'Green Gas plus', which is gaining
traction in the market and has received third party accreditation
from EcoAct.
SSE airtricity
SSE airtricity key performance indicators
SSE Airtricity September 21 September 20
====================================== ============= =============
Airtricity adjusted operating profit
- GBPm (2.9) 16.6
====================================== ============= =============
Airtricity reported operating profit
- GBPm (2.9) 20.4
====================================== ============= =============
Aged Debt (60 days past due) - GBPm 8.6 8.7
====================================== ============= =============
Bad debt expense - GBPm 2.0 2.1
====================================== ============= =============
Airtricity Electricity Sold - GWh 2,485 3,739
====================================== ============= =============
Airtricity Gas Sold - mtherms 65.7 74.0
====================================== ============= =============
All Ireland energy market customers
(Ire) - m 0.68 0.70
====================================== ============= =============
SSE Airtricity overview
SSE Airtricity provides a valuable route to market for SSE's
low-carbon energy solutions and green products to customers across
the island of Ireland. Airtricity retains a strong market position
as Ireland's largest supplier of 100% green energy, supplying
approximately 680,000 customers and holding 23% market share by
load.
Operational delivery
Throughout the pandemic, SSE Airtricity's priority has been the
safety and wellbeing of its teams. The vast majority of staff
continued to work remotely during the first nine months of 2021, in
line with government guidance.
Non-domestic demand reduced as economic activity scaled back but
was partly offset by increased demand from households. Several
physical services, which had been suspended due to lockdown
restrictions, returned, including door-to-door sales and
residential construction projects such as housing upgrades. These
services are now operating effectively as lockdown restrictions
have been eased across the island of Ireland.
Against a backdrop of rising wholesale prices, Airtricity in
both Northern Ireland and Ireland had to reflect this in the prices
charged to customers. SSE Airtricity has taken extra steps to
ensure that its customers are supported with their bills.
Affordability and customer support remain key priorities for the
winter ahead .
For financial performance commentary please refer to the Group
Financial Review.
Growth opportunities
SSE Airtricity continues to support customers and empower
communities in their transition towards a greener future. A key
area of focus is the provision of extended services and offerings,
including a new partnership with ePower on electric vehicle
charging infrastructure, as well as a partnership with Volkswagen
to bring more customers closer to net zero emissions by providing a
green end-to-end solution for motorists switching to electric
vehicles. The new partnership aims to encourage and educate drivers
on the seamless transition to electric vehicles and how this will
help offset carbon emissions. In return for transitioning to a 100%
green energy solution, customers will save up to EUR1,000 on their
annual energy bill. Airtricity has also agreed an exclusive
partnership with home alarm provider PhoneWatch to give customers
discounts on home alarms.
Finally, SSE Airtricity has continued to pursue its strategic
imperatives in 2021, including the continued rollout of its
'One-Stop Shop' in conjunction with An Post, a first of its kind in
the ROI market, providing customers with energy efficient home
upgrades and practical routes to reducing their usage.
distributed energy
distributed energy key performance indicators
Distributed Energy September 21 September 20
======================================= ============= =============
Distributed Energy adjusted operating
(loss)/profit - GBPm (7.3) (37.8)
======================================= ============= =============
Distributed Energy reported operating
profit/(loss) - GBPm (24.8) (37.8)
======================================= ============= =============
SSE Heat Network Customer Accounts 11,154 9,853
======================================= ============= =============
SSE Enterprise/distributed energy overview
Following the sale of its Contracting and Rail businesses, SSE's
reporting of its Enterprise segment has been adjusted, and
rebranding has been implemented. The financial results from the
Group's out of areas networks business and Neos Networks Limited
(formerly SSE Telecoms) joint venture will now be reported within
SSEN Distribution and Corporate Unallocated respectively.
Comparative information has been re-presented to reflect the change
to these segments. The SSE Enterprise brand name has been replaced
by SSE Energy Solutions, which gives customers a single point of
entry to the Group's Distributed Energy and Business Energy
offerings.
The primary retained activity of the former SSE Enterprise
businesses is now in the area of distributed energy. SSE's
Distributed Energy business provides the Group's solar and battery
storage asset development and operations and focuses on distributed
generation, EV infrastructure, heat and cooling networks, and smart
buildings and places.
Operational delivery
Financial performance in Distributed Energy was impacted by the
effects of coronavirus, but the business is now looking to grow
market share. Distributed Energy announced it had purchased the
project development rights for its first 50MW battery storage asset
on a consented site in Wiltshire, from Harmony Energy Ltd. It is
also looking at the viability of similar opportunities including at
SSE sites such as Ferrybridge and Fiddlers Ferry for 150MW
batteries.
Distributed Energy continues to play a key role in helping to
decarbonise transport. In London nearly one in every two electric
buses has been charged by infrastructure installed by Distributed
Energy. In Glasgow it will have completed work to power 150 green
buses by the end of 2021. Its EV team is going to develop a network
of super-fast charging community hubs to encourage electric vehicle
take up.
Growth opportunities
Distributed Energy's role in the SSE Group is to explore and
develop interesting growth platforms that complement its core low
carbon strategy. This includes taking a 'whole system thinking'
approach when it comes to partnering and providing solutions for
businesses and organisations embarking on their own net zero
journeys. Distributed Energy therefore seeks to help provide the
platform for a data-driven and sustainable world, including
distributed generation, energy optimisation, smart buildings and EV
charging.
The business is developing opportunities of over 1GW in solar
and battery storage across the UK to help respond to the needs of
local generation. Solar is at an earlier stage but offers potential
given SSE's capabilities and, together, these technologies could
represent a multi-GW opportunity. Finally, it will aim to bring
innovation to its heat networks and its IDNO businesses - both of
which show the diversity of the Distributed Energy portfolio and
offer clients effective pathways to decarbonisation.
energy portfolio management
EPM key performance indicators
EPM September 21 September 20
====================================== ============= =============
EPM adjusted operating profit/(loss)
- GBPm 5.7 (1.5)
====================================== ============= =============
EPM reported operating profit/(loss)
- GBPm 1,209.7 319.8
====================================== ============= =============
EPM overview
Energy Portfolio Management (EPM) is the energy markets heart of
the SSE Group, securing value for SSE's asset portfolios in
wholesale energy markets and managing volatility through
risk-managed trading of energy-related commodities for SSE's
market-based Business Units.
SSE trades the principal commodities to which its asset
portfolios are exposed, as well as the spreads between two or more
commodity prices (e.g. spark spreads): power (baseload and other
products); gas; and carbon (emissions allowances). Each commodity
has different liquidity characteristics, which impacts on the
quantum of hedging possible. See also SSE's Hedging Position
earlier in this document.
Operational Delivery
As a short-term energy market asset optimiser and a long-term
energy market adviser for all of SSE's energy portfolios, through
H1 2021/22 EPM has been navigating highly volatile energy markets.
EPM has been continuing to ensure the energy portfolios are hedged
in accordance with Group policy and optimised through prompt
periods to maximise overall Group value.
The value EPM secures for SSE's asset portfolio continues to be
reported against individual Business Units.
For detailed financial performance commentary please refer to
the Group Financial Review.
Growth Opportunities
In March 2021, EPM initiated a transformation programme to
enable the Business Unit to enhance its capabilities and role as
SSE's energy markets heart. In H1 2021/22 substantial progress has
been made, with recruitment to bolster capacity and bring in new
capabilities, including the establishment of a dedicated Advanced
Analytics team.
investment in scotia gas networks (sgn) - (DISCONTINUED
OPERATION)
sgn key performance indicators
Scotia Gas Networks (SGN) September 21 September 20
SSE's 33.3% share - Held for sale (Discontinued
Operation)
================================================== ============= =============
SGN adjusted operating profit - GBPm 21.0 89.4
================================================== ============= =============
SGN reported operating profit - GBPm (81.1) 45.2
================================================== ============= =============
Regulated Asset Value - GBPm 2,024 1,957
================================================== ============= =============
Overview of SSE's investment in SGN
As part of its strategic refocusing of the Group, agreement was
reached in August 2021 on the disposal of SSE's entire 33%
financial investment stake in SGN and the business is now a
discontinued operation for SSE. SGN continues to safely and
efficiently serve some 5.9m homes and businesses across the south
of England, all of Scotland, and the western region of Northern
Ireland. While the businesses has been a good long-term financial
investment since 2005, it no longer fits within SSE's sharpened
focus on its core, low-carbon electricity businesses. SSE expects
to complete a sale within the current, 2021/22 financial year.
Operational delivery
In the six months to 30 September 2021, 98.5% of uncontrolled
gas escapes were attended in under an hour. In the same period SGN
delivered 5,836 new gas connections, including 628 assisted
connections as part of efforts to help people out of fuel
poverty.
SGN's RIIO-GD2 price control business plan, which commenced in
April 2021, commits the business to making a positive impact on
society, delivering a safe and efficient service and contributing
to net-zero goals by accelerating a range of decarbonised gas
solutions. SGN was partially successful in its appeal to the CMA on
the financial parameters of the settlement with Ofgem, but has
accepted the totex settlement. The business expects to use the
re-opener process with Ofgem for further net zero aligned
investment outside the price control.
Alternative Performance Measures
When assessing, discussing and measuring the Group's financial
performance, management refer to measures used for internal
performance management. These measures are not defined or specified
under International Financial Reporting Standards (IFRS) and as
such are considered to be Alternative Performance Measures
("APMs").
By their nature, APMs are not uniformly applied by all preparers
including other participants in the Group's industry. Accordingly,
APMs used by the Group may not be comparable to other companies
within the Group's industry.
Purpose
APMs are used by management to aid comparison and assess
historical performance against internal performance benchmarks and
across reporting periods. These measures provide an ongoing and
consistent basis to assess performance by excluding items that are
materially non-recurring, uncontrollable or exceptional. These
measures can be classified in terms of their key financial
characteristics:
-- Profit measures allow management to assess and benchmark
underlying business performance during the year. They are primarily
used by operational management to measure operating profit
contribution and are also used by the Board to assess performance
against business plan.
-- Capital measures allow management to track and assess the
progress of the Group's significant ongoing investment in capital
assets and projects against their investment cases, including the
expected timing of their operational deployment.
-- Debt measures allow management to record and monitor both
operating cash generation and the Group's ongoing financing and
liquidity position.
The following table explains the key APMs applied by the Group
and referred to in these statements:
Closest equivalent Adjustments to reconcile to primary
Group APM Purpose IFRS measure financial statements
Adjusted Profit Operating
EBITDA (earnings measure profit * Movement on operating and joint venture financing
before interest, derivatives ('certain re-measurements')
tax, depreciation
and amortisation)
* Exceptional items
* Share of joint ventures and associates' interest and
tax
* Depreciation and amortisation before exceptional
charges (including depreciation and amortisation
expense on fair value uplifts)
* Share of joint venture and associates' depreciation
and amortisation
* Release of deferred income
------------- ------------------- ------------------------------------------------------------
Adjusted Profit Operating
operating measure profit * Movement on operating and joint venture financing
profit derivatives ('certain re-measurements')
* Exceptional items
* Depreciation and amortisation expense on fair value
uplifts
* Share of joint ventures and associates' interest and
tax
------------- ------------------- ------------------------------------------------------------
Adjusted Profit Profit before
profit before measure tax * Movement on operating and financing derivatives
tax ('certain re-measurements')
* Exceptional items
* Depreciation and amortisation expense on fair value
uplifts
* Interest on net pension assets/liabilities (IAS 19)
* Share of non-recurring joint venture refinancing
costs
* Share of joint ventures and associates' tax
------------- ------------------- ------------------------------------------------------------
Adjusted Profit Net finance
net finance measure costs * Exceptional items
costs
* Movement on financing derivatives
* Share of joint ventures and associates' interest
* Share of non-recurring joint venture refinancing
costs
* Interest on net pension assets/liabilities (IAS 19)
------------- ------------------- ------------------------------------------------------------
Adjusted Profit Tax charge
current measure * Share of joint ventures and associates' tax
tax charge
* Deferred tax including share of joint ventures and
associates
* Tax on exceptional items and certain re-measurements
* Reclassification of tax liabilities
------------- ------------------- ------------------------------------------------------------
Adjusted Profit Earnings
earnings measure per share * Exceptional items
per share
* Movements on operating and financing derivatives
('certain re-measurements')
* Depreciation and amortisation expense on fair value
uplifts
* Interest on net pension assets/liabilities (IAS 19)
* Share of non-recurring joint venture refinancing
costs
* Deferred tax including share of joint ventures and
associates
------------- ------------------- ------------------------------------------------------------
Adjusted Debt measure Unadjusted
net debt net debt * Hybrid equity
and hybrid
capital
* Outstanding liquid funds
* Lease obligations
* Cash presented as held for sale
------------- ------------------- ------------------------------------------------------------
Adjusted Capex Capital additions
investment measure to intangible * Other expenditure
and capital assets and
expenditure property,
plant and * Customer funded additions
equipment
* Allowances and certificates
* Disposed additions
* Joint venture and associate additions
* Refinancing proceeds
------------- ------------------- ------------------------------------------------------------
Rationale for adjustments
Adjustments to profit measure
1 Movement on operating and financing derivatives ('certain
re-measurements')
This adjustment can be designated between operating and
financing derivatives.
Operating derivatives are contracts where the Group's Energy
Portfolio Management ('EPM') function enters into forward
commitments or options to buy or sell electricity, gas and other
commodities to meet the future demand requirements of the Group's
Business Energy and Airtricity operating units, or to optimise the
value of the production from its SSE Renewables and Thermal
generation assets. Certain of these contracts are determined to be
derivative financial instruments under IFRS 9 and as such are
required to be recorded at their fair value. Changes in the fair
value of those commodity contracts designated as IFRS 9 financial
instruments are reflected in the income statement (as part of
'certain re-measurements'). The Group shows the change in the fair
value of these forward contracts separately as this mark-to-market
movement is not relevant to the underlying performance of its
operating segments due to the volatility that can arise on
revaluation. The Group will recognise the underlying value of these
contracts as the relevant commodity is delivered, which will
predominantly be within the subsequent 12 to 24 months. Conversely,
commodity contracts that are not financial instruments under IFRS 9
are accounted for as 'own use' contracts and are consequently not
recorded until the commodity is delivered and the contract is
settled. In addition, gas purchased by the Group's Gas Storage
business for secondary trading opportunities is also held at fair
value with gains and losses on re-measurement of inventory held
also recognised as part of 'certain re-measurements'.
Financing derivatives include all fair value and cash flow
interest rate hedges, non-hedge accounted (mark-to-market) interest
rate derivatives, cash flow foreign exchange hedges and non-hedge
accounted foreign exchange contracts entered into by the Group to
manage its banking and liquidity requirements as well as risk
management relating to interest rate and foreign exchange
exposures. Changes in the fair value of those financing derivatives
are reflected in the income statement (as part of 'certain
re-measurements'). The Group shows the change in the fair value of
these forward contracts separately as this mark-to-market movement
is not relevant to the underlying performance of its operating
segments.
The re-measurements arising from operating and financing
derivatives, and the tax effects thereof, are disclosed separately
to aid understanding of the underlying performance of the
Group.
2 Exceptional Items
Exceptional charges or credits, and the tax effects thereof, are
considered unusual by nature or scale and are of such significance
that separate disclosure is required for the underlying performance
of the Group to be properly understood. Further explanation for the
classification of an item as exceptional is included in note 2
(iii).
3 Share of joint ventures and associates' interest and tax
This adjustment can be split between the Group's share of
interest and the Group's share of tax arising from its investments
in equity accounted joint ventures and associates.
The Group is required to report profit before interest and tax
('operating profit') including its share of the profit after tax of
its equity accounted joint ventures and associates. However, for
internal performance management purposes and for consistency of
treatment, SSE reports its adjusted operating profit measure before
its share of the interest and/or tax on joint ventures and
associates.
4 Share of joint ventures and associates' depreciation and
amortisation
For management purposes, the Group considers EBITDA (earnings
before interest, tax, depreciation and amortisation) based on a
sum-of-the-parts derived metric which includes a share of the
EBITDA from equity accounted investments. While this is not equal
to adjusted cash generated from operating activities, it is
considered useful by management in assessing a proxy for such a
measure, given the complexity of the Group structure and the range
of investment structures utilised.
5 Depreciation and amortisation expense on fair value
uplifts
The Group's strategy includes the realisation of value from
divestments of stakes in certain assets and businesses namely its
offshore and international SSE Renewables developments. In
addition, for strategic purposes, the Group may also decide to
bring in equity partners to other businesses and assets. Where
SSE's interest in such vehicles changes from full to joint control,
and the subsequent arrangement is classified as an equity accounted
joint venture, SSE will recognise a fair value uplift on the
remeasurement of its retained equity investment. Those uplifts will
be treated as exceptional (and non-cash) gains in the year of the
relevant transactions completing. These uplifts create assets which
are depreciated or amortised over the remaining life of the
underlying assets or contracts in those businesses with the charge
being included in the Group's depreciation and amortisation
expense. The Group's adjusted operating profit, adjusted profit
before tax and adjusted earnings per share have therefore been
adjusted to exclude this additional depreciation and amortisation
expense arising from the fair value uplift given these charges
derived from significant one-off gains which are treated as
exceptional when initially recognised.
6 Release of deferred income
The Group deducts the release of deferred income in the year
from its adjusted EBITDA metric as it principally relates to
customer contributions against depreciating assets. As the metric
adds back depreciation, the income is also deducted.
7 Non recurring joint venture refinancing costs
The Group's joint venture investment, Beatrice Offshore Winds
Limited ('BOWL'), completed a refinancing of its debt in the six
months ended 30 September 2019, which resulted in transaction costs
from the original debt of GBP27.2m being expensed to the income
statement of the joint venture. In addition, GBP3.5m of costs
related to the repayment of the original instrument were incurred.
The Group's 40% share of the GBP30.7m expense was GBP12.3m, which
was adjusted from the Group's adjusted profit before tax and the
Group's adjusted finance costs in the six months ended 30 September
2019, as refinancing of this scale is non-recurring, considered to
be specific to this instance and therefore not representative of
normal operations.
8 Interest on net pension assets/liabilities (IAS 19)
The Group's interest charges relating to defined benefit pension
schemes are derived from the net assets/liabilities of the schemes
as valued under IAS 19. This will mean that the charge recognised
in any given year will be dependent on the impact of actuarial
assumptions such as inflation and discount rates. To avoid income
statement volatility derived from this basis of measurement and
reflecting the non-cash nature of these charges or credits, the
Group excludes these from its adjusted profit measures.
9 Deferred tax
The Group adjusts for deferred tax when arriving at adjusted
profit after tax, adjusted earnings per share and its adjusted
effective rate of tax. Deferred tax arises as a result of
differences in accounting and tax bases that give rise to potential
future accounting credits or charges. As the Group remains
committed to its ongoing capital programme, the liabilities
associated are not expected to reverse and accordingly the Group
excludes these from its adjusted profit measures.
Adjustments to debt measure
10 Hybrid equity
The characteristics of certain hybrid capital securities mean
they qualify for recognition as equity rather than debt under IFRS.
Consequently, their coupon payments are presented within dividends
rather than within finance costs. As a result, the coupon payments
are not included in SSE's adjusted profit before tax measure. In
order to present total funding provided from sources other than
ordinary shareholders, SSE presents its adjusted net debt measure
inclusive of hybrid capital to better reflect the Group's funding
position.
11 Outstanding liquid funds
Outstanding liquid funds are SSE cash balances held by
counterparties as collateral. SSE includes these as cash until they
are utilised for the purposes of calculating adjusted net debt.
Loans with a maturity of less than three months are also included
in this adjustment. The Group includes this adjustment in order to
better reflect the immediate cash resources to which it has access,
which in turn better reflects the Group's funding position.
12 Leases
SSE's reported loans and borrowings include lease liabilities on
contracts within the scope of IFRS 16, which are not directly
related to the external financing of the Group. The Group excludes
these liabilities from its adjusted net debt and hybrid capital
measure to better reflect the Group's underlying funding position
with its primary sources of capital.
13 Cash presented as held for disposal
Where the Group holds cash balances as part of a disposal group,
those balances will be excluded from the Group's debt measures. As
the Group will continue to fund such held for sale businesses
through intercompany loans and borrowings, any cash held by the
business will be an adjustment in the Group adjusted net debt
measure.
Adjustments to capex measure
14 Other expenditure
Other expenditure primarily represents subsequently derecognised
development expenditure which is excluded to better reflect the
Group's ongoing capital position.
15 Customer funded additions
Customer funded additions represents additions to electricity
and other networks funded by customer contributions. Given these
are directly funded by customers, these have been excluded to
better reflect the Group's underlying investment position.
16 Allowances and certificates
Allowances and certificates consist of purchased carbon
emissions allowances and generated or purchased renewable
obligations certificates (ROCs) and are not included in the Group's
'capital expenditure and investment' APM to better reflect the
Group's investment in enduring operational assets.
17 Additions through business combinations
Where the Group acquires an early stage development company,
which is classified as the acquisition of an asset, or group of
assets and not a business, the acquisition is treated as an
addition to intangible assets or property, plant and equipment and
is included within 'adjusted investment and capital expenditure'.
Where the Group acquires an established business requiring a fair
value assessment in line with the principles of IFRS 3 'Business
Combinations', the fair value of consolidated tangible or
intangible assets are excluded from the Group's 'adjusted
investment and capital expenditure', as they are not direct capital
expenditure by the Group.
