SSE PLC: PRELIMINARY
results
for the
YEAR
ended 31 MARCH 2024
22 May 2024
A YEAR OF DELIVERY, RESILIENCE
& GROWTH
· Delivered investment of
£2.5bn in critical national energy infrastructure,
including:
o Construction starting on Eastern Green Link 2 subsea
transmission cable, the largest in the UK;
o Full power at Seagreen, the world's deepest fixed bottom
offshore wind farm;
o Progressing the world's largest wind farm, with Dogger Bank A
turbine installations continuing;
o Final commissioning under way on both Viking onshore wind
farm and Shetland HVDC link.
· Reporting adjusted earnings
per share of 158.5p, towards the
top end of guidance and reflecting the resilience and quality of
earnings from balanced business
mix despite normalisation of energy markets.
· Enhanced
visibility of accelerated growth in core regulated Transmission business
creates significant depth to long-term earnings whilst
complementing SSE's renewables capacity additions and demonstrating
the benefit of optionality across networks, renewables and
flexibility.
· Making a major contribution
to communities, adding £6bn to UK
GDP, supporting over 50,000 UK jobs with a further €1bn
contribution to Ireland GDP and over 3,000 Irish jobs
supported.
· Investing in
safety, opening Scotland's first
immersive safety training facility which will deliver innovative
training to 7,000 people per year for the next three years.
However, the combined Total Recordable Injury Rate for employees
and contractors increased to 0.20 from 0.19 in 2023.
FINANCIAL SUMMARY
|
Adjusted
|
Reported
|
(continuing operations1)
|
Mar 2024
|
Mar 2023
|
% mvmt
|
Mar 2024
|
Mar 2023
|
% mvmt
|
Operating profit / (loss)
(£m)
|
2,426.4
|
2,529.2
|
(4%)
|
2,608.2
|
(146.3)
|
+1,883%
|
Profit / (loss) before tax
(£m)
|
2,174.7
|
2,183.6
|
(-%)
|
2,495.1
|
(205.6)
|
+1,314%
|
Earnings / (loss) per share
(p)
|
158.5
|
166.0
|
(5%)
|
156.7
|
(14.7)
|
+1,166%
|
Investment, capital &
acquisitions (£m)
|
2,476.7
|
2,803.3
|
(12%)
|
3,285.6
|
3,188.7
|
+3%
|
Net Debt and Hybrid Capital
(£bn)2
|
(9.4)
|
(8.9)
|
+6%
|
(8.1)
|
(8.2)
|
(1%)
|
|
|
|
|
|
|
|
|
1 Excluded discontinued
operation relates to the disposal of the Gas Production business
which contributed £nil to Reported profit for the year ended 31
March 2024 (2023: £35.0m profit). 2 Reported
numbers exclude equity accounted hybrid capital.
financial highlights: Delivering resilient
earnings
· Adjusted earnings per share
of 158.5p, towards the top end of
guidance provided in the pre-close statement reflecting strong
operational performance across the diversified business
mix.
· Reported earnings per share
of 156.7p, reflecting positive fair
value movements on derivatives offset by impairments in Triton
Power and Gas Storage, reversing previous valuation increases to
reflect changing market conditions, and an impairment in non-core
Neos Networks investment.
· Increased profits in SSEN
Transmission driven by increased investment
as the business progresses with delivery of the
RIIO-T2 business plan, whilst the timing of cost inflation recovery in SSEN
Distribution principally led to lower profitability in that
business.
· Profitability in Renewables
reflects higher hedged prices combined with lower hedge
buyback costs, with higher year-on-year output reflecting
Seagreen offshore wind farm reaching full power.
· In SSE
Thermal, lower market income was
partially offset by additional capacity from Triton Power and
Keadby 2 offering the market increased flexibility, alongside
strong future capacity auction results.
· Gas Storage earnings lower,
in line with expectations, as gas
prices and price volatility reduced
· £1.1bn of long-term debt
issued in the period including a
€750m eight-year Green Bond at a fixed coupon of 4.0% and a further
£500m 20-year Green Bond at an all-in rate of 5.575%.
· Adjusted investment, capital
and acquisition expenditure of £2.5bn.
· Adjusted net debt and hybrid
capital at £9.4bn, in line with
pre-close guidance, with a net debt to
EBITDA ratio of 3.0 times, well within a strong investment grade
credit rating range.
Final dividend in line with growth-enabling
plan
· Intention to recommend a
final dividend of 40.0p for payment on 19 September 2024,
making the full year dividend 60p
per share in line with growth aligned dividend
plan.
· Scrip uptake continues to be
capped at 25% and implemented by
means of a share buy-back.
PREMIUM ASSETS CREATING HIGH QUALITY
EARNINGS
· On track to deliver adjusted
EPS of 175 - 200p by FY27, a CAGR
of 13-16% over the five-year plan.
· Continued focus on delivery of the fully-funded £20.5bn Net Zero Acceleration
Programme Plus (NZAP Plus), converting high quality organic
project pipeline into long-term sustainable earnings.
o c.55% of capex focused on electricity networks with regulated,
index-linked revenues
o c.35% of capex on renewables with increasing proportion
under long-term index-linked contracts
o c.10% of capex on flexible
power which is benefiting from increasing capacity market
income
· Capex
weighting reflects strong
growth opportunities across
the Group's portfolio, including:
o Gross electricity networks RAV to exceed £16bn by 2026/27, a
>15% CAGR over the
five-years
o Up to 5GW net renewables
capacity additions over the period, although focus remains
on creating long-term value over short-term capacity
volume
· Maintaining balance sheet
strength through diversified
business mix with net debt / EBITDA
expected to remain within or below
3.5 - 4.0x range over the course of the plan.
· Reiterating commitment to target annual dividend increases of between 5
- 10% to 2026/27, based on an expected 60 pence full year
dividend for 2023/24, with retention of the scrip option capped at
25%.
STRATEGIC HIGHLIGHTS: DELIVERING ESSENTIAL
INFRASTRUCTURE
· Eastern Green Link
2, a 2GW subsea HVDC project being
delivered in partnership with National Grid, received confirmation
from Ofgem of £4.4bn project assessment, with onshore works now
under way in Peterhead. EGL2 will be the UK's biggest subsea
transmission project.
· Strong progress has also been made on delivery of further ASTI1
projects, which could collectively comprise c.£17bn of gross nominal investment to
unlock renewable resource in Scotland.
· Installation of SSEN Transmission's Shetland HVDC reaching final
commissioning ahead of energisation in Summer
2024.
· SSEN Distribution has
completed the first year of its RIIO-ED2 price
control, delivering accelerated
investment in capital projects whilst unlocking its first
Uncertainty Mechanism funding.
· Full power achieved at 1.1GW
Seagreen, Scotland's largest and
the world's deepest fixed bottom offshore wind farm and
final commissioning
reached at 440MW Viking,
which is expected to be the UK's most productive onshore wind farm
when it reaches full power later in 2024.
· Delivered first power at
3.6GW Dogger Bank, which will be
the world's largest offshore wind farm when complete. Whilst phase
one is behind original schedule, it is expected to deliver full
value in line with FID.
· Secured 605MW of onshore
wind in the UK fifth Contract for
Difference auction (AR5) in addition to 101MW in Ireland's third RESS
process.
1Accelerated Strategic
Transmission Investment
Alistair Phillips-Davies, Chief Executive,
said:
"This is a strong performance where we have delivered
essential energy infrastructure, benefited from the resilience of
our business model, and made disciplined investment in our
excellent growth opportunities.
"Renewables, flexible power and electricity networks are the
building blocks of a cleaner and more secure energy system. With
world-class assets and capabilities, and enhanced visibility of
growth in transmission, SSE is ideally placed to benefit from this
structural trend, creating value for shareholders and
society.
"Our immediate focus is on delivering our financial and
operational growth targets out to 2026/27 and we are on track to do
this, converting our premium organic project pipeline into
high-quality sustainable earnings."
Key Performance
Indicators
Key Financial Indicators
|
Adjusted
|
Reported
|
(continuing operations)
|
Mar 2024
|
Mar 2023
|
Mar 2024
|
Mar 2023
|
Operating profit / (loss) by business £m
|
|
|
|
|
- SSEN Transmission
|
419.3
|
372.7
|
559.1
|
405.5
|
- SSEN Distribution
|
272.1
|
382.4
|
272.1
|
382.4
|
- SSE Renewables
|
833.1
|
561.8
|
630.3
|
428.1
|
- SSE Thermal & Gas Storage
|
818.9
|
1,244.4
|
602.2
|
1,338.7
|
- Other businesses inc.
corporate unallocated
|
83.0
|
(32.1)
|
544.5
|
(2,701.0)
|
Operating profit / (loss) £m
|
2,426.4
|
2,529.2
|
2,608.2
|
(146.3)
|
EBITDA £m
|
3,295.6
|
3,382.1
|
3,333.1
|
557.9
|
Profit / (loss) before tax £m
|
2,174.7
|
2,183.6
|
2,495.1
|
(205.6)
|
Earnings / (loss) per share (EPS) pence
|
158.5
|
166.0
|
156.7
|
(14.7)
|
|
|
|
|
|
Full year dividend per share (DPS) pence
|
60.0
|
96.7
|
60.0
|
96.7
|
|
|
|
|
|
Investment and capital expenditure £m
|
|
|
|
|
- SSEN Transmission
|
595.6
|
495.5
|
797.5
|
543.8
|
- SSEN Distribution
|
505.1
|
421.0
|
657.1
|
502.0
|
- SSE Renewables
|
1,097.1
|
911.5
|
788.9
|
1,072.0
|
- SSE Thermal & Gas Storage
|
100.4
|
159.5
|
108.7
|
71.6
|
- Other
businesses
|
178.5
|
173.1
|
933.4
|
999.3
|
Acquisition consideration
£m
|
-
|
642.7
|
-
|
642.7
|
Investment, capital and acquisitions £m
|
2,476.7
|
2,803.3
|
3,285.6
|
3,831.4
|
|
|
|
|
|
Net debt and hybrid capital £m
|
9,435.7
|
8,894.1
|
8,097.8
|
8,168.1
|
|
|
|
|
|
|
2022/23 segmental numbers restated reflecting movement of
Solar and Battery business to SSE Renewables, previously reported
in SSE Enterprise. Excluded discontinued
operation contributed £nil to Reported profit for the period ended
31 Mar 2024 (31 Mar 2023: £35.0m profit).
Operational Key Performance Indicators
|
Mar 2024
|
Mar 2023
|
SSE Thermal generation -
GWh1
|
15,247
|
18,313
|
SSE Renewables generation - GWh
(inc. pumped storage and constrained-off GB wind)
|
11,158
|
10,159
|
Enterprise - GWh
|
105
|
96
|
Total generation output - all plant - GWh
|
26,510
|
28,568
|
|
|
|
SSEN Transmission gross RAV -
£m2
|
5,676
|
4,836
|
SSEN Distribution RAV -
£m
|
5,301
|
4,720
|
SSE Total Electricity Networks gross RAV -
£m2
|
10,977
|
9,556
|
|
|
|
SSE Business Energy Electricity
Sold - GWh
|
10,693
|
12,108
|
SSE Business Energy Gas Sold -
mtherms
|
168
|
200
|
Airtricity Electricity Sold -
GWh
|
6,400
|
5,795
|
Airtricity Gas Sold -
mtherms
|
199
|
193
|
1 2022/23 excludes 1,184GWh
of pre-commissioning output from Keadby 2 which entered commercial
operation on 15 March 2023
2 Gross of 25% non-controlling interest in SSEN
Transmission.
ESG Key Performance Indicators
|
Mar 2024
|
Mar 2023
|
Carbon emissions (scopes 1&2)
MtCO2e
|
4.81
|
6.52
|
Scope 1 GHG intensity
gCO2e/kWh
|
205
|
254
|
Total water consumed (million
cubic meters)
|
2.4
|
1.4
|
|
|
|
Total recordable injury rate per
100,000 hours worked
|
0.20
|
0.19
|
Total economic contribution -
UK/Ireland (£bn/€bn)1
|
5.96/1.06
|
6.04/0.43
|
Jobs supported - UK/Ireland
(headcount)2
|
53,230/3,270
|
39,940/2,430
|
Total taxes paid UK/Ireland
(£m/€m)
|
679.2/68.0
|
501.7/53.8
|
Employee retention/turnover rate
(%)3
|
91.3/8.7
|
89.5/10.5
|
Employee engagement index
(%)4
|
85
|
84
|
|
|
|
Average board tenure -
years5
|
3.8
|
4.4
|
Female board members
(%)6
|
42
|
46
|
Independent board members
(%)6
|
73
|
75
|
Total number of board
members
|
12
|
13
|
1Direct, indirect and
induced Gross Value Added, from PwC analysis; 2 Direct,
indirect and induced jobs supported, PwC analysis. 3
Includes voluntary and involuntary turnover, excludes end of fixed
term contracts and internal transfers. 4 Results from
SSE's annual employee engagement survey. 5 Non-Executive
directors including non-Executive Chair 6Excludes
non-Executive Chair.
Disclaimer
This financial report contains
forward-looking statements about financial and operational matters.
These statements are based on the current views, expectations,
assumptions, and information of management, and are based on
information available to the management as at the date of this
financial report. Because they relate to future events and are
subject to future circumstances, these forward-looking statements
are subject to unknown risks, uncertainties and other factors which
may not have been in contemplation as at the date of the financial
report. As a result, actual financial results, operational
performance, and other future developments could differ materially
from those envisaged by the forward-looking statements.
Neither SSE plc nor its affiliates assumes any obligations to
update any forward-looking statements.
SSE plc gives no express or
implied warranty, representation, assurance or undertaking as to
the impartiality, accuracy, completeness, reasonableness or
correctness of the information, opinions or statements expressed in
the presentation or any other information (whether written or oral)
supplied as part of it. Neither SSE plc, its affiliates nor its
officers, employees or agents will accept any responsibility or
liability of any kind for any damage or loss arising from any use
of this presentation or its contents. All and any such
responsibility and liability is expressly disclaimed. In
particular, but without prejudice to the generality of the
foregoing, no representation, warranty, assurance or undertaking is
given as to the achievement or reasonableness of any future
projections, forward-looking statements about financial and
operational matters, or management estimates contained in the
financial report.
This financial report does not
constitute an offer or invitation to underwrite, subscribe for, or
otherwise acquire or dispose of any SSE plc shares or other
securities, or of any of the businesses or assets described in the
financial report, and the information contained herein cannot be
relied upon as a guide to future performance.
Definitions
The financial information set out
in this Preliminary Results Statement has been prepared in
accordance with the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority and UK adopted International
Accounting Standards.
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 performance management 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 explained in the Alternative Performance
Measures ("APMs") section before the Summary Financial Statements.
SSE continues to prioritise the monitoring of developing practice
in the use of APMs, 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, 'Net Debt' represents the group's
'Adjusted Net Debt and Hybrid Capital" APM and 'EBITDA' represents
the full year group "Adjusted EBITDA" APM and including a further
adjustment to remove the proportion of "Adjusted EBITDA" from
equity-accounted Joint Ventures which relates to project financed
debt.
Important note: Discontinued Operations - Gas
Production
On 14 October 2021, the Group
completed the sale of its Gas Production business which had been
presented as a discontinued operation prior to disposal as the
transaction constituted the exit of all activity in that industry.
The Group's adjusted measures therefore exclude the contribution
from this business in all periods presented. The Group continues to
retain a 60% share of the decommissioning obligation of the Gas
Production business following disposal. Any adjustments to the
decommissioning obligation are accounted for through the Group's
consolidated income statement and removed from the Group's adjusted
profit measures as the revaluation of the provision is not
considered to be part of the Group's core continuing
operations.
Important note: Non-controlling equity stake
sale
On 30 November 2022, the Group
completed the sale of a 25% non-controlling equity stake in
Scottish Hydro Electric Transmission plc ('SHET') (see note 12 of
the Summary Financial Statements).
As this transaction did not result
in a loss of control, the business continues to be classified as a
continuing operation and its result continues to be included within
the Group's adjusted profit-based measures, after removing the
relevant share of profit attributable to holders of non-controlling
equity stakes from the point when the ownership structure changed
in accordance with the APM definitions.
Further Information
Investor Timetable
|
|
2024 Annual Report and
Sustainability Report published on sse.com
|
14 June 2024
|
AGM and Q1 Trading
Statement
|
18 July 2024
|
Final ex-dividend date
|
25 July 2024
|
Record date
|
26 July 2024
|
Scrip reference pricing
days
|
25-31 July 2024
|
Scrip reference price confirm and
released via RNS
|
1 August 2024
|
Final date for receipt of scrip
elections
|
22 August 2024
|
Final dividend payment
date
|
19 September 2024
|
Notification of Closed
Period
|
Around 30 September
2024
|
Interim results for the six months
ended 30 September 2024
|
13 November 2024
|
|
|
Contact Details
|
|
Institutional investors and
analysts
|
ir@sse.com
|
+ 44 (0)345 0760 530
|
Shareholder services
|
SSE@linkgroup.co.uk
|
+ 44 (0)345 143 4005
|
Media
|
media@sse.com
|
+ 44 (0)345 0760 530
|
MHP Group, Oliver
Hughes
|
oliver.hughes@mhpgroup.com
|
+ 44 (0)7885 224 532
|
MHP Group, James
McFarlane
|
james.mcfarlane@mhpgroup.com
|
+ 44 (0)7584 142 665
|
Management presentation webcast and
teleconference
SSE will present its full year
results for the twelve months to 31 March 2024 on Wednesday 22 May
at 10:00am BST.
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/6nczrdg7
This will also be available as a
teleconference, for which participants can register to receive a
unique pin code and conference call number using:
https://register.vevent.com/register/BI187dcac642ae47be89755db4e581283c
The presentation will be available
to replay.
Online Information
News releases and announcements are
made available on SSE's website at www.sse.com/investors and
you can register for Regulatory News Service alerts using the
following link:
sse.com/investors/regulatory-news/regulatory-news-alerts/.
You can also follow the latest news from SSE at
www.twitter.com/sse.
Strategic Overview
POWERING SUSTAINABLE
GROWTH
The work SSE is doing to accelerate
the construction of renewables assets, provide critical flexible
generation back-up and transform electricity networks goes to the
very heart of a long-held purpose that is building a better world
of energy. Renewables, flexibility and networks are the foundations
of the future energy system and we have the skills, world-class
assets and development pipeline to deliver it.
The same diversified business mix
that performed so well in 2023/24 gives us the optionality to pivot
our investment plans to where the best opportunities exist in the
clean electricity value chain. In this way we are powering
sustainable growth. Right now, that growth - and associated value
creation - are coming through networks and renewables, and this is
reflected in the adjustments we made in the year to capital
allocation across the Group with 90% of our fully-funded £20.5bn
Net Zero Acceleration Programme Plus (NZAP Plus) investment
programme geared to these two areas, particularly as we get
enhanced visibility of growth in our core regulated transmission
business.
As the UK and Ireland's clean energy
champion, there are significant tailwinds behind our core business
and broad political and societal consensus on the need to slow
climate change. Supportive market design will be key to SSE playing
its part and we welcomed the bulk of the UK Government's
long-awaited Review of Electricity Market Arrangements that will
accelerate reform of the energy system. We also welcome the more
strategic approach to network planning and continue to advocate for
the deployment of more renewables, greater ambition on flexible
generation technologies and streamlined planning and consenting
frameworks for networks.
DELIVERY, RESILIENCE AND
GROWTH
We can look back on 2023/24 as a
year in which we accelerated the delivery of a strategic plan that
is making significant inroads to a future energy system that is
cleaner, secure and more affordable. It was another year of record
investment, with £2.5bn spent on critical national infrastructure
as we pushed ahead with our fully-funded capex programme to 2026/27
and reached a number of delivery milestones on our flagship
infrastructure projects. At the same time we met our financial
objectives, achieving the higher end of our guided range of
full-year adjusted Earnings Per Share as the resilience of our
diversified business mix proved its worth yet again.
It is all the more pleasing that
progress in the year was accompanied by a significant reduction in
our greenhouse gas (GHG) emissions. Performance against our climate
targets represented the lowest value on record for SSE's total GHG
emissions, scope 1 GHG emissions and carbon intensity. This was
mainly attributable to a reduction in thermal generation output in
the year and we will continue to track closely the progress we are
making against interim science-based targets.
SSE's continued success is dependent
on the talent and commitment of our highly-skilled employees and
contract partners, and getting them home safe at the end of each
working day remains our top priority. We were therefore deeply
saddened by the loss of Richard Ellis, the employee of a contract
partner, who died in an offsite incident in October 2023. Among
direct employees we matched our best safety performance year, but
this was of course overshadowed by Richard's death. We are
redoubling efforts to ensure everyone at SSE is kept out of harm's
way, and with a growing workforce - we filled over 4,000 roles last
year - safety remains front of mind.
DELIVERY OF A CLIMATE-FOCUSED
STRATEGY
One measure of the strategic
progress we are making is the various milestones reached in the
year on major infrastructure projects within SSE's two growth
engines: networks and renewables. Working with our joint venture
partners, the construction of SSE Renewables' flagship projects
continued to progress, with Scotland's largest offshore wind farm,
Seagreen, completed in the Firth of Forth. We also made good
progress at Viking, on Shetland, and Yellow River and Lenalea in
Ireland, while construction got under way at onshore sites in
France and Spain. These are highly complex projects, however, and
not without risk, as we have seen with Dogger Bank A which has been
impacted by poor North Sea weather, installation vessel
availability and supply chain delays with completion now expected
in the first half of 2025.
At the same time, SSEN Transmission
has been delivering critical grid infrastructure that is vital to
the future energy system. Good progress was made in the year on
enabling work for the Eastern Green Link 2, or EGL2, which is the
High Voltage Direct Current (HVDC) undersea link from Peterhead to
Yorkshire. Elsewhere, major RIIO-T2 projects moved ahead at pace,
notably with the pioneering HVDC Shetland link where all 260km of
the subsea cable was laid in 2023 and the project remains on track
for full energisation in summer 2024.
resilience in a complex energy
landscape
We operate in a highly dynamic
energy landscape that is best navigated with a blend of diverse
technologies and revenue streams. Our very deliberate mix of
market-facing and economically-regulated businesses spans the clean
energy value chain and offers stable economic returns for the Group
as a whole, while providing multiple options for continued
investment. The agility of the Group business model has enabled us
to pivot capital to where it will have the biggest impact on net
zero and create the greatest value. And while SSE Renewables and
SSEN Transmission are the current drivers of growth, with
Transmission in particular offering a 'once in a generation' growth
opportunity, they are complemented by other businesses that
contribute to delivery of our climate-focused, value-creating
strategy.