18 Additions subsequently disposed/impaired
In the year ended 31 March 2020, the Group funded GBP19.7m of
capex additions in relation to the Seagreen windfarm prior to
part-disposal. On 3 June 2020, the Group disposed of a 51% stake in
Seagreen 1, therefore the capex incurred prior to that date has
been excluded from the Group's net adjusted investment and capital
expenditure metric.
19 Joint ventures and associates' additions
Joint ventures and associates' additions represent direct loan
or equity funding provided to joint venture and associate
arrangements in relation to capital expenditure projects. This has
been included to better reflect the Group's use of directly funded
equity accounted vehicles to grow the Group's asset base. Asset
additions funded by project finance raised within the Group's joint
ventures and associates are not included in this adjustment.
20 Refinancing proceeds
The Group's model for developing large scale capital projects
within joint ventures and associates will involve project finance
being raised within those entities. Where the Group funds early
stage capex which is then subsequently reimbursed to SSE following
the receipt of project finance within the vehicle, the refinance
proceeds are included in the Group's net adjusted investment and
capital expenditure metric. This is consistent with the inclusion
of the initial investment in the metric as explained at 19, above.
In the six months ended 30 September 2020, the Group received
reimbursed capex of GBP246.1m in relation to Seagreen windfarm and
in the six months ended 31 March 2021 GBP182.5m in relation to
Doggerbank windfarm. These receipts have been deducted from the
Group's adjusted investment and capital expenditure metric.
Impact of discontinued operations on the Group's APMs
The following metrics have been adjusted in all periods
presented to exclude the contribution of the Group's Gas Production
business and its investment in Scotia Gas Networks Limited ("SGN"),
both of which are held for sale at 30 September 2021:
-- Adjusted EBITDA;
-- Adjusted operating profit:
-- Adjusted net finance costs;
-- Adjusted profit before tax;
-- Adjusted current tax charge; and
-- Adjusted earnings per share.
'Adjusted net debt and hybrid capital', and 'investment and
capital expenditure' have not been adjusted as the Group continues
to fund the discontinued operations until the date of disposal.
The table below reconciles the adjusted performance measures to
the reported measures of the continuing operations of the
Group.
March
September September
2021 2020 2019
September
(restated*) 2021 (restated*) (restated*)
-------------- --------------------------------------------- ---------- ------------- -------------
GBPm GBPm GBPm GBPm
1,333.5 Adjusted operating profit 376.8 328.9 389.8
(384.6) Adjusted net finance costs (202.6) (195.0) (196.4)
-------------- --------------------------------------------- ---------- ------------- -------------
948.9 Adjusted profit before tax (PBT) 174.2 133.9 193.4
(85.9) Adjusted current tax charge (12.7) (11.6) (18.2)
863.0 Adjusted profit after tax 161.5 122.3 175.2
-------------- --------------------------------------------- ---------- ------------- -------------
(46.6) Hybrid coupon paid (50.7) (46.6) (46.5)
-------------- --------------------------------------------- ---------- ------------- -------------
Adjusted profit after tax attributable
to ordinary shareholders for earnings
816.4 per share (EPS) 110.8 75.7 128.7
1,040.9 Number of shares for EPS 1,054.7 1,039.6 1,030.4
78.4 Adjusted earnings per share (pence) 10.5 7.3 12.5
-------------- --------------------------------------------- ---------- ------------- -------------
1,995.3 Adjusted EBITDA 700.2 664.3 710.8
Depreciation, impairment and amortisation,
(556.2) before exceptional charges (272.1) (274.3) (263.8)
Depreciation and amortisation expense
20.6 on fair value uplifts 10.3 10.3 10.3
17.7 Release of deferred income 9.1 7.9 8.7
Share of joint ventures and associates'
(143.9) depreciation and amortisation (70.7) (79.3) (76.2)
-------------- --------------------------------------------- ---------- ------------- -------------
1,333.5 Adjusted operating profit 376.8 328.9 389.8
-------------- --------------------------------------------- ---------- ------------- -------------
1,333.5 Adjusted operating profit 376.8 328.9 389.8
Movement on operating and joint
597.8 venture financing derivatives 1,439.2 343.2 154.6
848.9 Exceptional items 157.9 327.0 (186.0)
Depreciation and amortisation expense
(20.6) on fair value uplifts (10.3) (10.3) (10.3)
Share of joint ventures and associates'
(104.7) interest and tax (59.2) (48.9) (55.1)
2,654.9 Reported operating profit 1,904.4 939.9 293.0
-------------- --------------------------------------------- ---------- ------------- -------------
948.9 Adjusted profit before tax (PBT) 174.2 133.9 193.4
Movement on operating and financing
653.4 derivatives 1,383.3 326.7 84.7
850.3 Exceptional items 160.2 327.0 (186.0)
Depreciation and amortisation expense
(20.6) on fair value uplifts (10.3) (10.3) (10.3)
8.3 Interest on net pension assets/(liabilities) 3.7 4.0 3.6
Share of joint ventures and associates'
(22.3) tax (25.0) (1.9) (3.4)
Share of non-recurring joint venture
- refinancing costs - - (12.3)
2,418.0 Reported profit before tax 1,686.1 779.4 69.7
-------------- --------------------------------------------- ---------- ------------- -------------
March
September September
2021 2020 2019
September
(restated*) 2021 (restated*) (restated*)
-------------- --------------------------------------------- ---------- ------------- -------------
384.6 Adjusted net finance costs 202.6 195.0 196.4
(1.4) Exceptional items (2.3) - -
(55.6) Movement on financing derivatives 55.9 16.5 69.9
Share of joint ventures and associates'
(82.4) interest (34.2) (47.0) (51.7)
(8.3) Interest on net pension assets/(liabilities) (3.7) (4.0) (3.6)
Share of non-recurring joint venture
- refinancing costs - - 12.3
-------------- --------------------------------------------- ---------- ------------- -------------
236.9 Reported net finance costs 218.3 160.5 223.3
-------------- --------------------------------------------- ---------- ------------- -------------
85.9 Adjusted current tax charge 12.7 11.6 18.2
Share of joint ventures and associates'
(22.3) tax (25.0) (1.9) (3.4)
Deferred tax including share of
37.9 joint ventures and associates 39.0 6.3 15.7
Tax on exceptional items and certain
122.8 re-measurements 515.6 63.3 (12.3)
224.3 Reported tax charge 542.3 79.3 18.2
-------------- --------------------------------------------- ---------- ------------- -------------
(8,898.9) Adjusted net debt and hybrid capital (9,611.4) (10,622.1) (10,338.9)
1,472.4 Hybrid equity 1,051.0 1,472.4 1,169.7
-------------- --------------------------------------------- ---------- ------------- -------------
(7,426.5) Adjusted net debt (8,560.4) (9,149.7) (9,169.2)
37.1 Outstanding liquid funds 87.4 (59.7) (238.0)
(421.0) Lease obligations (404.7) (429.7) (453.9)
- Cash presented as held for sale - (0.5) (75.0)
(7,810.4) Unadjusted net debt (8,877.7) (9,639.6) (9,936.1)
-------------- --------------------------------------------- ---------- ------------- -------------
Adjusted investment and capital
912.0 expenditure 1,042.8 434.4 638.2
428.6 Refinancing proceeds/refunds - 246.1 -
61.8 Customer funded additions 30.1 29.4 63.7
509.0 Allowances and certificates 326.7 119.3 253.4
- Additions through business combinations - - 14.5
19.7 Disposed/impaired additions - - -
(172.7) Joint ventures and associates' additions (356.7) (114.5) (93.6)
45.4 IFRS 16 right of use asset additions 13.7 8.7 -
-------------- --------------------------------------------- ---------- ------------- -------------
Capital additions to intangible
1,803.8 assets and property, plant and equipment 1,056.6 723.4 876.2
-------------- --------------------------------------------- ---------- ------------- -------------
701.3 Additions to intangible assets 397.7 213.0 370.7
Capital additions to property, plant
1,102.5 and equipment 658.9 510.4 505.5
-------------- --------------------------------------------- ---------- ------------- -------------
Capital additions to intangible
1,803.8 assets and property, plant and equipment 1,056.6 723.4 876.2
-------------- --------------------------------------------- ---------- ------------- -------------
*The comparative Alternative Performance Measures have been
restated. See note 2 (v) of the Interim Financial Statements.
The following table summarises the impact of excluding
discontinued operations from the APMs of the continuing operations
of the Group:
March
September September
2021 2020 2019
September
(restated*) 2021 (restated*) (restated*)
------------- --------------------------------------------- ---------- ------------- -------------
GBPm GBPm GBPm GBPm
Adjusted EBITDA of SSE Group (including
2,262.9 discontinued operations) 810.0 780.5 865.9
- Less: SSE Energy Services loss - - 7.4
(33.0) Less: Gas Production (profit)/loss (77.7) 3.0 (30.9)
(234.6) Less: SGN profit (32.1) (119.2) (131.6)
------------- --------------------------------------------- ---------- ------------- -------------
1,995.3 Adjusted EBITDA of continuing operations 700.2 664.3 710.8
Adjusted operating profit of SSE Group
1,539.5 (including discontinued operations) 475.5 415.3 469.2
- Less: SSE Energy Services loss - - 7.4
(33.0) Less: Gas Production (profit)/loss (77.7) 3.0 15.3
(173.0) Less: SGN profit (21.0) (89.4) (102.1)
------------- --------------------------------------------- ---------- ------------- -------------
Adjusted operating profit of continuing
1,333.5 operations 376.8 328.9 389.8
------------- --------------------------------------------- ---------- ------------- -------------
Adjusted net finance costs of SSE Group
443.9 (including discontinued operations) 210.6 225.5 228.5
(2.3) Less: Gas Production (1.6) (1.1) -
(57.0) Less: SGN (6.4) (29.4) (32.1)
------------- --------------------------------------------- ---------- ------------- -------------
Adjusted net finance costs of continuing
384.6 operations 202.6 195.0 196.4
------------- --------------------------------------------- ---------- ------------- -------------
Adjusted profit before tax of SSE Group
1,095.6 (including discontinued operations) 264.9 189.8 240.7
- Less: SSE Energy Services loss/(profit) - - 7.4
(30.7) Less: Gas Production loss/(profit) (76.1) 4.1 15.3
(116.0) Less: SGN profit (14.6) (60.0) (70.0)
------------- --------------------------------------------- ---------- ------------- -------------
Adjusted profit before tax of continuing
948.9 operations 174.2 133.9 193.4
------------- --------------------------------------------- ---------- ------------- -------------
Adjusted current tax of SSE Group (including
107.8 discontinued operations) 15.0 23.7 25.3
Less: SSE Energy Services current tax
- credit/(charge) - - 6.3
(21.9) Less: SGN current tax charge (2.3) (12.1) (13.4)
------------- --------------------------------------------- ---------- ------------- -------------
Adjusted current tax of continuing
85.9 operations 12.7 11.6 18.2
------------- --------------------------------------------- ---------- ------------- -------------
Adjusted earnings per share of SSE Group
90.5 (including discontinued operations) 18.9 11.5 16.4
Less: SSE Energy Services losses per
- share - - 0.1
Less: Gas Production (earnings)/losses)
(3.0) per share (7.2) 0.4 1.5
(9.1) Less: SGN (earnings)/losses per share (1.2) (4.6) (5.5)
------------- --------------------------------------------- ---------- ------------- -------------
Adjusted earnings per share of continuing
78.4 operations 10.5 7.3 12.5
------------- --------------------------------------------- ---------- ------------- -------------
*The comparative Alternative Performance Measures have been
restated. See note 2 (v) of the Interim Financial Statements.
The remaining APMs presented by the Group are unchanged in all
periods presented by the discontinued operations.
INTERIM FINANCIAL STATEMENTS
Consolidated Income Statement
for the period 1 April 2021 to 30 September 2021
2021 2020
Before Exceptional
Before Exceptional exceptional items and
exceptional items and items and certain
items and certain certain re-measure-ments
certain re-measure-ments re-measure-ments (note 6) Total
re-measure-ments (note 6) Total (restated*) (restated*) (restated*)
Note GBPm GBPm GBPm GBPm GBPm GBPm
Continuing
operations
Revenue 5 3,543.5 - 3,543.5 2,816.4 - 2,816.4
Cost of sales (2,625.1) 1,439.2 (1,185.9) (2,024.5) 343.7 (1,680.8)
----------------- ----------------- ----------
Gross profit 918.4 1,439.2 2,357.6 791.9 343.7 1,135.6
Operating
costs (591.8) 157.9 (433.9) (582.2) 15.7 (566.5)
Other
operating
income 9.3 - 9.3 47.9 311.3 359.2
Operating
profit before
joint
ventures and
associates 335.9 1,597.1 1,933.0 257.6 670.7 928.3
--------------- ----- ----------------- ----------------- ---------- ----------------- ----------------- ------------
Joint ventures
and
associates:
Share of
operating
profit 30.6 - 30.6 61.0 - 61.0
Share of
interest (34.2) - (34.2) (47.0) - (47.0)
Share of
movement on
derivatives - - - - (0.5) (0.5)
Share of tax (1.6) (23.4) (25.0) (1.9) - (1.9)
--------------- ----- ----------------- ----------------- ---------- ----------------- ----------------- ------------
Share of
(loss)/profit
on joint
ventures and
associates (5.2) (23.4) (28.6) 12.1 (0.5) 11.6
----------------- ----------------- ----------
Operating
profit from
continuing
operations 5 330.7 1,573.7 1,904.4 269.7 670.2 939.9
Finance income 7 38.3 2.3 40.6 45.5 - 45.5
Finance costs 7 (203.0) (55.9) (258.9) (189.5) (16.5) (206.0)
----------------- ----------------- ----------
Profit before
taxation 166.0 1,520.1 1,686.1 125.7 653.7 779.4
Taxation 8 (26.7) (515.6) (542.3) (16.0) (63.3) (79.3)
----------------- ----------------- ---------- ----------------- ----------------- ------------
Profit for the
period from
continuing
operations 139.3 1,004.5 1,143.8 109.7 590.4 700.1
----------------- ----------------- ---------- ----------------- ----------------- ------------
Discontinued
operations
Profit/(loss)
from
discontinued
operations,
net of tax 9 89.4 (183.2) (93.8) 45.3 0.7 46.0
----------------- ----------------- ---------- ----------------- ----------------- ------------
Profit for the
period 228.7 821.3 1,050.0 155.0 591.1 746.1
----------------- ----------------- ---------- ----------------- ----------------- ------------
Attributable
to:
Ordinary
shareholders
of the parent 178.0 821.3 999.3 108.4 591.1 699.5
Other equity
holders 50.7 - 50.7 46.6 - 46.6
----------------- ----------------- ---------- ----------------- ----------------- ------------
Earnings per
share
Basic (pence) 11 94.7 67.3
Diluted
(pence) 11 94.6 67.2
----------------- ----------------- ---------- ----------------- ----------------- ------------
Earnings per
share -
continuing
operations
Basic (pence) 11 103.6 62.9
Diluted
(pence) 11 103.4 62.8
----------------- ----------------- ---------- ----------------- ----------------- ------------
*The comparative Consolidated Income Statement has been
restated. See note 2 (v).
The accompanying notes are an integral part of this interim
statement.
Consolidated Income Statement
for the year ended 31 March 2021
Before exceptional items and Exceptional items and certain
certain re-measure-ments
re-measure-ments (note 6) Total
(restated*) (restated*) (restated*)
Note GBPm GBPm GBPm
Continuing operations
Revenue 5 6,826.4 - 6,826.4
Cost of sales (4,732.7) 598.6 (4,134.1)
------------------------------ ------------------------------ -------------
Gross profit 2,093.7 598.6 2,692.3
Operating costs (1,198.4) (127.1) (1,325.5)
Other operating income 268.7 976.0 1,244.7
------------------------------ ------------------------------ -------------
Operating profit before joint
ventures and associates 1,164.0 1,447.5 2,611.5
------------------------------ ----- ------------------------------ ------------------------------ -------------
Joint ventures and
associates:
Share of operating profit 149.0 - 149.0
Share of interest (82.4) - (82.4)
Share of movement on
derivatives - (0.8) (0.8)
Share of tax (22.4) - (22.4)
----- ------------------------------ ------------------------------ -------------
Share of profit on joint
ventures and associates 44.2 (0.8) 43.4
------------------------------ ------------------------------ -------------
Operating profit from
continuing operations 5 1,208.2 1,446.7 2,654.9
Finance income 7 78.2 57.0 135.2
Finance costs 7 (372.1) - (372.1)
------------------------------ ------------------------------ -------------
Profit before taxation 914.3 1,503.7 2,418.0
Taxation 8 (101.5) (122.8) (224.3)
------------------------------ ------------------------------ -------------
Profit for the year from
continuing operations 812.8 1,380.9 2,193.7
------------------------------ ------------------------------ -------------
Discontinued operations
Profit from discontinued
operations, net of tax 9 127.5 1.6 129.1
------------------------------ ------------------------------ -------------
Profit for the year 940.3 1,382.5 2,322.8
------------------------------ ------------------------------ -------------
Attributable to:
Ordinary shareholders of the
parent 893.7 1,382.5 2,276.2
Other equity holders 46.6 - 46.6
Earnings per share
Basic (pence) 11 218.7
Diluted (pence) 11 218.3
------------------------------ ------------------------------ -------------
Earnings per share -
continuing operations
Basic (pence) 11 206.3
Diluted (pence) 11 206.0
------------------------------ ------------------------------ -------------
*The comparative Consolidated Income Statement has been
restated. See note 2 (v).
The accompanying notes are an integral part of this interim
statement.
Consolidated Statement of Comprehensive Income
for the period 1 April 2021 to 30 September 2021
Year ended 31 March 2021 Six months ended 30 September 2020
(restated*) Six months ended 30 September 2021 (restated*)
GBPm GBPm GBPm
Profit for the
period
Continuing
2,193.7 operations 1,143.8 700.1
Discontinued
129.1 operations (93.8) 46.0
------------------------- ---------------- ------------------------------------ -----------------------------------
2,322.8 1,050.0 746.1
Other
comprehensive
income:
Items that will
be reclassified
subsequently to
profit or loss:
Net
(losses)/gains
on cash flow
(44.7) hedges 30.0 (46.3)
Transferred to
assets and
liabilities on
cash flow
(5.1) hedges 0.9 (4.2)
Taxation on
cash flow
8.5 hedges (8.0) 8.8
------------------------- ---------------- ------------------------------------ -----------------------------------
(41.3) 22.9 (41.7)
25.0 Share of other 43.3 25.6
comprehensive
gain of joint
ventures and
associates, net
of taxation
(43.3) Exchange 5.0 25.9
difference on
translation of
foreign
operations
Gain/(loss) on
net investment
37.3 hedge (9.5) (29.0)
------------------------- ---------------- ------------------------------------ -----------------------------------
(22.3) 61.7 (19.2)
Items that will
not be
reclassified to
profit or loss:
(12.8) Actuarial 26.2 (170.5)
(loss)/gain on
retirement
benefit
schemes, net of
taxation
(23.3) Share of other (1.7) (11.9)
comprehensive
loss)/income of
joint ventures,
net of taxation
1.1 Gains on - -
revaluation of
investments in
equity
instruments,
net of taxation
------------------------- ---------------- ------------------------------------ -----------------------------------
(35.0) 24.5 (182.4)
------------------------- ---------------- ------------------------------------ -----------------------------------
(57.3) Other 86.2 (201.6)
comprehensive
(loss)/gain,
net of taxation
------------------------- ---------------- ------------------------------------ -----------------------------------
2,265.5 Total 1,136.2 544.5
comprehensive
income for the
period
------------------------- ---------------- ------------------------------------ -----------------------------------
Total
comprehensive
income for the
period arises
from
Continuing
2,155.0 operations 1,231.2 510.8
Discontinued
operations
Items that will
be reclassified
subsequently to
profit or loss:
4.7 Share of other 0.5 (0.4)
comprehensive
gain/(loss) of
joint ventures
and associates,
net of taxation
Items that will
not be
reclassified to
profit or loss:
(23.3) Share of other (1.7) (11.9)
comprehensive
loss of joint
ventures, net
of taxation
------------------------- ---------------- ------------------------------------ -----------------------------------
(18.6) Other (1.2) (12.3)
comprehensive
loss from
discontinued
operations
------------------------- ---------------- ------------------------------------ -----------------------------------
110.5 Total (95.0) 33.7
comprehensive
income/(loss)
from
discontinued
operations
------------------------- ---------------- ------------------------------------ -----------------------------------
2,265.5 Total 1,136.2 544.5
comprehensive
income for the
period
------------------------- ---------------- ------------------------------------ -----------------------------------
Attributable
to:
Ordinary
shareholders of
2,218.9 the parent 1,085.5 497.9
Other equity
46.6 holders 50.7 46.6
------------------------- ---------------- ------------------------------------ -----------------------------------
2,265.5 1,136.2 544.5
------------------------- ---------------- ------------------------------------ -----------------------------------
*The comparative Consolidated Statement of Other Comprehensive
Income has been restated. See note 2 (v).
The accompanying notes are an integral part of this interim
statement.