SSE Thermal offers much of the
system flexibility needed for energy security and secured
significant capacity contracts in the year; SSEN Distribution is
transforming itself and investing to electrify streets and homes as
demand for its services increases; SSE Energy Markets is managing
risk, navigating market volatility and securing value for our
assets; and our customer businesses are ensuring a valuable route
to market with new products and systems, bringing energy users with
us on the road to net zero. As the constituent parts of a
strategically cohesive group, these are quality businesses that are
creating lasting value. Detail of how all of our businesses have
played their part in the past year can be found in the following
pages.
growth beyond the five-year plan
Looking beyond the NZAP Plus, we see
more growth to come. With steady regulatory earnings and
well-established infrastructure, electricity networks have long
been an underappreciated part of the energy system. An impending
surge in demand has changed all that. SSEN Transmission is required
by its licence conditions to deliver £20bn of upgrades to the
network in the north of Scotland under the Large Onshore
Transmission Infrastructure (LOTI) and Accelerated Strategic
Transmission Infrastructure (ASTI) frameworks, with additional
investment of at least £5bn earmarked for early delivery in the
north of Scotland in Ofgem's Beyond 2030 plan.
And we have an enviable development
pipeline of energy assets that will be needed for net zero too.
Renewables projects like Berwick Bank, Seagreen 1A, Coire Glas and
Arklow will be complemented by future auction possibilities and
other opportunities in our home markets and abroad. There is also a
range of flexibility options across different technologies, from
batteries and pumped storage hydro to carbon capture and storage
and hydrogen.
on course with the nzap pluS
For now, our primary focus is on
delivery of our five-year plan and the lasting value it will bring
to shareholders and society. Much of the anticipated NZAP Plus
growth is factored into the later years of the plan, and some 60%
of the forecast earnings is regulated and inflation-linked. This -
combined with a fully-funded investment plan; strict capital
discipline; quality assets and people; a resilient business mix;
and a strong balance sheet with the majority of debt held at fixed
rates - gives us every confidence in our guidance to
2026/27.
Alistair Phillips-Davies
Chief Executive
SSE plc
Group financial review
Year ENDED 31 MARCH 2024
This Group Financial Review sets out
the financial performance of the SSE Group for the year ended 31
March 2024. See also the separate sections on Group Financial
Outlook, 2024/25 and beyond, and Supplemental Financial
Information.
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 shareholders and other stakeholders.
The SSE Renewables and SSE Business
Energy comparative results have been restated to reflect the
transfer of responsibility for the Solar and Battery business to
SSE Renewables and Building Energy Management Systems to SSE
Business Energy. These businesses both transfer from SSE
Enterprise, where comparative results are also restated.
The definitions SSE uses for
adjusted measures are consistently applied and are explained -
including a detailed reconciliation to reported measures - in the
Alternative Performance Measures section of this document before
the Summary Financial Statements.
Key Financial Metrics
|
Adjusted
|
Reported
|
(continuing operations)1
|
Mar 2024
£m
|
Mar 2023
£m
|
Mar 2024
£m
|
Mar 2023
£m
|
Operating profit /
(loss)
|
2,426.4
|
2,529.2
|
2,608.2
|
(146.3)
|
Net finance (costs) /
income
|
(251.7)
|
(345.6)
|
(113.1)
|
(59.3)
|
Profit / (loss) before
tax
|
2,174.7
|
2,183.6
|
2,495.1
|
(205.6)
|
Current tax (charge) /
credit
|
(371.0)
|
(358.8)
|
(610.7)
|
110.0
|
Effective current tax rate (%)
|
17.1
|
16.4
|
25.6
|
(12.7)
|
Profit / (loss) after
tax
|
1,803.7
|
1,824.8
|
1,884.4
|
(95.6)
|
Less: hybrid equity coupon
payments
|
(73.1)
|
(38.8)
|
(73.1)
|
(38.8)
|
Less: profits attributable to
non-controlling interests
|
-
|
-
|
(100.8)
|
(23.6)
|
Profit / (loss) after tax
attributable to ordinary shareholders
|
1,730.6
|
1,786.0
|
1,710.5
|
(158.0)
|
|
|
|
|
|
Earnings / (loss) per share
(pence)
|
158.5
|
166.0
|
156.7
|
(14.7)
|
|
|
|
|
|
Number of shares for
basic/reported and adjusted EPS (million)
|
1,091.8
|
1,075.6
|
1,091.8
|
1,075.6
|
Shares in issue at 31 March
(million)2
|
1,093.4
|
1,090.3
|
1,093.4
|
1,090.3
|
1 Excluded discontinued
operation relates to the disposal of the Gas Production business
which contributed £nil to Reported profit for the year ended 31
March 2024 (2023: £35.0m profit).
2 Excludes Treasury shares of
2.8m in March 2024 and 3.6m in March 2023
Dividend per Share (pence)
|
Mar 2024
|
Mar 2023
|
Interim Dividend
|
20.0
|
29.0
|
Final Dividend
|
40.0
|
67.7
|
Full Year Dividend
|
60.0
|
96.7
|
As announced alongside the NZAP Plus
capital investment plan, and following completion of the Group's
previous commitments to dividend growth, the 2023/24 dividend was
rebased to 60.0 pence per share to support SSE's ongoing ambitions
to accelerate investment in the assets required to reach net
zero.
Operating profit performance for the Year to
31 march 2024
Business-by-business segmental
|
Adjusted
|
Reported
|
(continuing operations)
|
Mar 2024
£m
|
Mar 2023
£m
|
Mar 2024
£m
|
Mar 2023
£m
|
Operating profit / (loss)
|
|
|
|
|
SSEN Transmission
|
419.3
|
372.7
|
559.1
|
405.5
|
SSEN Distribution
|
272.1
|
382.4
|
272.1
|
382.4
|
Electricity networks total
|
691.4
|
755.1
|
831.2
|
787.9
|
|
|
|
|
|
SSE Renewables
|
833.1
|
561.8
|
630.3
|
428.1
|
|
|
|
|
|
SSE Thermal
|
736.1
|
1,031.9
|
644.4
|
1,089.5
|
Gas Storage
|
82.8
|
212.5
|
(42.2)
|
249.2
|
Thermal Total
|
818.9
|
1,244.4
|
602.2
|
1,338.7
|
|
|
|
|
|
SSE Business Energy
|
95.8
|
15.7
|
95.8
|
15.7
|
SSE Airtricity (NI and
Ire)
|
95.0
|
5.6
|
94.5
|
5.2
|
Energy Customer Solutions Total
|
190.8
|
21.3
|
190.3
|
20.9
|
|
|
|
|
|
SSE Energy Markets (formerly EPM)
|
38.9
|
80.4
|
590.0
|
(2,626.0)
|
|
|
|
|
|
SSE Enterprise (formerly Distributed
Energy)
|
(25.6)
|
(7.0)
|
(25.6)
|
(13.1)
|
|
|
|
|
|
Neos Networks
|
(32.3)
|
(39.8)
|
(116.1)
|
(56.0)
|
|
|
|
|
|
Corporate unallocated
|
(88.8)
|
(87.0)
|
(94.1)
|
(26.8)
|
|
|
|
|
|
Total operating profit / (loss)
|
2,426.4
|
2,529.2
|
2,608.2
|
(146.3)
|
|
|
|
|
|
Net finance (costs) /
income
|
(251.7)
|
(345.6)
|
(113.1)
|
(59.3)
|
|
|
|
|
|
Profit / (loss) before tax
|
2,174.7
|
2,183.6
|
2,495.1
|
(205.6)
|
|
|
|
|
|
Notes: 2022/23 segmental numbers above restated to reflect
movement of Solar and Battery business to SSE Renewables and
Building Energy Management Systems to SSE Business Energy, both
previously reported under SSE Enterprise.
Excluded
discontinued operation relates to the disposal of the Gas
Production business which contributed £nil to Reported profit for
the year ended 31 March 2024 (2023: £35.0m profit).
Segmental EBITDA results are
included in Note 6 to the Summary Financial Statements.
Operating profit
Adjusted and reported operating
profits/losses in SSE's business segments for the year to 31 March
2024 are set out below; comparisons are with the same period to 31
March 2023 unless otherwise stated.
SSEN Transmission: Adjusted
operating profit increased by 13% to £419.3m from £372.7m in the
prior year. 25% of this business was divested on 30 November 2022
and the prior year comparative therefore includes 100% of the
operating profit for the business for the first eight months of the
year and 75% thereafter, whilst the current year includes 75% of
the operating profit for the full year. If the prior year
comparative was normalised for this basis difference of £(68.6)m,
adjusted operating profit would have increased by 38%.
SSEN Transmission saw a significant
increase in allowed revenues during the year, reflecting both the
increased portfolio of works under the RIIO-T2 price control as
well as inflation uplifts in line with the regulatory framework,
together with a positive timing variance following under-recovery
of revenues in the previous year. These were partially offset by
increases in operating costs as the business continues to grow its
operational capabilities and depreciation as the asset base
expands.
Reported operating profit increased
by 38% to £559.1m compared to £405.5m, reflecting all of the
movements above except for the non-controlling interest basis
difference, as non-controlling interests are fully consolidated for
all profit metrics under IFRS.
SSEN Distribution: Adjusted
and reported operating profit decreased by 29% to £272.1m compared
to £382.4m in the prior year.
The price control allowed revenue
for 2023/24 is based on tariffs which were set in December 2021 and
therefore over this period do not reflect the inflationary
increases to the operating cost base since that date, which will be
recovered in the 2024/25 financial year. As a result, the decrease
in operating profit during the year principally reflects the
increase in the operating cost base due to inflation alongside
higher network costs due to maintenance volumes. The operating
result also includes around £18m of additional fault and repair
costs as the business reacted to a year with ten named storms as
well as additional depreciation charges as the asset base expands
under RIIO-ED2.
SSE
Renewables: Adjusted operating
profit increased by 48% to £833.1m from £561.8m in the prior year.
The increase in profitability was largely driven by the growth in
revenues during the year due to a combination of the higher power
price environment combined with additional operating capacity which
more than offset the lower wind speed environment in Scotland.
Renewables forward hedged prices at the start of the year were
between 35 - 40% higher than the previous year, reflecting forward
hedging activity in a higher price environment. The increase in
operational capacity as Seagreen offshore wind farm reached full
commercial operations during October 2023, combined with the prior
year reflecting a £(143)m one-off buy-back costs relating to
Seagreen volumes hedged but not delivered, further improved the
year-on-year result. However, this was partially offset by 4% lower
wind speeds in Scotland which, when combined with the impact of ten
named storms, meant onshore wind volumes were c.6% down
year-on-year. Finally, at the operating cost level, the cessation
of Balancing Services Use of System (BSUoS) charges as part of the
network charging reform was offset by an increase in staff costs
driven by inflation and increased headcount due to organic growth
of the business.
Reported operating profit increased
by 47% from £428.1m to £630.3m. In addition to the factors above,
this is reflective of an increase in the share of Joint venture
interest and tax of £(42.7)m and a £(37.4)m remeasurement on SSE's
affiliate CfD arrangements which are classified as derivative
contracts.
SSE
Thermal: Adjusted operating profit
decreased by 29% to £736.1m, compared to £1,031.9m in the prior
year. This decrease is largely driven by the lower spark spread and
lower volatility market environment, as energy commodity prices
normalise down during the second half of the year from the peaks
reached in 2022/23. This decrease was partially offset by a full
year of financial contribution from 893MW Keadby 2 which entered
full operations in March 2023 and therefore contributed to overall
gross margin improvements.
Reported operating profit decreased
by 41% to £644.4m, compared to £1,089.5m in the prior year which
included a net gain of £128.0m from a number of exceptional items
and remeasurements. Lower forward power prices has meant the
current year result includes a £(15.4)m net remeasurement on Triton
Power operating derivatives reflecting lower levels of in-the-money
hedges compared to prior year. The power price environment also
meant a £(63.2)m impairment was recognised on the Triton Power
investment, as the previous years have seen strong realised
cashflows from the asset. The reported result also reflects SSE's
share of Joint Venture Interest and Tax expenditure decreasing from
£(60.4)m in the prior year to £(13.1)m in the current
year.
Gas
Storage: Adjusted operating profit
decreased by 61% to £82.8m, compared to £212.5m of profit in the
prior year. The prior year result reflected a more volatile gas
market as well as an inversion of the typical spread between
higher-priced winter gas and lower-priced summer gas due to low
Russian gas supplies and high demand as gas stores were built up.
Whilst the year saw increased volumetric trading, this was offset
by less overall volatility in the gas market and lower gas prices
which therefore decreased trading profits.
Reported operating loss decreased
117% to £(42.2)m from a profit in the prior year of £249.2m. In
addition to the movements above, the prior year included an
impairment reversal of £45.7m compared to an impairment charge in
the current year of £(134.1)m, reversing prior write-backs and
reflecting a lower point-in-time estimate of future gas prices and
lower volatility assumptions. In addition, the reported results
include a £9.1m revaluation gain on gas held in storage, compared
to a £(9.0)m loss in the prior year.
SSE
Business Energy: Adjusted and
reported profitability increased to £95.8m in the year compared to
£15.7m in the prior year. The business has seen a challenging three
years of profits below expectations due firstly to the global
pandemic and then followed by a period of extreme commodity price
volatility which affected consumer demand. The current year has
seen the business return to a higher level of profitability,
reflecting the well-established competitive pricing and hedging
controls. However, it still remains a challenging environment for
consumers and customer-facing businesses with bad debt expenses
increasing by £5m on the prior year. During the year, the business
established a £15m customer support fund for small businesses,
voluntary and charitable organisations. The business has also seen
an increase in its operating cost base during the year reflecting
the implementation of a new customer management system called
Evolve.
SSE
Airtricity: Adjusted profitability
increased to £95.0m from £5.6m in the prior year. This was aided by
an increase in income from wind farms contracted to SSE Airtricity
which rose from £28m in the prior year to £74m in the current year.
The prior year saw Airtricity respond to the challenging
circumstances faced by its domestic energy customers during the
year by committing to not make a profit through tariff delays,
price freezes for vulnerable customers and a €25m customer fund.
Residual profits from the previous financial year of £5.6m were
also redistributed in April 2023 via customer credits. Supporting
customers continued to be the main focus during the current year,
with two tariff reductions implemented and continuation of
financial supports for vulnerable customers. Increased consumer
demand combined with reduced commodity price volatility has meant
supply margins have returned towards more normalised levels this
year.
Reported operating profit increased
to £94.5m compared to £5.2m in the prior year reflecting a £(0.1)m
change in the share of interest and tax from Joint Ventures, in
addition to the movements above.
SSE
Energy Markets (formerly Energy Portfolio
Management): Adjusted operating
profit has decreased to £38.9m from a £80.4m profit in the prior
year. Energy Markets continues to generate a relatively low level
of baseline operating earnings through service provision to those
SSE businesses requiring access to the Energy Markets. In addition,
the business is permitted to take optimisation opportunities whilst
managing liquidity and shape on external trades, but these
optimisation opportunities are subject to strict internal VAR
limits and controls. The business also looks to add value
through contracting for third party PPA and route to market
contracts and significant value is also generated from the
optimisation of green certificates such as ROCs and REGOs. The
decrease in year-on-year profitability is mainly due to a lower
level of volatility and price of power and gas trades in the
market, which has driven lower profits from trading, optimisation
activities and wind PPA contracts.
Reported operating profit increased
to £590.0m from £(2,626.0)m in the prior year. In addition to the
movements above, the reported operating result includes the net
remeasurement gain on forward commodity derivatives in the year
relative to loss on the same remeasurement in the prior year. In
line with previous years, these IFRS 9 remeasurements exclude any
remeasurement of 'own use' contracts and are unrelated to
underlying operating performance.
SSE
Enterprise (formerly Distributed Energy):
An adjusted operating loss of £(25.6)m was
recognised, compared to a loss of £(7)m in the prior year. The
business continues to incur planned losses as it invests to support
business growth in localised and flexible, smart energy
infrastructure.
Reported operating losses increased
to £(25.6)m from £(13.1)m, with the prior year reflecting an
exceptional charge of £(6.1)m which mainly related to provisions in
connection with the sale of the Contracting and Rail business in
June 2021.
Neos Networks: SSE's
remaining 50% share in the Telecoms business Neos Networks Limited
recorded an adjusted operating loss of £(32.3)m compared to
£(39.8)m in the prior year, reflecting planned losses incurred to
support future business growth, and a reported operating loss of
£(116.1)m
compared to a loss of £(56.0)m in the prior year.
The reported result in the current
year includes an exceptional impairment of £(73.6m), reflecting the
wide range of reasonably probable valuations for this
business.
Corporate Unallocated: Adjusted operating loss of £(88.8)m compares against a loss
of £(87.0)m in the prior year. The result reflects lower revenue
recovered from disposed businesses following the cessation of
transitional service contracts established as part of the strategic
disposal programme completed in 2022, which have been offset by
gains on disposal of £9m, and the unwind of liabilities associated
with financial and performance guarantees.
Reported operating losses rose from
£(26.8)m in the prior year to £(94.1)m, with the prior year
benefiting from a £50.5m positive revaluation adjustment on legacy
Gas Production decommissioning provisions relative to a £(9.9)m
downward adjustment to the same provision in the current year. This
is partially offset by an exceptional credit of £4.6m relating to
the reacquisition of Enerveo Limited - the Contracting and Rail
business that was previously sold by SSE in June 2021. SSE is
currently conducting a review to develop and then implement a
longer-term strategy for each part of the Enerveo business.
Further details of the transaction are contained in the Summary
Financial Statements.
Adoption of IFRS 17 "Insurance Contracts"
On 1 April 2023, the Group adopted
IFRS 17 'Insurance Contracts' on a modified retrospective basis
from the earliest period presented.
The Group provides guarantees in
respect of certain activities of former subsidiaries and to certain
current joint venture investments. Prior to adoption of IFRS 17,
these contracts were designated as insurance contracts under IFRS 4
'Insurance Contracts' ('IFRS 4'). Under IFRS 4, existing accounting
practices were grandfathered and the contracts were treated as
contingent liabilities until such time as it became probable the
Group would be required to make payment to settle the obligation.
The adoption of IFRS 17 from 1 April 2022 resulted in a
reassessment of these contracts and the Group elected to apply the
valuation principles of IFRS 9 to these contracts. Adoption
resulted in the recognition of financial guarantee liabilities of
£54.9m; a £22.7m increase in equity investments in joint ventures
and associates; and a £32.2m adjustment to retained earnings. On 1
September 2022, the Group acquired a 50% joint venture investment
in Triton Power Holdings Limited ('Triton') and provided parent
company guarantees to Saltend Cogeneration Company Limited, a
subsidiary of Triton. In the comparative year to 31 March 2023, the
Group has therefore recognised a further £16.0m increase to the
Group's financial guarantee liabilities to reflect this guarantee
and a £16.0m increase to the Group's equity investment in
Triton.
During the current year to 31 March
2024, the Group recognised a net decrease in financial guarantee
liabilities of £31.4m, a reduction in the value of its joint
venture investments of £6.9m and a settlement of £12.0m resulting
in a net income statement credit of £12.5m, of which £5.1m has been
treated as exceptional. The reduction in the year is primarily due
to the expiration of guarantees provided to joint
ventures.
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 on net pension liabilities, exceptional
items, depreciation on fair value adjustments, revaluation
adjustments to the retained 60% Gas Production decommissioning
obligation, results attributable to non-controlling interest
holders and the impact of certain remeasurements.
SSE's adjusted EPS measure provides
an important and meaningful measure of underlying financial
performance. In adjusting for these items, 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 please refer to the Adjusted Performance Measures
section of this statement.
In the twelve months ended 31 March
2024, SSE's adjusted earnings per share was 158.5p. This compares
to 166.0p for the previous year and reflects the movements in
adjusted operating profit outlined in the section above in addition
to lower year-on-year net finance costs which were largely offset
by higher taxation charges and coupon payments on hybrid bonds as
set out in the Supplemental Financial Information section
below.
financial outlook - 2024/25 and beyond
FINANCIAL OUTLOOK for 2024/25
SSE continues to focus on delivering
long-term sustainable financial performance through implementation
of its five-year NZAP Plus capex plan. And whilst energy prices
have normalised from the highs seen over the last 24 months, SSE
remains confident that its balanced business mix will continue to
deliver strong and sustainable operating profit over the coming
years.
In line with historical practice,
and consistent with the approach taken before the period of extreme
market volatility seen over the last couple of years, SSE is not
providing full earnings guidance for 2024/25 at this stage of the
financial year reflecting the inherent seasonality within its
business. However, the Group has set out the following expectations
for the forthcoming year:
· SSEN
Transmission - It is expected that
operating profit will be lower than the prior year as the taxation
benefit from "full expensing" for qualifying capital expenditure is
passed through to consumers through reduced tariffs. This is
accompanied by an increase in the operational cost base as the
business prepares to deliver over £20bn of capital investment in
LOTI and ASTI projects over the rest of the decade.
· SSEN
Distribution - It is anticipated
that operating profit will be significantly higher than the prior
year outturn, with the expected inflationary catch-up in tariffs
expected to more than double operating profit.
· SSE Renewables
- The c.30% increase in hedged prices during the
year combined with additional volumes from key capital projects
such as Seagreen (full year impact), Viking (operations expected in
summer 2024) and Dogger Bank A (phased towards the end of the year)
means that operating profits are expected to increase significantly
year-on-year.
· SSE Thermal
and Gas
Storage - It is now expected that operating profit will be
significantly lower than the prior year outturn, reflecting the
continued normalisation of energy commodity prices seen in current
forward price curves. However operating profit is expected to be
higher than historical averages, and even with a low-case
volatility scenario which limits the amount of extrinsic value the
operating plant can capture, more than £200m.