Consolidated Balance Sheet
as at 30 September 2021
At
31 March At
2021 At 30 September 2021 30 September 2020
GBPm Note GBPm GBPm
Assets
13,254.3 Property, plant and equipment 13,903.4 13,092.9
841.3 Goodwill and other intangible assets 893.6 813.7
1,643.5 Equity investments in joint ventures and associates 1,103.7 1,697.2
554.3 Loans to joint ventures and associates 632.8 628.8
3.6 Other investments 3.5 1.7
115.9 Other receivables 128.2 109.4
114.7 Derivative financial assets 16 2,207.1 176.3
543.1 Retirement benefit assets 17 501.7 528.5
---------- -------------------
17,070.7 Non-current assets 19,374.0 17,048.5
---------- --------------------- -------------------
374.9 Intangible assets 408.4 177.9
234.9 Inventories 456.3 165.1
1,488.2 Trade and other receivables 1,629.4 1,481.2
12.7 Current tax asset 42.4 24.4
1,600.2 Cash and cash equivalents 232.7 415.5
470.9 Derivative financial assets 16 419.2 360.7
339.1 Assets held for sale 9 845.9 677.9
---------- --------------------- -------------------
4,520.9 Current assets 4,034.3 3,302.7
---------- --------------------- -------------------
21,591.6 Total assets 23,408.3 20,351.2
---------- --------------------- -------------------
Liabilities
937.6 Loans and other borrowings 13 2,066.8 1,363.5
1,987.3 Trade and other payables 2,202.9 1,527.0
12.8 Current tax liabilities - -
79.3 Provisions 121.4 54.6
238.7 Derivative financial liabilities 16 1,008.0 276.2
253.5 Liabilities held for sale 9 172.6 456.5
--------------------- -------------------
3,509.2 Current liabilities 5,571.7 3,677.8
---------- --------------------- -------------------
8,473.0 Loans and other borrowings 13 7,043.6 8,691.6
774.3 Deferred tax liabilities 1,368.2 663.4
722.5 Trade and other payables 907.4 674.3
793.3 Provisions 866.7 582.0
186.1 Retirement benefit obligations 17 63.7 382.0
452.1 Derivative financial liabilities 16 500.2 485.6
---------- --------------------- -------------------
11,401.3 Non-current liabilities 10,749.8 11,478.9
---------- --------------------- -------------------
14,910.5 Total liabilities 16,321.5 15,156.7
---------- --------------------- -------------------
6,681.1 Net assets 7,086.8 5,194.5
---------- --------------------- -------------------
Equity:
524.5 Share capital 15 535.6 524.1
847.1 Share premium 838.2 850.9
49.2 Capital redemption reserve 49.2 49.2
(133.6) Hedge reserve (67.4) (133.4)
0.4 Translation reserve (4.1) 3.3
3,921.1 Retained earnings 4,684.3 2,428.0
---------- --------------------- -------------------
Equity attributable to ordinary shareholders of the 6,035.8 3,722.1
5,208.7 parent
1,472.4 Hybrid equity 14 1,051.0 1,472.4
---------- --------------------- -------------------
Total equity attributable to equity holders of the 7,086.8 5,194.5
6,681.1 parent
---------- --------------------- -------------------
The accompanying notes are an integral part of this interim
statement.
Consolidated Statement of Changes in Equity
for the period 1 April 2021 to 30 September 2021
Total equity
Total attributable
Capital attributable to equity
Share Share redemption Hedge Translation Retained to ordinary Hybrid holders of
capital premium reserve reserve reserve earnings shareholders equity the parent
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 April
2021 524.5 847.1 49.2 (133.6) 0.4 3,921.1 5,208.7 1,472.4 6,681.1
Profit for the
period - - - - - 999.3 999.3 50.7 1,050.0
Other
comprehensive
income/(loss) - - - 66.2 (4.5) 24.5 86.2 - 86.2
-------- -------- ---------- -------- ----------- -------- ------------ --------- ------------
Total
comprehensive
income/(loss) - - - 66.2 (4.5) 1,023.8 1,085.5 50.7 1,136.2
Dividends to
shareholders - - - - - (590.5) (590.5) - (590.5)
Scrip dividend
related share
issue 11.1 (11.1) - - - 327.5 327.5 - 327.5
Distributions
to Hybrid
equity
holders - - - - - - - (50.7) (50.7)
Issue of
shares - 2.2 - - - - 2.2 - 2.2
Redemption of
Hybrid Equity - - - - - (4.6) (4.6) (421.4) (426.0)
Credit in
respect of
employee
share awards - - - - - 8.5 8.5 - 8.5
Investment in
own shares - - - - - (1.5) (1.5) - (1.5)
At 30
September
2021 535.6 838.2 49.2 (67.4) (4.1) 4,684.3 6,035.8 1,051.0 7,086.8
-------- -------- ---------- -------- ----------- -------- ------------ --------- ------------
Total equity
Total attributable
Capital attributable to equity
Share Share redemption Hedge Translation Retained to ordinary Hybrid holders of
capital premium reserve reserve reserve earnings shareholders equity the parent
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 April
2020 523.1 875.6 49.2 (111.1) 6.4 2,407.2 3,750.4 1,169.7 4,920.1
Profit for the
period - - - - - 699.5 699.5 46.6 746.1
Other
comprehensive
loss - - - (16.1) (3.1) (182.4) (201.6) - (201.6)
-------- -------- ---------- -------- ----------- --------- ------------ -------- ------------
Total
comprehensive
income - - - (16.1) (3.1) 517.1 497.9 46.6 544.5
Dividends to
shareholders - - - - - (582.1) (582.1) - (582.1)
Scrip dividend
related share
issue 1.0 (1.0) - - - 25.5 25.5 - 25.5
Distributions
to Hybrid
equity
holders - - - - - - - (46.6) (46.6)
Issue of
Hybrid equity - - - - - - - 1,051.0 1,051.0
Redemption of
Hybrid equity - - - - - (1.7) (1.7) (748.3) (750.0)
Credit in
respect of
employee
share awards - - - - - 8.8 8.8 - 8.8
Investment in
own shares
(i) - (23.7) - - - 25.7 2.0 - 2.0
Adjustment in
relation to
historic
measurement
of financial
instruments,
net of tax
(ii) - - - (6.2) - 27.5 21.3 - 21.3
At 30
September
2020 524.1 850.9 49.2 (133.4) 3.3 2,428.0 3,722.1 1,472.4 5,194.5
-------- -------- ---------- -------- ----------- --------- ------------ -------- ------------
(i) Investment in own shares is the purchase of own shares less
the settlement of treasury shares for sharesave schemes. This
includes a reclassification between share premium and retained
earnings of GBP27.1m for previous treasury share issuances to
employees.
(i)
Consolidated Statement of Changes in Equity
for the year ended 31 March 2021
Total equity
Total attributable
Capital attributable to equity
Share Share redemption Hedge Translation Retained to ordinary Hybrid holders of
capital premium reserve reserve reserve earnings shareholders equity the parent
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 April
2020 523.1 875.6 49.2 (111.1) 6.4 2,407.2 3,750.4 1,169.7 4,920.1
Profit for the
year - - - - - 2,276.2 2,276.2 46.6 2,322.8
Other
comprehensive
loss - - - (16.3) (6.0) (35.0) (57.3) - (57.3)
-------- -------- ---------- -------- ----------- -------- ------------ --------- ------------
Total
comprehensive
income for
the year - - - (16.3) (6.0) 2,241.2 2,218.9 46.6 2,265.5
Dividends to
shareholders - - - - - (836.4) (836.4) - (836.4)
Scrip dividend
related share
issue 1.4 (1.4) - - - 39.0 39.0 - 39.0
Distributions
to Hybrid
equity
holders - - - - - - - (46.6) (46.6)
Issue of
Hybrid equity - - - - - - - 1,051.0 1,051.0
Redemption of
Hybrid equity - - - - - (1.7) (1.7) (748.3) (750.0)
Credit in
respect of
employee
share awards - - - - - 19.7 19.7 - 19.7
Investment in
own shares
(i) - (27.1) - - - 24.6 (2.5) - (2.5)
Adjustment in
relation to
historic
depreciation
rates, net of
tax (ii) - - - (6.2) - 27.5 21.3 - 21.3
At 31 March
2021 524.5 847.1 49.2 (133.6) 0.4 3,921.1 5,208.7 1,472.4 6,681.1
-------- -------- ---------- -------- ----------- -------- ------------ --------- ------------
Consolidated Cash Flow Statement
for the period 1 April 2021 to 30 September 2021
Year
ended 31 March 2021 Six months ended 30 September 2020
(*restated) Note Six months ended 30 September 2021 (*restated)
GBPm GBPm GBPm
--------------------- -------------------- ----- ----------------------------------- -----------------------------------
Operating profit -
continuing
2,654.9 operations 5 1,904.4 939.9
121.6 Operating (97.3) 42.2
profit/(loss) -
discontinued
operations 9
--------------------- -------------------- ----- ----------------------------------- -----------------------------------
Operating profit -
2,776.5 total operations 1,807.1 982.1
(132.0) Less share of 109.7 (56.8)
loss/(profit) of
joint ventures and
associates
--------------------- -------------------- ----- ----------------------------------- -----------------------------------
2,644.5 Operating profit 1,916.8 925.3
before jointly
controlled entities
and associates
(22.8) Pension service (12.5) (9.7)
charges, less
contributions paid
Movement on
operating
(590.1) derivatives 5 (1,204.0) (321.3)
637.9 Depreciation, 184.8 274.3
amortisation, write
downs and
impairments
18.1 Charge in respect 8.5 8.8
of employee share
awards (before tax)
(1,227.9) Loss/(profit) on 21.5 (359.2)
disposal of assets
and businesses
Release of
(4.1) provisions (23.9) (5.1)
Release of deferred
(17.7) income 5 (9.1) (7.9)
--------------------- -------------------- ----- ----------------------------------- -----------------------------------
1,437.9 Cash generated from 882.1 505.2
operations before
working capital
movements
--------------------- -------------------- ----- ----------------------------------- -----------------------------------
(Increase)/decrease
(71.7) in inventories 12.7 4.3
Decrease/(increase)
155.3 in receivables (159.1) 275.8
Increase/(decrease)
420.0 in payables 42.9 35.3
Increase in
36.1 provisions 7.0 7.3
--------------------- -------------------- ----- ----------------------------------- -----------------------------------
Cash generated from
1,977.6 operations 785.6 827.9
--------------------- -------------------- ----- ----------------------------------- -----------------------------------
Dividends received
191.1 from investments 83.1 71.3
(288.7) Interest paid (141.5) (140.1)
(62.8) Taxes paid (39.0) (19.9)
--------------------- -------------------- ----- ----------------------------------- -----------------------------------
Net cash from
operating
1,817.2 activities 688.2 739.2
--------------------- -------------------- ----- ----------------------------------- -----------------------------------
(985.0) Purchase of (520.0) (307.8)
property, plant and
equipment
Purchase of other
(192.3) intangible assets (74.3) (92.9)
Deferred income
11.2 received 7.0 3.0
Proceeds from
1,734.8 disposals 12 5.0 433.1
(172.8) Cash disposed - -
through disposals
182.5 Joint venture - -
development
expenditure refunds
(188.9) Loans and equity (376.2) (122.7)
provided to joint
ventures and
associates
54.2 Loans and equity 31.2 42.2
repaid by joint
ventures
Net cash from
investing
443.7 activities (927.3) (45.1)
--------------------- -------------------- ----- ----------------------------------- -----------------------------------
Proceeds from issue
10.4 of share capital 2.2 3.4
(797.4) Dividends paid to (263.0) (556.6)
the company's
equity holders 10
Hybrid equity
(46.6) dividend payments 14 (50.7) (46.6)
Employee share
awards share
(12.9) purchase 15 (1.5) (1.4)
Issue of hybrid
1,051.0 instruments 14 - 1,051.0
Redemption of
(750.0) hybrid instruments 14 (426.0) (750.0)
1,668.5 New borrowings 103.3 1,313.9
246.1 Seagreen - -
development
expenditure
refinancing
proceeds
Repayment of
(2,189.3) borrowings (493.7) (1,452.2)
Settlement of
(5.1) cashflow hedges 1.0 (4.2)
Net cash from
financing
(825.3) activities (1,128.4) (442.7)
--------------------- -------------------- ----- ----------------------------------- -----------------------------------
1,435.6 Net (1,367.5) 251.4
increase/(decrease)
in cash and cash
equivalents
--------------------- -------------------- ----- ----------------------------------- -----------------------------------
164.6 Cash and cash 1,600.2 164.1
equivalents at the
start of period
(including cash
presented as held
for sale)
1,435.6 Net (1,367.5) 251.4
increase/(decrease)
in cash and cash
equivalents
1,600.2 Cash and cash 232.7 415.5
equivalents at the
end of period
--------------------- -------------------- ----- ----------------------------------- -----------------------------------
Notes to the Interim Financial Statements
1. Condensed Financial Statements
SSE plc (the Company) is a company domiciled in Scotland. The
Condensed Interim Statements comprise those of the Company and its
subsidiaries (together referred to as the Group).
The financial information set out in these Condensed Interim
Statements does not constitute the Group's statutory accounts for
the periods ended 30 September 2021, 31 March 2021 or 30 September
2020 within the meaning of Section 435 of the Companies Act 2006.
Statutory accounts for the year ended 31 March 2021, which were
prepared in accordance with International Accounting Standards in
conformity with the requirements of the Companies Act 2006 and in
accordance with International Financial Reporting Standards
pursuant to Regulation (EC) No.1606/2002 as it applies in the
European Union ('adopted IFRS'), have been reported on by the
Group's auditors and delivered to the Registrar of Companies. The
report of the auditor was (i) unqualified (ii) did not include
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report and (iii) did not
contain statements under section 498 (2) or (3) of the Companies
Act 2006. The Group's financial statements for the year ending 31
March 2022 will be prepared in accordance with United Kingdom
adopted International Financial Reporting Standards.
The financial information set out in these interim statements
has been prepared in accordance with the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority and UK
adopted International Accounting Standard 34 Interim Financial
Reporting. The interim financial information is unaudited but has
been formally reviewed by the auditor and its report to the Company
is set out on page 102.
These interim statements were authorised by the Board on 16
November 2021.
2. Basis of preparation
These Condensed Interim Statements for the period to 30
September 2021 and the comparative information for the period to 30
September 2020 have been prepared applying the accounting policies
used in the Group's consolidated financial statements for the year
ended 31 March 2021. The changes to presentation are explained at
note 2(v).
(i) Adjusted measures
The Directors assess the performance of the Group and its
reportable segments based on 'adjusted measures'. These measures
are used for internal performance management and are believed to be
appropriate for explaining underlying performance to users of the
accounts. These measures are also deemed the most useful for the
ordinary shareholders of the Company and for other
stakeholders.
Reconciliations from the reported measures to adjusted measures
along with further description of the rationale for those
adjustments are included in the 'Alternative Performance Measures'
section at pages 52 to 58.
(ii) Going concern
The Directors consider that the Group has adequate resources to
continue in operational existence for the period to 31 December
2022. The financial statements are therefore prepared on a going
concern basis.
In reaching their conclusion, the Directors regularly review the
Group's funding structure (see note 13) against the current
economic climate to ensure that the Group has the short and long
term funding required. The Group has performed detailed going
concern testing, including the consideration of cashflow forecasts
under stressed scenarios for the period to December 2022.
In the six months ended 30 September 2021, the Group has issued
new debt instruments totalling GBP103.3m and has redeemed GBP871.4m
of hybrid capital and maturing debt in the period. The Group also
continues to have access to its GBP1.5bn of committed revolving
credit facilities which mature in 2026. Subject to satisfactory
completion of conditions precedent, the Group anticipates at least
a further GBP1.295bn of disposals proceeds to be received by the
Group in the second half of the year. Note those proceeds have not
been taken account of in concluding on the Group's going concern
status.
(iii) Exceptional items and certain re-measurements
Exceptional items are those charges or credits that are
considered unusual by nature and/or scale and of such significance
that separate disclosure is required for the financial statements
to be properly understood. The trigger points for recognition of
items as exceptional items will tend to be non-recurring although
exceptional charges (or credits) may impact the same asset class or
segment over time.
Market conditions that have deteriorated significantly over time
will only be captured to the extent observable at the balance sheet
date. Examples of items that may be considered exceptional include
material asset or business impairment charges, reversals of
historic impairments, business restructuring costs and
reorganisation costs, significant realised gains or losses on
disposal, unrealised fair value adjustments on part disposal of a
subsidiary and provisions in relation to contractual settlements
following significant disputes and claims.
The Group operates a policy framework for estimating whether
items are considered to be exceptional. This framework, which is
reviewed annually, estimates the materiality of each broad set of
potentially exceptional circumstances, after consideration of
strategic impact and likelihood of recurrence, by reference to the
Group's key performance measure of Adjusted Earnings per Share.
This framework estimates that any item greater than GBP30.0m will
be considered exceptional, with lower thresholds applied to
circumstances that are considered to have a greater strategic
impact and are less likely to recur. The only exception to this
threshold is for gains or losses on disposal or divestment of
international or offshore wind farm development projects which are
considered non-exceptional in line with the Group's strategy to
generate recurring gains from developer divestments.
Certain re-measurements are re-measurements arising on certain
commodity, interest rate and currency contracts which are accounted
for as held for trading or as fair value hedges in accordance with
the Group's policy for such financial instruments, or
re-measurements on stocks of commodities held at the balance sheet
date.
2. Basis of preparation (continued)
This excludes commodity contracts not treated as financial
instruments under IFRS 9 where held for the Group's own use
requirements which are not recorded until the underlying commodity
is delivered.
The impact of changes in Corporation Tax rates on deferred tax
balances are also included within certain remeasurements.
(iv) Other additional disclosures
As permitted by IAS 1 'Presentation of financial statements',
the Group's income statement discloses additional information in
respect of joint ventures and associates, exceptional items and
certain re-measurements to aid understanding of the Group's
financial performance and to present results clearly and
consistently.
(v) C hanges to presentation - prior year adjustments
Discontinued operations
On 2 August 2021, the Group announced it had agreed to sell its
33.3% stake in gas distribution operator SGN to a consortium
comprising existing SGN shareholders Ontario Teachers' Pension Plan
Board and Brookfield Super-Core Infrastructure Partners for cash
consideration of GBP1,225m. The agreement is conditional on certain
regulatory approvals and is expected to complete by 31 March 2022.
The Group assessed that the investment met the criteria to be
classified as held for sale on 11 June 2021 when an Exclusivity
Agreement was signed by the consortium. Accordingly from 11 June
2021 the Group ceased to equity account for its investment in SGN
on designation as held for sale. As the investment in SGN comprised
a separate single line of business, the investment has also been
classified as a discontinued operation. Therefore, comparative
information for the 6 months ended 30 September 2020 and 12 months
ended 31 March 2021 have been restated and the Group's investment
is presented as held for sale at 30 September 2021. The impact of
reclassification of the SGN investment has been to reduce adjusted
operating profit (September 2020 GBP89.4m, March 2021 GBP173.0m),
adjusted PBT (September 2020 GBP60.0m, March 2021 GBP116.0m) and
adjusted EPS (September 2020 4.6p, March 2021 9.1p).
Segments
In accordance with the requirements of IFRS 8 'Operating
Segments' the Group has aligned its segmental disclosures with its
revised internal reporting following changes to the Group's
structure and operations. These segments are used internally by the
Group Executive Committee to in order to assess operating
performance and to make decisions on how to allocate capital.
Consequently, the segmental results reported in the Group's
operating segments have been restated with effect from 1 April
2021. Following the Group's sale of its Contacting and Rail
business to Aurelius Group, the primary retained activities of the
Enterprise business is Distributed Energy which will develop and
provide the Group's solar and battery storage operations and focus
on distributed generation, heat and cooling networks, smart
buildings and EV charging. Accordingly, the result from the Group's
out of areas networks business and Neos Networks Limited joint
venture will now be reported within SSEN Distribution and Corporate
Unallocated respectively. Comparative segmental information in note
5 has been re-presented to reflect the change to these segments.
The impact of the restatements are an increase to reported revenue
of SSEN Distribution (September 2020 GBP12.4m, March 2021 GBP25.0m)
and a decrease to the reported revenue of Distributed Energy
(September 2020 GBP12.4m, March 2021 GBP25.0m), and an increase to
the adjusted operating profit of SSEN Distribution (September 2020
GBP4.7m, March 2021 GBP8.5m), an increase to the adjusted operating
loss of Distributed Energy (September 2020 GBP4.3m, March 2021
GBP5.7m) and an increase to the adjusted operating loss of
Corporate Unallocated (September 2020 GBP0.4m, March 2021
GBP2.8m).
3. New accounting policies and reporting changes
The accounting policies applied in the preparation of these
Interim Financial Statements are consistent with those applied by
the Group in the preparation of the consolidated financial
statements for the year ended 31 March 2021. Set out below are
revisions to accounting standards that have become applicable in
the period, or are issued but not yet effective.
3.1 New standards, amendments and interpretations effective or adopted by the Group
Phase 2 of the Interest Rate Benchmark Reform became effective
for the Group from 1 April 2021. Under Phase 2, provided that the
new basis for calculating cash flows is economically equivalent to
the previous basis, reliefs permit hedge accounting relationships
to continue unaffected. The Group has applied these reliefs to
continue hedge accounting on affected instruments and therefore
adoption of the amendment had no impact on the Interim Financial
Statements.
The amendment to IFRS 16 'Covid-19 Related Rent Concessions
beyond 30 June 2021' had no impact on the Interim Financial
Statements.
3.2 New standards, amendments and interpretations issued, but not yet adopted by the Group
A number of standards, amendments and interpretations have been
issued but not yet adopted by the Group within these Interim
Financial Statements, because application is not yet mandatory or
because adoption by the UK remains outstanding at this point in
time.
Amendments to IAS 16 'Property, Plant and Equipment: Proceeds
Before Intended Use' is expected to be effective from 1 January
2022 but remains subject to UK endorsement. The standard is
available for early adoption, with retrospective application in
periods presented. The Group is currently constructing the Keadby 2
CCGT asset which may be tested and earn pre-commissioning revenue
in the second half of the current financial year. It is not
expected that restatements of prior year comparatives will have a
material impact on reported results in those periods.
IFRS 17 'Insurance contracts' is expected to be effective from 1
January 2023 (1 April 2023 for the Group) but remains subject to UK
endorsement. The Group's initial expectation is that adoption of
this standard will not have a material impact on the Group's
consolidated financial statements.
Other interpretations and amendments issued but not yet
effective are not anticipated to have a material impact on the
Group's consolidated financial statements.
4. Accounting judgements and estimation uncertainty
In the process of applying the Group's accounting policies,
management necessarily require to make judgements and estimates
that will have a significant effect on the amounts recognised in
the financial statements. Changes in the assumptions underlying the
estimates could result in a significant impact to the financial
statements. The Group's key accounting judgement and estimation
areas are noted below.
The changes the Group has made to significant financial
judgements disclosed at 31 March 2021 are detailed in note 4.1(iv)
and 4.2(i) below.
4.1 Significant financial judgements and estimation uncertainties
The preparation of these Condensed Interim Statements has
specifically considered the following significant financial
judgements, some of which are areas of estimation uncertainty as
noted below.
(i) Impairment testing and valuation of certain non-current
assets - financial judgement and estimation uncertainty
The Group reviews the carrying amounts of its goodwill, other
intangible assets, and specific property, plant and equipment
assets to determine whether any adjustment to the carrying value of
those assets requires to be recorded. Where an indicator of
impairment or impairment reversal exists, the recoverable amount of
those assets is determined by reference to value in use
calculations.
At 30 September 2021, the Group has reviewed assets related to
thermal and wind power generation for indicators of impairment (or
impairment reversal) arising since the last formal review performed
at 31 March 2021. The main assumptions in the Group's impairment
assessments performed at 31 March 2021 were: power, gas, carbon and
other commodity prices, volatility of gas prices, plant running
regimes and load factors, discount rates and other inputs.
At 30 September 2021, observable prices for power and gas have
increased, which is considered an indicator of impairment reversal
necessitating the formal reassessment of the carrying value of
certain thermal assets that have been impaired previously. The
conclusions from this impairment assessment are set out in note 6.1
(ii). Wind generation assets have not been impaired previously and
so no formal reassessment was performed at 30 September 2021.
The Group will reassess the assets for indicators of impairment,
or impairment reversal, at 31 March 2022.
(ii) Retirement benefit obligations - estimation uncertainty
The assumptions in relation to the cost of providing
post-retirement benefits during the period are based on the Group's
best estimates and are set after consultation with qualified
actuaries. While these assumptions are believed to be appropriate,
a change in these assumptions would impact the level of the
retirement benefit obligation recorded and the cost to the Group of
administering the schemes.
Further detail of the calculation basis, key assumptions used
and the resulting movements in obligations are disclosed in note 17
of these Interim Financial Statements.
(iii) Revenue recognition - Customers unbilled supply of energy - estimation uncertainty
Revenue from energy supply activities undertaken by Business
Energy and Airtricity businesses includes an estimate of the value
of electricity or gas supplied to customers between the date of the
last meter reading and the period end. This estimation comprises
both billed revenue and unbilled revenue and is calculated based on
applying the tariffs and contract rates applicable to customers
against estimate customer consumption, taking account of various
factors including usage patterns, weather trends and externally
notified aggregated volumes supplied to customers from national
settlement bodies. A change in the assumptions underpinning the
calculation would have an impact on the amount of revenue
recognised in any given period.
Given the non-routine process, the number and the extent of
differing inputs and the requirement of management to apply
judgement noted above, the estimated revenue estimate is considered
a significant estimate made by management in preparing the Interim
Financial Statements. A more comprehensive disclosure of the
Group's policy, and the judgements applied, is disclosed in note 18
of the Group's 31 March 2021 annual report.
(iv) Valuation of other receivables - financial judgement and estimation uncertainty
The Group holds a GBP100m loan note due from Ovo Energy Limited
following the disposal of SSE Energy Services on 15 January 2020.
The loan carries interest at 13.25% and is presented cumulative of
accrued interest payments, discounted at 13.25%. Consistent with
the prior year, the Group has assessed recoverability of the loan
note receivable and has recognised a provision for expected credit
loss in accordance with the requirements of IFRS 9. Due to recent
market volatility, the Group's assessment of the value of the loan
note is now considered a more significant financial judgement.
While the carrying value is considered to be appropriate, changes
in economic conditions could lead to a change in the level of
expected credit loss incurred by the Group.
4.2 Other accounting judgements
(i) Changes from the prior year
Accounting for the impacts of coronavirus - accounting judgement
and estimation uncertainty
For the years ended 31 March 2020 and 31 March 2021, the Group
included a specific accounting judgement and estimation uncertainty
in relation to the impact of coronavirus on its operations and
going concern assessments. During the six months ended 30 September
2021, the UK economy has continued to recover from the effects of
the pandemic, and therefore the specific accounting judgement and
estimation uncertainty in relation to the impact of coronavirus is
no longer required.
4. Accounting judgements and estimation uncertainty (continued)
4.3 Other areas of estimation uncertainty
(i) Tax provisioning
The Group has a small number of open tax issues with the tax
authorities in the UK. Where management makes a judgement that an
outflow of funds is probable, and a reliable estimate of the
dispute can be made, provision is made for the best estimate of the
most likely liability.
In estimating any such liability, the Group applies a risk-based
approach, taking into account the specific circumstances of each
dispute based on management's interpretation of tax law and
supported, where appropriate, by discussion and analysis from
external tax advisors. These estimates are inherently judgmental
and could change substantially over time as each dispute progresses
and new facts emerge. Provisions are reviewed on an ongoing basis,
however the resolution of tax issues can take a considerable period
of time to conclude and it is possible that amounts paid on
settlement will be different from the amounts provided. Provisions
for uncertain tax positions are included in current tax
liabilities, and total GBP34.7m at 30 September 2021 (2020:
GBP40.1m; March 2021: GBP37.6m). The Group estimates that a
reasonably possible range of settlement outcomes for the uncertain
tax provisions given their binary nature is between nil and the
full value of the provision.
(ii) Decommissioning costs
The estimated cost of decommissioning at the end of the useful
lives of certain property, plant and equipment assets is reviewed
periodically and was reassessed at 30 September 2021.
Decommissioning costs in relation to gas exploration and production
assets are periodically agreed with the field operators and reflect
the latest expected economic production lives of the fields. The
Group's next formal reassessment of the decommissioning liabilities
associated with its Thermal and Renewables assets by independent
experts will be performed in the financial year to March 2022.
Provision is made for the estimated discounted cost of
decommissioning at the balance sheet date.
The dates for settlement of future decommissioning costs are
uncertain, particularly for gas exploration and production assets
where reassessment of gas and liquids reserves and fluctuations in
commodity prices can lengthen or shorten the field life. At 30
September 2021 the Group's Gas Production assets are held for sale.
Under the terms of the disposal the Group will retain 60% of the
decommissioning obligation. Provision is made for the estimated
discounted cost of decommissioning at the balance sheet date. The
Group is currently incurring decommissioning costs related to the
Ferrybridge and Fiddlers Ferry power stations, with the remaining
provision expected to being increasingly utilised over the next ten
years and continue out to 2040.
5. Segmental information
The changes to the Group's segments in the period are explained
at note 2(v) and includes the realignment of the activities of the
Distributed Energy business (from the Enterprise segment) and the
impact of the Group's investment in SGN being classified as a
discontinued operation. Comparative information has been
re-presented to reflect the change to these segments. The Group's
Gas Production business remained 'held for sale' at 30 September
2021 and is presented separately as a discontinued operation. The
Group's 'Corporate unallocated' segment is the Group's residual
corporate central costs which cannot be allocated to individual
segments and which now includes the contribution from the Group's
Neos Networks joint venture.
The types of products and services from which each reportable
segment derives its revenues are:
Business area Reported segments Description
-------------------------- ---------------------------------- ------------------------------------------------------
Continuing operations
----------------------------------------------------------------------------------------------------------------------
Transmission SSEN Transmission The economically regulated high voltage transmission
of electricity from generating plant
to the distribution network in the North of Scotland.
-------------------------- ---------------------------------- ------------------------------------------------------
Distribution SSEN Distribution The economically regulated lower voltage distribution
of electricity to customer premises
in the North of Scotland and the South of England.
This now includes the result from the Group's
out of area networks business.
-------------------------- ---------------------------------- ------------------------------------------------------
Renewables SSE Renewables The generation of power from renewable sources, such
as onshore and offshore windfarms and
run of river and pumped storage hydro assets in the
UK and Ireland.
-------------------------- ---------------------------------- ------------------------------------------------------
Thermal SSE Thermal The generation of power from thermal plant and the
Group's interests in multifuel assets in
the UK and Ireland.
-------------------------- ---------------------------------- ------------------------------------------------------
Gas Storage The storage of gas for the purpose of benefitting
from market price fluctuations.
-------------------------- ---------------------------------- ------------------------------------------------------
Energy Customer Solutions Business Energy The supply of electricity and gas to business
customers in Great Britain.
-------------------------- ---------------------------------- ------------------------------------------------------
SSE Airtricity The supply of electricity, gas and energy related
services to residential and business customers
in the Republic of Ireland and Northern Ireland.
-------------------------- ---------------------------------- ------------------------------------------------------
Distributed Energy Distributed Energy The provision of services to enable customers to
optimise and manage low carbon energy use;
development and management of battery storage and
solar assets; distributed generation, independent
distribution, heat and cooling networks, smart
buildings and EV charging activities. The results
of the Group's Contracting and Rail business are
included within this segment until it was
disposed on 30 June 2021.
-------------------------- ---------------------------------- ------------------------------------------------------
EPM & I Energy Portfolio Management (EPM) The provision of a route to market for the Group's
Renewable, Thermal and discontinued Gas
Production businesses and commodity procurement for
the Group's energy supply businesses in
line with the Group's stated hedging policies.
-------------------------- ---------------------------------- ------------------------------------------------------
Discontinued operations
----------------------------------------------------------------------------------------------------------------------
EPM & I Gas Production The production and processing of gas and oil from
North Sea fields.
-------------------------- ---------------------------------- ------------------------------------------------------
Gas Distribution SGN SSE's share of profits of Scotia Gas Networks, which
operates two economically regulated gas
distribution networks in Scotland and the South of
England.
-------------------------- ---------------------------------- ------------------------------------------------------
The internal measure of profit used by the Board is 'adjusted
profit before interest and tax' or 'adjusted operating profit'
which is arrived at before exceptional items, the impact of
financial instruments measured under IFRS 9, the impact of
depreciation on fair value uplifts, the net interest costs
associated with defined benefit pension schemes and after the
removal of taxation and interest on profits from joint ventures and
associates.
Analysis of revenue, operating profit and earnings before
interest, taxation, depreciation and amortisation ('EBITDA') by
segment is provided below. All revenue and profit before taxation
arise from operations within the UK and Ireland.
5. Segmental information (continued)
5. (a) Revenue by segment
Six months ended 30 September 2021 Six months ended 30 September 2020
Reported Inter-segment Segment Reported Inter-segment Segment
revenue revenue (i) revenue revenue revenue (i) revenue
2021 2021 2021 2020 2020 2020
GBPm GBPm GBPm GBPm GBPm GBPm
Continuing
operations
SSEN
Transmission 278.7 - 278.7 201.6 - 201.6
SSEN
Distribution 435.3 28.5 463.8 370.5 23.1 393.6
SSE Renewables 133.3 93.5 226.8 118.7 190.6 309.3
SSE Thermal 370.4 250.6 621.0 207.6 353.4 561.0
Gas Storage 3.6 667.4 671.0 3.2 152.1 155.3
Energy Customer
Solutions
Business Energy 909.0 14.3 923.3 875.7 13.8 889.5
SSE Airtricity 442.9 159.3 602.2 463.7 17.7 481.4
Distributed
Energy 112.3 13.6 125.9 140.6 13.6 154.2
EPM:
Gross trading 4,149.6 2,333.3 6,482.9 3,967.8 1,274.6 5,242.4
Optimisation
trades(ii) (3,327.6) (742.7) (4,070.3) (3,599.3) (268.1) (3,867.4)
----------------- --------------- -------------- --------------- --------------- --------------- ---------------
EPM 822.0 1,590.6 2,412.6 368.5 1,006.5 1,375.0
Corporate
unallocated 36.0 73.1 109.1 66.3 70.9 137.2
--------------- -------------- --------------- --------------- --------------- ---------------
Total continuing
operations 3,543.5 2,890.9 6,434.4 2,816.4 1,841.7 4,658.1
--------------- -------------- --------------- --------------- --------------- ---------------
Discontinued
operations
Gas Production 6.7 109.5 116.2 6.3 70.9 77.2
--------------- -------------- --------------- --------------- --------------- ---------------
Total
discontinued
operations 6.7 109.5 116.2 6.3 70.9 77.2
---------------
Total SSE Group 3,550.2 3,000.4 6,550.6 2,822.7 1,912.6 4,735.3
--------------- -------------- --------------- --------------- --------------- ---------------
5. Segmental information (continued)
5. (a) Revenue by segment (continued)
Year ended 31 March 2021
Reported revenue Inter-segment revenue (i) Segment revenue
Continuing operations
SSEN Transmission 404.9 - 404.9
SSEN Distribution 834.5 69.1 903.6
SSE Renewables 281.9 544.2 826.1
SSE Thermal 504.0 699.0 1,203.0
Gas Storage 7.1 766.0 773.1
Energy Customer Solutions
Business Energy 1,934.5 30.5 1,965.0
SSE Airtricity 1,072.7 61.5 1,134.2
Distributed Energy 334.5 33.6 368.1
EPM:
Gross trading 8,811.9 2,699.3 11,511.2
Optimisation trades(ii) (7,449.2) (155.8) (7,605.0)
---------------------------------- ----------------- -------------------------- ----------------
EPM 1,362.7 2,543.5 3,906.2
Corporate unallocated 89.6 189.4 279.0
----------------- -------------------------- ----------------
Total continuing operations 6,826.4 4,936.8 11,763.2
----------------- -------------------------- ----------------
Discontinued operations
Gas Production 14.2 90.8 105.0
----------------- -------------------------- ----------------
Total discontinued operations 14.2 90.8 105.0
----------------- -------------------------- ----------------
Total SSE Group 6,840.6 5,027.6 11,868.2
----------------- -------------------------- ----------------
(i) Revenue from the Group's investment in Scotia Gas Networks
Limited, the Group's share being GBP60.4m for the period to 11 June
2021 (30 September 2020: GBP199.1m, 31 March 2021: GBP411.8m) is
not recorded in the revenue line in the income statement.
(ii) The Group continues to provide optimisation volume
disclosures to disclose the volume of trading in the period by its
EPM segment.
5. Segmental information (continued)
5. (a) Revenue by segment (continued)
Disaggregation of revenue
Revenue from contracts with customers can be disaggregated by
reported segment, by major service lines and by timing of revenue
recognition as follows:
Six months ended 30 September 2021
Revenue from contracts with customers
Goods or services transferred at
Goods or services transferred over time a point in time
Total
revenue
from
Use of Supply Construction Other contracts Other
electricity of related contracted Physical Gas Other with contract
networks energy services services energy storage revenue customers revenue Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Continuing
operations
SSEN
Transmission 268.9 - - 8.4 - - 1.4 278.7 - 278.7
SSEN
Distribution 413.9 - - 4.7 - - 10.6 429.2 6.1 435.3
SSE Renewables - 59.3 - - 74.0 - - 133.3 - 133.3
SSE Thermal - 368.1 - - - - 2.3 370.4 - 370.4
Gas Storage - - - - - 3.6 - 3.6 - 3.6
Distributed
Energy
Business
Energy - 909.0 - - - - - 909.0 - 909.0
SSE
Airtricity - 432.2 - 10.7 - - - 442.9 - 442.9
Distributed
Energy 13.2 8.8 66.0 21.6 - - - 109.6 2.7 112.3
EPM - - - - 608.5 - 213.5 822.0 - 822.0
Corporate
unallocated - - - - - - 36.0 36.0 - 36.0
Total
continuing
operations 696.0 1,777.4 66.0 45.4 682.5 3.6 263.8 3,534.7 8.8 3,543.5
Discontinued
operations
Gas Production - - - - - - 6.7 6.7 - 6.7
Total
discontinued
operations - - - - - - 6.7 6.7 - 6.7
Total SSE Group 696.0 1,777.4 66.0 45.4 682.5 3.6 270.5 3,541.4 8.8 3,550.2
5. Segmental information (continued)
5. (a) Revenue by segment (continued)
Disaggregation of revenue (continued)
Six months ended 30 September 2020
Revenue from contracts with customers
Goods or services transferred at
Goods or services transferred over time a point in time
Total
revenue
from
Use of Supply Construction Other contracts Other
electricity of related contracted Physical Gas Other with contract
networks energy services services energy storage revenue customers revenue Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Continuing
operations
SSEN
Transmission 186.9 - - 13.2 - - 1.5 201.6 - 201.6
SSEN
Distribution 350.2 - - 5.3 - - 6.2 361.7 8.8 370.5
SSE Renewables - 41.3 - - 77.4 - - 118.7 - 118.7
SSE Thermal - 202.1 - - - - 5.5 207.6 - 207.6
Gas Storage - - - - - 3.2 - 3.2 - 3.2
Distributed
Energy
Business
Energy - 875.7 - - - - - 875.7 - 875.7
SSE
Airtricity - 454.7 - 9.0 - - - 463.7 - 463.7
Distributed
Energy 10.5 6.9 107.0 13.0 - - - 137.4 3.2 140.6
EPM - - - - 362.8 - 5.7 368.5 - 368.5
Corporate
unallocated - - - - - - 66.3 66.3 - 66.3
Total
continuing
operations 547.6 1,580.7 107.0 40.5 440.2 3.2 85.2 2,804.4 12.0 2,816.4
Discontinued
operations
Gas Production - - - - - - 6.3 6.3 - 6.3
Total
discontinued
operations - - - - - - 6.3 6.3 - 6.3
Total SSE Group 547.6 1,580.7 107.0 40.5 440.2 3.2 91.5 2,810.7 12.0 2,822.7
5. Segmental information (continued)
5. (a) Revenue by segment (continued)
Disaggregation of revenue (continued)
Year ended 31 March 2021
Revenue from contracts with customers
Goods or services transferred at
Goods or services transferred over time a point in time
Total
revenue
from
Use of Supply Construction Other contracts Other
electricity of related contracted Physical Gas Other with contract
networks energy services services energy storage revenue customers revenue Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Continuing
operations
SSEN
Transmission 373.8 - - 26.4 - - 4.7 404.9 - 404.9
SSEN
Distribution 787.1 - - 9.1 - - 16.2 812.4 22.1 834.5
SSE Renewables - 159.9 - - 122.0 - - 281.9 - 281.9
SSE Thermal - 484.3 - - - - 19.7 504.0 - 504.0
Gas Storage - - - - - 7.1 - 7.1 - 7.1
Distributed
Energy
Business
Energy - 1,934.5 - - - - - 1,934.5 - 1,934.5
SSE
Airtricity - 1,055.2 - 17.5 - - - 1,072.7 - 1,072.7
Distributed
Energy 12.8 15.4 265.4 33.3 1.2 - 0.5 328.6 5.9 334.5
EPM - - - - 988.9 - 373.8 1,362.7 - 1,362.7
Corporate
unallocated - - - - - - 89.6 89.6 - 89.6
Total
continuing
operations 1,173.7 3,649.3 265.4 86.3 1,112.1 7.1 504.5 6,798.4 28.0 6,826.4
Discontinued
operations
Gas Production - - - - - - 14.2 14.2 - 14.2
Total
discontinued
operations - - - - - - 14.2 14.2 - 14.2
Total SSE Group 1,173.7 3,649.3 265.4 86.3 1,112.1 7.1 518.7 6,812.6 28.0 6,840.6
5. Segmental information (continued)
5. (b) Operating profit/(loss) by segment
Six months ended 30 September 2021
Before
Adjusted Joint Venture/ exceptional Exceptional
operating profit Depreciation on Associate share items and items and
reported to the fair value of interest and certain certain
Board uplifts tax (i) remeasurements remeasurements Total
GBPm GBPm GBPm GBPm GBPm GBPm
Continuing
operations
SSEN Transmission 181.7 - - 181.7 - 181.7
SSEN Distribution 153.3 - - 153.3 - 153.3
SSE Renewables 25.4 (9.4) (25.6) (9.6) (24.0) (33.6)
SSE Thermal 36.1 - (4.7) 31.4 184.2 215.6
Gas Storage 28.7 - - 28.7 235.2 263.9
Energy Customer
Solutions
Business Energy 2.4 - - 2.4 - 2.4
SSE Airtricity
(ii) (2.9) - - (2.9) - (2.9)
Distributed Energy (7.3) - - (7.3) (17.5) (24.8)
EPM 5.7 - - 5.7 1,204.0 1,209.7
Corporate
unallocated (46.3) (0.9) (5.5) (52.7) (8.2) (60.9)
Total continuing
operations 376.8 (10.3) (35.8) 330.7 1,573.7 1,904.4
Discontinued
operations
Gas Production 77.7 - - 77.7 (93.9) (16.2)
SGN 21.0 - (12.8) 8.2 (89.3) (81.1)
Total discontinued
operations 98.7 - (12.8) 85.9 (183.2) (97.3)
Total SSE Group 475.5 (10.3) (48.6) 416.6 1,390.5 1,807.1
(i) The adjusted operating profit of the Group is reported after
removal of the Group's share of interest, fair value movements on
financing derivatives, the depreciation charge on fair value
uplifts and tax from joint ventures and associates and after
adjusting for exceptional items and certain re-measurements (note
6). The share of SGN interest includes loan stock interest payable
to the consortium shareholders (included in SGN). The Group has
accounted for its 33% share of this, GBP5.1m (2020: GBP4.9m, March
2021: GBP9.8m), as discontinued finance income.