· Energy Customer
Solutions - It is expected that the
stabilisation in customer margins seen through 2023/24 will
continue into the 2024/25 financial year.
These expectations are subject to
normal weather conditions, current market conditions and plant
availability.
Following the rebase of the dividend
to 60p for 2023/24, the 2024/25 financial year is expected to see
the dividend increase by between 5 - 10%, in line with a commitment
to aligning future dividends with SSE's ambitious growth
profile.
Capital expenditure and investment
in 2024/25 is expected to significantly increase to over £3bn,
reflecting a ramping up of project delivery during the year, with
the net debt to EBITDA ratio expected to be towards the lower end
of the 3.5 - 4.0x targeted range.
Net Zero Acceleration Programme
PLUS
Since releasing SSE's original Net
Zero Acceleration Programme - or NZAP - in November 2021, energy
market and wider economic disruption has amplified the shareholder
and societal benefit that comes from a balanced energy business
with a strategic focus aligned with the transition to net
zero.
In an operating environment impacted
by geopolitical conflict, abnormal meteorological patterns and
economic volatility, SSE's purpose to provide energy needed today
while building a better world of energy for tomorrow continues to
enjoy broad political and societal consensus.
The progress made in delivery of a
strategy that creates 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, coupled with growing momentum behind the
global green transition, saw SSE upgrade the targets, ambitions and
investment mix twice in the 24 months since the original NZAP was
released.
NZAP Plus - an upweighted £20.5bn Five Year Investment
Programme
SSE's strategy is built on the
knowledge that the three pillars of networks, renewables and
flexibility will be the foundations of the future energy system.
The optionality and balance of the Group's business mix means that
investment will pivot across the value chain, reacting to
visibility of growth opportunities as well as relative
attractiveness of returns. As ever, this optionality will be
exercised in line with SSE's commitment to rigorous capital
discipline.
The update to the NZAP presented in
May 2023 reflected the strong progress made in delivering the
original investment plan, whilst recognising the impact from a
changing macroeconomic environment. And, in November 2023, the
Group announced a further revision to increase its investment
programme as a result of the increased visibility over the scale of
investment opportunities available to SSEN Transmission.
This increase, which will now see
the Group invest around £20.5bn over the five years to 2026/27, has
the effect of upweighting the proportion of regulated electricity
networks spend as outlined below:
Investment Plan (5
years)
|
NZAP
(Nov 2021)
|
NZAP+
(May 2023)
|
NZAP+
Nov 23 update
|
Total adjusted
investment
|
~£12.5bn
|
~£18.0bn
|
~£20.5bn
|
- Electricity
networks
|
~40%
|
~50%
|
~55%
|
- Market based
|
~60%
|
~50%
|
~45%
|
Following this increase, SSE
anticipates the investment will be focused on:
· SSEN Transmission (~37% or
~£7.5bn) to continue to comprise
the majority of expected investment in regulated electricity
networks. With the RIIO-T2 baseline investment programme continuing
at pace, there is ever increasing visibility over incremental
investment across three Large Onshore Transmission Investment
('LOTI') projects that have received approval of need from Ofgem,
in addition to the early construction costs required for the eight
Accelerated Strategic Transmission Investment ('ASTI') framework
projects. These eleven projects - which are currently estimated to
require a gross nominal investment of c.£20bn to deliver by 2030 -
continue to progress and are expected to drive gross RAV for this
business to at least £10bn by the end of 2026/27.
· SSEN Distribution (~17% or
~£3.5bn) remains on track to
deliver its £3.6bn RIIO-ED2 investment programme. This baseline
investment - alongside growth opportunities from Uncertainty
Mechanisms which are already being secured - is expected to
increase gross RAV to between £6 - 7bn by the end of
2026/27.
· SSE Renewables (~34% or
~£7bn) is continuing to deliver on
its ambitious construction programme, with critical milestones
achieved in the year such as full power from Seagreen offshore wind
farm and first power from Dogger Bank offshore wind farm. Whilst
the target to reach around 9GW of installed capacity by 2026/27
remains, the business continues to focus on financial discipline
and selective renewables growth only where it is value accretive.
With that focus, the allocation of capital continues to move across
a diverse mix of renewable technologies such as battery storage
projects where almost 700MW of capacity is currently in operation
or under construction.
· SSE Thermal and other
businesses (~12% or ~£2.5bn) comprise the remaining expected investment, with SSE
Thermal's pipeline of lower-carbon generation projects - such as
sustainable biofuels, carbon capture and ultimately hydrogen -
continuing to make progress over the last 12
months.
With around 90% of the upweighted
investment plan expected to be invested in electricity networks and
renewables, the substantial majority is focused on climate
solutions to achieve SSE's 2030 Goals which are linked to its most
highly-material UN Sustainable Development Goals (SDGs) and aligned
to the Technical Screening Criteria of the EU Taxonomy.
Fully-funded investment plan, with continued strong balance
sheet
SSE has demonstrated its
ability to realise value from disposals, create sustainable
earnings growth and raise capital at highly attractive terms. In
the current period, £1.1bn of long-term debt was issued at
attractive, fixed coupons.
The Group's business mix, capital
investment and funding plans are designed to ensure that it retains
an investment grade credit rating which provides capacity to reach
a 4.5x net debt / EBITDA ratio.
And the financial strength of the
Group and continued earnings growth means that it expects to still
be within or below the target range of 3.5 - 4.0x net debt / EBITDA
over the course of the plan to 2026/27.
Maintaining disciplined investment and
returns
SSE maintains its focus
on allocating capital based on clear internal investment criteria
intended to maximise investment returns whilst ensuring delivery of
its strategy.
Against the backdrop of a changing
macroeconomic environment, SSE remains fully committed to its
disciplined approach of focusing investment on high-quality assets
where its capabilities can deliver favourable risk-adjusted project
returns, namely continuing to target:
· Solar: returns between 50-300
bps over WACC for unlevered projects, depending on the balance of
merchant, technology and construction risk for each
project;
· Onshore
wind: returns between 100-300 bps
over WACC for unlevered projects, also depending on the balance of
merchant, technology and construction risk for each
project;
· Offshore
wind: more than 11% equity returns
(excluding developer profits but including seabed lease fees) for
project financed developments;
· Networks: between 7 - 9%
return on equity assuming a level of outperformance, CPIH inflation
of 2% p.a. and an average gearing ratio of 60%; and
· Emerging technologies
(principally Batteries, CCS and Hydrogen): between 300-500 bps over WACC for unlevered projects,
reflecting the expected increased operating and technology risk
from newer, first-of-a-kind technologies.
These investment criteria - and
targeted returns - continue to be applied in both domestic and
overseas markets.
Updating segmental earnings guidance to
2026/27
The enhanced NZAP Plus capex plan
was first announced in a period of extreme market volatility which
saw individual businesses such as SSE Thermal and Gas Storage
successfully navigate rapidly changing market condition. Whilst the
market has begun to normalise, the strength and resilience of our
balanced mix of businesses means we continue to have confidence in
the long term earnings growth for the Group.
Taking into account the current
forward price curves as well as progress made on key capital
projects, we therefore set out the following updated expectations
for segmental earnings to 2026/27:
· SSEN
Transmission - The upweighting of
investment towards Networks is also expected to upweight the
adjusted operating profits (net of 25% Non-Controlling Interest) to
more than £500m per annum on average across the five-year plan. The
profile of earnings growth is expected to largely follow the
profile of increased capital expenditure as the business receives
an upfront revenue benefit through the regulatory
mechanism.
· SSEN
Distribution - In line with
previous expectations, and reflecting the predictability of the
regulatory businesses, we continue to expect to deliver expected
adjusted operating profits of around £450m per annum on average
across the five-year plan.
· SSE Renewables
- Reflecting a lower baseload power price
assumption for 2026/27 of c.£65/MWh, this business is now forecast
to deliver a ~19% adjusted profit CAGR across the five-year plan,
subject to weather and plant availability.
· SSE Thermal and Gas
Storage - Following the continued
normalisation of energy commodity prices seen in current forward
price curves, it is now expected that the existing efficient,
flexible thermal fleet will deliver adjusted operating profits of
around £400m on average for the four financial years to 2026/27.
The profile of earnings are expected to significantly rise towards
the end of the plan, reflecting the upweighted revenue from
contracted and index linked Capacity Market payments which are
expected to increase by ~2.5x from 2024/25 to 2026/27.
· Energy Customer
Solutions - Following an extended
period of challenging conditions with a global pandemic followed by
the extreme commodity price volatility, the stabilisation in
margins seen during 2023/24 for the SSE Business Energy and SSE
Airtricity businesses are expected to continue throughout the
medium term.
Reaffirming expected earnings growth and dividend
plan
Taking account of the
Group's latest view of renewables and networks project delivery out
to 2026/27, in addition to the normalisation of market prices seen
over the course of the last few months, SSE continues to have
confidence in reaching its 175 - 200p adjusted earnings per share
guidance range for 2026/27. The increased visibility over
investment through regulatory approvals for network upgrades, the
progress made on the 2.8GW of renewable projects under construction
and the extension of "full expensing" capital allowances more than
offset the current nomalisation of market prices.
This view assumes a ~£65/MWh
nominal baseload power price for renewable output in 2026/27; no
assumed developer profits on project sell-downs; normal weather and
plant availability; a ~4.5% average cost of debt across the plan
which in turn assumes a 5.5% coupon on new debt issuance; and a
~12% average effective tax rate across the five-year
plan.
Reflecting the SSE plc Boards'
confidence in delivering this future earnings growth, the
commitment to target dividend increases of between 5 to 10% per
year across 2024/25, 2025/26 and 2026/27 - following the rebase to
60 pence per share in 2023/24 - remains unaffected. This plan
retains the scrip dividend option for shareholders, with the cap on
take-up still set at 25% and implemented (if necessary) by means of
a share buy-back.
Supplemental financial
information
Adjusted Investment and Capex Summary
|
Mar 2024
Share %
|
Mar 2024
£m
|
Mar 2023
£m
|
SSEN Transmission (excluding 25%
MI from 1 Dec 2022)
|
24%
|
595.6
|
495.5
|
SSEN Distribution
|
21%
|
505.1
|
421.0
|
Regulated networks total
|
45%
|
1,100.7
|
916.5
|
|
|
|
|
SSE Renewables
|
45%
|
1,097.1
|
911.5
|
|
|
|
|
SSE Thermal
|
4%
|
99.6
|
153.2
|
Gas Storage
|
-
|
0.8
|
6.3
|
Thermal Energy Total
|
4%
|
100.4
|
159.5
|
|
|
|
|
Energy Customer
Solutions
|
2%
|
58.5
|
49.8
|
|
|
|
|
SSE Energy Markets (formerly
Energy Portfolio Management)
|
-
|
8.6
|
4.7
|
|
|
|
|
SSE Enterprise (formerly
Distributed Energy)
|
2%
|
51.0
|
50.3
|
|
|
|
|
Corporate unallocated
|
2%
|
60.4
|
68.3
|
|
|
|
|
Adjusted investment and capital expenditure
|
100%
|
2,476.7
|
2,160.6
|
|
|
|
|
Acquisitions
|
|
-
|
642.7
|
|
|
|
|
Adjusted investment, capital and acquisitions
expenditure
|
|
2,476.7
|
2,803.3
|
Note: 2022/23 segmental numbers above restated to reflect
movement of Solar and Battery business to SSE Renewables and
Building Energy Management Systems to SSE Business Energy, both
previously reported under SSE Enterprise
SSE'S Capital Expenditure Programme
During the 12 months to 31 March
2024, SSE's adjusted investment, capital and acquisitions
expenditure totalled £2,476.7m, compared to £2,803.3m in the same
period last year. The reduction is driven largely by prior period
acquisition expenditure relating to the purchase of the Southern
European onshore wind development platform, and the acquisition of
Triton Power Holdings, in separate transactions which both
completed on 1 September 2022.
Investment in the reporting period
was driven mainly by SSE's renewables and electricity networks
divisions, with limited deployment of capital in thermal and other
businesses, and no acquisitions expenditure.
In SSEN Transmission, £595.6m net capex
was delivered, including £102m on the final stages of the Shetland
connection with offshore works now complete and the project in the
final commissioning phase. The East Coast Upgrade to 400kV also
progressed well with a further £117m invested during the period,
which sees the first of three phases complete and successfully
energised. A further £41m was also invested as part of the Eastern
Green Link 2 and 3 preliminary works.
The first year of SSEN Distribution's RIIO-ED2 saw capex
increase by 20% to £505.1m, with a continued focus on network
resilience and future proofing for the expected consumer-led uptake
in low-carbon technology. £210m of this was delivered in the North
in a wide variety of projects with £53m of this invested in subsea
cables, including the Pentland Firth East cable which energised
during the period. In the South, £295m of capex was delivered
during the period across a broad range of projects, with
significant investment in Bramley Thatcham and Iver
Reinforcement.
SSE
Renewables invested a total of
£1,097.1m during the period, including £219m on Viking onshore wind
farm on Shetland, where all turbines have now been installed and
commercial operations are expected in Summer 2024. In Ireland, £90m
of capex was delivered on the construction of the 101MW Yellow
River wind farm, which is targeting commissioning in early 2025. In
the North Sea, Seagreen offshore wind farm reached commercial
operations in October 2023 and £86m equity was drawn down to fund
the final stages of construction. £158m of combined equity and
shareholder loans were drawn to fund construction works which are
under way at Dogger Bank A, which has previously been funded by
non-recourse project financing in the Joint Venture.
In SSE Thermal, investment totalled
£100.4m in the period, £30m of which was incurred on Slough
Multifuel station, a joint venture with CIP, which achieved first
fire in March 2024.
SSE's Hedging Position at 31 March
2024
SSE has an established approach to
hedging through which it generally seeks to reduce its broad
exposure to commodity price variation at least 12 months in advance
of delivery. SSE continues to monitor market developments and
conditions and alters its hedging approach in response to changes
in its exposure profile.
A summary of the hedging position
for each of SSE's market-based businesses is set out
below.
SSE
Renewables - GB wind and hydro:
Energy output hedges are
progressively established through the forward sale of
either:
· Electricity - where market depth and liquidity
allows;
· Gas
and carbon equivalents - recognising that spark spread exposures
remain; or
· Gas
equivalents only - recognising that carbon and spark spread
exposures remain.
This approach was developed in
response to lower levels of available forward market depth and
liquidity for certain energy products. Whilst some basis risk or
commodity exposure will remain under this approach, it does
facilitate the reduction of SSE Renewables' overall exposure to
potentially volatile spot market outcomes.
For transparency, the table below
notes both the proportion of hedges and prices of those hedges for
electricity and equivalents (i.e. where gas and carbon equivalents
have been hedged) and for gas alone (i.e. where the carbon leg has
been unable to be hedged).
|
2023/24
|
2024/25
|
2025/26
|
2026/27
|
Wind
|
|
|
|
|
Total energy output volumes hedged - TWh
|
5.5
|
6.4
|
5.2
|
1.5
|
- Hedge in electricity &
equivalents - TWh
|
5.5
|
4.1
|
2.0
|
0.7
|
- Electricity hedge price -
£MWh
|
£75
|
£91
|
£93
|
£80
|
- Hedge in Gas -
TWh
|
-
|
2.3
|
3.2
|
0.8
|
- Gas hedge price -
£MWh
|
-
|
£122
|
£77
|
£56
|
|
|
|
|
|
Hydro
|
|
|
|
|
Total energy output volumes hedged - TWh
|
3.0
|
2.9
|
1.9
|
0.6
|
- Hedge in electricity &
equivalents - TWh
|
3.0
|
1.8
|
0.6
|
0.2
|
- Electricity hedge price -
£MWh
|
£86
|
£96
|
£90
|
£74
|
- Hedge in Gas -
TWh
|
-
|
1.1
|
1.3
|
0.4
|
- Gas hedge price -
£MWh
|
-
|
£120
|
£82
|
£56
|
Note: where gas and carbon trades have been used as a proxy
for electricity, a constant 1 MWh:69.444 th and 1MWh:0.3815 te/MWh
conversion ratio between commodities has been applied. These same
ratios have been used to convert underlying commodity prices into
electricity £MWh and therefore no assumptions have been made on
either spark or carbon.
The table excludes additional
volumes and income for Balancing Mechanism activity, ROCs,
ancillary services, capacity mechanism and shape variations and
optimisations. It also excludes volumes and income relating to
Irish wind output, pumped storage and CfDs.
The hedged volumes include SSE's
equity share of forecast pre-CFD volumes from Seagreen offshore
wind farm and Viking onshore wind farm. No volumes have been
included for Dogger Bank offshore wind farm as hedging for this
asset has not yet commenced.
For renewable energy output, SSE's
established approach seeks to minimise the volumetric downside risk
by targeting a hedge of less than 100% of its anticipated wind
energy output for the coming 12 months. The targeted hedge
percentage is reviewed and adjusted as necessary to reflect any
changes in market and wind capture insights. The last such revision
occurred in September 2023, setting a baseline target hedge of
around 80% of the anticipated energy output from wind and hydro for
the coming twelve months from that date.
Energy output hedges for both wind
and hydro are progressively established over the 36 months prior to
delivery (although the extent of hedging activity for future
periods also depends on the level of available market depth and
liquidity).
Target hedge levels are achieved
through the forward sale of either electricity or a combination of
gas or carbon equivalents as outlined above. When gas-and-carbon
hedges are converted into electricity hedges a "spark spread" is
realised which can lead to changes in the average hedge price
expected. This can increase the previously published average hedge
price or decrease it. Likewise, when gas hedges are subsequently
converted into electricity hedges ahead of delivery, a
carbon-and-spark spread value is realised which will also lead to
changes in the average hedge price expected.
GB Thermal: In the 6 months
prior to delivery, SSE aims to hedge all of the expected economic
output of its CCGT assets, having progressively established this
hedge over the 18 months prior to delivery.
This hedging approach is adjusted
to take into account any changes in exposures as a result of
current market conditions, such as the plant availability exposure,
counterparty credit risk, and changes to cost of capital for
collateral.
Hedging activity also depends on
the availability of sufficient market depth and liquidity, which
can be limited, particularly for periods further into the
future.
Gas Storage: The assets are
being commercially operated to optimise value arising from changes
in the spread between summer and winter prices, market volatility
and plant availability.
At 31 March 2024, 40 mTh of gas
inventory was physically held which represents c.21% of SSE's share
of gross capacity (at 31 March 2023, 126mTh of gas inventory
representing c.65% of SSE's share of gross capacity).
SSE Business Energy: The
business supplies electricity and gas to business and public sector
customers. Sales to contract customers are hedged: at point of sale
for fixed contract customers; upon instruction for flexi contract
customers; and on a rolling hedge basis for tariff
customers.
Given the pricing and
macro-economic context, SSE Business Energy is dynamically
monitoring nearer term consumption actuals for early signs of
demand variability and adjusting future volumes hedged
accordingly.
SSE Energy Markets: This
business provides the route to market and manages the execution for
all of SSE's commodity trading outlined above (spark spread, power,
gas, oil and carbon). This includes monitoring market conditions
and liquidity and reporting net Group exposures. The business
operates under strict position limits and VAR controls.
There is some scope for
position-taking to permit this business to manage around shape and
liquidity whilst taking optimisation opportunities. This has been
contained within a total daily VAR limit of £5m, which will be
increased to £9m from 1 April 2024 to reflect growing optimisation
opportunities as the SSE portfolio expands.
Ireland: Vertical integration
of the generation and customer businesses in Ireland limits the
Group's commodity exposure in that market.
Summarising movements on exceptional
items
and certain remeasurements
Exceptional items
In the year ended 31 March 2024, SSE
recognised a net exceptional charge within continuing operations of
£(266.0)m before tax. The following table provides a summary of the
key components making up the net charge:
Exceptional credits / (charges)
within continuing operations
|
Total
£m
|
Triton Power impairment
|
(63.2)
|
Gas Storage impairment
|
(134.1)
|
Neos Networks
impairment
|
(73.6)
|
Enerveo reacquisition (previously
SSE Contracting)
|
4.6
|
Other
|
0.3
|
Total exceptional charge
|
(266.0)
|
Note: The definition of exceptional items can be found in
Note 4.2 of the Summary Financial Statements.
For a full description of
exceptional items, see Note 7 of the Summary Financial
Statements.
Certain
remeasurements
In the year ended 31 March 2024, SSE
recognised a favourable net remeasurement within continuing
operations of £513.5m before tax. The following table provides a
summary of the key components making up the favourable
movement:
Certain remeasurements
within continuing operations
|
Total
£m
|
Operating derivatives (including
share from jointly controlled entities net of tax)
|
498.3
|
Commodity stocks held at fair
value
|
9.1
|
Financing derivatives
|
6.1
|
Total net favourable remeasurement
|
513.5
|
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 are
required 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 2024 is expected to be within
the next 6 - 18 months.
The change in the operating
derivative mark-to-market valuation was a £498.3m positive movement
from the start of the year, reflecting a £452.2m positive movement
on fully consolidated operating derivatives combined with a £46.1m
share of positive movement on derivatives in jointly controlled
entities (net of tax) driven by commodity contract
revaluations.
The positive movement of £452.2m on
fully consolidated operating derivatives includes:
· Settlement
during the year of £1,025.3m of previously net "out-of-the-money"
contracts in line with the contracted delivery periods;
and
· An adverse
net mark-to-market remeasurement of £(573.1)m on unsettled
contracts including affiliate CfDs, largely entered into during the
course of 2022/23 and 2023/24 and in line with the Group's stated
approach to hedging. This mark-to-market remeasurement - which
compares to a £(2,980.2)m adverse movement in the prior period -
reflects the reduced volatility seen in commodity markets during
the year.
As in prior years, the reported
result does not include remeasurement of 'own use' hedging
agreements which do not meet the definition of a derivative
financial instrument under IFRS 9 "Financial
Instruments".
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
£9.1m favourable movement in the year reflects the combination of a
higher forward market price at the period end when compared to the
actual weighted average cost of gas stored at that time and the
decrease in the amount of gas physically held.
However, whilst this movement
reflects the net change in fair value of physical gas inventory
held at the period end, it does not take into account any positive
or negative mark-to-market movement on forward contracted sales.
Therefore, similar to derivative contracts held at fair value, SSE
does not expect that this valuation movement will reflect the final
result realised by the business.