(ii) The adjusted operating profit reported to the Board for SSE
Airtricity includes a correction in respect of historic use of
system costs of GBP25.0m. It has been assessed that adjustment in
current year does not materially impact prior year financial
statements.
5. Segmental information (continued)
5. (b) Operating profit/(loss) by segment
Six months ended 30 September 2020
Before
Adjusted Joint Venture/ exceptional
operating profit Depreciation on Associate share items and Exceptional items
reported to the fair value of interest and certain and certain
Board uplifts tax (i) remeasurements remeasurements Total
GBPm GBPm GBPm GBPm GBPm GBPm
Continuing
operations
SSEN Transmission 115.2 - - 115.2 - 115.2
SSEN Distribution 114.3 - - 114.3 - 114.3
SSE Renewables 141.6 (9.4) (28.1) 104.1 214.5 318.6
SSE Thermal 49.6 - (16.3) 33.3 24.8 58.1
Gas Storage (17.9) - - (17.9) 22.4 4.5
Energy Customer
Solutions
Business Energy (27.4) - - (27.4) 11.9 (15.5)
Airtricity 16.6 - - 16.6 3.8 20.4
Distributed Energy (37.8) - - (37.8) - (37.8)
EPM (1.5) - - (1.5) 321.3 319.8
Corporate
unallocated (23.8) (0.9) (4.5) (29.2) 71.5 42.3
Total continuing
operations 328.9 (10.3) (48.9) 269.7 670.2 939.9
Discontinued
operations
Gas Production (3.0) - - (3.0) - (3.0)
SGN 89.4 - (44.9) 44.5 0.7 45.2
Total discontinued
operations 86.4 - (44.9) 41.5 0.7 42.2
Total SSE Group 415.3 (10.3) (93.8) 311.2 670.9 982.1
5. Segmental information (continued)
5. (b) Operating profit/(loss) by segment (continued)
Year ended 31 March 2021
Before
Adjusted Joint Venture/ exceptional Exceptional
operating profit Depreciation on Associate share items and items and
reported to the fair value of interest and certain certain
Board uplifts tax (i) remeasurements remeasurements Total
GBPm GBPm GBPm GBPm GBPm GBPm
Continuing
operations
SSEN Transmission 220.9 - - 220.9 - 220.9
SSEN Distribution 275.8 - - 275.8 - 275.8
SSE Renewables 731.8 (18.8) (71.4) 641.6 214.4 856.0
SSE Thermal 160.5 - (19.6) 140.9 634.4 775.3
Gas Storage (5.7) - - (5.7) 8.5 2.8
Energy Customer
Solutions
Business Energy (24.0) - - (24.0) 20.1 (3.9)
SSE Airtricity 44.0 - - 44.0 6.0 50.0
Distributed
Energy (27.0) - - (27.0) (49.1) (76.1)
EPM 18.4 - - 18.4 590.1 608.5
Corporate
unallocated (61.2) (1.8) (13.7) (76.7) 22.3 (54.4)
Total continuing
operations 1,333.5 (20.6) (104.7) 1,208.2 1,446.7 2,654.9
Discontinued
operations
Gas Production 33.0 - - 33.0 - 33.0
SGN 173.0 - (86.0) 87.0 1.6 88.6
Total
discontinued
operations 206.0 - (86.0) 120.0 1.6 121.6
Total SSE Group 1,539.5 (20.6) (190.7) 1,328.2 1,448.3 2,776.5
5. Segmental information (continued)
5. (c) Earnings/(losses) before interest, taxation, depreciation and amortisation ('EBITDA')
30 September 2021
Adjusted
operating
profit Depreciation Depreciation/ Joint venture/ Release
reported on fair impairment/ amortisation Associate share of of
to the value before exceptional depreciation and deferred Adjusted
Board uplifts charges amortisation income EBITDA
GBPm GBPm GBPm GBPm GBPm GBPm
Continuing
operations
SSEN Transmission 181.7 - 48.1 - (2.3) 227.5
SSEN Distribution 153.3 - 86.6 - (5.9) 234.0
SSE Renewables 25.4 (9.4) 78.7 43.3 - 138.0
SSE Thermal 36.1 - 23.6 8.4 - 68.1
Gas Storage 28.7 - 0.4 - - 29.1
Energy Customer
Solutions
Business Energy 2.4 - 2.5 - - 4.9
SSE Airtricity (2.9) - 3.6 - - 0.7
Distributed
Energy (7.3) - 3.2 - (0.6) (4.7)
EPM 5.7 - 2.4 - - 8.1
Corporate
unallocated (46.3) (0.9) 23.0 19.0 (0.3) (5.5)
Total continuing
operations 376.8 (10.3) 272.1 70.7 (9.1) 700.2
Discontinued
operations
Gas Production 77.7 - - - - 77.7
SGN 21.0 - - 11.1 - 32.1
Total
discontinued
operations 98.7 - - 11.1 - 109.8
Total SSE Group 475.5 (10.3) 272.1 81.8 (9.1) 810.0
5. Segmental information (continued)
5. (c) Earnings/(losses) before interest, taxation, depreciation
and amortisation ('EBITDA') (continued)
30 September 2020
Adjusted
operating Depreciation Depreciation/ Joint venture/ Release
profit on fair impairment/ Associate share of of
reported to value amortisation before depreciation and deferred Adjusted
the Board uplifts exceptional charges amortisation income EBITDA
GBPm GBPm GBPm GBPm GBPm GBPm
Continuing
operations
SSEN Transmission 115.2 - 42.1 - (1.3) 156.0
SSEN Distribution 114.3 - 83.5 - (5.7) 192.1
SSE Renewables 141.6 (9.4) 79.0 48.0 - 259.2
SSE Thermal 49.6 - 26.6 11.4 - 87.6
Gas Storage (17.9) - 0.4 - - (17.5)
Energy Customer
Solutions
Business Energy (27.4) - 1.1 - - (26.3)
SSE Airtricity 16.6 - 3.6 - - 20.2
Distributed
Energy (37.8) - 2.1 - (0.3) (36.0)
EPM (1.5) - - - - (1.5)
Corporate
unallocated (23.8) (0.9) 35.9 19.9 (0.6) 30.5
Total continuing
operations 328.9 (10.3) 274.3 79.3 (7.9) 664.3
Discontinued
operations
Gas Production (3.0) - - - - (3.0)
SGN 89.4 - - 29.8 - 119.2
Total
discontinued
operations 86.4 - - 29.8 - 116.2
Total SSE Group 415.3 (10.3) 274.3 109.1 (7.9) 780.5
31 March 2021
Depreciation/
impairment/
Depreciation amortisation
Adjusted operating on fair before Joint venture/ Associate Release of
profit reported to value exceptional share of depreciation deferred Adjusted
the Board uplifts charges and amortisation income EBITDA
GBPm GBPm GBPm GBPm GBPm GBPm
Continuing
operations
SSEN Transmission 220.9 - 87.1 - (2.6) 305.4
SSEN Distribution 275.8 - 168.8 - (11.3) 433.3
SSE Renewables 731.8 (18.8) 158.0 90.1 - 961.1
SSE Thermal 160.5 - 54.3 15.8 (1.0) 229.6
Gas Storage (5.7) - 0.8 - - (4.9)
Energy Customer
Solutions
Business Energy (24.0) - 4.6 - - (19.4)
Airtricity 44.0 - 7.5 - - 51.5
Distributed
Energy (27.0) - 8.2 - (1.7) (20.5)
EPM 18.4 - 5.3 - - 23.7
Corporate
unallocated (61.2) (1.8) 61.6 38.0 (1.1) 35.5
Total continuing
operations 1,333.5 (20.6) 556.2 143.9 (17.7) 1,995.3
Discontinued
operations
Gas Production 33.0 - - - - 33.0
SGN 173.0 - - 61.6 - 234.6
Total
discontinued
operations 206.0 - - 61.6 - 267.6
Total SSE Group 1,539.5 (20.6) 556.2 205.5 (17.7) 2,262.9
6. Exceptional items and certain re-measurements
Year ended 31 March Six months ended 30 September Six months ended 30 September
2021 (restated*) 2021 2020 (restated*)
GBPm GBPm GBPm
Continuing operations
Exceptional items (note 6.1)
Asset impairments and related
(50.4) (charges) and credits 182.2 15.7
Provisions for restructuring
(75.3) and other liabilities - -
(125.7) 182.2 15.7
Net gains/(losses) on
disposals of businesses and
976.0 other assets (22.0) 311.3
850.3 Total exceptional items 160.2 327.0
Certain re-measurements (note
6.2)
Movement on operating
590.1 derivatives 1,204.0 321.3
Movement in fair value of
8.5 commodity stocks 235.2 22.4
Movement on financing
55.6 derivatives (55.9) (16.5)
Share of movement on
derivatives in jointly
controlled entities (net of
(0.8) tax) - (0.5)
653.4 Total certain re-measurements 1,383.3 326.7
-------------------------------
Total exceptional items and
certain re-measurements before
1,503.7 taxation 1,543.5 653.7
-------------------------------
Taxation
Taxation on other exceptional
3.1 items (33.2) (2.8)
Taxation on certain
(125.9) re-measurements (267.5) (60.5)
Effect of deferred tax rate
change in wholly owned
- entities (214.9) -
Effect of deferred tax rate
change in jointly controlled
- entities (23.4) -
-------------------------------
(122.8) Taxation (539.0) (63.3)
-------------------------------
Total exceptional items and
certain re-measurements on
continuing operations after
1,380.9 taxation 1,004.5 590.4
-------------------------------
Discontinued operations
Exceptional items (note 6.1)
and certain re-measurements
(note 6.2)
Gas production asset
impairments and related
- charges (93.9) -
Share of movement on
derivatives in jointly
controlled entities (net of
1.6 tax) (3.8) 0.7
Effect of deferred tax rate
change in jointly controlled
- entities (85.5) -
Total exceptional items and
certain re-measurements on
discontinued operations after
1.6 taxation (183.2) 0.7
-------------------------------
6. Exceptional items and certain re-measurements (continued)
Exceptional items and
certain re-measurements
are disclosed across
the following
categories
within the income
statement:
Year ended 31 March
2021 Six months ended 30 September 2020
(restated*) Six months ended 30 September 2021 (restated*)
GBPm GBPm GBPm
Continuing operations
Cost of sales:
Movement on operating
590.1 derivatives (note 16) 1,204.0 321.3
8.5 Movement in fair value 235.2 22.4
of commodity stocks
-----------------------------------
598.6 1,439.2 343.7
-----------------------------------
Operating costs:
Asset impairments and
(30.1) reversals 182.2 15.7
(24.2) SSE Energy Services - -
related restructuring
costs and asset
impairments
(72.8) Other exceptional (24.3) -
provisions and charges
-----------------------------------
(127.1) 157.9 15.7
-----------------------------------
Operating income:
976.0 Net gains on disposals - 311.3
of businesses and
other assets
-----------------------------------
976.0 - 311.3
-----------------------------------
Joint ventures and
associates:
(0.8) Share of movement on - (0.5)
derivatives in jointly
controlled entities
(net of tax)
Effect of deferred tax
rate change in jointly
- controlled entities (23.4) -
(0.8) (23.4) (0.5)
-----------------------------------
1,446.7 Operating profit: 1,573.7 670.2
-----------------------------------
Finance costs/(income)
55.6 Movement on financing (55.9) (16.5)
derivatives (note 16)
1.4 Interest income on 2.3 -
deferred consideration
receipt
-----------------------------------
57.0 (53.6) (16.5)
-----------------------------------
1,503.7 Profit before taxation 1,520.1 653.7
on continuing
operations
-----------------------------------
Discontinued operations
Joint ventures and
associates:
Gas production asset
impairments and
- related charges (93.9) -
1.6 Share of movement on (3.8) 0.7
derivatives in jointly
controlled entities
(net of tax)
-----------------------------------
1.6 Profit/(loss) on (97.7) 0.7
discontinued
operations
-----------------------------------
*Comparative information has been restated. See note 2 (v).
6. Exceptional items and certain re-measurements (continued)
6.1 Exceptional items
Exceptional items recognised in the current financial period
Exceptional items within continuing operations
i) SSE Contracting - loss on disposal
On 30 June 2021, the Group completed the sale of its Contracting
and Rail business to the Aurelius Group for headline consideration
of GBP22.5m and GBP5m of contingent consideration, based on earning
targets within the business. Due to working capital movements in
the business subsequent to the transaction agreement, cash
consideration received was GBP0.2m. The Group recorded an
additional exceptional loss on disposal of GBP18.1m on completion,
in addition to the exceptional impairment loss of GBP51.2m
recognised during the year ended 31 March 2021.
ii) Thermal Generation - impairment reversals
At 30 September 2021, observable prices for power and gas have
increased significantly from prices used in the last formal
impairment assessment at 31 March 2021. This is considered an
indicator of impairment reversal, necessitating formal reassessment
of the carrying value of certain thermal assets that have
previously been impaired. A value in use model based on pre-tax
discounted cashflows, with an updated observable spark spread input
at 30 September 2021 was prepared to assess the fair value of the
assets. This was performed for the Group's GB combined cycle gas
turbine ('CCGT') power stations and the Group's Great Island CCGT
in Ireland as follows:
Cash flow Operating and other valuation Commentary and impairment
Assets period assumption assumptions conclusions
GB CCGTs Period to Modelling methodology Conclusion
(Keadby, end of life and assumptions At 30 September 2021
Medway, Peterhead The VIU of the Group's an impairment reversal
and Marchwood GB combined cycle gas totalling GBP175.8m has
(PPA right turbine ('CCGT') power been recognised on the
of use asset) stations were based on GB CCGT assets. Individual
pre-tax discounted cash impairment reversals
flows expected to be were recognised on Peterhead
generated by each plant, (GBP25.4m); Keadby (GBP46.7m);
based on management's Medway (GBP49.7m) and
view of operating prospects Marchwood (GBP54.0m).
and operational flexibility
within the GB wholesale Sensitivity analysis
market, including capacity In line with the formal
market clearing prices. valuation exercise performed
Cash flows are subject at 31 March 2021, sensitivities
to a pre-tax real discount to the impairment reversal
rate between 13.3% and were calculated to assess
20.9% (31 March 2021: the overall write-back
between 8.9% and 19.9%). within a range of reasonably
Changes from 31 March possible scenarios.
2021 A 20% decrease in gross
Certain assets within margin would result in
the Group's GB CCGT fleet an impairment of GBP17.1m
are nearing the end of in Peterhead. For Keadby
their operational life the impairment reversal
and are therefore more would reduce to GBP29.9m
sensitive to fluctuations and for Medway it would
in market assumptions. reduce to GBP30.2m. Marchwood
During the period, observable impairment reversal would
peak load spark price be unchanged.
assumed for the assets A 20% increase in gross
has increased significantly margin would result in
which has been reflected an increase to the impairment
in the updated VIU model. reversal Peterhead of
GBP43.4m, Keadby GBP17.9m
and Medway GBP20.5m Marchwood
impairment reversal would
be unchanged.
A GBP10/KW decrease in
non-contracted capacity
market price would reduce
the impairment write
back in Peterhead to
GBP5.6m. Keadby, Medway
and Marchwood impairment
reversal would be unchanged.
A GBP10/KW increase in
non-contracted capacity
market price would result
in an increase to the
impairment reversal on
Peterhead of GBP20.7m.
Keadby, Medway and Marchwood
impairment reversal would
be unchanged.
6. Exceptional items and certain re-measurements (continued)
6.1 Exceptional items (continued)
Cash flow Operating and other valuation Commentary and impairment
Assets period assumption assumptions conclusions
Great Island Period to The VIU of the Group's Conclusion
CCGT end of life Great Island CCGT power At 30 September 2021
station was based on an impairment reversal
pre-tax discounted cash of GBP5.8m has been recognised.
flows expected to be
generated based on management's Sensitivity analysis
view of operating prospects. In line with the formal
Cash flows are subject valuation exercise performed
to a pre-tax real discount at 31 March 2021, sensitivities
rate of 10.8% reflecting to the impairment reversal
the specific risks in were calculated to assess
the Irish market (31 the overall write-back
March 2021: 10.8%). within a range of reasonably
possible scenarios.
A 20% decrease in gross
margin would result in
an impairment of GBP82.0m,
a 20% increase in gross
margin would result in
an impairment reversal
of GBP56.6m.
A EUR10/KW decrease in
non-contracted capacity
market price would result
an impairment of GBP11.9m.
A EUR10/KW increase would
result in an impairment
reversal of GBP23.5m.
iii) Neos Networks - adjustments to consideration
In the year ended 31 March 2019, the Group disposed of 50% of
its stake in Neos Networks Limited (formerly SSE Telecommunications
Limited) to Infracapital Partners III, 'Infracap', for initial
consideration of GBP215.0m and the potential for a further GBP165m
of contingent consideration dependent on achievement of certain
targets. In the 6 months ended 30 September 2021, the Group
reassessed its position relating to the retained contingent
elements and its contractual position with Infracap, with the net
impact being the recognition of an exceptional charge of
GBP6.2m.
iv) Other credits
At 30 September 2021 the Group reassessed its impairment
provision recognised in 2017/18 related to its Enterprise Utilities
business following improvements in the performance of the Heat
Networks assets. The impairment review resulted in a reversal in
impairment of GBP0.6m (September 2020: GBPnil, March 2021 GBP2.2m).
While this reversal is not exceptional, it has been classified as
exceptional to align to the classification of the initial
impairment.
At 30 September 2021 the Group recognised GBP2.3m (2021:
GBP1.4m) of exceptional finance credits in relation the unwind of
discounting on deferred consideration recognised for the part
disposal of SSE Slough Multifuel Limited in the year ending 31
March 2021.
Exceptional items within discontinued operations
i) Gas Production - impairment charges
The Group recorded an exceptional impairment charge of GBP93.9m
related to the carrying value of the Gas Production assets and
liabilities held for sale, which are not subject to deprecation
under IFRS 5, based on their fair value less costs to sell,
excluding the deferred tax asset which continues to be measured
under IAS 12. The sale to Viaro Energy through its subsidiary
RockRose Energy Limited completed on 14 October 2021, subsequent to
the balance sheet date. The additional loss on sale, not recognised
at 30 September 2021, but due to the buyer based on production
between 1 October 2021 and 14 October 2021 is estimated at
GBP24.1m. This has arisen due to the lock box mechanism effective 1
April 2019 within the sale agreement and will be recognised in the
second half of the financial year.
Exceptional items recognised in the previous financial year
i) Thermal Electricity Generation - impairment charges
At 31 March 2021, the Group carried out a formal impairment
review in order to assess the carrying value of its CCGT plant at
Great Island. As a result of the assessment, the Group recognised
an exceptional impairment of GBP58.1m (September 2020: GBPnil) to
the carrying value of the asset, which arose following reductions
in forward price curves and forecast electricity demand in
Ireland.
ii) Customer bad debt provisioning
In the year ended 31 March 2020, the Group recognised an
exceptional provision for exposure to bad debts of GBP33.7m
specifically related to the coronavirus pandemic within its
Business Energy (GBP27.7m) and Airtricity (GBP6.0m) businesses. The
initial outbreak of the pandemic happened late 2019 and the UK
remained in lockdown at the date of approval of the Annual Report
on 16 June 2020, which meant that significant uncertainty
surrounded the judgement at that date. The provision reflected the
Group's best estimate at that date and was treated as an adjusting
post balance sheet event. During the year to 31 March 2021, the
Group achieved higher cash collections in recovery of its debt than
was expected, largely due to government support schemes and other
factors. As a result, a reversal of the exceptional provision of
GBP20.1m (September 2020: GBP11.9m) in its Business Energy and
GBP6.0m (September 2020: GBP3.8m) in its Airtricity businesses was
recognised.
6. Exceptional items and certain re-measurements (continued)
6.1 Exceptional items (continued)
Exceptional items recognised in the previous financial year
(continued)
iii) SSE Contracting - impairment charges
On 1 April 2021, the Group announced the sale of its Contracting
and Rail business to Aurelius Group. The transaction was for
initial consideration of GBP17.5m, plus a loan note receivable of
GBP5m, and a further GBP5m of contingent consideration based upon
future financial performance of the business. At 31 March 2021, the
Group classified its interest in the business as held for sale (see
note 9) and impaired the carrying amount of the held for sale asset
to its net realisable value, resulting in an impairment of GBP51.2m
(September 2020: GBPnil). The transaction completed on 30 June
2021.
iv) SSE Energy Services disposal costs
In the year ended 31 March 2020, the Group disposed of its SSE
Energy Services business to Ovo Energy Limited, incurring an
exceptional loss of GBP237.7m. The calculation of the loss included
estimates for costs of disposal and separation which were
subsequently re-estimated in the year to 31 March 2021. These
additional costs of disposal, which total GBP24.2m (September 2020:
GBPnil), included increased estimates of the cost of IT separation
and decommissioning and the impairment of SSE properties which are
wholly (or substantially) leased to the disposal group.
v) Neos Networks adjustment to consideration
In the year ended 31 March 2019, the Group disposed of 50% of
its stake in Neos Networks Limited (formerly SSE Telecommunications
Limited) to Infracapital Partners III, 'Infracap', for initial
consideration of GBP215.0m and the potential for a further GBP165m
of contingent consideration dependent on achievement of certain
targets. In the year ended 31 March 2021, the Group received
further cash proceeds of GBP44m relating to previously accrued
deferred consideration but also reassessed its position relating to
the retained contingent elements and its contractual position with
Infracap, with the net impact being the recognition of an
exceptional charge of GBP20.2m (September 2020: GBPnil).
vi) Other charges
At 31 March 2021 the Group reassessed its impairment provision
recognised in 2017/18 related to its Enterprise Utilities business
following improvements in the performance of the Heat Networks
assets. The impairment review resulted in a reversal in impairment
of GBP2.2m (September 2020: GBPnil). While this reversal was not
exceptional, it was classified as exceptional to align to the
classification of the initial impairment.
In 2017/18 the Group recognised an exceptional impairment
related to its Barkip anaerobic digestion plant following
operational issues at the site. In the year ended 31 March 2021,
the Group disposed of the site for consideration of GBP1.3m,
resulting in a GBP1.3m (September 2020: GBPnil) reversal of the
exceptional impairment recognised in 2017/18. While this reversal
was not exceptional, it was classified as exceptional to align to
the classification of the initial impairment.
vii) Disposal gains
During the year ended 31 March 2021, the Group progressed with
its disposal plan for non-core assets announced in June 2020, which
resulted in exceptional gains on disposal. The exceptional gains on
disposal totalling GBP976.0m (September 2020: GBP311.3m) are
summarised below. Further details regarding the disposals during
the year ended 31 March 2021 are provided in note 12.
On 13 October 2020, the Group announced it had reached an
agreement to dispose of its 50% investment in Multifuel Energy
Limited and Multifuel Energy 2 Limited (together 'MEL') to European
Diversified Infrastructure Fund III for headline consideration of
GBP995m. The agreement was subject to antitrust approval by the
European Commission, which was granted on the 7 January 2021 when
the transaction completed. The Group recorded an exceptional gain
on disposal of GBP669.9m (September 2020: GBPnil).
On 2 September 2020, the Group agreed to sell its subsidiary,
SSE Renewables Walney Limited, to Greencoat UK Wind Plc for
consideration of GBP350m, resulting in an exceptional gain on sale
of GBP188.7m (September 2020: GBP188.7m). SSE Renewables Walney
Limited was the holding company of the Group's non-operated 25.1%
stake in Walney Offshore Wind Farm. As essentially a financial
investment and as Walney Offshore Wind Farm Limited had been
operational for several years, the disposal was not considered to
be aligned to the Group's strategic objective of gaining value from
divestment of stakes in offshore or international wind
developments, therefore the gain on disposal was recognised as
exceptional.
On 23 September 2020, the Group disposed of its 33% investment
in Maple Topco Limited, the smart meter services provider, for
proceeds of GBP95.3m, and recognised an exceptional gain on
disposal of GBP70.4m (September 2020: GBP70.4m).
On 3 June 2020, the Group disposed of a 51% stake in its wholly
owned subsidiary, Seagreen Holdco 1 Ltd ('Seagreen 1'), to Total.
The transaction was for initial cash proceeds of GBP70m, plus
contingent consideration of up to GBP60m dependent upon future
criteria being met. The Group assessed that control of the company
was lost on that date, and that the investment in Seagreen 1 should
be accounted for as an equity accounted joint venture under the
principles of IFRS 11 "Joint Arrangements". The Group acquired the
joint venture investment at fair value under the principles of IFRS
10 "Consolidated Financial Statements", resulting in a total gain
of GBP49.0m (September 2020: GBP49.0m). Of that gain, GBP25.7m
(September 2020: GBP25.7m) was recognised as exceptional, as it
represented the fair value gain on acquisition of the joint venture
investment retained by the Group. The remaining GBP23.3m (September
2020: GBP23.3m) of the gain was included in underlying operations,
in line with the Group's stated exceptional policy (see note 2
(iii)).
6. Exceptional items and certain re-measurements (continued)
6.1 Exceptional items (continued)
Exceptional items recognised in the previous financial year
(continued)
On 2 April 2020, the Group disposed of a 50% stake in its wholly
owned subsidiary, SSE Slough Multifuel Ltd, to Copenhagen
Infrastructure Partners. The transaction was for initial cash
proceeds of GBP10m, plus contingent consideration of up to GBP59.1m
dependent upon future criteria being met. The Group assessed that
control of the company was lost on that date, and that the
investment in Slough Multifuel should be accounted for as an equity
accounted joint venture under the principles of IFRS 11 "Joint
Arrangements". The Group acquired the joint venture investment at
fair value under the principles of IFRS 10 "Consolidated Financial
Statements", resulting in a total gain of GBP41.7m (September 2020:
GBP48.7m). Of that gain, GBP21.3m (September 2020: GBP24.8m) was
recognised as exceptional, as it represented the fair value gain on
acquisition of the joint venture investment retained by the Group.
The remaining GBP20.4m (September 2020: GBP23.9m) of the gain was
included in underlying operations, in line with the Group's stated
exceptional policy (see note 2 (iii)).
6.2 Certain re-measurements
The Group, through its EPM business, enters into forward
commodity purchase (and sales) contracts to meet the future demand
requirements of its Business Energy and SSE Airtricity supply
businesses and to optimise the value of its SSE Renewables and SSE
Thermal. Certain of these contracts are determined to be derivative
financial instruments under IFRS 9 "Financial Instruments" and as
such are required to be recorded at their fair value. Conversely,
commodity contracts that are not financial instruments under IFRS 9
are accounted for as 'own use' contracts and are not recorded at
fair value. In addition, inventory purchased to utilise excess
capacity ahead of an optimised sale in the market by the Gas
Storage business is held as trading inventory at fair value.
Changes in the fair value through the profit and loss statement
of those commodity contracts designated as financial instruments
and trading inventory are therefore reflected in the income
statement. The Group shows the change in the fair value of these
forward contracts and trading inventory separately, as "certain
re-measurements", as the Group does not believe this mark-to-market
movement is relevant to the underlying performance of its operating
segments.
At 30 September 2021, volatility in global commodity markets has
resulted in an 'in the money' mark-to-market remeasurement on
commodity contracts designated as financial instruments and trading
inventory of GBP1,439.2m. However, the Group has 'own use'
designated commodity contracts which, if classified as financial
instruments and remeasured at fair value in accordance with IFRS 9,
would significantly reduce the total fair value remeasurement. A
significant proportion of 'in the money' mark-to-market
remeasurement recorded at 30 September 2021 and 'own use'
designated commodity contracts are expected to reverse in the
second half of the financial year as the relevant commodity is
delivered. The remaining settlement of these contracts will
predominately be within the subsequent 12 to 24 months. The
mark-to-market gain in the period has resulted in a deferred tax
charge of GBP297.4m, which has also been classified as
exceptional.
The re-measurements arising from IFRS 9 and the associated
deferred tax charge are disclosed separately to aid understanding
of the underlying performance of the Group.
This category also includes the income statement movement on
financing derivatives (and hedged items) as described in note
16.
6.3 Change in UK corporation tax rates
The Government announced in the Budget on 3 March 2021 that the
main rate of corporation tax will increase to 25% for the financial
year beginning 1 April 2023. Prior to this date, the rate of
corporation tax will remain at 19%. The increase to 25% was
substantively enacted on 24 May 2021. The deferred tax balances
have been re-measured at 30 September 2021 accordingly. The impact
of the rate change for wholly owned entities is GBP214.9m within
the income statement.
Finance Bill 2021 also included draft legislation in respect of
Capital Allowance 'Super-deductions' of 130% in respect of General
Pool plant and machinery, alongside First Year Allowances of 50%
for Special Rate Pool plant and machinery for the two years
commencing 1 April 2021. The Group expects these changes, which
were substantively enacted on 24 May 2021, to significantly
increase the deduction for Capital Allowances in the financial
years ending 31 March 2022 and 31 March 2023. An estimate of the
super-deduction has been taken into account when calculating the
effective rate of tax for the interim period. The Group notes that
final guidance in respect of the application of the super-deduction
has not yet been issued by HMRC.
Taxation
The Group has separately recognised the tax effect of the
exceptional items and certain re-measurements summarised above.
7. Finance income and costs
Year ended 31 March
2021 Six months ended 30 September 2020
(restated*) Six months ended 30 September 2021 (restated*)
GBPm GBPm GBPm
Finance income:
Interest income from
1.9 short term deposits 0.5 1.5
Interest on pension
8.3 scheme assets 3.7 4.0
Foreign exchange
translation of monetary
1.3 assets and liabilities - -
Other interest
receivable:
Joint ventures and
43.9 associates 19.5 28.8
24.2 Other receivable 16.9 11.2
68.1 36.4 40.0
79.6 Total finance income 40.6 45.5
Finance costs:
(24.0) Bank loans and overdrafts (7.6) (15.2)
(323.2) Other loans and charges (173.6) (160.9)
Foreign exchange
translation of monetary
- assets and liabilities (14.9) -
Notional interest arising
(3.8) on discounted provisions (2.3) (1.9)
(35.3) Lease charges (16.2) (17.6)
Less: interest
14.2 capitalised 11.6 6.1
(372.1) Total finance costs (203.0) (189.5)
Changes in fair value of
financing derivative
assets or liabilities at
fair value through
55.6 profit or loss (55.9) (16.5)
(236.9) Net finance costs (218.3) (160.5)
Presented as:
135.2 Finance income 40.6 45.5
(372.1) Finance costs (258.9) (206.0)
(236.9) Net finance costs (218.3) (160.5)
Adjusted net finance costs are arrived at after the following
adjustments:
Six months ended 30
Year ended 31 March Six months ended 30 September
2021 September 2020
(restated*) 2021 (restated*)
GBPm GBPm GBPm
(236.9) Net finance costs (218.3) (160.5)
(add)/less:
(82.4) Share of interest from joint ventures and associates (34.2) (47.0)
(8.3) Interest on pension scheme (assets)/liabilities (3.7) (4.0)
(55.6) Movement on financing derivatives (note 16) 55.9 16.5
(1.4) Exceptional item (2.3) -
(384.6) Adjusted net finance costs (202.6) (195.0)
3.8 Notional interest arising on discounted provisions 2.3 1.9
35.3 Lease charges 16.2 17.6
(46.6) Hybrid coupon payment (50.7) (46.6)
(392.1) Adjusted net finance costs for interest cover
calculations (234.8) (222.1)
*The comparative has been restated. See note 2 (v).
8. Taxation
The income tax expense for the interim period is calculated in
accordance with the principles of IAS 34, where the forecast
effective rate of tax for the year is applied to the profits for
the period, with discreet items arising in the interim period being
separately treated.
The income tax expense reflects the anticipated effective rate
of tax on profits before taxation for the Group for the year ending
31 March 2022, taking account of the movement in the deferred tax
provision in the period so far as it relates to items recognised in
the income statement. The reported tax rate on the profit before
tax before exceptional items and certain re-measurements on
continuing operations is 16.1% (2020: 12.7%, March 2021: 11.1%).
The reported tax rate on the profit before tax after exceptional
items and certain remeasurements is 32.2% (2020: 10.2%, March 2021:
9.3%).
The charge recognised in the income statement is as follows:
30 September 2021 30 September 2020
Before Before
exceptional items exceptional items
and Exceptional items and Exceptional items
remeasurements and remeasurements Total remeasurements and remeasurements Total
GBPm GBPm GBPm GBPm GBPm GBPm
Current tax
UK corporation tax 13.4 (6.4) 7.0 9.0 6.9 15.9
Adjustments in
respect of
previous years (3.0) (9.0) (12.0) 0.7 - 0.7
Total current tax 10.4 (15.4) (5.0) 9.7 6.9 16.6
Deferred tax
Current year 16.3 316.1 332.4 9.4 56.4 65.8
Effect of change in
tax rate - 214.9 214.9 - - -
Adjustments in
respect of
previous years - - - (3.1) - (3.1)
Total deferred tax 16.3 531.0 547.3 6.3 56.4 62.7
Total taxation
charge/(credit) 26.7 515.6 542.3 16.0 63.3 79.3
31 March 2021
Before exceptional
items and Exceptional items and
remeasurements remeasurements Total
Current tax
UK corporation tax 84.1 6.2 90.3
Adjustments in respect
of previous years (11.4) - (11.4)
Total current tax 72.7 6.2 78.9
Deferred tax
Current year 34.0 113.3 147.3
Adjustments in respect
of previous years (5.2) 3.3 (1.9)
Total deferred tax 28.8 116.6 145.4
Total taxation
charge/(credit) 101.5 122.8 224.3
The 'adjusted current tax charge' and the 'adjusted effective
rate of tax', which are presented in order to best represent
underlying performance by making similar adjustments to the
'adjusted profit before tax' measure, are arrived at after the
following adjustments:
Year ended Six months ended
31 March 2021 Six months ended 30 September 2020
(restated*) 30 September 2021 (restated*)
GBPm % GBPm % GBPm %
Continuing operations
224.3 9.3 Group tax charge and effective rate 542.3 32.2 79.3 10.2
Add: reported deferred tax charge and effective
(145.4) (6.1) rate (547.3) (32.5) (62.7) (8.0)
78.9 3.2 Reported current tax charge and effective rate (5.0) (0.3) 16.6 2.2
5.1 Effect of adjusting items (2.5) 10.2
78.9 8.3 Reported current tax charge on adjusted basis (5.0) (2.8) 16.6 12.4
add:
Share of current tax from joint ventures and 2.3 1.3
14.9 1.6 associates 1.9 1.4
less:
(7.9) (0.8) Current tax charge/credit on exceptional items 15.4 8.8 (6.9) (5.1)
85.9 9.1 Adjusted current tax charge and effective rate 12.7 7.3 11.6 8.7
The adjusted effective current tax rate for the period after
adjusting for discrete events arising in the first half of the year
is 7.3%. The forecast full-year effective current tax rate is
expected to be between 8% - 9%.
*The comparative has been restated. See note 2 (v).
9. Discontinued operations and assets and liabilities held for sale
Discontinued operations
The discontinued operations are the Group's Gas Production
business, which remains held for sale at the balance sheet date,
and its joint venture investment in SGN. SGN constitutes a separate
major line of business of the Group, therefore it has been
classified as a discontinued operation and is included in
discontinued operations in all comparative information below. The
profit/(loss) of the discontinued operations for the period is as
follows:
30 September 2021 30 September 2020
Before exceptional items and remeasurements(i) Exceptional items and remeasurements Total(i)
Before exceptional items and remeasurements Exceptional items and remeasurements Total (restated*) (restated*) (restated*)
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue(i) 116.2 - 116.2 77.2 - 77.2
Cost of
sales(i) (36.9) - (36.9) (78.5) - (78.5)
Gross
profit/(loss) 79.3 - 79.3 (1.3) - (1.3)
Operating costs (1.6) (93.9) (95.5) (1.7) - (1.7)
Operating
profit/(loss)
before joint
ventures 77.7 (93.9) (16.2) (3.0) - (3.0)
Joint ventures:
Share of
operating
profit 21.0 - 21.0 89.4 - 89.4
Share of
interest (11.1) - (11.1) (32.9) - (32.9)
Share of
movement on
derivatives - (4.6) (4.6) - 0.8 0.8
Share of tax (1.7) (84.7) (86.4) (12.0) (0.1) (12.1)
Share of profit
on joint
ventures 8.2 (89.3) (81.1) 44.5 0.7 45.2
Operating
profit/(loss) 85.9 (183.2) (97.3) 41.5 0.7 42.2
Finance income 5.1 - 5.1 4.9 - 4.9
Finance costs (1.6) - (1.6) (1.1) - (1.1)
Profit/(loss)
before tax 89.4 (183.2) (93.8) 45.3 0.7 46.0
Profit/(loss)
from
discontinued
operations,
net of tax 89.4 (183.2) (93.8) 45.3 0.7 46.0
(i) For the 6 months ended 30 September 2020 revenue and cost of
sales have been adjusted by GBP70.9m to reflect the external
revenue and cost of sales that will be lost by SSE on disposal of
Gas Production.
31 March 2021
Before exceptional items and Exceptional items and
remeasurements remeasurements Total
(restated*) (restated*) (restated*)
GBPm GBPm GBPm
Revenue 105.0 - 105.0
Cost of sales (68.9) - (68.9)
Gross profit 36.1 - 36.1
Operating costs (3.1) - (3.1)
Operating profit before joint
ventures 33.0 - 33.0
Joint ventures:
Share of operating profit 173.0 - 173.0
Share of interest (64.1) - (64.1)
Share of movement on derivatives - 1.9 1.9
Share of tax (21.9) (0.3) (22.2)
Share of profit on joint ventures 87.0 1.6 88.6
Operating profit/(loss) 120.0 1.6 121.6
Finance income 9.8 - 9.8
Finance costs (2.3) - (2.3)
Profit before taxation 127.5 1.6 129.1
Profit for the year from
discontinued operations, net of
tax 127.5 1.6 129.1
* The comparative has been restated. See note 2 (v).
Other comprehensive income from discontinued operations
March
2021 September 2021 September 2020
GBPm GBPm GBPm
Items that will be reclassified subsequently to profit or loss:
Share of other comprehensive gain/(loss) of joint ventures and associates,
4.7 net of taxation 0.5 (0.4)
Items that will not be reclassified to profit or loss:
Share of other comprehensive (loss)/income of joint ventures, net of (1.7)
(23.3) taxation (11.9)
(18.6) Other comprehensive loss from discontinued operations (1.2) (12.3)
9. Discontinued operations and assets and liabilities held for sale (continued)
Cashflows from discontinued operations
March
2021 September 2021 September 2020
GBPm GBPm GBPm
26.8 Cashflows from operating activities 11.6 12.5
(26.8) Cashflows from investing activities (11.6) (12.5)
Net increase/(decrease) in cash and cash equivalents from discontinued -
- operations -
Assets and liabilities held for sale
At 30 September 2021, the Group's Gas Production assets and
liabilities were deemed available for immediate sale. As referred
at note 21.2, the transaction to dispose of Gas Production was
completed on 14 October 2021. On 2 August 2021, the Group announced
it had agreed to sell its 33.3% investment in SGN to a consortium
comprising existing SGN shareholders Ontario Teachers' Pension Plan
Board and Brookfield Super-Core Infrastructure Partners for cash
consideration of GBP1,225m. The agreement is conditional on certain
regulatory approvals and is expected to complete by 31 March 2022.
Accordingly, the investment is presented as held for sale at 30
September 2021. The final gain on sale will be determined on
completion of the transaction, but is expected to be in excess of
GBP570m. Finally, a 10% stake in Doggerbank windfarm development C
has also been classified as held for sale at 30 September 2021, as
the Group was progressed in discussions to sell a 10% stake in
Dogger Bank C to Eni. The transaction was announced on 2 November
2021, subsequent to the balance sheet date (see note 21.3).
The assets and liabilities of each of these businesses have been
classified as held for sale and have been presented separately
after elimination of intercompany balances on the face of the
balance sheet.
March
2021 Gas Production SGN 10% Dogger bank C September 2021 September 2020
GBPm GBPm GBPm GBPm GBPm GBPm
167.5 Property plant and equipment 124.7 - - 124.7 180.4
Goodwill and other intangible
49.6 assets 33.7 - - 33.7 41.6
Equity investments in joint
- ventures and associates - 543.1 2.6 545.7 71.9
Loans to joint ventures and
- associates - 118.8 - 118.8 281.2
14.9 Deferred tax asset 14.7 - - 14.7 14.7
4.7 Inventories 5.8 - - 5.8 7.1
102.4 Trade and other receivables 2.5 - - 2.5 80.5
- Cash and cash equivalents - - - - 0.5
339.1 Total assets 181.4 661.9 2.6 845.9 677.9
(55.4) Trade and other payables (13.2) - - (13.2) (50.0)
(0.1) Current tax liabilities - - - - -
(195.8) Provisions (159.4) - - (159.4) (405.0)
(2.2) Loans and other borrowings - - - - (1.5)
(253.5) Total liabilities (172.6) - - (172.6) (456.5)
85.6 Net assets/(liabilities) 8.8 661.9 2.6 673.3 221.4
Amounts accumulated in hedge reserve related to SGN total
GBP28.2m, net of tax.