Financing derivatives
In addition to the movements above,
a positive movement of £6.1m was recognised on financing
derivatives in the year ended 31 March 2024, including
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 recognised gain
reflects a slight increase in the UK long term interest rates which
means that the net "out of the money" position on these hedges has
reduced slightly during the year.
These remeasurements are presented
separately as they do not represent underlying business performance
in the year. 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 twelve months to 31 March 2024
are significantly higher than the previous year. In addition to the
£513.5m net gain on forward commodity, gas inventory and financing
derivative fair value remeasurements and the £(266.0)m net pre-tax
exceptional charge noted above - reported results also include,
primarily, £26.2m of interest income on the net pension asset;
£134.4m share of profits attributable to non-controlling interests;
a £(9.9)m adjustment to legacy gas production decommissioning
provisions; £(19.0)m depreciation on fair value uplifts; and a
£(74.1)m share of joint venture interest and tax.
Reported results in the prior period
reflected pre-tax certain re-measurement losses of £(2,351.9)m
mainly driven by the significant volatility in commodity markets in
the prior period, as well as pre-tax exceptional items of £(0.4)m
reflecting various offsetting impairments, asset write-ups and a
gain on sale, and £16.2m net interest income on the net pension
asset.
Financial management and balance
sheet
Debt metrics
|
Mar 2024
£m
|
Sep 2023
£m
|
Mar 2023
£m
|
Net Debt / EBITDA*
|
3.0x
|
N/A
|
2.7x
|
Adjusted net debt and hybrid capital (£m)
|
(9,435.7)
|
(8,943.8)
|
(8,894.1)
|
Average debt maturity
(years)
|
6.4
|
5.9
|
6.4
|
Adjusted interest cover
|
8.9x
|
3.9x
|
7.6x
|
Average cost of debt at period end
(including all hybrid coupon payments)
|
3.90%
|
4.02%
|
3.92%
|
*
Note: Net debt represents the group adjusted net debt and hybrid
capital. EBITDA represents the full year group adjusted
EBITDA, less £179.6m at March 2024 (March 2023: £146.9m) for the
proportion of adjusted EBITDA from equity-accounted Joint Ventures
relating to project financed debt.
Net finance costs reconciliation
|
Mar 2024
£m
|
Mar 2023
£m
|
Adjusted net finance costs
|
251.7
|
345.6
|
Add/(less):
|
|
|
Lease interest charges
|
(25.8)
|
(29.4)
|
Notional interest arising on
discounted provisions
|
(25.2)
|
(22.1)
|
Hybrid equity coupon
payment
|
73.1
|
38.8
|
Adjusted finance costs for
interest cover calculation
|
273.8
|
332.9
|
Principal Sources of debt funding
|
Mar 2024
|
Sep 2023
|
Mar 2023
|
Bonds
|
58%
|
54%
|
54%
|
Hybrid debt and equity
securities
|
18%
|
18%
|
18%
|
European investment bank
loans
|
5%
|
5%
|
5%
|
US private placement
|
8%
|
8%
|
10%
|
Short-term funding
|
8%
|
11%
|
9%
|
Index -linked debt
|
3%
|
4%
|
4%
|
%
of which has been secured at a fixed rate
|
93%
|
91%
|
92%
|
Rating Agency
|
Rating
|
Criteria
|
Date of
Issue
|
Moody's
|
Baa1
'stable outlook'
|
'Low
teens' Retained Cash Flow/Net Debt
|
19
December 2023
|
Standard and Poor's
|
BBB+
'outlook positive'
|
About
18% Funds From Operations/Net Debt
|
5
September 2023
|
Maintaining a strong balance
sheet
A key objective of SSE's long-term
approach to balancing capital investment, debt issuance and
securing value and proceeds from disposals is by maintaining a
strong net debt/EBITDA ratio. SSE calculates this ratio based on a
methodology that it believes best reflects its activities and
commercial structure, in particular its strategy to secure value
from partnering by using Joint Ventures and non-recourse project
financing.
SSE considers it has the capacity to
reach a ratio of up to around 4.5x, comparable with private sector
utilities across Europe, whilst remaining above the equivalent
ratios required for an investment grade credit rating.
Given the strength of the Group's
Balance Sheet, the current net debt/EBITDA ratio is well below this
threshold at 3.0x. However it is expected that this ratio will
trend upwards to around 4.0x, as the Group delivers on its £20.5bn
investment plan to 31 March 2027.
SSE's Standard and Poor's credit
rating was re-affirmed in September 2023 at BBB+ with 'outlook
positive' and its Moody's rating was reaffirmed in December 2023 at
Baa1 with 'stable outlook'.
Adjusted net debt and hybrid
capital
SSE's adjusted net debt and hybrid
capital was £9.4bn at 31 March 2024, an increase of £0.5bn from 31
March 2023. With no significant acquisitions or divestments in the
period, the debt movement relates to capital investment expenditure
and revaluation of currency debt as well as various working capital
movements being offset by operating cash flows less dividend
payments.
Debt summary as at 31 March
2024
The Group issued £1.1bn of new
long-term debt in the financial year whilst also continuing to roll
Commercial Paper at a broadly similar level as 31 March
2023:
· In
September 2023, SSE plc issued an 8 year €750m green bond at a
fixed coupon of 4.0% with an all-in cost of funding rate of just
above 4% once fees have been included. The bond was left in Euros
as a net investment hedge for the Group's Euro denominated
subsidiaries.
· In
January 2024, Scottish Hydro Electric Transmission plc issued a 20
year £500m green bond at a fixed coupon of 5.5% with an all-in
funding cost of 5.575% once fees have been
included.
· Over
the course of the year, SSE plc rolled maturing short-term debt
which takes the total outstanding Commercial Paper at 31 March 2024
to €990m (£852m). Commercial Paper has been issued in Euros and
swapped back to Sterling at an average cost of debt of 5.75% and
matures between April 2024 and May 2024.
In the year ended 31 March 2024,
£0.7bn of medium-to-long-term debt has matured comprising £155m of
US Private Placements which matured in April 2023 and September
2023, €700m (£514m) of Eurobonds which matured in September 2023
and £50m of European Investment Bank fixed rate loans which matured
in September 2023.
Over the next financial year, there
is a further £0.2bn of medium-to-long-term debt maturing being the
£204m US Private Placement maturing in April 2024. As noted above,
€990m (£852m) of short-term debt in the form of Commercial Paper is
also due to mature in the first half of 2024/25, however the
current intention is to roll this maturing short-term debt forward
throughout the 2024/25 financial year.
Hybrid bonds summary as at 31
march 2024
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, as their 50%
equity treatment by the rating agencies is positive for SSE's
credit metrics.
A summary of SSE's hybrid bonds as
at 31 March 2024 can be found below:
Issued
|
Hybrid Bond Value1
|
All in rate2
|
First Call Date
|
Accounting Treatment
|
July 2020
|
£600m
|
3.74%
|
Apr 2026
|
Equity accounted
|
July 2020
|
€500m (£453m)
|
3.68%
|
July 2027
|
Equity accounted
|
April 2022
|
€1bn (£831m)
|
4.00%
|
Apr 2028
|
Equity accounted
|
1 Sterling equivalents shown
reflect the fixed exchange rate on date of receipt of proceeds and
is not subsequently revalued.
2 All in rate reflects coupon
on bonds plus any cost of swap into sterling which currently only
applies to July 2020 Hybrid.
Further details on each hybrid bond
can be found in Note 14 to the Summary Financial Statements and a
table noting the amounts, timing and accounting treatment of coupon
payments is shown below:
Hybrid coupon payments
|
2024/25
|
2023/24
|
|
HYe
|
FYe
|
HYa
|
FYa
|
Total equity (cash)
accounted
|
£73m
|
£73m
|
£73m
|
£73m
|
Total debt (accrual)
accounted
|
-
|
-
|
-
|
-
|
Total hybrid coupon
|
£73m
|
£73m
|
£73m
|
£73m
|
SSE's July 2020 and April 2022
hybrid bonds are perpetual instruments and are therefore accounted
for as part of equity within the Summary Financial Statements but,
consistent with previous years, have been included within SSE's
'Adjusted net debt and hybrid capital' to aid
comparability.
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.
Managing net finance
costs
SSE's adjusted net finance costs -
which included interest on debt accounted hybrid bonds but not
equity accounted hybrid bonds - were (£251.7m) in the year ended 31
March 2024, compared to (£345.6m) in the previous year. The lower
level of finance costs in the year is driven by lower swap interest
arising from higher short term interest rates on fixed rate swaps,
the impact of lower inflation on index linked debt, and higher
capitalised interest costs reflecting increasing construction
activity. These were partially offset by a higher share of JV
costs, predominantly due to Seagreen becoming fully operational
during the year.
Reported net finance costs were
(£113.1m) compared to (£59.3m) in the previous period. Higher
interest charges incurred in Joint Ventures combined with a £195.8m
decrease in beneficial movement on financing derivatives as
previously referenced more than offset the reduction seen in
adjusted net finance costs.
Summarising cash and cash
equivalents
At 31 March 2024, SSE's adjusted net
debt included cash and cash equivalents of £1.0bn, which is
slightly higher than the £0.9bn at March 2023.
The cash collateral balance at 31
March 2024 was a net liability of £353.2m, consisting of a
liability of £362.5m and an asset of £9.3m (2023: £nil liability
and £316.3m asset). This reflects the lower levels of initial
margin required for commodity contracts traded on exchanges
following a reduction in risk factors and the Group replacing cash
collateral with £100m of letters of credit. Additionally, variation
margin positions for March 2024 have moved to being 'in the money'
due to lower commodity prices versus the 'out the money' positions
experienced in the prior year.
Cash collateral is only required for
forward commodity contracts traded through commodity exchanges and
comprises an 'initial margin' element based on the size and period
of the trade and a 'variation margin' element which will change
from day to day depending on the fair value of that trade each day.
The level of cash collateral either provided or received therefore
depends on the volume of trading through the exchanges, the periods
being traded and the associated price volatility. As collateral is
only required on a portion of trades, the movement in collateral
provided or received will not correlate to the IFRS 9 fair value
movement recognised, which also only covers a portion of the total
Group trading activity. The decrease in cash collateral reflects
the lower forward power and gas price environment, alongside
reduced-price volatility in those markets.
Revolving Credit Facility /
SHORT-TERM FUNDING
SSE has £3.5bn 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 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
|
£1.3bn
|
Oct 19
|
SSE plc
|
Revolving Credit Facility with
Bank of China
|
2026
|
£200m
|
Nov 22
|
SHET plc
|
Syndicated Revolving Credit
Facility with 11 Relationship Banks
|
2026
|
£750m
|
Nov 22
|
SHEPD plc and SEPD plc
|
Syndicated Revolving Credit
Facility with 11 Relationship Banks
|
2026
|
£250m
|
Feb 23
|
SSE plc
|
Syndicated Revolving Credit
Facility with 10 Relationship Banks
|
2025
|
£1.0bn
|
In November 2022, SSEN Transmission
entered a three-year £750m facility, including two one-year
optional extensions with the first year's option exercised in
September 2023. A £250m facility on the same terms has been entered
into by SSEN Distribution. These facilities support the ongoing
capital expenditure investment programmes that are required to
deliver their ambitious future growth plans and will be drawn on as
required.
The £1bn facility signed in February
2023 (and subsequently extended for a further year in February
2024) was executed to cover potential cash collateral balances
required to cover commodity positions on exchanges or via credit
support annexes on bilateral contracts.
The facilities can also be utilised
to cover short-term funding requirements - however they remain
undrawn for most of the year and were undrawn as at 31 March 2024
(2023: £100m drawn on the £750m SHET plc
facility).
The two SSE plc facilities totalling
£1.5bn that mature in 2026 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 Moody's ESG Solutions. The £750m Transmission
facility is also classified as a sustainable facility with interest
rate and fees paid dependant on four ESG-related KPI's being
achieved.
In addition to the above, a $300m
private placement shelf facility exists with NY Life which can be
drawn in approximately two equal tranches 12 months apart over the
next three years. At 31 March 2024, no drawings have been made on
this facility. The Group also has access to a £15m overdraft
facility.
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, 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 31 March 2024, 93%
of SSE's borrowings were at fixed rates (2023: 91%).
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 using 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, now totals £5.8bn and SSE's objective is to
maintain a reasonable range of debt maturities.
A key objective of the Group's NZAP
Plus five-year investment plan is to strike the right balance
between capital investment, long-term debt issuance and securing
value through disposals, all whilst maintaining a strong net debt /
EBITDA ratio. Whilst this investment will naturally require a level
of incremental debt issuance - in addition to refinancing of
existing debt - the Group considers the plan to be fully-funded
given expected continued access to debt markets and with SSE
retaining a strong investment grade credit rating.
At 31 March 2024, the average debt
maturity, excluding hybrid securities, was 6.4 years, consistent
with the position at 31 March 2023. This position reflects the
£1.1bn of new long-term debt issued in the last year, which has
been offset by maturing long term debt.
SSE's average cost of debt is now
3.90%, compared to 3.92% at 31 March 2023. The small decrease
relates to higher swap income on fixed rate swaps due to higher
floating rates in the period.
Going Concern
The Directors consider that the
Group has adequate resources to continue in operational existence
for the period to 31 December 2025. The summary 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 of the Summary Financial Statements) 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 cash flow forecasts
under stressed scenarios for the period to December
2025.
The Group has an established €1.5bn
Euro commercial paper programme (paper can be issued in a range of
currencies and swapped into Sterling) and as at 31 March 2024 there
was £840m commercial paper outstanding. In the year ended 31 March
2024, the Group has issued new long-term debt instruments totalling
£2.0bn and has redeemed £0.7bn of maturing medium- long-term debt.
The Group also continues to have access to its £3.5bn of revolving
credit facilities. As at 31 March 2024 there were no drawings
against these committed facilities. The details of the five
committed facilities at 31 March 2024 are:
· a
£1.3bn revolving credit facility for SSE plc maturing March
2026;
· a
£0.2bn bilateral facility for SSE plc maturing October
2026;
· a
£0.75bn facility for Scottish Hydro Electric Transmission plc
maturing November 2026;
· a
£0.25bn facility for Scottish Hydro Electric Power Distribution plc
and Southern Electric Power Distribution plc maturing November
2026; and
· a
£1.0bn committed facility for SSE plc maturing February
2025.
The £1.3bn revolving credit facility
and £0.2bn bilateral facility are both in place to provide back-up
to the commercial paper programme and support the Group's capital
expenditure plans. The Transmission and Distribution related
facilities, both of which have a further 1-year extension option at
the borrower's discretion, were entered into to help cover the
capital expenditure and working capital of those businesses. The
one year extension option on the £1bn committed facility for SSE
plc was exercised in February 2024, and was entered into to provide
cover for potential cash collateral requirements if periods of
extreme volatility return to the commodity markets. There were no
drawings against these facilities at 31 March 2024 compared to
£100m drawn on the £750m Transmission facility at 31 March
2023.
Operating a Scrip Dividend
Scheme
SSE's Scrip Dividend Scheme was last
renewed for a three-year period at the 2021 AGM and will be
proposed for renewal for a further three-year period at the 2024
AGM. As part of the Group's dividend plan to 2026/27, it is
intended that take-up from the Scrip Dividend Scheme will be capped
at 25%. This cap would be implemented by means of a share
repurchase programme, or 'buyback', in October each year following
payment of the final dividend. The scale of any share repurchase
program would be determined by shareholder subscription to Scrip
Dividend Scheme across the full year, taking into account the
interim and final dividend elections.
Following approval of the dividend
at the Annual General Meeting on 20 July 2023, and receipt of the
final dividend scrip elections on 24 August 2023, the overall scrip
dividend take-up for the 2022/23 financial year was less than the
25% threshold and therefore no buy-back to limit scrip dilution was
required.
SSE believes limiting the dilutive
effect of the Scrip in this way strikes the right balance in terms
of giving shareholders choice, potentially securing cash dividend
payment savings and managing the number of additional shares
issued.
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 off-balance sheet debt
associated with its equity interests in JVs which totals around
£3.6bn as at 31 March 2024.
SSE principal JVs and
associates1
|
Asset type
|
SSE holding
|
SSE share of external debt
|
SSE Shareholder loans
|
Marchwood Power Ltd
|
920MW
CCGT
|
50%
|
No external debt
|
£12m
|
Seabank Power Ltd
|
1,234MW
CCGT
|
50%
|
No external debt
|
No loans outstanding
|
SSE Slough Multifuel
Ltd
|
50MW energy-from-waste
facility
|
50%
|
No external debt
|
£158m
|
Triton Power Holdings
Ltd
|
1,200MW CCGT & 140MW
OCGT
|
50%
|
No external debt
|
No loans outstanding
|
Beatrice Offshore Windfarm
Ltd
|
588MW offshore wind
farm
|
40%
|
£623m
|
Project financed
|
Dogger Bank A Wind Farm
|
1,200MW offshore wind
farm
|
40%
|
£928m
|
£88m
|
Dogger Bank B Wind Farm
|
1,200MW offshore wind
farm
|
40%
|
£785m
|
Project financed
|
Dogger Bank C Wind Farm
|
1,200MW offshore wind
farm
|
40%
|
£619m
|
Project financed
|
Ossian Offshore Windfarm
Ltd
|
ScotWind seabed
|
40%
|
No external debt
|
No loans outstanding
|
Seagreen Wind Energy
Ltd
|
1,075MW offshore wind
farm
|
49%
|
£661m
|
£995m2
|
Seagreen 1a Ltd
|
Offshore wind farm
extension
|
49%
|
No external debt
|
£22m
|
Lenalea Wind Energy Ltd
|
30MW onshore wind farm
|
50%
|
No external debt
|
£14m
|
Clyde Windfarm (Scotland)
Ltd
|
522MW onshore wind
farm
|
50.1%
|
No external debt
|
£127m
|
Dunmaglass Windfarm Ltd
|
94MW onshore wind farm
|
50.1%
|
No external debt
|
£47m
|
Stronelairg Windfarm
Ltd
|
228MW onshore wind farm
|
50.1%
|
No external debt
|
£89m
|
Cloosh Valley Wind Farm
|
105MW onshore wind farm
|
25%
|
No external debt
|
£25m
|
Neos Networks Ltd
|
Private telecoms
network
|
50%
|
No external debt
|
£58m
|
Notes:
1 Greater Gabbard, a 504MW
offshore windfarm, is proportionally consolidated and reported as a
Joint Operation with no loans outstanding.
2 For accounting purposes,
£309m of the £995m of SSE shareholder loans advanced to Seagreen
Wind Energy Limited have been classified as
equity.
Taxation
SSE is one of the UK's biggest
taxpayers, and in the 2023 PwC Total Tax Contribution survey
published in December 2023 was ranked 17th out of the 100 Group of
Companies in 2023 in terms of taxes borne (those which represent a
cost to the company, and which are reflected in its financial
results).
SSE considers being a responsible
taxpayer to be a core element of its social contract with the
societies in which it operates and seeks to pay the right amount of
tax on its profits, in the right place, at the right time. While
SSE has an obligation to its shareholders, customers and other
stakeholders to efficiently manage its total tax liability, 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.
Under its social contract SSE 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 to operate
within both the letter and spirit of the law at all
times.
SSE was the first FTSE 100 company
to be Fair Tax Mark accredited and has now been accredited for ten
years. The group's overseas expansion presented the opportunity to
move to Fair Tax Foundation's Global Multinational Business
Standard Accreditation, which was launched in late 2021. SSE was
the first company to transition from the UK headquartered
accreditation to the global accreditation in 2022.
In November 2023, SSE published its
'Talking Tax 2023: tax matters for net zero' report. It did this
because it believes building trust with stakeholders on issues
relating to tax is important to the long-term sustainability of the
business. SSE won PwC's Building Public Trust Award for Tax
Reporting in the FTSE 350 for the second consecutive year for the
quality of its tax reporting.
In the year to 31 March 2024, SSE
paid £679.2m of profit taxes, property taxes, environmental taxes,
and employment taxes in the UK, compared with £501.7m in the
previous year. The increase in total taxes paid in 2023/24 compared
with the previous year was primarily due to higher levels of
corporation tax being paid on UK profits, together with higher
employment taxes and property taxes due to the expansion of the
Group's activities.
In the year to 31 March 2024 SSE
also paid €68.0m of taxes in Ireland, compared to €53.8m the
previous year, due to increased profits in SSE's Irish businesses
and a general increase in business activities. Ireland is the only
country outside the UK in which SSE currently has significant
trading operations - activities elsewhere are still at an early
stage and are not yet paying material amounts of tax.
As with other key financial
indicators, 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, based on adjusted
profit before tax, was 17.1%, compared with 16.4% in 2022/23 on the
same basis. The increase in rate is primarily as a result of the
increase in UK corporation tax rate from 19% to 25% from 1 April
2023, partly mitigated by increased capital allowances as noted
below.
On 23 March 2023, the Group's case
concerning the availability of capital allowances on Glendoe Hydro
Electric Station was heard at the Supreme Court. On 17 May 2023,
the Supreme Court released its decision, which rejected HMRC's
appeal in full. The matter is now concluded and is not subject to
further appeal.
The adoption during the period of
the "Deferred Tax related to Assets and Liabilities arising from a
Single Transaction" amendment to IAS 12 "Income Taxes" resulted in
an increase of £50.1m (2023: £45.5m) to the Group's gross deferred
tax assets and gross deferred tax liabilities recognised in
relation to the Group's decommissioning obligations and a
reclassification between deferred tax categories of £79.5m.
Adoption had no impact on retained earnings or profits recognised
in presented periods.
The UK Spring Budget in March 2023
introduced "full expensing" for qualifying capital expenditure
incurred during the period from 1 April 2023 to 31 March 2026, that
measure then being made permanent in the November 2023 Autumn
Statement. Capital allowances rates of 100% and 50% replace the
existing rates of 18% and 6% respectively for qualifying capital
expenditure, significantly increasing the amount of capital
allowances available on SSE's capital investment
programme.
The UK has now introduced
legislation in respect of Multinational Top-up Tax in line with
OECD BEPS pillar 2 principles. The Group has applied the exemption
from recognising and disclosing information about deferred tax
assets and liabilities related to Pillar Two income taxes as
required by the amendments to IAS 12 - International Tax
Reform-Pillar Two Model Rules, which were issued in May 2023.The
legislation will come into force for the year ended 31 March 2025.