The assets and liabilities classified as held for sale at 30
September 2020 were the Group's investment in Multifuel Energy
Limited, the Group's 10% stake in Doggerbank A&B windfarm
development, the Group's SSE Contracting business and the Group's
investment in Gas Production assets. Multifuel Energy Limited was
sold on 7 January 2021 (see note 12) and the 10% stake in
Doggerbank A & B windfarm development was sold was sold on 4
December 2020 (see note 12), while the SSE Contracting business and
the Group's investment in Gas Production assets remained held for
sale at 31 March 2021. As noted above, both SSE Contracting and Gas
Production have now been disposed.
10. Dividends
Ordinary dividends
Six months ended 30 September
Year ended 31 March 2021 2021 Six months ended 30 September 2020
Pence per Settled Pence per Settled Pence per
Settled via ordinary Total via scrip ordinary via scrip ordinary
Total GBPm scrip GBPm share GBPm GBPm share Total GBPm GBPm share
Final -
year ended
31 March
- - - 2021 590.5 327.5 56.6 - - -
Interim -
year ended
31 March
254.3 13.5 24.4 2021 - - - - -
Final -
year ended
31 March
582.1 25.5 56.0 2020 - - 582.1 25.5 56.0
836.4 39.0 590.5 327.5 582.1 25.5
The final dividend of 56.6p per ordinary share declared in
respect of the financial year ended 31 March 2021 (2020: 56.0p) was
approved at the Annual General Meeting on 22 July 2021 and was paid
to shareholders on 23 September 2021. Shareholders were able to
elect to receive ordinary shares credited as fully paid instead of
the cash dividend under the terms of the Company's scrip dividend
scheme.
An interim dividend of 25.5p per ordinary share (2020: 24.4p)
has been proposed and is due to be paid on 10 March 2022 to those
shareholders on the SSE plc share register on 14 January 2022. The
proposed interim dividend has not been included as a liability in
these financial statements. A scrip dividend will be offered as an
alternative.
11. Earnings per share
Basic earnings per share
The calculation of basic earnings per ordinary share at 30
September 2021 is based on the net profit attributable to ordinary
shareholders and the weighted average number of ordinary shares
outstanding during the period ended 30 September 2021.
Adjusted earnings per share
Adjusted earnings per share has been calculated by excluding the
charge for deferred tax, the interest on net pension liabilities
under IAS 19, the depreciation charged on fair value uplifts and
the impact of exceptional items and certain re-measurements.
Continuing operations
Year ended Six months ended
31 March 2021 Six months ended 30 September 2020
(restated*) 30 September 2021 (restated*)
Earnings Earnings per share Earnings Earnings per share Earnings Earnings per share
GBPm pence GBPm pence GBPm pence
Earnings attributable to
2,276.2 218.7 ordinary shareholders 999.3 94.7 699.5 67.3
Less: losses/(earnings) 93.8 8.9 (46.0) (4.4)
attributable to
(129.1) (12.4) discontinued operations
Basic earnings on 653.5 62.9
continuing operations used
2,147.1 206.3 to calculate adjusted EPS 1,093.1 103.6
Exceptional items and (1,004.5) (95.2) (590.4) (56.8)
certain re-measurements
(1,380.9) (132.8) (note 6)
Basic excluding 88.6 8.4 63.1 6.1
exceptional items and
766.2 73.5 certain re- measurements
Adjusted for:
Depreciation charge on 10.3 1.0 10.3 1.0
20.6 2.0 fair value uplifts
Interest on net pension (3.7) (0.4) (4.0) (0.4)
(8.3) (0.8) scheme assets (note 7)
32.2 3.1 Deferred tax 16.3 1.6 9.8 0.9
Deferred tax from share (0.7) (0.1) (3.5) (0.3)
of joint ventures and
5.7 0.6 associates
816.4 78.4 Adjusted 110.8 10.5 75.7 7.3
2,147.1 206.3 Basic 1,093.1 103.6 653.5 62.9
- (0.3) Dilutive effect of outstanding share options - (0.2) - (0.1)
2,147.1 206.0 Diluted 1,093.1 103.4 653.5 62.8
Reported earnings per share
Year ended Six months ended
31 March 2021 Six months ended 30 September 2020
(restated*) 30 September 2021 (restated*)
Earnings Earnings per
Earnings per share Earnings share Earnings Earnings per share
GBPm pence GBPm pence GBPm pence
Basic
Earnings per share on
2,147.1 206.3 continuing operations 1,093.1 103.6 653.5 62.9
Earnings/(losses) per share on (93.8) (8.9) 46.0 4.4
129.1 12.4 discontinued operations
Earnings per share 999.3 94.7 699.5 67.3
attributable to ordinary
2,276.2 218.7 shareholders
Dilutive effect of outstanding - (0.1)
- (0.4) share options - (0.1)
2,276.2 218.3 Diluted 999.3 94.6 699.5 67.2
11. Earnings per share (continued)
The weighted average number of shares used in each calculation
is as follows:
Six months ended 30 September Six months ended 30 September
Year ended 31 March 2021 2021 2020
Number of shares Number of shares Number of shares
(millions) (millions) (millions)
For basic and adjusted
1,040.9 earnings per share 1,054.7 1,039.6
Effect of exercise of share
1.6 options 2.2 1.5
For diluted earnings per
1,042.5 share 1,056.9 1,041.1
12. Acquisitions and disposals
Acquisitions and disposals in the current period
Acquisitions
There have been no significant acquisitions in the current
period.
Disposals
SSE Contracting: on 30 June 2021, the Group completed the sale
of its Contracting and Rail business to the Aurelius Group for
headline consideration of GBP22.5m and GBP5m of contingent
consideration based on earnings targets within the business . Due
to working capital movements in the business subsequent to the
transaction agreement, cash consideration received was GBP0.2m. The
Group recorded an additional exceptional loss on disposal of
GBP18.1m on completion, in addition to the exceptional impairment
loss of GBP51.2m recognised during the year ended 31 March
2021.
Other disposals: On 19 August 2021 the Group received a dividend
of GBP4.8m following the sale of Smarter Grid Solutions by the
Environmental Energies Fund Limited, resulting in a gain on sale of
GBP2.8m.
Prior year acquisitions and disposals
During the year ended 31 March 2021, the Group progressed its
disposal plan for non-core assets announced in June 2020, and
continued its programme of strategic partnering generating
developer gains. As a result, it recognised exceptional gains on
disposal of GBP976.0m (September 2020, GBP311.3m) and
non-exceptional gains on disposal of GBP251.9m (September 2020,
GBP47.2m). The gains at September 2020 related to disposals of
investments in Walney Windfarm and Maple Smart Meter Assets, and
stakes in Seagreen 1 Windfarm and Slough Multifuel. The disposals
below primarily comprise sales of stakes in non-operated investment
assets, or the sale of a stake in early stage offshore windfarm
developments, which aligns to the Group's stated policy to realise
value from these assets.
There were no significant additions during the year ended 31
March 2021.
Sale of investment in Ferrybridge Multifuel: On 7 January 2021,
the Group completed the disposal of its 50% joint venture
investment in Multifuel Energy Limited and Multifuel Energy 2
Limited (together 'MEL'), to European Diversified Infrastructure
Fund III for headline consideration of GBP995m. The Group recorded
an exceptional gain on disposal of GBP669.9m on completion.
Sale of investment in Walney Windfarm: On 2 September 2020, the
Group agreed to sell its subsidiary, SSE Renewables Walney Limited,
to Greencoat UK Wind Plc for consideration of GBP350m, resulting in
an exceptional gain on sale of GBP188.7m. The disposal is not
considered to be aligned to the Group's strategic objective of
gaining value from divestment of stakes in offshore or
international wind developments, therefore the gain on disposal was
recognised as exceptional.
Sale of investment in Maple Smart Meter Assets: On 23 September
2020, the Group disposed of its 33% joint venture investment in
Maple Topco Limited, the smart meter services provider, for
proceeds of GBP95.3m, recognising an exceptional gain on disposal
of GBP70.4m.
Sale of stake in Doggerbank A&B Windfarms: On 4 December
2020, the Group announced it had agreed to sell a 10% stake in
Doggerbank A and Doggerbank B windfarms to Eni for equity
consideration of GBP206.3m, resulting in a non-exceptional gain on
disposal of GBP202.8m. The gain has been recognised within the
adjusted profit of the Group in line with the Group's stated
exceptional policy for gains on disposal of divestments in offshore
windfarms.
Sale of stake in Seagreen 1 Windfarm: On 3 June 2020, the Group
disposed of a 51% stake in its wholly owned subsidiary, Seagreen
Holdco 1 Ltd ('Seagreen 1'), to Total. The transaction was for
initial cash proceeds of GBP70m, plus contingent consideration of
up to GBP60m dependent upon future criteria being met. The Group
has assessed that control of the company was lost on that date, and
that the investment in Seagreen 1 should be accounted for as an
equity accounted joint venture under the principles of IFRS 11
"Joint Arrangements". The Group acquired the joint venture
investment at fair value under the principles of IFRS 10
"Consolidated Financial Statements", resulting in a total gain of
GBP49.0m. Of that gain, GBP25.7m was recognised as exceptional, as
it represented the fair value gain on acquisition of the joint
venture investment retained by the Group. The remaining GBP23.3m of
the gain was included in underlying operations, in line with the
Group's stated exceptional policy.
Sale of stake in Slough Multifuel: On 2 April 2020, the Group
disposed of a 50% stake in its wholly owned subsidiary, SSE Slough
Multifuel Ltd, to Copenhagen Infrastructure Partners. The
transaction was for initial cash proceeds of GBP10m, plus
contingent consideration of up to GBP59.1m dependent upon future
criteria being met. The Group has assessed that control of the
company was lost on that date, and that the investment in Slough
Multifuel should be accounted for as an equity accounted joint
venture under the principles of IFRS 11 "Joint Arrangements". The
Group acquired the joint venture investment at fair value under the
principles of IFRS 10 "Consolidated Financial Statements",
resulting in a total gain of GBP41.7m. Of that gain, GBP21.3m was
recognised as exceptional, as it represented the fair value gain on
acquisition of the joint venture investment retained by the Group.
The remaining GBP20.4m of the gain was included in underlying
operations, in line with the Group's stated exceptional policy.
13. Sources of finance
13.1 Capital management
The Board's policy is to maintain a strong balance sheet and
credit rating to support investor, counterparty and market
confidence in the Group and to underpin future development of the
business. The Group's credit ratings are also important in
maintaining an efficient cost of capital and in determining
collateral requirements throughout the Group. As at 30 September
2021, the Group's long term credit rating was BBB+ stable outlook
for Standard & Poor's and Baa1 negative outlook for
Moody's.
The maintenance of a medium term corporate model is a key
control in monitoring the development of the Group's capital
structure and allows for detailed scenarios and sensitivity
testing. Key ratios drawn from this analysis underpin regular
updates to the Board and include the ratios used by the rating
agencies in assessing the Group's credit ratings.
The Group's debt requirements are principally met through
issuing bonds denominated in Sterling and Euros as well as private
placements and medium term bank loans including those with the
European Investment Bank. On 1 April 2021, the Group exercised its
option to redeem its EUR600m hybrid equity bond (GBP421.4m). The
bond had no fixed redemption date, but the Group had the option to
redeem all of the bond on 1 April 2021 or every 5 years
thereafter.
Adjusted net debt and hybrid capital is stated after removing
lease obligations and cash held as collateral in line with the
Group's presentation basis which is explained at note 2(i). Cash
held as collateral refers to amounts deposited on commodity trading
exchanges which are reported within 'trade and other receivables'
on the face of the balance sheet.
The GBP1.5bn of committed bank facilities, being a GBP1.3bn
Revolving Credit Facility with a March 2026 maturity date and a
GBP0.2bn bilateral facility with an October 2026 maturity date.
These facilities can also be utilised to cover short term funding
requirements; however, they remain undrawn for most of the time and
were undrawn at 30 September 2021. In addition, the Group has an
established EUR1.5bn Euro commercial paper programme (paper can be
issued in a range of currencies and swapped into Sterling). At 30
September 2021, GBP103m of commercial paper was outstanding (2020:
GBP336m; March 2021: nil).
The Group capital comprises:
March September September
2021 2021 2020
GBPm GBPm GBPm
8,989.6 Total borrowings (excluding lease obligations) 8,705.8 9,625.4
(1,600.2) Less: Cash and cash equivalents (232.7) (415.5)
- Cash presented as held for sale - (0.5)
7,389.4 Net debt (excluding hybrid equity) 8,473.1 9,209.4
1,472.4 Hybrid equity 1,051.0 1,472.4
37.1 Cash held as collateral and other short-term loans 87.4 (59.7)
8,898.9 Adjusted net debt and hybrid equity 9,611.5 10,622.1
5,208.7 Equity attributable to shareholders of the parent 6,035.8 3,722.1
14,107.6 Total capital excluding lease obligations 15,647.3 14,344.2
13.2 Loans and other borrowings
March 2021 September 2021 September 2020
GBPm GBPm GBPm
Current
864.7 Short term loans 2,014.4 1,289.1
72.9 Lease obligations 52.4 74.4
937.6 2,066.8 1,363.5
Non-current
8,124.9 Loans 6,691.3 8,336.3
348.1 Lease obligations 352.3 355.3
8,473.0 7,043.6 8,691.6
9,410.6 Total loans and borrowings 9,110.4 10,055.1
(1,600.2) Cash and cash equivalents (232.7) (415.5)
7,810.4 Unadjusted net debt 8,877.7 9,639.6
Add/(less):
1,472.4 Hybrid equity (note 14) 1,051.0 1,472.4
(421.0) Lease obligations (404.7) (429.7)
37.1 Cash held/(deposited) as collateral and other short term loans 87.4 (59.7)
- Cash presented as held for sale - (0.5)
8,898.9 Adjusted net debt and hybrid equity 9,611.4 10,622.1
SSE's adjusted net debt and hybrid capital was GBP9.6bn at 30
September 2021, compared with GBP8.9bn at 31 March 2021 and
GBP10.6bn at 30 September 2020.
Adjusted net debt and hybrid capital is stated after removing
lease obligations and cash held as collateral in line with the
Group's presentation basis which is explained at note 2(i). Cash
held as collateral refers to amounts deposited on commodity trading
exchanges which are reported within 'trade and other receivables'
on the face of the balance sheet.
13. Sources of finance (continued)
13.3 Reconciliation of net increase in cash and cash equivalents
to movement in adjusted net debt and hybrid equity
March 2021 September 2021 September 2020
GBPm GBPm GBPm
1,435.6 (Decrease)/increase in cash and cash equivalents (1,367.5) 251.4
Add/(less)
- Cash presented as held for sale - (0.5)
(1,912.9) New borrowing proceeds (103.3) (1,313.9)
(1,051.0) New hybrid equity proceeds - (1,051.0)
1,895.9 Repayment of borrowings 450.0 1,394.4
438.6 Disposal of borrowings - -
748.3 Repayment of hybrid equity 421.4 750.0
306.0 Non-cash movement on borrowings (62.8) 10.1
(293.5) Decrease in cash held as collateral and other short term borrowings (50.3) (196.7)
1,567.0 (Increase)/decrease in adjusted net debt and hybrids (712.5) (156.2)
13.4 Hybrid debt
Included within loans and borrowings at 30 September 2021 is
GBP1.0bn (2020: GBP1.0bn, March 2021: GBP1.0bn) of hybrid debt
securities issued on 16 March 2017 with an issuer first call date
on 16 September 2022. Due to the instruments having a fixed
redemption date, they have been accounted for as debt and are
included within loans and borrowings. This is in contrast to the
previous hybrid instruments issued which had no fixed redemption
date and are accounted for as equity. The purpose of the SSE's
hybrid capital programme is to strengthen SSE's capital base and
complement other sources of finance. Further commentary is provided
in note 13.1.
14. Hybrid Equity
March 2021 September 2021 September 2020
GBPm Perpetual subordinated capital securities GBPm GBPm
421.4 EUR 600m 2.375% perpetual subordinated capital securities (i) - 421.4
598.0 GBP 600m 3.74% perpetual subordinated capital securities (ii) 598.0 598.0
453.0 EUR 500m 3.125% perpetual subordinated capital securities (ii) 453.0 453.0
1,472.4 1,051.0 1,472.4
(i) 10 March 2015 EUR600m Hybrid Capital Bonds
The March 2015 hybrid capital bond has no fixed redemption date,
but the Company could, at its sole discretion, redeem all but not
part of the capital securities at their principal amount. The date
for the first discretionary redemption of the EUR600m hybrid
capital bond was executed and this hybrid bond was redeemed on 1
April 2021.
(ii) 2 July 2020 GBP600m and EUR500m Hybrid Capital Bonds
The new hybrid capital bonds issued in July 2020 have no fixed
redemption date, but the Company may, at its sole discretion,
redeem all but not part of the capital securities at their
principal amount. The date for the first potential discretionary
redemption of the GBP600m hybrid bond is 14 April 2026 and then
every 5 years thereafter. The date for the first potential
discretionary redemption of the EUR500m hybrid capital bond is 14
July 2027 and then every 5 years thereafter. For the GBP600m
hybrid, the coupon payments are made annually on 14 April and for
the EUR500m hybrid the coupon payments are made annually on 14
July.
Coupon Payments
In relation to the EUR600m hybrid equity bond, the final coupon
payment of GBP17.5m (2021: GBP17.5m) was made on 1 April 2021 and
for the GBP750m hybrid equity bond the final coupon payment of
GBP29.1m was paid on 10 September 2020. In relation to the GBP600m
hybrid equity bond a coupon payment of GBP16.8m (2021: GBPnil) was
made on 14 April 2021 and for the EUR500m hybrid equity bond a
coupon payment of GBP16.4m (2021: GBPnil) was made on 14 July 2021.
The coupon payments in the six month period to 30 September 2021
consequently totalled GBP50.7m (2020: GBP46.6m).
The Company has the option to defer coupon payments on the bonds
on any relevant payment date, as long as a dividend on the ordinary
shares has not been declared. Deferred coupons shall be satisfied
only on redemption; or on a dividend payment on ordinary shares,
both of which occur at the sole option of the Company. Interest
will accrue on any deferred coupon.
15. Share capital
Number
(millions) GBPm
Allotted, called up and fully paid:
At 1 April 2021 1,049.1 524.5
Issue of shares 22.2 11.1
At 30 September 2021 1,071.3 535.6
The Company has one class of ordinary share which carries no
right to fixed income. The holders of ordinary shares are entitled
to receive dividends as declared and are entitled to one vote per
share at meetings of the Company.
Shareholders were able to elect to receive ordinary shares in
place of the final dividend for the year to 31 March 2021 of 56.6p
(2020: 56.0p in relation to the final dividend for the year to 31
March 2020; March 2021: 24.4p in relation to the interim dividend
for the year to 31 March 2021) per ordinary share under the terms
of the Company's scrip dividend scheme. This resulted in the issue
of 22,201,443 (September 2020: 1,918,977; March 2021: 2,802,380)
new fully paid ordinary shares.
15. Share capital (continued)
In addition, the Company issued 0.2m shares (2020: 0.3m, March
2021: 0.9m) during the period under the savings-related share
option schemes and discretionary share option schemes, all of which
were settled by shares held in Treasury for a consideration of
GBP2.2m (2020: GBP3.4m, March 2021: GBP10.4m).
No shares were repurchased in the period.
Of the 1,071.3m shares in issue, 5.9m are held as treasury
shares. These shares will be held by the Group and used to award
shares to employees under the Sharesave scheme in the UK.
During the period, on behalf of the Company, the employee share
trust purchased 0.1 million shares (2020: 0.1 million, March 2021:
0.9 million) for a consideration of GBP1.5m (2020: GBP1.4m, March
2021: GBP12.9m) to be held in trust for the benefit of employee
share schemes.
16. Financial Risk Management
The Board has overall responsibility for the establishment and
oversight of the Group's risk management framework. The Group's
policies for risk management are established to identify the risks
faced by the Group, to set appropriate risk limits and controls,
and to monitor risks and adherence to limits. Exposure to
commodity, currency and interest rate risks arise in the normal
course of the Group's business and derivative financial instruments
are entered into to hedge exposure to these risks.
There is a Group wide risk committee reporting to the Group
Executive Committee, which is responsible for reviewing the
strategic, market, credit, operational and liquidity risks and
exposures that arise from the Group's operating activities. In
addition, the Group has two dedicated Energy Market risk committees
reporting to the Group Executive Committee and Board respectively,
with the Group Executive Sub-committee chaired by the Group Finance
Director and the Board Sub-committee chaired by Non-Executive
Director Tony Cocker. These Committees oversee the Group's
management of its energy market exposures, including its approach
to hedging.
In the six months to 30 September 2021, the Group was exposed to
exceptional volatility in energy markets impacting the primary
commodities to which it is exposed (Gas, Carbon and Power). The
Group's approach to hedging, and the diversity of its energy
portfolios (across Wind, Hydro, Thermal and Customers) has provided
significant mitigation of these exposures. Exceptional rises and
volatility in commodity prices have created a particular challenge
in managing counter-party credit and collateral exposures and
requirements, to ensure continued access to energy markets to
enable hedging and prompt optimisation of SSE's energy portfolios.
This market access has been successfully maintained.
The Group's policy in relation to liquidity risk continues to be
to ensure, in so far as possible, that it will always have
sufficient liquidity to meet its liabilities when due, under both
normal and stressed conditions, without incurring unacceptable
losses or risking damage to its reputation. Further detail is noted
in the Group's financial statements at 31 March 2021.
For financial reporting purposes, the Group has classified
derivative financial instruments into two categories, operating
derivatives and financing derivatives. Operating derivatives relate
to all qualifying commodity contracts including those for
electricity, gas, oil, coal and carbon. Financing derivatives
include all fair value and cash flow interest rate hedges,
non-hedge accounted (mark-to-market) interest rate derivatives,
cash flow foreign exchange hedges and non-hedge accounted foreign
exchange contracts. Non-hedge accounted contracts are treated as
held for trading.
The net movement reflected in the interim income statement can
be summarised as follows:
Six months ended 30 September Six months ended 30 September
Year ended 31 March 2021 2021 2020
GBPm GBPm GBPm
Operating derivatives
Total result on operating
429.1 derivatives (i) 1,584.1 143.8
161.0 Less: amounts settled (ii) (380.1) 177.5
Movement in unrealised
590.1 derivatives 1,204.0 321.3
Financing derivatives (and
hedged items)
Total result on financing
35.2 derivatives (i) (55.3) (90.6)
20.4 Less: amounts settled (ii) (0.6) 74.1
Movement in unrealised
55.6 derivatives (55.9) (16.5)
645.7 Net income statement impact 1,148.1 304.8
(i) Total result on derivatives in the income statement
represents the total amounts (charged) or credited to the income
statement in respect of operating and financial derivatives.
(ii) Amounts settled in the period represent the result on
derivatives transacted which have matured or been delivered and
have been included within the total result on derivatives.
16. Financial Risk Management (continued)
The fair values of the primary financial assets and liabilities
of the Group together with their carrying values are as
follows:
March 2021 September 2021 September 2020
Carrying Fair Carrying Fair Carrying Fair
value value value value value value
GBPm GBPm GBPm GBPm GBPm GBPm
Financial Assets
Current
832.2 832.2 Trade receivables 947.5 947.5 792.6 792.6
3.8 3.8 Other receivables 3.2 3.2 6.7 6.7
2.7 2.7 Cash collateral and other short term loans 59.4 59.4 59.7 59.7
1,600.2 1,600.2 Cash and cash equivalents 232.7 232.7 415.5 415.5
470.9 470.9 Derivative financial assets 419.2 419.2 360.7 360.7
----------- ----------- -----------
2,909.8 2,909.8 1,662.0 1,662.0 1,635.2 1,635.2
----------- ----------- -----------
Non-current
3.6 3.6 Unquoted equity investments 3.5 3.5 1.7 1.7
115.9 115.9 Loan note receivable 128.2 128.2 109.4 109.4
Loans to associates and jointly controlled
554.3 554.3 entities 632.8 632.8 643.9 643.9
114.7 114.7 Derivative financial assets 2,207.1 2,207.1 176.3 176.3
----------- ----------- -----------
788.5 788.5 2,971.6 2,971.6 931.3 931.3
----------- ----------- -----------
3,698.3 3,698.3 4,633.6 4,633.6 2,566.5 2,566.5
----------- ----------- -----------
Financial Liabilities
Current
(433.3) (433.3) Trade payables (610.0) (610.0) (304.8) (304.8)
(39.8) (39.8) Outstanding liquid funds (146.8) (146.8) - -
(864.7) (880.2) Loans and borrowings (2,014.4) (2,087.4) (1,289.1) (1,303.2)
(72.9) (72.9) Lease liabilities (52.4) (52.4) (74.4) (74.4)
(238.7) (238.7) Derivative financial liabilities (1,008.0) (1,008.0) (276.2) (276.2)
(1,649.4) (1,664.9) (3,831.6) (3,904.6) (1,944.5) (1,958.6)
----------- ----------- -----------
Non-current
(8,124.9) (9,373.1) Loans and borrowings (6,691.3) (7,703.5) (8,336.3) (9,441.9)
(348.1) (348.1) Lease liabilities (352.3) (352.3) (355.3) (355.3)
(452.1) (452.1) Derivative financial liabilities (500.2) (500.2) (485.6) (485.6)
----------- ----------- -----------
(8,925.1) (10,173.3) (7,543.8) (8,556.0) (9,177.2) (10,282.8)
----------- ----------- -----------
(10,574.5) (11,838.2) (11,375.4) (12,460.6) (11,121.7) (12,241.4)
----------- ----------- -----------
(6,876.2) (8,139.9) Net financial liabilities (6,741.8) (7,827.0) (8,555.2) (9,674.9)
Fair value hierarchy
The following table provides an analysis of financial
instruments that are measured subsequent to initial recognition at
fair value, grouped into Levels 1 to 3 based on the degree to which
the fair value is observable.
-- Level 1 fair value measurements are those derived from
unadjusted quoted market prices for identical assets or
liabilities.
-- Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
-- Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data.
September 2021 September 2020
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Financial Assets
Energy derivatives 132.5 2,302.0 - 2,434.5 - 147.8 - 147.8
Interest rate derivatives - 177.7 - 177.7 - 374.9 - 374.9
Foreign exchange derivatives - 14.0 - 14.0 - 14.3 - 14.3
Loan note receivable - - 128.2 128.2 - - 109.4 109.4
Unquoted equity instruments - - 3.5 3.5 - - 1.7 1.7
132.5 2,493.7 131.7 2,757.9 - 537.0 111.1 648.1
Financial Liabilities
Energy derivatives - (1,023.9) - (1,023.9) (8.4) (202.7) - (211.1)
Interest rate derivatives - (433.2) - (433.2) - (534.7) - (534.7)
Foreign exchange derivatives - (51.1) - (51.1) - (16.0) - (16.0)
Loans and borrowings - (48.9) - (48.9) - (234.3) - (234.3)
- (1,557.1) - (1,557.1) (8.4) (987.7) - (996.1)
There were no significant transfers out of Level 1 into Level 2
and out of Level 2 into Level 1 during the 6 months ended 30
September 2021, nor the 6 months ended 30 September 2020.
16. Financial Risk Management (continued)
Fair Value Hierarchy (continued)
March 2021
Level 1 Level 2 Level 3 Total
GBPm GBPm GBPm GBPm
Financial Assets
Energy derivatives 68.8 275.9 - 344.7
Interest rate derivatives - 217.6 - 217.6
Foreign exchange derivatives - 23.3 - 23.3
Loan note receivable - - 115.9 115.9
Unquoted equity instruments - - 3.6 3.6
68.8 516.8 119.5 705.1
Financial Liabilities
Energy derivatives - (138.1) - (138.1)
Interest rate derivatives - (489.7) - (489.7)
Foreign exchange derivatives - (63.0) - (63.0)
Loans and borrowings - (3.2) - (3.2)
- (694.0) - (694.0)
There were no significant transfers out of Level 1 into Level 2
and out of Level 2 into Level 1 during the year ended 31 March
2021.
17. Retirement Benefit Obligations
Defined Benefit Schemes
The Group has two funded final salary pension schemes which
provide defined benefits based on final pensionable pay. The
schemes are subject to independent valuations at least every three
years. The Group also has an Employer Financed Retirement Benefit
scheme and a defined contribution scheme, SSE Pensions+ under a
master trust with Aviva, details of which were provided in the
Group's Financial Statements to 31 March 2021.
Summary of Defined Benefit Pension Schemes:
Movement
recognised in Pension Movement recognised in respect of
the SoCI asset/(liability) the pension asset in the SoCI Pension asset/(liability)
March March September September September September
2021 2021 2021 2020 2021 2020
GBPm GBPm GBPm GBPm GBPm GBPm
Scottish Hydro
Electric Pension
8.6 543.1 Scheme (41.7) (6.3) 501.7 528.5
Southern Electric
(24.4) (186.1) Pension Scheme 106.5 (204.2) (63.7) (382.0)
Net actuarial
gain/(loss) and
combined
(15.8) 357.0 asset/(liability) 64.8 (210.5) 438.0 146.5
A triennial valuation of the Southern Electric Pension Scheme
('SEPS') was finalised in the year ended 31 March 2020 and showed a
deficit of GBP286.6m as at 31 March 2019. The Group continues to
pay deficit contributions which, along with investments returns
from return seeking assets, is expected to make good this shortfall
by 31 March 2027. The next funding valuation will be carried out as
at 31 March 2022.
The last triennial valuation for the Scottish Hydro Electric
Pension Scheme ('SHEPS') was carried out as at 31 March 2021 and
showed a surplus on a cash funding basis of GBP268.4m. Following
this valuation, the Group agreed to a new schedule of contributions
to the scheme which continues to cease contributions to the scheme
for a period until the surplus on a gilts funding basis is negative
for two successive quarterly valuations.
A summary of the movement presented in the statement of changes
in equity is shown below:
Six months ended 30 September Six months ended 30 September
Year ended 31 March 2021 2021 2020
GBPm GBPm GBPm
Actuarial gains/(losses)
(15.8) recognised 64.8 (210.5)
3.0 Deferred tax thereon (38.6) 40.0
Net gain recognised in
(12.8) statement of changes in equity 26.2 (170.5)
17. Retirement Benefit Obligations (continued)
The major assumptions used by the actuaries in both schemes in
preparing the IAS19 valuations were:
March 2021 September 2021 September 2020
3.70% Rate of increase in pensionable salaries 3.85% 3.55%
3.20% Rate of increase in pension payments 3.35% 3.05%
2.00% Discount rate 1.95% 1.50%
3.20% Inflation rate 3.35% 3.05%
The assumptions relating to longevity underlying the pension
liabilities are based on standard actuarial mortality tables, and
include an allowance for future improvements in longevity. The
assumptions, equivalent to future longevity for members in normal
health at age 65, are as follows:
March 2021 September 2021 September 2020
Male Female Male Female Male Female
Scottish Hydro Electric Pension Scheme
23 24 Currently aged 65 22 24 23 24
25 27 Currently aged 45 24 27 24 26
Southern Electric Pension Scheme
23 25 Currently aged 65 23 25 23 25
24 26 Currently aged 45 24 26 24 26
18. Capital Commitments
March 2021 September 2021 September 2020
GBPm GBPm GBPm
Capital Expenditure
1,189.5 Contracted for but not provided 1,285.8 1,254.8
19. Related Party Transactions
The following transactions took place during the period between
the Group and entities which are related to the Group, but which
are not members of the Group. Related parties are defined as those
in which the Group has control, joint control or significant
influence over.
September 2021 September 2020
Sale of Purchase of Sale of Purchase of
goods and goods and Amounts Amounts owed goods and goods and Amounts Amounts owed
services services owed from to services services owed from to
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Joint
ventures:
Seabank
Power Ltd 47.2 (47.5) 0.1 (35.3) 24.9 (23.2) 0.8 (16.9)
Marchwood
Power Ltd 32.5 (107.8) 19.5 (43.6) 20.9 (76.3) 0.3 (14.7)
Scotia Gas
Networks
Ltd(ii) 15.3 (5.0) 15.5 (0.8) 12.0 (6.7) 11.7 (1.1)
Clyde
Windfarm
(Scotland)
Ltd 2.3 (52.8) - (33.6) 2.1 (37.8) 1.3 (30.4)
Beatrice
Offshore
Windfarm
Ltd 2.8 (31.4) 1.0 (10.7) 2.9 (11.2) 0.6 (3.5)
Stronelairg
Windfarm
Ltd 1.1 (28.6) 1.1 (16.5) 0.9 (14.9) - (9.6)
Dunmaglass
Windfarm
Ltd 0.5 (12.7) 0.2 (8.1) 0.4 (7.7) - (5.7)
Neos
Networks
Ltd(i) 15.0 (13.8) 2.2 (42.7) 6.9 (19.5) 0.8 (7.9)
Other Joint
Ventures 24.4 (71.9) 11.7 (41.0) 23.7 (78.6) 7.1 (45.8)
Associates - - - - - (16.2) - -
March 2021
Purchase of goods and
Sale of goods and services services Amounts owed from Amounts owed to
GBPm GBPm GBPm GBPm
Joint ventures:
Seabank Power Ltd 75.2 (86.7) 0.1 (16.8)
Marchwood Power Ltd 45.3 (142.3) 0.6 (11.2)
Scotia Gas Networks Ltd 29.9 (13.1) 17.3 (1.1)
Clyde Windfarm (Scotland)
Ltd 4.3 (116.1) 0.1 (38.2)
Beatrice Offshore Windfarm
Ltd 5.3 (43.7) 1.1 (5.3)
Stronelairg Windfarm Ltd 1.9 (44.7) - (17.1)
Dunmaglass Windfarm Ltd 0.9 (22.2) - (6.6)
Neos Networks Ltd(i) 38.0 (26.3) 41.4 (1.4)
Other Joint Ventures 22.5 (193.8) 54.8 (1.9)
Associates - (16.2) - -
(i) Formerly SSE Telecommunications Limited.
19. Related Party Transactions (continued)
The transactions with Seabank Power Limited and Marchwood Power
Limited relate to the contracts for the provision of energy or the
tolling of energy under power purchase arrangements.
Scotia Gas Networks Limited ('SGN') operates the gas
distribution networks in Scotland and the South of England. The
Group's gas supply activity incurs gas distribution charges while
the Group also provides services to SGN in the form of a management
services agreement for corporate and shared services. On 2 August
2021, the Group announced it had agreed to sell its 33.3% stake in
SGN. The Group assessed that the investment met the criteria to be
classified as held for sale on 11 June 2021 when an Exclusivity
Agreement was signed by the acquiring consortium. Accordingly, from
11 June 2021 the Group ceased to equity account for SGN.
The amounts outstanding are trading balances, are unsecured and
will be settled in cash. No guarantees have been given or received.
No provisions have been made for doubtful debts in respect of the
amounts owed by the related parties.
In addition to the above at 30 September 2021, the Group was
owed the following loans from its principal joint ventures :
Marchwood Power Limited GBP43.6m (2020: GBP53.5m, March 2021:
GBP47.1m), Scotia Gas Networks Limited GBP118.8m (2020: GBP113.9m,
March 2021: GBP118.8m), Clyde Windfarm (Scotland) Limited GBP127.1m
(2020: GBP127.1m, March 2021: GBP127.1m), Stronelairg Windfarm
Limited GBP88.7m (2020: GBP88.2m, March 2021: GBP88.2m), Dunmaglass
Windfarm Limited GBP46.5m (2020: GBP46.5m, March 2021: GBP46.5m),
Neos Networks Limited GBP77.8m (2020: GBP44.2m, March 2021:
GBP60.9m) and Multifuel Energy Limited GBP48.6m (2020: GBP244.3m,
March 2021: GBPnil).
20. Seasonality of operations
Certain activities of the Group are affected by weather and
temperature conditions and seasonal market price fluctuations.
Within the six months ending 30 September 2021, the summer period
was one of the calmest across most of the UK and Ireland, and one
of the driest in the last seventy years in SSE's Hydro catchment
areas. Therefore, amounts reported for the interim period may not
be indicative of the amounts that will be reported for the full
year due to seasonal fluctuations in customer demand for gas,
electricity and services, the impact of weather on demand,
renewable generation output and commodity prices and market changes
in commodity prices. In Transmission and Distribution, the volumes
of electricity and gas distributed or transmitted across network
assets are dependent on levels of customer demand which are
generally higher in winter months. In Business Energy and
Airtricity, notable seasonal effects include the impact on customer
demand of warmer temperatures in the first half of the financial
year. In Thermal Generation, Renewables and Gas Production
(discontinued), there is the impact of lower production on
commodity prices. The weather impact on Renewable generation
production in relation to hydro and wind assets is particularly
affected by seasonal fluctuation. The impact of temperature on
customer demand for gas is more volatile than the equivalent demand
for electricity.
21. Post Balance Sheet Events
21.1 Acquisition 80% equity interest in Japanese offshore wind
development platform
On 29 October 2021 the Group, through its wholly owned
subsidiary SSE Renewables International Holdings Ltd, completed the
acquisition of an 80% equity interest in an offshore wind
development platform from Pacifico Energy and its affiliates for
$193m USD upfront cash consideration and a further $30m USD
deferred consideration subject to a number of conditions. This
acquisition is aligned to the Group's published strategy to pursue
overseas renewable opportunities.
An 80% equity stake has been acquired in the SSE Pacifico K.K.,
Aichi Offshore Wind Power No.1 G.K., Aichi Offshore Wind Power No.2
G.K., Enshunada Offshore Wind Power No.1 G.K., Goto-Fukue Offshore
Wind Power G.K., Izu Islands Offshore Wind Power G.K., Minami-Izu
Offshore Wind Power No.1 G.K., Niigata Offshore Wind Power No.1
G.K., Oki Islands Offshore Wind Power G.K., Wakayama-West Offshore
Wind Power No.1 G.K. and Wakayama-West Offshore Wind Power No.2
G.K..
The assets and liabilities acquired largely comprise tangible
and intangible assets, being early-stage development costs, grid
connections and goodwill. Given the timing of the completion of the
acquisition and the proximity to the reporting date, a formal PPA
assessment has not yet been completed, therefore the Group is
unable to provide a quantification of the fair values of the assets
and liabilities acquired. The Group will include an acquisition
balance sheet in its full year results for 31 March 2022.
21.2 Gas production - disposal
On 14 October 2021, the Group completed the sale of its Gas
Production business to Viaro Energy through its subsidiary RockRose
Energy Limited. In the period ended 30 September 2021, the Gas
Production business had an operating profit (recognised in
discontinued operations) of GBP77.7m (see note 9). The Group
recorded an exceptional impairment charge of GBP93.9m for the
period ended 30 September 2021 related to the carrying value of the
Gas Production assets and liabilities held for sale, based on their
fair value less costs to sell. The additional loss on sale, not
recognised at 30 September 2021, but due to the buyer based on
production between 1 October 2021 and 14 October 2021 is estimated
at GBP24.1m. This has arisen due to the lock box mechanism
effective 1 April 2019 within the sale agreement and will be
recognised in the second half of the financial year.
21.3 Dogger Bank C - disposal
On 2 November 2021, SSE announced it had entered into an
agreement to sell a 10% stake in Dogger Bank C to Eni for an equity
consideration of GBP70m and contingent consideration of up to
GBP40m. The transaction is expected to complete by Q1 2022 subject
to regulatory approvals and customary purchase price adjustments.
The initial indicative gain on sale is anticipated to be in excess
of GBP60m. After the sale the Group's shareholding in Dogger Bank C
will be 40%.
22.
Principal risks and Uncertainties
SSE's established Risk Management Framework and wider system of
internal control continues to inform strategic decision-making in
2021/22. This, combined with a resilient business model, helps the
Group manage and minimise the human, operational and financial
impacts from external conditions such as volatile commodity prices
and to meet its objective of supporting the reliable supply of
electricity to those who needed it.
The Directors continually monitor the Principal Risks and
Uncertainties of the Group and have determined that those reported
in the 2021 Annual Report and summarised below remain relevant for
the remaining half of the financial year.
-- Climate Change
-- Commodity Prices **
-- Cyber Security and Resilience
-- Energy Affordability **
-- Energy Infrastructure Failure
-- Financial Liabilities
-- Large Capital Projects Management
-- People and Culture
-- Politics, Regulation and Compliance **
-- Safety and the Environment *
-- Speed of Change
* Safety remains SSE's most important value, and management of
this risk remains SSE's highest priority.
** It should be noted that Energy Affordability is particularly
closely linked to - and therefore impacted by - Politics,
Regulation and Compliance and Commodity Prices.
As noted in the 2021 Annual Report, an additional review of the
"Joint Venture and Partner Management" emerging risk was undertaken
by the Group Risk Committee in Q2 of the financial year 21/22 which
concluded it should remain an emerging risk for now.
For more information on these risks, and the wider system of
internal control, please refer to pages 54 to 63 of the SSE plc
2021 Annual Report which is available on the company website
www.sse.com .
Statement of director's responsibilities in respect of the
condensed interim financial statements
We confirm that to the best of our knowledge:
i) the condensed set of financial statements has been prepared
in accordance with UK adopted IAS 34 Interim Financial
Reporting;
ii) the interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year that have materially affected
the financial position or performance of the entity during that
period; and any changes in the related party transactions described
in the last annual report that could do so.
(c) DTR 4.2.10 of the Disclosure and Transparency Rules, being
the condensed set of financial statements, which has been prepared
in accordance with the applicable set of accounting standards,
gives a true and fair view of the assets, liabilities, financial
position and profit or loss of the issuer, or the undertakings
included in the consolidation as a whole.
For and on behalf of the Board
Alistair Phillips-Davies Gregor Alexander
Chief Executive Finance Director
London
16 November 2021
Independent review report to SSE plc
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the half yearly financial report for the
six months ended 30 September 2021 which comprises the Consolidated
Income Statement, Consolidated Statement of Other Comprehensive
Income, Consolidated Balance Sheet, Consolidated Statement of
Changes in Equity, Consolidated Cash Flow Statement and the related
explanatory notes 1 to 21. We have read the other information
contained in the half yearly financial report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of
financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half yearly financial report for the six months ended 30
September 2021 is not prepared, in all material respects, in
accordance with UK adopted International Accounting Standard 34 and
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK and Ireland) "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the
group will be prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Responsibilities of the directors
The directors are responsible for preparing the half yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half yearly financial report. Our
conclusion is based on procedures that are less extensive than
audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
Glasgow
16 November 2021
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