Similar draft legislation has been introduced in the Republic of
Ireland and other EU jurisdictions. The Group has undertaken
modelling and does not expect a material impact to arise as tax
rates, including deferred tax, in the countries in which the Group
operates are expected to exceed 15%.
Pensions
Contributing to employees' pension schemes - IAS
19
|
|
March 24
£m
|
March 23
£m
|
Net pension scheme asset recognised in the balance sheet
before deferred tax £m
|
|
421.6
|
541.1
|
Employer cash contributions
Scottish Hydro Electric scheme £m
|
|
1.0
|
1.0
|
Employer cash contributions
Southern Electric scheme £m
|
|
27.1
|
52.1
|
Deficit repair contribution
included above £m
|
|
16.3
|
38.0
|
In the year to 31 March 2024, the
surplus across SSE's two pension schemes decreased by £119.5m, from
£541.1m to £421.6m, primarily due to actuarial losses of £155.2m,
offset partially by contributions to the schemes.
The valuation of the SSE Southern
scheme decreased by £92.2m in 2023/2024 primarily due to actuarial
losses of £118.1m driven by losses on plan assets, offset partially
by contributions to the scheme of £27.1m.
The decrease in contributions in the
year is driven by the new schedule of contributions agreed by the
Group following finalisation of the scheme's most recent triennial
valuation.
The Scottish Hydro Electric Pension
scheme has partially 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 scheme's surplus decreased by
£27.3m. This decrease was also mainly driven by actuarial losses
relating to losses on plan assets.
Additional information on employee
pension schemes can be found in note 15 to the Summary Financial
Statements.
SUSTAINABILITY SUMMARY
Short-term progress with long-term goals in
sight
Due to the essential nature of SSE's
activities, sustainability has naturally been a long-standing
feature of its business model, embedded at the heart of its
strategy. It provides a framework that guides decisions as it
transitions to net zero, ensuring it is done in a way that creates
and shares value with stakeholders.
Sustainability is articulated at the
highest level, with SSE's business strategy aligned to the UN's
Sustainable Development Goals (SDGs). To embed this approach
throughout the organisation, SSE has identified four SDGs which are
highly material to the business, and to which it has linked its
four core business goals for 2030. These 2030 Goals are focused on
addressing the challenge of climate change in a way that is fair to
working people, consumers and communities. SSE has identified a
further three material SDGs, which are focused on the environment
and guide the pillars of SSE's Environment Strategy.
This framework allows SSE to
navigate complex economic, social and environmental impacts and
address them in a balanced way to ensure the best outcomes for
stakeholders.
MEASURING SSE's CARBON
PERFORMANCE
Measuring and disclosing SSE's
year-on-year carbon performance and progress against targets, keeps
SSE accountable to its stakeholders for delivery against its Net
Zero Transition Plan.
The scope 1 GHG intensity of
electricity generated in 2023/24 was the lowest recorded by SSE,
falling by 19% to 205gCO2e/kWh, from 254gCO2e/kWh the previous
year. This represents a 41% progress against SSE's scope 1 GHG
carbon intensity targets for 2030.
SSE's intensity performance is
calculated based on two elements - total generation output,
comprising thermal and renewable generation source, and total scope
1 GHG emissions (99% of which is from thermal generation). The
increased proportion of total generation output contributed to by
renewables, combined with a significant reduction in GHG emissions
arising from thermal generation, drove the considerable improvement
in scope 1 GHG intensity performance.
In 2023/24, SSE's total reported GHG
emissions consisted of 47% scope 1 emissions, 5% scope 2 emissions
and 48% scope 3 emissions. Overall, SSE's total reported GHG
emissions fell by 18% between 2022/23 and 2023/24.
SSE's changing carbon footprint over
time shows scope 1 emissions decreasing as a result of strategic
intervention but is also balanced by an increase in scope 3
emissions over time. For the first year, SSE's scope 3 emissions
represented the largest portion of SSE's total GHG emissions in
2023/24.
GHG emissions arising from thermal
generation activities represents the single most material
contribution to SSE's total recorded GHG emissions, making up 99%
of SSE's scope 1 emissions and 36% of its scope 3 emission through
its joint venture investments.
BUSINESS OPERATING
REVIEW
SSE's businesses are highly
complementary with significant growth potential given their key
role in developing, building, operating and investing in the
electricity infrastructure and businesses needed in the transition
to net zero. With common skills and capabilities in the
development, construction, financing and operation of highly
technical and world-class electricity assets, these businesses have
strong synergies between them. With their shared focus on
decarbonisation they will be at the heart of a future energy system
that is clean, secure and affordable. The review of the Business
Units that follows provides details of performance and future
priorities.
regulated ELECTRICITY networks
SSE's regulated electricity networks
businesses benefit from inflation-linked remuneration under the
RIIO (Revenue = Incentives + Innovation + Outputs) framework set by
Ofgem. The regulator determines an annual allowed level of required
capital expenditure and operating costs 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 the transmission and distribution
businesses.
Regulatory operational expenditure
('fast money') flows into revenue, whereas regulatory capex ('slow
money') is added to the regulatory asset value ('RAV') for each
network. Both SSEN Transmission and SSEN Distribution 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. Under the RIIO T2 and ED2 regulatory mechanisms, revenues and
RAV for both businesses are CPIH index-linked, providing protection
against an inflationary environment. Each business can earn above
its base return on equity through delivering efficiency totex
savings that flow through to customer bills. If service levels
improve against targets as set out in the price control, there is
also an opportunity to earn additional income through incentives.
However, if service levels fall below these targets, a penalty is
incurred which reduces network revenue and therefore customer
bills. In addition, RIIO-2 Uncertainty Mechanisms provide
opportunities for each business to progress projects not included
within their original business plans, or to recover supplementary
costs which were not anticipated when the baseline expenditure was
agreed.
SSEN Transmission, is paid by the
Electricity System Operator based on a forecast of allowed revenue
which is set three months in advance of the regulatory year.
Revenue varies depending on actual versus forecast volumes
transported and over- or under-recovered volumes - including any
other changes to forecasted revenues - are accommodated in allowed
revenue in the following regulatory year.
In SSEN Distribution, charges per
MWh ('tariffs') are set by licensees 15 months in advance of the
regulatory year and 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.
The current RIIO-2 price control
runs to 31 March 2026 for SSEN Transmission, and to 31 March 2028
for SSEN Distribution. Following the end of their RIIO-2 price
controls, the businesses will commence a further five-year RIIO-3
price control period. The process to determine the parameters of
the SSEN Transmission price control commenced during 2023, with
Ofgem expected to confirm Final Determinations in Q4 2025 ahead of
a Licence Decision in February 2026.
SSEN Transmission
SSEN Transmission
|
March 24
|
March 23
|
Transmission adjusted operating
profit1 - £m
|
419.3
|
372.7
|
Transmission reported operating
profit - £m
|
559.1
|
405.5
|
Transmission adjusted investment and
capital expenditure - £m
|
595.6
|
495.5
|
Gross Regulated Asset Value (RAV) -
£m
|
5,676
|
4,836
|
SSE Share Regulated Asset Value
(RAV) 1 - £m
|
4,257
|
3,627
|
Renewable Capacity connected within
SSEN Transmission Network area - MW2
|
9,312
|
9,208
|
1 Excludes 25% minority
interest from 1 December 2022
2 Transmission and distribution connected capacity within the
SSEN Transmission Network area includes 300MW (2022/23: 300MW) of
pumped storage and 334MW (2022/23: 285MW) of battery
storage.
|
SSEN Transmission overview
SSEN Transmission owns, operates and
develops the high voltage electricity transmission system in the
north of Scotland and its islands. The business is well placed to
capture the significant long-term growth opportunities from the
development of renewables across the north of Scotland and the
North Sea. Following a minority stake sale completed in November
2022, the business is owned 75% by SSE plc and 25% by Ontario
Teachers' Pension Plan Board. All capex and RAV references in this
update relate to 100% of the business unless otherwise
stated.
RIIO-T2 Operational delivery
SSEN Transmission continues to
deliver strong operational performance in 2023/24, achieving 95% of
the available reward through the 'Energy Not Supplied' (ENS)
incentive, equating to £730k additional income in the year (18/19
prices). This slight reduction in performance relates to one brief
outage which was quickly resolved, while overall performance has
earned 98.3% of available reward since the beginning of RIIO-T2 and
£2.3m additional incentive income (18/19 prices). This performance
is underpinned by a robust and ongoing programme of inspection,
maintenance, refurbishment and replacement of SSEN Transmission's
assets, keeping the lights on for communities across the north of
Scotland and ensuring reliable network access for electricity
generators to support security of supply in Great
Britain.
Capital investment programme
SSEN Transmission's RIIO-T2 capital investment programme continues,
with progress being made across major projects. This includes the
Shetland High Voltage Direct Current (HVDC) Link, with all offshore
cable works now complete including seabed rock placement. The
onshore cable works are also complete following a successful high
voltage test in January 2024. The project is now in the final
commissioning stage, remaining on track for completion and full
energisation in summer 2024. Work has also progressed to connect
Shetland's existing electricity distribution network to the
Shetland HVDC link, connecting Shetland's homes and business to the
GB electricity network for the first time via the new Grid Supply
Point being constructed at Gremista. The Kergord-Gremista 132kV
circuits will then connect the HVDC link to the new Gremista Grid
Supply Point. Following a well-publicised incident at the site
earlier this month, which resulted in no injuries, work is expected
to recommence in stages and the project remains on track to be
complete by the end of 2025.
Progress has also been made on
increasing the capacity of the North-East Scotland transmission
network to 400kV, with all circuits in the first phase completed
and energised in February 2024. Work to increase incrementally the
voltage in this area of the network continues with the next phase
due to be completed towards the end of 2026, in line with RIIO-T2
commitments. Further 400kV infrastructure is expected to enter
construction as part SSEN Transmission's ASTI projects, from 2026
onwards.
As of 31 March 2024, the total
installed capacity of the north of Scotland network was almost
10.6GW, of which just over 9.3GW is from renewable and other low
carbon sources, including 0.6GW of pumped storage and batteries.
Several large renewable schemes are scheduled to connect during
2024/25, and SSEN Transmission is on track to exceed its RIIO-T2
goal to deliver an electricity network in the north of Scotland
with the capacity and flexibility to accommodate 10GW of renewable
generation, enough to power more than 10m homes by 2026.
For financial performance commentary please refer to the
Group Financial Review.
OTHER REGULATORY INVESTMENTS
The business has made significant
progress over the course of the last few years in securing the
regulatory approvals required to take forward several major
investments over and above its baseline investment case secured at
the start of RIIO-T2. Initially, large onshore transmission
projects were taken forward through Ofgem's Large Onshore
Transmission Investment (LOTI) Uncertainty Mechanism, with SSEN
Transmission currently progressing three projects through that
framework. However, to accelerate the regulatory process and
facilitate delivery of the required offshore and onshore network
reinvestments required for the energy transition, Ofgem introduced
the Accelerated Strategic Transmission Investment (ASTI) regulatory
framework in December 2022 with SSEN Transmission currently
progressing a further eight projects through that
framework.
To support the timely delivery of
ASTI projects, SSEN Transmission is actively advocating for a
maximum 12-month determination of all Section 37 overhead line
planning applications. This is in line with the recommendations of
the UK Government's Electricity Networks Commissioner, and
others.
LOTI projects
In July
2023, Ofgem approved the Final Needs Case for the Orkney
transmission link, the final piece in connecting all three of
Scotland's main island groups to the GB electricity network. The
Orkney transmission link will accommodate around 220MW of renewable
electricity generation, helping further unlock Orkney's vast
renewable potential alongside supporting the continued development
and growth of Orkney's marine energy sector. Main construction
works are due to commence in summer 2024, with full energisation
expected in 2028.
In August 2023, Ofgem also approved
the Final Needs Case for the Skye reinforcement project, which will
see the replacement and upgrade of the existing Fort Augustus to
Skye transmission line. This is required to maintain security of
supply and enable the connection of renewable electricity
generation along its route. Both substation applications were
granted consent by the Highland Council in early 2024 with a
decision on the Section 37 overhead line planning application
expected during 2024 with construction works ready to begin and
full energisation expected in 2028.
In October 2023, Ofgem approved the
Final Needs Case for the Argyll and Kintyre 275kV Reinforcement,
subject to all material planning consents being secured. The
reinforcement is required to upgrade the local transmission network
from 132kV to 275kV operation, supporting the forecast growth in
renewables in the region. With all substation planning consents for
the Argyll and Kintyre 275kV Reinforcement now secured, SSEN
Transmission awaits the outcome of the Inveraray to Creagh Dhubh
275kV connection Section 37 planning application and the Public
Local Inquiry for the Creag Dhubh to Dalmally 275kV connection,
both of which are expected during 2024. Construction is planned to
commence later in 2024, with full energisation expected during
2028.
ASTI projects
As part of
the National Grid Electricity System Operator's NGESO Holistic
Network Design (HND), eight projects were identified for SSEN
Transmission to progress through Ofgem's ASTI framework which
included several subsea cables, overhead line and substation
installations and upgrades to support the connection of offshore
wind and onshore electricity generation. These ASTI projects are
wholly owned by SSEN Transmission, with the exception of the
Eastern Green Link 2 (EGL2) and Eastern Green Link 3 (EGL3) which
are being jointly developed with National Grid. The estimate of
gross nominal investment required to deliver these projects is
around £17bn.
The EGL2 project - which will see
the installation of a 2GW subsea superhighway of electricity
transmission between the north east of Scotland and Yorkshire - has
made progress during the year with Marine Scotland granting a
Marine Licence for cable protection measures in May 2023. The
project also reached contract award status in February 2024 with
Prysmian Group to supply around 1,000km of cable as well as Hitachi
Energy and BAM to supply the converter stations at either end of
the link. With the onshore works now underway in Peterhead, the
project remains on track for targeted completion in
2029.
The other ASTI projects also
continue to progress, with SSEN Transmission reaching 'preferred
bidder' status with its supply chain partners for its North of
Scotland ASTI subsea HVDC projects, Spittal to Peterhead and the
Western Isles, in May 2023. In August 2023, SSEN Transmission
entered into Capacity Reservation Agreements with the supply chain
for the HVDC cable and converter stations, securing supply chain
manufacturing capacity in what is an extremely competitive and
constrained global supply chain market. Also in August 2023, SSEN
Transmission also reached 'preferred bidder' status for all of its
key onshore ASTI projects, a significant milestone in securing the
supply chain for the delivery of all overhead line, cabling and
substation components.
SSEN Transmission has also concluded
its first round of public consultation across its 100% owned
onshore and subsea ASTI projects. Further consultation will take
place throughout 2024 in advance of submitting consent applications
to the relevant consenting authorities.
Finally, work to progress EGL3 -
which will see the installation of a 2GW subsea superhighway of
electricity transmission between the north east of Scotland and
south Lincolnshire/West Norfolk - is also progressing with the
supply chain now engaged with the tender process.
RIIO-T3 price control
The
process to determine the parameters of the RIIO-T3 price control
for SSEN Transmission commenced during the year with the
publication in October 2023 by Ofgem of their Future Systems and
Networks Regulation consultation, which confirmed the framework for
the new price controls.
While the signals from Ofgem to
support investment in the SSMC were positive, the unprecedented
level of investment required to deliver the SSEN Transmission's
£20bn plus of LOTI, ASTI and RIIO-T3 projects means the final
RIIO-T3 framework must be attractive to both equity and debt
providers. SSEN Transmission will work constructively with
Ofgem and wider stakeholders to ensure the future regulatory
framework provides the flexibility and agility required to deliver
the unprecedented level of required investment.
Work progresses to develop the SSEN
Transmission Business plan, which will be submitted to Ofgem,
currently scheduled for December 2024
Future growth Opportunities
'Beyond 2030' report
Further investment beyond the Pathway to 2030 is required to
unlock the North of Scotland's full renewable potential and to
deliver energy security and net zero targets.
These additional onshore and
offshore network reinforcements were set out by National Grid
Electricity System Operator through the publication of the second
transitional Centralised Strategic Network Plan (tCSNP), titled
'Beyond 2030' in March 2024. This will connect another tranche of
ScotWind whilst also setting out options to deliver the remainder.
For the north of Scotland, the ESO's plan confirms the need for a
number of projects to proceed now for delivery by 2035, which
combined represent a potential estimated investment of over £5bn
for SSEN Transmission. This includes a second HVDC link to Shetland
and in May 2024, the Sumitomo Electric Van Oord Consortium was
selected as preferred bidder for the proposed 1.8GW subsea cable,
the anchor project enabling Sumitomo Electric Industries investment
in its new cable manufacturing facility at Nigg.
SSEN DISTRIBUTION
SSEN Distribution
|
Mar 24
|
Mar 23
|
Distribution adjusted and reported
operating profit - £m
|
272.1
|
382.4
|
Regulated Asset Value (RAV) -
£m
|
5,301
|
4,720
|
Distribution adjusted investment and
capital expenditure - £m
|
505.1
|
421.0
|
Electricity Distributed -
TWh
|
37
|
36
|
Customer minutes lost (SHEPD)
average per customer
|
66
|
59
|
Customer minutes lost (SEPD) average
per customer
|
58
|
46
|
Customer interruptions (SHEPD) per
100 customers
|
57
|
60
|
Customer interruptions (SEPD) per
100 customers
|
51
|
44
|
Customer minutes lost and Customer interruptions
figures estimated and subject to outturn of annual regulatory
process
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 3.9m homes and businesses across central
southern England and the North of Scotland. SSEN Distribution's
networks cover the greatest land mass of any of the UK's
Distribution Network Operators with over 75,000km² of extremely
diverse terrain. The business has significant growth opportunities
as a key enabler of the local and national transition to a net zero
future.
RIIO-ED2 OPERATIONAL DELIVERY
SSEN Distribution has completed the
first year of operating in the RIIO-ED2 price control period. This
price control, which will run until March 2028, identified the need
for £3.6bn of baseline expenditure, representing an increase of 22%
on the previous price control, alongside the opportunity to trigger
up to £0.7bn in additional funding under Uncertainty Mechanisms.
This will include investment to satisfy new demand and generation
growth, and to improve subsea cable resilience for connections to
Scottish islands.
SSEN Distribution is working closely
with Ofgem, and its stakeholders, to ensure the price control has
the agility and flexibility needed to deliver the infrastructure
needed for net zero requirements, supported by a three-point
strategy. This is centred on growing the asset base to underpin the
net zero transition and as a consequence the Regulatory Asset Value
(RAV) will increase; by driving targeted improvements in customer
performance and operational efficiency; and by continuing SSEN
Distribution's lead role in developing the future flexible energy
system.
Improving customer performance
Targets for improving service
levels for customers are set for SSEN Distribution through the
regulatory framework. Incentive rewards will typically be collected
two years after they are earned. In RIIO-ED2, the ability to secure
higher incentive returns has been tightened, compared with previous
price controls. Within the Interruptions Incentive Scheme (IIS),
SSEN is offered an incentive on its performance against the loss of
electricity supply, through the recording of the number of Customer
Interruptions (CI) and Customer Minutes Lost (CML). These include
planned, as well as unplanned, interruptions.
SHEPD's Customer Interruption (CI)
performance has improved in the first year of RIIO-ED2 compared to
the last year of RIIO-ED1, by 5%. SEPD has seen a decrease in its
CI performance by 12%. Both SHEPD and SEPD's Customer Minutes Lost
(CML) performance has decreased from 2022/23 by 11% and 17%
respectively. In the first year of RIIO-ED2, a penalty of ~£13.7m
was incurred across both SEPD and SHEPD under the Interruptions
Incentive Scheme (IIS). This penalty arose from the introduction of
tougher targets under the IIS compared to RIIO-ED1. In addition to
this, adverse weather had an impact on CI and CML
performance.
To put these figures in context,
SSEN Distribution's licence areas have been severely affected by
several named storms. Investment of £35m in automation across
network areas has had a tangible, positive impact on SSEN
Distribution's ability to reconfigure the system quickly and
remotely, if a storm-related fault occurs. This, alongside cable
replacement work to reinforce the network, has mitigated service
interruptions in what has been an unsettled winter
period.
As SSEN Distribution's investment in
network renewal and reinforcement increases, there is a need to
initiate Planned Service Interruptions to enable the business to
carry out the necessary works safely and efficiently. This
investment will significantly improve the performance of the
network.
SSEN Distribution's Customer
Satisfaction performance is a clear focus for the business, and the
service improvements being made are making a positive
difference. In SHEPD, our score increased by 0.67%; in SEPD
it is up by 0.4%. For SSEN Distribution as a whole, there is a
0.54% increase: in line with the industry average of
0.56%.
In the first year of this current
price-control period, SSEN Distribution is delivering ongoing
efficiencies. £2m a year is already being saved through redesigned
tenders for plant and materials, including for SSEN's extensive
subsea maintenance and inspection programme.
Capital investment programme
The first year of the current price control period has
featured an acceleration of SSEN Distribution's major capital
investment programme across both its networks. This is delivering
performance improvements, an improved service for customers, and
future earnings through RAV growth.
In 2023/24, capital expenditure has
increased to £505m. This compares to £421m in 2022/23. In the past
year, SSEN has spent £14.7m to upgrade the network from Aultbea to
Ullapool. The £44m Pentland Firth East subsea cable was energised
in September. This investment is now strengthening supplies in
Orkney.
In the central southern England
(SEPD) licence area, a new contracting system with three partners
is now in place. A £1bn programme of investment, representing 25%
of the total ED2 figure, is under way following the largest
contract awards issued by SSEN Distribution. Three UK companies,
Keltbray Energy Limited, OCU Services Limited and The Clancy Group
Limited, are each responsible for a regional delivery zone. This
new approach is reducing supply chain risk in delivering upgrades
to the network in support of SSE's Net Zero Acceleration Plan, and
is expected to deliver material efficiency benefits for customers
through a collaborative approach to project delivery. The joint
regional delivery teams are now well established, and are mobilised
to accelerate the programme of capital delivery, including creating
capacity for more new connections.
In the SHEPD licence area, in April
2024, SSEN Distribution issued opportunities to tender for a £320m
programme of investment and infrastructure development in the north
of Scotland. The investment will create greater network capacity,
enable more connections, and increase network resilience. The
change to award Framework Agreements based on geographical areas
for underground cable works, substations, and overhead line
projects gives a commitment to contract partners, which will help
facilitate growth, and the development of locally-based workers,
thus strengthening their own ability to deliver
projects.
For financial performance commentary please refer to the
Group Financial Review.
OTHER REGULATORY INVESTMENTS
SSEN Distribution has successfully
triggered its first uncertainty mechanism with Ofgem approving over
£30m in additional funding for cyber security following a
submission in April 2023. A further submission was made in
the October 2023 reopener window and is awaiting Ofgem's
determination.
SSEN Distribution continued to work
proactively with its stakeholders and the regulator to prepare
robust, evidence-based submissions for a range of uncertainty
mechanisms which were triggered in January 2024. These include
security of supply on Shetland with a request for additional
funding of £38m, the first phase of whole system investment for
Hebrides and Orkney (HOWSUM) with a request of £59m and a request
of £14m for an investment programme to enhance network resilience
following the impact of Storm Arwen. Consultations and
decision on these reopeners are still to take place.
Looking further ahead to
load-related uncertainty mechanisms which will open for submissions
in January 2025, SSEN Distribution is leading the way in taking a
'Net Zero First' approach to investment in distribution
infrastructure to meet future generation and demand
needs.
Leading on the future system
SSEN Distribution's goal is to
facilitate the connection of around two million EVs and one million
heat pumps by 2030. The growth in the take-up of low carbon
technologies is needed in order to get to net zero, and demand is
increasing sharply; there has been a 13-fold increase in the number
of electric vehicles connected in the past six years. In addition
to more demand-side connections to the network, an increasing
number of generation projects like solar and battery are seeking to
connect too. SSEN Distribution is working with transmission
companies, NGESO, and other DNOs to modernise the connections
system to connect more projects which are ready, while also
reducing the impact of 'first come, first served'
queueing.
In West London, SSEN Distribution
and National Grid - in partnership with Electricity System Operator
and Greater London Authority - have devised innovative solutions to
unlocking electricity network capacity. By enabling ramped
connections that deliver increased electricity supply over time,
housing developments in parts of the London boroughs of Hounslow,
Hillingdon and Ealing have had their connection dates brought
forward. This means that project developments totalling 7,800 homes
have had their connection dates accelerated.
SSEN's strong support for net zero
planning at a local level, is also borne out by its proactive
relationships with local authorities. This is epitomised by
SSEN's sector-leading Local Energy Net Zero Accelerator (LENZA)
Tool. LENZA is a geospatial planning tool, which empowers local
authorities to make effective, efficient net-zero plans. It is
designed to bring together a range of datasets, including SSEN's
network data, to assist with strategic energy planning, and ensure
that local plans are incorporated into SSEN's longer-term strategic
network investment. LENZA also provides SSEN with the robust
evidence for regulatory funding of future investment.
SSEN has onboarded more than half
the applicable local authorities in how to use this tool. LENZA
complements SSEN's support for local authorities in developing
their own Local Area Energy Planning programmes.
FUTURE GROWTH OPPORTUNITIES
Smart. Fair. Now.
SSEN
Distribution is at the forefront of sector-wide development around
smart, flexible, electricity systems. Over the past year, it has
published detailed plans for how its Distribution System Operations
(DSO) will operate. These plans are based on SSEN's 'Smart, Fair,
Now' principles, committing it to developing the smart electricity
system of the future, in a way that is fair for all users,
quickly.
Over the past few months, the DSO
team has been following through on its overarching action plan with
details on how and why decisions will be made, on the flexibility
roadmap for between now and the end of the decade, on how data will
be responsibly harnessed to make the electricity system smarter,
and about how the network will develop through capital investment,
and the efficient use of Flexibility Services.
On a practical level, SSEN
Distribution continues to increase the tendering of Flexibility
Services in areas where localised high demand can be offset to
extend overall network capacity. During 2023/24, SSEN contracted
703MW of flexibility services for dispatch in ED2, and our
network-wide call for flexibility is targeting a total of 5GW of
flexible capacity by end of RIIO-ED2.
SSE Renewables
SSE
Renewables
|
Mar 24
|
Mar 23
|
Renewables adjusted operating profit
- £m
|
833.1
|
561.8
|
Renewables reported operating profit
- £m
|
630.3
|
428.1
|
Renewables adjusted investment &
capital expenditure before acquisitions - £m
|
1,097.1
|
911.5
|
Generation capacity - MW
|
|
|
Onshore wind capacity (GB) -
MW
|
1,285
|
1,285
|
Onshore wind capacity (NI) -
MW
|
117
|
117
|
Onshore wind capacity (ROI) -
MW
|
582
|
567
|
Total onshore wind capacity - MW
|
1,984
|
1,969
|
Offshore wind capacity (GB) -
MW
|
1,014
|
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
|
4,457
|
3,915
|
Contracted capacity
|
2,792
|
2,792
|
Generation output - GWh
|
|
|
Onshore wind output (GB) -
GWh
|
2,461
|
2,770
|
Onshore wind output (NI) -
GWh
|
251
|
286
|
Onshore wind output (ROI) -
GWh
|
1,352
|
1,357
|
Total onshore wind output - GWh
|
4,064
|
4,413
|
Offshore wind output (GB) -
GWh
|
2,477
|
1,846
|
Conventional hydro output (GB) -
GWh
|
3,071
|
3,037
|
Pumped storage output (GB) -
GWh
|
315
|
301
|
Total renewable generation (inc.
pumped storage) - GWh
|
9,927
|
9,597
|
Total renewable generation (also inc. constrained off GB
wind) - GWh
|
11,158
|
10,159
|
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 GB wind output excludes 530GWh of compensated
constrained off generation in 2023/24 and 456GWh in 2022/23;
Offshore GB wind output excludes 701GWh of compensated constrained
off generation in 2023/24 and 106GWh in 2022/23
Note 4: Biomass capacity of 15MW and output of 78GWh in
2023/24 and 68GWh 2022/23 is excluded, with the associated
operating profit or loss reported within SSE
Enterprise
Note 5: Offshore capacity increased by 527MW with Seagreen
offshore windfarm fully operational in October
2023
Note 6: ROI Onshore capacity increased by 15MW with Lenalea
fully operational December 2023
SSE Renewables overview
SSE Renewables is a leading
developer and operator of renewable energy generation, focusing on
onshore and offshore wind, hydro, solar and battery storage. The
business' core focus is on the UK and Ireland, with a growing
presence internationally, and comprises 1,900 renewable energy
professionals predominately based across the UK and Ireland with a
growing presence in Continental Europe and Japan.
Operational delivery
In onshore wind, the
lower-than-expected wind speeds in early summer led to the
accelerated delivery of normal maintenance campaigns which were all
completed ahead of plan. Asset availability has remained high
throughout the year, particularly given the busy winter period
which included 10 named storms. The second half of the year saw a
return towards more normal wind speeds, albeit still below
long-term averages, resulting in output around 6% down
year-on-year.
In offshore, Beatrice (588MW, SSE
share 40%) and Greater Gabbard (504MW, SSE share 50%) maintained
high levels of availability throughout the year, however, Beatrice
output was impacted by a wider transmission network fault during
part of December. Greater Gabbard experienced higher than
anticipated wind resource, whilst Beatrice was lower than expected,
demonstrating the value of geographical diversity in the
fleet.
Whilst there were some
commissioning delays at Seagreen (1,075MW, SSE share 49%), the
asset has since achieved significant stable and reliable generation
towards the end of the financial year. The addition of Seagreen -
which has more than doubled the installed offshore wind capacity -
more than offset lower than average wind speeds, with output around
34% up year-on-year.
In hydro, teams managed extremely
challenging weather conditions well throughout a number of major
named storms. Plant availability was strong throughout 2023/24 and
production was 3,071GWh, with normal storage levels ahead of the
drier spring and summer months.
As part of standard practice, SSE
Renewables periodically reviews its P50 production estimates (the
forecast average measure of output over the project's life) across
the fleet, updating assumptions for the latest data including
weather conditions. The last four years have seen
lower-than-expected weather resource, which has triggered a more
detailed review of these assumptions. Whilst that review
highlighted some small immaterial changes to expected output on an
asset-by-asset basis, there was no net material effect across the
whole fleet. The detailed review also validated the use of
long-term wind speed averages - around 30 years - in the P50
production estimates, as a more accurate estimate of expected
long-term profitability of these assets over their useful
lives.
For financial performance commentary please refer to the
Group Financial Review.
DELIVERING WORLD-CLASS ASSETS
Seagreen formally entered into
commercial operations in October 2023 with all 114 Vestas V164-10MW turbines now fully
operational. Seagreen is now Scotland's largest wind farm as well as the
world's deepest fixed-bottom offshore wind farm, with its deepest
foundation installed at 58.7m below sea level.
Construction remains ongoing at all
three phases of the world's largest offshore wind farm at Dogger
Bank (each 1,200MW, SSE share 40%) off the coast of
England.
All monopiles and transition pieces
have now been installed at Dogger Bank A, with inter-array cable
installation also well progressed. However, turbine installation
has been affected by challenging weather conditions with vessel
availability and supply chain delays further impacting progress.
The return of the installation vessel back to site in early May has
meant that turbine installation has now resumed and, assuming
continued clear weather conditions, it is expected that
installation activity will continue uninterrupted over the summer
months, with the project targeting full commercial operations
during the first half of 2025. With the HVDC Transmission system
fully commissioned, it is expected that turbine commissioning and
export will happen in conjunction with installation. It is not
expected that the delays noted will materially affect project
returns.
On Dogger Bank B, all monopiles,
transition pieces and cables have been fabricated, with monopile
installation having commenced in early May. An offshore substation
platform utilising HVDC technology has also been successfully
installed. It is expected that the delays seen on Dogger Bank A
will impact the Dogger Bank B timetable, with completion of that
phase expected in early 2026. Dogger Bank C works remains on track
offshore and onshore with fabrication of components under way with
completion of that phase expected in early 2027.
Onshore, construction of Viking
(443MW) in Shetland is nearing completion. Turbine commissioning
was completed throughout the winter months and the project is
expected to be fully operational by Summer 2024 following
energisation of the associated transmission link. When complete,
Viking is expected to be the UK's most productive onshore wind
farm.
In hydro, SSE Renewables continues
to make progress with the Tummel Bridge power station refurbishment
project, reaching a significant milestone in April 2024 with the
successful commissioning and energisation of the first bespoke
turbine. Full focus is now on the installation and commissioning of
the second turbine, which is expected to be complete by mid-summer
2024 increasing the station's potential output to 34-40MW and
extending its life by 30 years.
SSE Renewables continues to advance
technology diversity as it progresses grid-scale solar and battery
storage technology projects. In England, SSE's first 50MW battery
energy storage system at Salisbury in Wiltshire is now fully
operational while a second 150MW battery storage project at
Ferrybridge in Yorkshire is due to reach completion within the next
12 months, located at the site of SSE's former coal power station.
Construction is also under way at SSE's 320MW battery energy
storage project at Monk Fryston, also in Yorkshire, which will be
completed in 2025/26. In December 2023, SSE Renewables took a final
investment decision and started construction of a 150MW / 300MWh
battery energy storage system project in Warrington, Cheshire, at
the site of SSE's former Fiddler's Ferry coal-fired power station.
The asset is expected to be operational in summer 2025.
In Ireland, the 30MW Lenalea
onshore wind farm in Donegal (SSE share 50%) became fully
operational in December 2023. Together with co-development partners
FuturEnergy Ireland, the business has entered into a multi-year
Corporate Power Purchase Agreement (CPPA) with Microsoft which will
see the renewable electricity produced at Lenalea contributing
towards Microsoft's goal of powering its data centre operations
with 100% renewable energy by 2025. This is the first long-term
CPPA which SSE Renewables has entered into for one of its assets.
In the country's Midlands, turbine installation at the 29-turbine,
101MW Yellow River wind farm is on track to be completed by Summer
2024, with commercial operations expected in early 2025. It secured
a 16.5-year contract for low carbon power under RESS 3 for all
installed capacity.
Good progress is also being made
at the first of SSE's onshore Continental Europe wind projects with
Chaintrix (28MW) in France and Jubera (64MW) in Spain under
construction and targeting commissioning at the end of 2024 and
2025, respectively.
DOMESTIC opportunities
Onshore wind
SSE Renewables has maintained its
focus on growing its onshore wind portfolio in home markets. It was
the biggest winner in the UK Government's fifth Contracts for
Difference (CfD) Allocation Round. Strathy South, Aberarder, and
Bhlaraidh Extension onshore wind farm projects in the Scottish
Highlands, and the Viking wind farm project secured CfDs for a
total of 605MW at a guaranteed strike price of £52.29/MWh, based on
2012 prices but annually indexed for CPI inflation. A final
investment decision was announced on Aberarder (50MW) in May 2024,
and enabling works on Bhlaraidh Extension (101MW) are scheduled to
complete in June 2024 with main construction works expected to
commence in early 2025, subject to a final investment
decision.
SSE Renewables, together with Bord
na Móna, announced in March 2024 one of the largest ever joint
venture renewable energy deals in the Irish market to accelerate
delivery of up to 800MW (SSE share 50%) of new onshore wind
generation over the next decade. The joint venture includes three
projects already in pre-planning development (c.250MW) as well as a
portfolio of 550MW of future prospects.
Offshore wind
Turning to offshore wind, SSE
Renewables did not enter offshore bids for AR5 because the process
did not meet SSE's investment criteria. However, progress continues
to be made on a number of development opportunities that could
deliver significant volumes of offshore wind needed to help the UK
achieve energy security targets. Located in the North Sea, in the
outer Firth of Forth, Berwick Bank wind farm has the potential to
deliver up to 4.1GW of installed capacity, making it one of the
largest offshore opportunities in the world. In December 2023, East
Lothian Council granted planning permission in principle for the
project's onshore transmission infrastructure and grid connection
at Branxton. However, the project continues to await consent for
the offshore array from the Scottish Government, which is now
expected during 2024.
In partnership with Equinor, SSE
Renewables is also actively developing a fourth phase of Dogger
Bank wind farm, Dogger Bank D (up to 2GW, SSE share 50%). In March
2024, National Grid ESO published the Transitional Centralised
Strategic Network Plan (tCSNP2) which included confirmation that
Dogger Bank D will connect into Birkhill Wood, a proposed new 400kV
substation located in the East Riding of Yorkshire. The tCSNP2
publication also included details of the onshore design
requirements for SSE Renewables 3.6GW floating offshore wind
project, Ossian, (SSE share 40%) which will be located in
Lincolnshire.
In Ireland, the business remains
committed to delivering Arklow Bank Wind Park 2 (up to 800MW),
despite being unsuccessful in Ireland's first Offshore Renewable
Energy Support Scheme (ORESS) auction in May 2023. It will proceed
to submit a planning application in Spring 2024 to Ireland's
planning board, An Bord Pleanála, and will continue to demonstrate
discipline whilst it considers alternative routes to
market.
The next ORESS auction (ORESS 2.1)
will be for a 900MW site within the South Coast Designated Maritime
Area Plan (DMAP) announced in May 2024 and is expected to take
place in the first half of 2025. Subsequent auctions, within this
and new DMAPs are expected to follow annually to 2030.
Hydro / pumped Storage
In January 2024, the UK Government
published a consultation on how it intends to support the
deployment of long-duration electricity storage projects, a process
with which SSE has actively engaged. Subject to being successful in
the administrative allocation of an investable cap and floor
mechanism, SSE Renewables hopes to make a final investment decision
on Coire Glas (1,300MW) in late 2025 or early 2026, allowing for
main construction to commence in the second half of 2026.
Construction is expected to last up to seven years, which means the
project could be operating in 2032 and fully completed during 2033.
Plans are also progressing to convert the existing plant at Sloy
power station into pumped storage hydro.
Solar and batteries
SSE Renewables continues to view
solar and battery technologies as key net zero enablers. Its ~2GW
secured pipeline of projects across the UK and Ireland includes a
recently-acquired and fully-consented 100MW / 200MWh battery
storage project in County Tyrone, Northern Ireland, on which SSE
hopes to make a final investment decision in the next 12
months.
Overall, the deliverability of the
future prospects pipeline is being assessed in light of the ongoing
NGESO Connections Reform proposals.
INTERNATIONAL opportunities
Continental Europe
SSE Renewables is progressing its Southern European onshore wind
development portfolio of ~4.5GW. It is currently expected that over
120MW of projects will aim for a final investment decision in the
next 12 months, with a total of 220MW in operation by March 2027.
In Northern Europe, the business is progressing a 959MW portfolio
of solar photovoltaics ('solar PV') projects in Poland. This
early-stage pipeline will be progressed under Developer Services
Agreements with local development partners.
SSE Renewables also has other
selective offshore wind opportunities in Northern Europe. In the
Netherlands, it has bid into the Dutch Government's Ijmuiden Ver
zone tender (2 x 2GW), with its joint venture partner APG (acting
on behalf of Dutch pension fund ABP), with winning bids expected to
be announced in Summer 2024. The business will continue to assess
participation in offshore leasing rounds across selected markets in
Northern Europe, where they offer attractive returns.
Japan
SSE Renewables is continuing to pursue offshore wind opportunities
in Japan through its joint ownership company SSE Pacifico (80%
stake) and its dedicated team in Tokyo where it has both
self-developed sites alongside targeted bid partnerships with which
to enter auctions.
Project
|
Capacity (MW)
|
SSE
Share (MW)
|
In
construction
|
|
|
Offshore wind
|
3,600
|
1,440
|
Onshore wind
|
686
|
686
|
Solar and battery
|
650
|
651
|
Total in construction - GW
|
|
2.8GW
|
Late-stage development
|
|
|
Offshore wind
|
500
|
245
|
Onshore wind
|
892
|
861
|
Solar and battery
|
250
|
250
|
Pumped storage
|
1,300
|
1,300
|
Total late-stage development - GW
|
|
2.6GW
|
Early-stage development
|
|
|
Offshore wind
|
9,004
|
6,592
|
Onshore wind
|
3,431
|
2,782
|
Solar and battery
|
1,950
|
2,009
|
Total early-stage development - GW
|
|
11.4GW
|
|
|
|
TOTAL SECURED PIPELINE - GW
|
|
16.8GW
|
|
|
|
Other Future prospects
|
|
|
Offshore wind
|
~8,000
|
~6,000
|
Onshore wind
|
~3,000
|
~3,000
|
Solar and battery
|
~3,000
|
~2,300
|
Hydro
|
~1,800
|
~900
|
Total future prospects
|
|
~12GW
|
Notes: Table reflects ownership and development status as at
31 March 2024. All capacities are subject to change as projects
refined. Onshore includes solar and battery hybridisation.
Late-stage is consented in GB and Ireland and grid or land security
elsewhere, early-stage has land/seabed rights in GB and Ireland and
some security over planning or land elsewhere. Future prospects are
named sites where non-exclusive development activity is under
way.
SSE Thermal
SSE Thermal key performance indicators
SSE
Thermal
|
March 24
|
March 23
|
Thermal adjusted operating profit -
£m
|
736.1
|
1,031.9
|
Thermal reported operating profit -
£m
|
644.4
|
1,089.5
|
Thermal adjusted investment and
capital expenditure, before acquisitions - £m
|
99.6
|
153.2
|
Generation capacity - MW
|
|
|
Gas- and oil-fired generation
capacity (GB) - MW
|
5,538
|
5,538
|
Gas- and oil-fired generation
capacity (ROI) - MW
|
672
|
1,292
|
Total thermal generation capacity - MW
|
6,210
|
6,830
|
Generation output - GWh
|
|
|
Gas- and oil-fired output (GB) -
GWh
|
13,597
|
16,781
|
Gas- and oil-fired output (ROI) -
GWh
|
1,650
|
1,532
|
Total thermal generation - GWh
|
15,247
|
18,313
|
Note 1: Capacity is wholly owned and share of joint ventures,
and reflects Transmission Entry Capacity
Note 2: ROI capacity in March 24 reflects closure of Tarbert
oil-fired station
Note 3: Output is based on SSE 100% share of wholly owned
sites and 100% share of Marchwood PPAs due to the contractual
arrangement.
Note 4: Output in GB in year to March 2023 excludes 1,184GWh
of pre-commissioning output from Keadby 2 CCGT which commissioned
15 March 2023
SSE Thermal overview
SSE Thermal owns and operates
conventional flexible thermal generation in GB and Ireland, whilst
actively exploring opportunities for growth in technologies such as
carbon capture and storage (CCS) and hydrogen power generation. The
business seeks to become the leading provider of flexible thermal
energy in a net zero world through transforming existing
high-carbon generation assets to low-carbon, whilst ensuring a just
transition for our people.
SSE Thermal's flexible and efficient
fleet of gas-fired generation will continue to play a critical role
in the transition to a net zero future, providing reliable back-up
power and complementing renewable energy. However, the business has
committed to not constructing any further gas-fired power stations
without a clear route to decarbonisation and it is actively seeking
ways to decarbonise current assets.
Operational delivery
SSE Thermal's fleet delivered
another strong year of performance in GB and Ireland, despite lower
spark prices and less volatility compared to 2022/23. Value has
been secured by selling output to the market and contracting
forward ahead of delivery, using the fleet's inherent flexibility
to optimise the value received.
In GB, the impact of unplanned
outages, most notably at Keadby 2 and a one-off extended outage at
Marchwood, were offset by value captured during pockets of
volatility throughout the year. This demonstrates the importance of
asset availability in line with system needs, where the ability to
efficiently flex output is becoming more valuable. Managing
availability responsibly, both within year and taking a view of
future system needs, continues to be a priority for SSE
Thermal.
Keadby 2 (893MW), which entered
commercial operation in March 2023, is Europe's most efficient
CCGT, displacing older more carbon intensive plant on the system. A
planned outage was successfully delivered across the summer,
alongside unplanned outages, both recognising the first-of-a-kind
nature of this plant. In October 2023, Keadby 2's 15-year Capacity
Market agreement commenced in line with expectations, with all
milestones having been met.
In February 2024, the GB four-year
ahead Capacity Market auction cleared at a record high clearing
price of £65/kW, with all of SSE Thermal's wholly-owned and Joint
Venture CCGTs securing agreements. A similar trend was seen in
Ireland T-4 auction results, with a record high clearing price for
delivery in 2027/28. Great Island (374MW derated) and SSE Thermal's
two smaller peaking plant (89MW derated) secured agreements in this
auction. Keadby 1 (692 MW) and Medway (673MW) also secured one-year
ahead agreements commencing in October 2024, having not taken
agreements in the four-year ahead auction. These auction results
demonstrate the enduring need for flexible capacity on the GB and
Ireland system.
In Ireland, Great Island (464MW)
continued to see increased output year-on-year, demonstrating the
ongoing need for dispatchable plant in that constrained marked.
Tarbert oil-fired power station (620MW) closed at the end of
December 2023, in line with requirements under the Industrial
Emissions Directive.
SSE Thermal has now secured ISO
55001 certification across its portfolio - an international asset
management standard which underlines the approach we take to ensure
effective management of plant availability across the lifecycle of
our portfolio.
For financial performance commentary please refer to the
Group Financial Review.
SSE Thermal Capacity Contract Awards
The following agreements have been
awarded through competitive auctions:
Station
|
Asset type
|
Station Capacity
|
SSE
share of contract
|
Capacity obligation
|
Medway (GB)
|
CCGT
|
735MW
|
100%
|
To September 2028
|
Keadby (GB)
|
CCGT
|
755MW
|
100%
|
To September 2028
|
Keadby 2 (GB)
|
CCGT
|
893MW
|
100%
|
16 years commencing October
2022
|
Peterhead (GB)
|
CCGT
|
1,180MW
|
100%
|
To September 2028
|
Seabank (GB)
|
CCGT
|
1,234MW
|
50%
|
To September 2028
|
Marchwood (GB)
|
CCGT
|
920MW
|
100%
|
To September 2028
|
Saltend (GB)
|
CCGT
|
1,200MW
|
50%
|
To September 2028
|
Indian Queens (GB)
|
OCGT
|
140MW
|
50%
|
To September 2028
|
Slough Multifuel (GB)
|
Energy from Waste
|
50MW
|
50%
|
15 years commencing October
2024
|
Burghfield (GB)
|
OCGT
|
45MW
|
100%
|
To September 2028
|
Chickerell (GB)
|
OCGT
|
45MW
|
100%
|
To September 2028
|
Great Island (Ire)
|
CCGT
|
464MW
|
100%
|
To September 2028
|
Rhode (Ire)
|
Gas/oil peaker
|
104MW
|
100%
|
To September 2028
|
Tawnaghmore (Ire)
|
Gas/oil peaker
|
104MW
|
100%
|
To September 2028
|
Tarbert (Ire)
|
Biofuel
|
300MW
|
100%
|
10 years commencing October
2026
|
Platin (Ire)
|
Biofuel
|
150MW
|
100%
|
10 years commencing October
2026
|
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.
Capacities stated reflect Transmission Entry
Capacity
Marchwood (SSE equity share 50%) tolling arrangement means
SSE receives 100% of economic benefit from capacity
contract
Medway has capacity obligation in 2023/24 and 2026/27 but
none in 2025/26.
Keadby 2 16 year obligation comprised of a T-1 and a 15 year
contract
The Tarbert oil-fired station previously reported was closed
in September 2023.
CONSTRUCTION PROGRAMME
Final commissioning is continuing at
Slough Multifuel (55MW), the energy-from-waste facility which is a
50:50 Joint Venture with Copenhagen Infrastructure Partners. First
fire was achieved in March 2024 and the project is on track to
enter commercial operations ahead of schedule in summer
2024.
In Ireland, construction is ongoing
on a Temporary Emergency Generation unit at our Tarbert site in
County Kerry. This is being delivered at the request of Irish
authorities, with the 150MW plant to run on distillate oil. The
unit is scheduled for delivery in September 2024. Under legislation
from the Irish Government, it will cease operations when the
temporary electricity emergency has been addressed and no later
than March 2028. Until then, it would only be utilised when it is
clear that market-sourced generation will not be sufficient to meet
system needs and with a maximum duration of 500 hours per
year.
Growth opportunities
Flexibility, along with renewables
and networks, is a core pillar of the future energy system and
there is a critical need for new low-carbon flexible power in both
GB and Ireland this decade. SSE Thermal continues to progress its
low-carbon plans to help meet this urgent requirement while working
to decarbonise its CCGT fleet where possible - vital actions for
delivering our goal of an 80% reduction in carbon intensity by
2030.
In GB, there is cross-party support
on the need for both CCS and hydrogen, underlining the strategic
rationale of SSE's growing low-carbon portfolio. To enable these
technologies, Government intervention is needed both in terms of
relevant policies and in building the shared CO2 and hydrogen
pipeline infrastructure that new assets will connect to and rely
on. However, policy progress has been slow.
For CCS, the Government is expected
to launch the Track 2 process during 2024/25, which will allow
projects within the Scottish Cluster and Viking Cluster the
opportunity to connect to shared infrastructure. Progress is also
expected on the Track 1 Expansion process, which would support
projects within existing Track 1 clusters in the north-east and
north-west of England. This could create opportunities for SSE
Thermal's CCS projects being developed in a 50/50 collaboration
with Equinor - Keadby Carbon Capture Power Station (910MW) in North
Lincolnshire and Peterhead Carbon Capture Power Station (900MW) in
Aberdeenshire to secure Dispatchable Power Agreements. FEED studies
have been completed at Keadby Carbon Capture, which has planning
consent in 2022. At Peterhead, FEED studies continue while a
planning decision is expected in the current financial
year.
Recognising that progress to
decarbonise is slower than expected, SSE Thermal has evolved its
CCGT strategy to ensure new projects can meet the short-term
capacity challenge while driving long-term decarbonisation efforts.
In 2024/25, Keadby Hydrogen Power Station will go into planning
with the application being 'dual fuel' in nature. This means that
the 900MW plant - being developed on a 50/50 basis with Equinor -
could either run on hydrogen or natural gas whilst being
operational by 2030. While the ambition would be to run on 100%
hydrogen from inception, Keadby Hydrogen would have the capability
to run on natural gas for an initial period if the necessary
hydrogen infrastructure is not fully in place, while also utilising
market-leading turbine technology to ensure maximum
efficiency.
To minimise the risk of locking-in
unabated emissions, SSE has set clear criteria against which it
will evaluate whether to enter potential hydrogen-ready CCGT
projects into planning. This includes proximity to planned national
or regional hydrogen networks, location within an established
cluster, grid connection access and compatibility with SSE's Net
Zero Transition Plan. SSE will assess whether a project has a clear
pathway to full decarbonisation by 2035, within a supportive
regulatory framework, before taking any Final Investment
Decision.
In addition, development continues
on other projects across the hydrogen value chain. A strategic
investment has been made to acquire 50% of H2NorthEast, a proposed
blue hydrogen production facility in Teesside co-owned with Kellas
Midstream. Blue hydrogen production will be essential to scaling up
broader hydrogen production efforts and providing volumes required
to decarbonise power generation. As part of the East Coast Cluster,
H2NorthEast is expected to participate in the Track 1 Expansion
process.
SSE Thermal also continues to
progress green hydrogen production projects into UK Government's
HAR2 allocation round, which aims to provide revenue support to
850MW of green hydrogen production capacity. This includes
Aldbrough Hydrogen Pathfinder, which in addition to hydrogen
production also includes hydrogen storage and hydrogen power
generation. Additionally, SSE is continuing to develop options for
hydrogen blending into Keadby 2, with pre-FEED activity under way,
and at Saltend Power Station, part of the Triton Power portfolio
co-owned by SSE Thermal and Equinor.
In Ireland, the business continues
to advance new power stations which would utilise sustainable
biofuels (in accordance with EU sustainability standards) and would
be capable of converting to hydrogen in the future. A decision is
expected from An Bord Pleanála this summer on planning consent for
the 300MW Tarbert Next Generation power station. Initial consent is
secured on the 170MW Platin power station from Meath County
Council, with the decision now referred to An Bord Pleanála and a
decision also expected this summer. This will allow final
investment decisions to be made this year, with both projects
holding 10-year Capacity Market agreements due to commence in the
2026/27 delivery year.
Gas Storage
Gas
Storage
|
March 24
|
March 23
|
Gas Storage adjusted operating
profit - £m
|
82.8
|
212.5
|
Gas Storage reported operating
(loss) / profit - £m
|
(42.2)
|
249.2
|
Gas storage adjusted investment and
capital expenditure - £m
|
0.8
|
6.3
|
Gas storage level at period end -
mTh
|
40
|
126
|
Gas storage level at period end -
%
|
21
|
65
|
Gas Storage overview
SSE holds around 40% of the UK's
conventional underground gas storage capacity at two sites on the
East Yorkshire coast. The Atwick facility, near Hornsea, is
wholly-owned by SSE, while the Aldbrough facility is operated as a
joint venture with Equinor. These two sites offer flexibility and
hedging services to the UK and interconnected gas
markets.
As part of the transition to a net
zero future, opportunities to convert gas storage facilities to
store low-carbon hydrogen, which can be used to decarbonise power
generation, industry, heat, transport and other key sectors are
being explored.
Operational delivery
SSE's Gas Storage assets continue to
respond to market needs, optimising assets to help ensure security
of gas supply for the UK whilst providing important liquidity to
the market. These assets are an important risk management tool to
the Group's generation portfolio by offering short-notice
flexibility, as a result of their technical ability to cycle
quickly, to mitigate exposures from wind speeds and demand
variability. Positive spreads between summer and winter, combined
with trading optimisation, supported a year of strong
performance.
In Aldbrough, after successfully
returning to service ahead of winter 2022/23, Caverns 6 and 9 have
performed well, providing valuable additional capacity and
deliverability to the UK system. And with the equivalent of two
caverns being added over the past three years at Atwick, work to
optimise maximum and minimum operation pressures also continues.
Work is also under way to rewater Aldbrough Cavern 4Z, which has
been operating at a reduced level due to cavern instability, with
completion of this work expected in 2024.
In April 2023, Gas Storage secured
ISO 55001 certification, an international asset management
standard, for Atwick and Aldbrough facilities.
For financial performance commentary please refer to the
Group Financial Review.
GROWTH OPPORTUNITIES
In December 2023, an updated view of
gas security of supply and demand was published by the UK
Government alongside an exploration of the future role that
flexible sources of gas supply, including storage, might play in
gas security over the medium to long term. This concluded that
natural gas will continue to play a role in delivering energy
security to 2050, as part of a net zero emissions trajectory, with
additional requirements for flexibility. The UK Government intends
to issue a call for evidence on gas flexibility, to explore
potential roles and policy frameworks. SSE Thermal remains
committed to working with UK Government departments and Ofgem to
ensure the critical role of UK storage is properly valued, and
low-carbon options can be delivered in tandem.
Following the publication of a
minded-to position on Hydrogen Storage Business Model support, the
UK Government has undertaken further market engagement on
allocation of support. The first allocation round is expected to
open later in 2024, to support investments in nationally strategic
hydrogen storage assets. SSE is developing Aldbrough Hydrogen
Storage, a new build hydrogen storage facility, with a view to
participating in this allocation round.
Energy Customer Solutions
ENERGY CUSTOMER SOLUTIONS OVERVIEW
SSE Business Energy in Great Britain
(non-domestic) and SSE Airtricity on the island of Ireland
(domestic and non-domestic) provide a shopfront and route to market
for SSE's generation, renewable green products and low-carbon
energy solutions. Across Great Britain and the island of Ireland,
the primary focus has been on supporting customers, managing
external market volatility, modernising systems and expanding the
green energy and low carbon product offerings to enable customers
to reduce their energy consumption and carbon emissions.
SSE Business Energy
SSE Business Energy key performance
indicators
SSE
Business Energy
|
March 24
|
March 23
|
SSE Business Energy adjusted &
reported operating profit - £m
|
95.8
|
15.7
|
Electricity Sold - GWh
|
10,693
|
12,108
|
Gas Sold - mtherms
|
168
|
200
|
Aged Debt (60 days past due) -
£m
|
336
|
167
|
Bad debt expense - £m
|
113
|
108
|
Energy customers' accounts -
m
|
0.38
|
0.43
|
operational delivery
The current year has seen the
business return to a higher level of profitability, reflecting the
well-established competitive pricing and hedging controls in the
business. However, it still remains a challenging environment for
consumers and customer-facing businesses which has led to a
customer support fund of £15m being established in the period to
support customers including small businesses, voluntary and
charitable organisations.
Enabling customers to optimise
their energy consumption remains a key focus with the development
of data tools and a 26% increase in smart meter installations year
on year. The business has also invested considerably to improve
customer experience and to meet future needs by upgrading its
legacy billing platform and implementing digital
technologies.
Connecting customers with SSE
Renewables assets continues to grow with additional corporate
customers taking CPPA products during the year. SSE Business Energy
has also trialled a new flexibility service called EnergiFlex,
enabling customers to participate in National Grid's Demand
Flexibility Service (DFS) and incentivising businesses to reduce
demand during peak hours to help balance the grid.
For additional financial performance commentary please refer
to the Group Financial Review.
GROWTH OPPORTUNITIES
The strength of the BE book and
the strong portfolio mix means the business is well positioned to
expand its product suite. Under the SSE Energy Solutions brand, the
business is delivering solutions to help customers reduce carbon
emissions and energy costs across multiple sectors. Our digital
capability is rapidly expanding, enabling us to offer increased
flexibility and energy optimisation.
SSE Airtricity
SSE Airtricity key performance indicators
SSE
Airtricity
|
March 24
|
March 23
|
Airtricity adjusted operating profit
- £m
|
95.0
|
5.6
|
Airtricity reported operating profit
- £m
|
94.5
|
5.2
|
Aged Debt (60 days past due) -
£m
|
18.3
|
11.0
|
Bad debt expense - £m
|
13.7
|
7.8
|
Airtricity Electricity Sold -
GWh
|
6,400
|
5,795
|
Airtricity Gas Sold -
mtherms
|
199
|
193
|
All Ireland energy market customers
(Ire) - m
|
0.75
|
0.74
|
OPERATIONAL DELIVERY
Maintaining SSE Airtricity's
commitment to help its customers remains a key focus for the
business with consecutive tariff reductions taking effect in
October 2023 and February 2024.
Continuation into 2023/24 of
support for financially vulnerable customers was provided under the
terms of the €25m customer support fund established in
2022/23. A further €5m all-island Community Fund was
announced in May 2024 to support communities on the path to net
zero.
SSE Airtricity continued its focus
on enabling access to low carbon solutions for its customers
including the delivery of 500 home energy upgrades during the year.
The business strives to continually improve customer experience,
including through the expansion of digital tools such as AI to
enhance the offering.
For additional financial performance commentary please refer
to the Group Financial Review.
GROWTH OPPORTUNITIES
SSE Airtricity remains focused on
continued growth of its energy efficiency and low-carbon solutions
offering with planned expansion into the Northern Ireland's
domestic and business markets. Investment in innovations such as
demand side management and the further expansion of low-carbon
solutions provides additional avenues for growth.
SSE Enterprise
SSE Enterprise key performance indicators
SSE
ENTERPRISE
|
March 24
|
March 23
|
SSE Enterprise adjusted operating
(loss) - £m
|
(25.6)
|
(7.0)
|
SSE Enterprise reported operating
(loss) - £m
|
(25.6)
|
(13.1)
|
SSE Heat Network Customer
Accounts
|
12,104
|
11,431
|
Biomass, heat network and other
capacity - MW
|
26
|
26
|
Biomass, heat network and other
output - GWh
|
105
|
96
|
|
SSE Enterprise overview
SSE Enterprise (previously
Distributed Energy) aspires to be the UK and Ireland's leading
provider of local clean energy infrastructure. The business is well
positioned for future growth, providing local authorities and
commercial customers with low-carbon and smart digital energy
solutions with district heat networks, EV charging infrastructure,
private wires, behind the meter solar and battery, and Independent
Distribution Network Operator (IDNO) capability.
Operational delivery
Operational availability across the
portfolio of 18 heat networks across Scotland and England has
remained strong during the year, with Slough Heat and Power in
particular benefiting from additional connections to deliver
electric, water and steam services across Slough Trading
Estate.
SSE Enterprise has continued to
advance its IDNO capabilities, including the development of a
150MVA private network connection trial at Imperial Park, bringing
the total capacity at that site to around 400MVA.
Progression of the businesses' EV
infrastructure growth strategy continues, with 13 electric charging
hubs either completed or built during the period. This includes the
upcoming launches of Scotland's most powerful EV charging hub in
Myrekirk, Dundee (2.5MVA) and SSE's first EV hub in the Republic of
Ireland in Lough Sheever (800kVA).
The smart digital energy solutions
business continues to support value creation within SSE, working
with the Energy Markets team to optimise the front of meter battery
trading activity for the Group. Externally, the business also
secured contracts to provide optimisation services for a 500MW
battery energy storage system project in Coalburn, Scotland, one of
the largest of its kind in Europe.
For financial performance commentary please refer to the
Group Financial Review.
Growth opportunities
The size and scale of the pipeline
of opportunities for SSE Enterprise has continued to increase
during the year, as the business looks to develop its whole-system
approach to local networks, including behind-the-meter solar and
battery, and energy optimisation services.
The business has seized a number of
opportunities to help local authorities execute local energy
projects, signing several strategic energy partnerships with
Greater Manchester Combined Authority, West Midlands Combined
Authority and Newcastle City Council, with an ambition to go
further.
In December 2023, the UK Government
published a consultation on proposals for a new regulatory and
zoning regime to support investment in heat networks in England.
The legislative passage of these proposals would help unlock an
ambitious heat project pipeline under development by the business
that is pioneering innovation in heat distribution. This includes
capturing heat from data centres, deep geothermal, electricity
network transformers and energy from waste plants.
SSE Energy Markets
SSE Energy markets key performance
indicators
SSE
ENERGY MARKETS
|
March 24
|
March 23
|
SSE Energy Markets adjusted
operating profit - £m
|
38.9
|
80.4
|
SSE Energy Markets reported
operating profit/(loss) - £m
|
590.0
|
(2,626.0)
|
SSE
ENERGY MARKETS OVERVIEW
SSE Energy Markets - previously
Energy Portfolio Management (EPM) - commercially optimises all of
SSE's market-based Business Units assets in the wholesale energy
markets, securing value on behalf of these businesses by trading in
wholesale energy markets and managing volatility through active
risk management.
This involves trading the principal
commodities to which SSE's 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 risk and
liquidity characteristics, which impacts the quantum of hedging
possible.
OPERATIONAL DELIVERY
SSE Energy Markets continues to
optimise the flexibility of the Group, maximising benefits from the
diverse portfolio while mitigating risk around natural market
turbulence. Having successfully optimised energy assets in the
short-term, Energy Markets is now also the primary decision maker
for longer term trading periods, allowing decisions to be made
quickly from one Centre of Excellence.
The value Energy Markets secured for
SSE's asset portfolio continues to be reported against individual
Business Units.
For financial performance commentary please refer to the
Group Financial Review.
GROWTH OPPORTUNITIES
As well as taking on a leading role
in optimising SSE's market-based assets, SSE Energy Markets is also
expanding the ways in which it independently adds value to the
Group.
This includes contracts being
secured with Copenhagen Infrastructure Partners and Sheaf Energy
Limited to deliver trading and optimisation services for their
respective energy storage projects. It also includes an increase in
trading in European power and gas markets which will also support
the wider group's ambition of international growth.
In addition, Energy Markets
continues to develop its data and advanced analytics capabilities
setting it up well for future developments in the
markets.
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. The Group has six profit
measures, of which adjusted operating profit and adjusted profit
before tax are the main focus of management through the financial
year and adjusted earnings per share is the main focus of
management on an annual basis. In order to derive adjusted earnings
per share, the Group has defined adjusted operating profit,
adjusted net finance costs, and adjusted current tax charge as
components of the adjusted earnings per share calculation. Adjusted
EBITDA is used by management as a proxy for cash derived from
ordinary operations of the Group.
· 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 and also to provide a measure of progress against the
Group's strategic Net Zero Acceleration Programme Plus
objectives.
· Debt measures
allow management to record and monitor both
operating cash generation and the Group's ongoing financing and
liquidity position.
There have been no changes to the
way the Group calculates its APMs in the current year.
The following section explains the
key APMs applied by the Group and referred to in these Summary
Financial Statements:
Profit Measures
Group APM
|
Purpose
|
Closest equivalent IFRS measure
|
Adjustments to reconcile to primary financial
statements
|
Adjusted EBITDA (earnings before
interest, tax, depreciation and amortisation)
|
Profit measure
|
Operating profit
|
· Movement on operating and joint venture operating derivatives
('certain re-measurements')
· Exceptional items
· Adjustments to retained Gas Production decommissioning
provision
· 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 ventures and associates' depreciation and
amortisation
· Non-controlling share of operating profit
· Non-controlling share of depreciation and
amortisation
· Release of deferred income
|
Adjusted Operating
Profit
|
Profit measure
|
Operating profit
|
· Movement on operating and joint venture operating derivatives
('certain re-measurements')
· Exceptional items
· Adjustments to retained Gas Production decommissioning
provision
· Depreciation and amortisation expense on fair value
uplifts
· Share
of joint ventures and associates' interest and tax
· Non-controlling share of operating profit
|
Adjusted Profit Before
Tax
|
Profit measure
|
Profit before tax
|
· Movement on operating and financing derivatives ('certain
re-measurements')
· Exceptional items
· Adjustments to retained Gas Production decommissioning
provision
· Non-controlling share of profit before tax
· Depreciation and amortisation expense on fair value
uplifts
· Interest on net pension assets/liabilities (IAS
19)
· Share
of joint ventures and associates' tax
|
Adjusted Net Finance
Costs
|
Profit measure
|
Net finance costs
|
· Exceptional items
· Movement on financing derivatives
· Share
of joint ventures and associates' interest
· Non-controlling share of financing costs
· Interest on net pension assets/liabilities (IAS
19)
|
Adjusted Current Tax
Charge
|
Profit measure
|
Tax charge
|
· Share
of joint ventures and associates' tax
· Non-controlling share of current tax
· Deferred tax including share of joint ventures, associates
and non-controlling interests
· Tax
on exceptional items and certain re-measurements
|
Adjusted Earnings Per
Share
|
Profit measure
|
Earnings per share
|
· Exceptional items
· Adjustments to retained Gas Production decommissioning
provision
· 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)
· Deferred tax including share of joint ventures, associates
and non-controlling interests
|
Rationale for 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 SSE Energy Markets (formerly 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
SSE Business Energy and SSE Airtricity operating units, or to
optimise the value of the production from SSE Renewables and
Thermal generation assets or to conduct other trading subject to
the value at risk limits set out by the Energy Markets Risk
Committee. Certain of these contracts (predominantly purchase
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 (predominantly sales contracts)
are accounted for as 'own use' contracts and are consequently not
recorded until the commodity is delivered and the contract is
settled. Gas inventory 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 recognised as part of
'certain re-measurements' in the income statement. Finally, the
mark-to-market valuation movements on the Group's contracts for
difference contracts entered into by SSE Renewables that are not
designated as government grants and which are measured as Level 3
fair value financial instruments are also included within '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 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 4.2.
3.
Adjustments to retained Gas Production decommissioning
provision
The Group retains an obligation
for 60% of the decommissioning liabilities of its former Gas
Production business which was disposed in October 2021. The
revaluation adjustments relating to these decommissioning
liabilities are accounted for through the Group's consolidated
income statement and are removed from the Group's adjusted profit
measures as the revaluation of the provision is not considered to
be part of the Group's core continuing operations.
4.
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 from its equity accounted joint ventures and associates.
However, for internal performance management purposes and for
consistency of treatment, SSE reports its adjusted operating profit
measures before its share of the interest and/or tax on joint
ventures and associates.
5.
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. For the
purpose of calculating the 'Net Debt to EBITDA' metric, 'adjusted
EBITDA' is further refined to remove the proportion of adjusted
EBITDA from equity-accounted joint ventures relating to off-balance
sheet debt (see note 6.3).
6.
Depreciation and amortisation expense on fair value
uplifts
The Group's strategy includes the
realisation of value (developer gains) from divestments of stakes
in SSE Renewables' offshore and international 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 may recognise a fair value uplift on the
remeasurement of its retained equity investment. Those non-cash
accounting uplifts will be treated as exceptional gains in the year
of the relevant transactions completing. Furthermore, SSE may
acquire businesses or joint venture interests which are determined
to generate an exceptional opening gain on acquisition and
accordingly will record an accounting fair value uplift to the
opening assets acquired. These uplifts create assets or adjustments
to 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 are
adjusted to exclude any additional depreciation, amortisation and
impairment expense arising from the fair value uplifts given these
charges are derived from significant one-off gains, which are
treated as exceptional when initially recognised.
7.
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.
8.
Interest on net pension assets/liabilities (IAS 19 "Employee
Benefits")
The Group's interest income
relating to defined benefit pension schemes is derived from the net
assets of the schemes as valued under IAS 19. This will mean that
the credit or charge recognised in any given year will be dependent
on the impact of actuarial assumptions such as inflation and
discount rates. The Group excludes these from its adjusted profit
measures due to the non-cash nature of these charges or
credits.
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.
10. Results
attributable to non-controlling interest holders
The Group's structure includes
non-wholly owned but controlled subsidiaries which are consolidated
within the financial statements of the Group under IFRS. The most
significant of those is SSEN Transmission, a 25% stake in which was
divested on 30 November 2022 (see note 12). In the current and
prior year the Group has removed the share of profit attributable
to holders of non-controlling equity stakes in such businesses from
the point when the ownership structure changed (i.e. for SSEN
Transmission, with effect from 1 December 2022) from all of its
profit measures, to report all metrics based on the share of
profits items attributable to the ordinary equity holders of the
Group. The adjustment has been applied consistently to all of the
Group's adjusted profit measures, including removing proportionate
non-controlling share of operating profit and depreciation and
amortisation from the Group's adjusted EBITDA metric; removing the
non-controlling share of operating profit from the Group's adjusted
operating profit metric; removing the non-controlling share of net
finance costs from the Group's adjusted net finance costs metric;
and removing the non-controlling interest share of current tax from
the Group's adjusted current tax metric. There is no impact to
disclosures for 31 March 2022.
|
March 2024
|
|
Continuing operations
(£m)
|
Reported
|
Movement
on derivatives
|
Exceptional items
|
Adjustments to Gas Production decommissioning
provision
|
Depreciation on FV uplifts
|
Joint
venture interest and tax
|
Interest
on net pension asset
|
Deferred
tax
|
Share of
profit attributable to non-controlling interests
|
Adjusted
|
Operating Profit
|
2,608.2
|
(522.7)
|
266.3
|
9.9
|
19.0
|
184.8
|
-
|
-
|
(139.1)
|
2,426.4
|
Net finance costs
|
(113.1)
|
(6.1)
|
(0.3)
|
-
|
-
|
(110.7)
|
(26.2)
|
-
|
4.7
|
(251.7)
|
Profit before taxation
|
2,495.1
|
(528.8)
|
266.0
|
9.9
|
19.0
|
74.1
|
(26.2)
|
-
|
(134.4)
|
2,174.7
|
Taxation
|
(610.7)
|
130.3
|
(23.3)
|
-
|
-
|
(74.1)
|
-
|
198.8
|
8.0
|
(371.0)
|
Profit after taxation
|
1,884.4
|
(398.5)
|
242.7
|
9.9
|
19.0
|
-
|
(26.2)
|
198.8
|
(126.4)
|
1,803.7
|
Attributable to other equity
holders
|
(173.9)
|
-
|
-
|
-
|
-
|
-
|
-
|
(25.6)
|
126.4
|
(73.1)
|
Profit attributable to ordinary
shareholders
|
1,710.5
|
(398.5)
|
242.7
|
9.9
|
19.0
|
-
|
(26.2)
|
173.2
|
-
|
1,730.6
|
Number of shares for EPS
|
1,091.8
|
|
|
|
|
|
|
|
|
1,091.8
|
Earnings per share
|
156.7
|
|
|
|
|
|
|
|
|
158.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
March 2024
|
|
Adjusted
operating profit from continuing operations
£m
|
Share of
joint ventures and associates' depreciation and
amortisation
£m
|
Release
of deferred income
£m
|
Depreciation on FV uplifts
£m
|
Depreciation, impairment and amortisation before exceptional
charges
£m
|
Share of
depreciation, impairment and amortisation before exceptional items
attributable to non-controlling interests
£m
|
Adjusted
EBITDA
£m
|
|
2,426.4
|
208.8
|
(13.0)
|
(19.0)
|
724.9
|
(32.5)
|
3,295.6
|
|
|
|
|
|
March 2023
|
|
Continuing operations
(£m)
|
Reported
|
Movement
on derivatives
|
Exceptional items
|
Adjustments to Gas Production decommissioning
provision
|
Depreciation on FV uplifts
|
Joint
venture interest and tax
|
Interest
on net pension asset
|
Deferred
tax
|
Share of
profit attributable to non-controlling interests
|
Adjusted
|
Operating (loss)/profit
|
(146.3)
|
2,514.3
|
0.6
|
(50.5)
|
28.8
|
213.2
|
-
|
-
|
(30.9)
|
2,529.2
|
Net finance costs
|
(59.3)
|
(201.9)
|
(0.2)
|
-
|
-
|
(70.1)
|
(16.2)
|
-
|
2.1
|
(345.6)
|
(Loss)/profit before
taxation
|
(205.6)
|
2,312.4
|
0.4
|
(50.5)
|
28.8
|
143.1
|
(16.2)
|
-
|
(28.8)
|
2,183.6
|
Taxation
|
110.0
|
(460.5)
|
34.1
|
-
|
-
|
(143.1)
|
-
|
99.6
|
1.1
|
(358.8)
|
(Loss)/profit after
taxation
|
(95.6)
|
1,851.9
|
34.5
|
(50.5)
|
28.8
|
-
|
(16.2)
|
99.6
|
(27.7)
|
1,824.8
|
Attributable to other equity
holders
|
(62.4)
|
-
|
-
|
-
|
-
|
-
|
-
|
(4.1)
|
27.7
|
(38.8)
|
(Loss)/profit attributable to
ordinary shareholders
|
(158.0)
|
1,851.9
|
34.5
|
(50.5)
|
28.8
|
-
|
(16.2)
|
95.5
|
-
|
1,786.0
|
Number of shares for EPS
|
1,075.6
|
|
|
|
|
|
|
|
|
1,075.6
|
(Losses)/earnings per
share
|
(14.7)
|
|
|
|
|
|
|
|
|
166.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
March 2023
|
Adjusted
operating profit from continuing operations
£m
|
Share of
joint ventures and associates' depreciation and
amortisation
£m
|
Release
of deferred income
£m
|
Depreciation on FV uplifts
£m
|
Depreciation, impairment and amortisation before exceptional
charges
£m
|
Share of
depreciation, impairment and amortisation before exceptional items
attributable to non-controlling interests
£m
|
Adjusted
EBITDA
£m
|
2,529.2
|
201.1
|
(13.9)
|
(28.8)
|
704.2
|
(9.7)
|
3,382.1
|
March
2022
|
|
Continuing operations
(£m)
|
Reported
|
Movement
on derivatives
|
Exceptional items
|
Adjustments to Gas Production decommissioning
provision
|
Depreciation on FV uplifts
|
Joint
venture interest and tax
|
Interest
on net pension asset
|
Deferred
tax
|
Adjusted
|
|
Operating profit
|
3,749.5
|
(2,097.8)
|
(301.8)
|
13.1
|
20.6
|
147.3
|
-
|
-
|
1,530.9
|
|
Net finance costs
|
(273.2)
|
(21.0)
|
(3.2)
|
-
|
-
|
(67.8)
|
(7.6)
|
-
|
(372.8)
|
|
Profit before taxation
|
3,476.3
|
(2,118.8)
|
(305.0)
|
13.1
|
20.6
|
79.5
|
(7.6)
|
-
|
1,158.1
|
|
Taxation
|
(881.3)
|
408.0
|
323.7
|
-
|
-
|
(79.5)
|
-
|
122.0
|
(107.1)
|
|
Profit after taxation
|
2,595.0
|
(1,710.8)
|
18.7
|
13.1
|
20.6
|
-
|
(7.6)
|
122.0
|
1,051.0
|
|
Attributable to other equity
holders
|
(50.7)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(50.7)
|
|
Profit attributable to ordinary
shareholders
|
2,544.3
|
(1,710.8)
|
18.7
|
13.1
|
20.6
|
-
|
(7.6)
|
122.0
|
1,000.3
|
|
Number of shares for EPS
|
1,055.0
|
|
|
|
|
|
|
|
1,055.0
|
|
Earnings per share
|
241.2
|
|
|
|
|
|
|
|
94.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
March
2022
|
Adjusted
operating profit from continuing operations
£m
|
Share of
joint ventures and associates' depreciation and
amortisation
£m
|
Release
of deferred income
£m
|
Depreciation on FV uplifts
£m
|
Depreciation, impairment and amortisation before exceptional
charges
£m
|
Adjusted
EBITDA
£m
|
1,530.9
|
146.6
|
(17.6)
|
(20.6)
|
612.0
|
2,251.3
|
Debt Measure
Group APM
|
Purpose
|
Closest equivalent IFRS measure
|
Adjustments to reconcile to primary financial
statements
|
Adjusted Net Debt and Hybrid
Capital
|
Debt measure
|
Unadjusted net debt
|
· Hybrid equity
· Cash
held and posted as collateral
· Lease
obligations
· Non-controlling share of borrowings and cash
|
rationale for Adjustments to Debt measure
11. Hybrid
equity
The characteristics of certain
hybrid capital securities mean that they qualify for recognition as
equity rather than debt under IFRS. Consequently, their coupon
payments are presented within equity 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.
12. Cash held and
posted as collateral
Cash held and posted as collateral
refers to cash balances received from and deposited with
counterparties including trading exchanges. Collateral balances
mostly represent initial and variation margin, required as part of
the management of the Group's exposures on commodity contracts,
that will be received on maturity of the related trades. 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.
13. Lease
obligations
SSE's reported loans and
borrowings include lease liabilities on contracts within the scope
of IFRS 16, which are not directly related to 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.
14. Debt and cash
attributable to non-controlling interests
The Group's structure includes
non-wholly owned but controlled subsidiaries which are consolidated
within the financial statements of the Group under IFRS. The most
significant of those is SSEN Transmission, a 25% stake in which was
divested on 30 November 2022 (see note 12 for more details of that
transaction). Following completion of the transaction, the Group
has removed the share of external debt and cash in these
subsidiaries proportionately attributable to the non-controlling
interest holders from its adjusted net debt and hybrid capital
metric. While legal entitlement to these items has not changed, the
Group makes this adjustment to present net debt attributable to
ordinary equity holders of the Group.
|
March 2024
|
March
2023
|
March
2022
|
|
£m
|
£m
|
£m
|
Unadjusted net debt
|
(8,097.8)
|
(8,168.1)
|
(8,015.4)
|
Cash (held)/posted as
collateral
|
(353.2)
|
316.3
|
74.7
|
Lease obligations
|
407.5
|
405.9
|
393.5
|
External net debt attributable to
non-controlling interests
|
490.2
|
434.2
|
-
|
Adjusted Net Debt
|
(7,553.3)
|
(7,011.7)
|
(7,547.2)
|
Hybrid equity
|
(1,882.4)
|
(1,882.4)
|
(1,051.0)
|
Adjusted Net Debt and Hybrid Capital
|
(9,435.7)
|
(8,894.1)
|
(8,598.2)
|
|
|
|
|
Capital Measures
Group APM
|
Purpose
|
Closest equivalent IFRS measure
|
Adjustments to reconcile to primary financial
statements
|
Adjusted Investment and Capital
Expenditure
|
Capital measure
|
Capital additions to intangible
assets and property, plant and equipment
|
· Customer funded additions
· Allowances and certificates
· Additions acquired through business combinations
· Joint
ventures and associates' additions funding
· Non-controlling share of capital expenditure
· Lease
asset additions
|
Adjusted Investment, Capital and
Acquisition Expenditure
|
Capital measure
|
Capital additions to intangible
assets and property, plant and equipment
|
· Customer funded additions
· Allowances and certificates
· Additions acquired through business combinations
· Joint
ventures and associates' additions funding
· Non-controlling share of capital expenditure
· Lease
asset additions
· Acquisition cash consideration
|
rationale for Adjustments to Capital
Measures
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 additions 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 additions
in the year 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
acquired 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 the acquisition
of 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 or interest in an
equity-accounted joint venture requiring a fair value assessment in
line with the principles of IFRS 3 'Business Combinations', the
fair value of acquired 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. However, the fair valuation of consideration paid for the
business or investment is included in the Group's 'adjusted
investment, capital and acquisition expenditure' metric, see 23
below. Please refer to note 12 for detail of the Group's
acquisitions in the year.
18. Additions
subsequently disposed or impaired
For consistency of presentation,
any capital additions in the year that are subsequently
written-down or disposed are removed from the APM.
19. Joint ventures
and associates' additions funding
Joint ventures and associates'
additions included in the Group's capital measures represent the
direct loan or equity funding provided by the Group 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. Non-controlling
share of capital expenditure
The Group's structure includes
non-wholly owned but controlled subsidiaries which are consolidated
within the financial statements of the Group under IFRS. The most
significant of those is SSEN Transmission, a 25% stake in which was
divested on 30 November 2022 (see note 12 for more details of that
transaction). In the current year, the Group has removed the share
of capital additions attributable proportionately to these equity
holders from the point when the ownership structure changed (i.e.
for SSEN Transmission, with effect from 1 December 2022) from its
"adjusted investment and capital expenditure" and "adjusted
investment, capital and acquisition expenditure" metrics. This is
consistent with the adjustments noted elsewhere related to these
non-controlling interests. This has no impact on the metrics for
March 2022.
21. Refinancing
proceeds/refunds
The Group's model for developing
large scale capital projects within joint ventures and associates
involves 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 refinancing 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 17 above. There were no refinancing proceeds
in the year ended 31 March 2024 (2023: £nil). In the year ended 31
March 2022, Doggerbank windfarm reimbursed SSE for previous funding
of £136.7m. These receipts have been deducted from the Group's
adjusted investment and capital expenditure metric.
22. Lease
additions
Additions of right of use assets
under the Group's IFRS 16 compliant policies for lease contracts
are excluded from the Group's adjusted capital measures as they do
not represent directly funded capital investment. This is
consistent with the treatment of lease obligations explained at 13,
above.
23. Acquisition
cash consideration in relation to business
combinations
The Group has outlined a
significant investment programme which will partly be achieved
through the acquisition of businesses with development
opportunities for the Group. The cash consideration paid for these
entities is included within the Group's adjusted investment,
capital and acquisition expenditure metric as it provides
stakeholders an accurate basis of cash investment into the Group's
total development pipeline and is consistent with the reporting of
the Group's Net Zero Acceleration Programme Plus.
|
March 2024
|
March
2023
|
March
2022
|
|
£m
|
£m
|
£m
|
Capital additions to intangible
assets
|
1,314.2
|
1,688.6
|
921.0
|
Capital additions to property, plant
and equipment
|
1,971.4
|
1,500.1
|
1,392.9
|
Capital additions to intangible assets and property, plant
and equipment
|
3,285.6
|
3,188.7
|
2,313.9
|
Customer funded additions
|
(152.0)
|
(80.9)
|
(91.3)
|
Allowances and
certificates
|
(774.5)
|
(805.2)
|
(544.5)
|
Additions through business
combinations
|
-
|
(515.2)
|
(197.8)
|
Additions subsequently
disposed/impaired
|
-
|
-
|
(13.9)
|
Joint ventures and associates'
additions
|
390.0
|
498.4
|
682.5
|
Non-controlled interests share of
capital expenditure
|
(199.4)
|
(46.7)
|
-
|
Refinancing
(proceeds)/refunds
|
-
|
-
|
(136.7)
|
Lease asset additions
|
(73.0)
|
(78.5)
|
(85.7)
|
Adjusted Investment and Capital Expenditure
|
2,476.7
|
2,160.6
|
1,926.5
|
Acquisition cash
consideration
|
-
|
642.7
|
141.3
|
Adjusted Investment, Capital and Acquisition
Expenditure
|
2,476.7
|
2,803.3
|
2,067.8
|
Impact of discontinued operations on the Group's
APMs
The following metrics have been
adjusted in all years presented to exclude the contribution of the
Group's investment in Scotia Gas Networks Limited ("SGN") which was
disposed on 22 March 2022 and the Group's Gas Production operations
which were disposed on 14 October 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'; 'adjusted investment and capital expenditure'; and
'adjusted investment, capital and acquisition expenditure' have not
been adjusted as the Group continues to fund the discontinued
operations until the date of disposal.
The following table summarises the
impact of excluding discontinued operations from the APMs of the
continuing activities of the Group in the year ended 31 March
2022:
|
March 2024
|
March
2023
|
March
2022
|
|
£m
|
£m
|
£m
|
Adjusted EBITDA of SSE Group
(including discontinued operations)
|
3,295.6
|
3,382.1
|
2,384.8
|
Less: Gas Production
profit
|
-
|
-
|
(101.4)
|
Less: SGN profit
|
-
|
-
|
(32.1)
|
Adjusted EBITDA of continuing operations
|
3,295.6
|
3,382.1
|
2,251.3
|
|
|
|
|
Adjusted operating profit of SSE
Group (including discontinued operations)
|
2,426.4
|
2,529.2
|
1,653.3
|
Less: Gas Production
profit
|
-
|
-
|
(101.4)
|
Less: SGN profit
|
-
|
-
|
(21.0)
|
Adjusted operating profit of continuing
operations
|
2,426.4
|
2,529.2
|
1,530.9
|
|
|
|
|
Adjusted net finance costs of SSE
Group (including discontinued operations)
|
251.7
|
345.6
|
377.6
|
Less: Gas Production
|
-
|
-
|
(0.1)
|
Less: SGN
|
-
|
-
|
(4.7)
|
Adjusted net finance costs of continuing
operations
|
251.7
|
345.6
|
372.8
|
|
|
|
|
Adjusted profit before tax of SSE
Group (including discontinued operations)
|
2,174.7
|
2,183.6
|
1,275.7
|
Less: Gas Production
profit
|
-
|
-
|
(101.3)
|
Less: SGN profit
|
-
|
-
|
(16.3)
|
Adjusted profit before tax of continuing
operations
|
2,174.7
|
2,183.6
|
1,158.1
|
|
|
|
|
Adjusted current tax of SSE Group
(including discontinued operations)
|
371.0
|
358.8
|
109.4
|
Less: SGN current tax
charge
|
-
|
-
|
(2.3)
|
Adjusted current tax of continuing
operations
|
371.0
|
358.8
|
107.1
|
|
|
|
|
Adjusted earnings per share of SSE
Group (including discontinued operations)
|
158.5
|
166.0
|
105.6
|
Less: Gas Production earnings per
share
|
-
|
-
|
(9.6)
|
Less: SGN earnings per
share
|
-
|
-
|
(1.2)
|
Adjusted earnings per share of continuing
operations
|
158.5
|
166.0
|
94.8
|
The remaining APMs presented by
the Group are unchanged in all periods presented by the
discontinued operations.
summary Financial
Statements
Consolidated Income Statement
for the year ended 31 March 2024
|
|
2024
|
|
2023
|
|
|
Before
exceptional
items and
certain
re-measure
ments
|
Exceptional items
and
certain
re-measure-ments
(note 7)
|
Total
|
|
Before
exceptional
items
and
certain
re-measure-ments
|
Exceptional items and
certain
re-measure-ments
(note
7)
|
Total
|
|
Note
|
£m
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
|
|
|
|
|
|
Revenue
|
6
|
10,457.2
|
-
|
10,457.2
|
|
12,490.7
|
-
|
12,490.7
|
Cost of sales
|
|
(6,568.3)
|
461.3
|
(6,107.0)
|
|
(9,933.2)
|
(2,717.2)
|
(12,650.4)
|
Gross profit/(loss)
|
|
3,888.9
|
461.3
|
4,350.2
|
|
2,557.5
|
(2,717.2)
|
(159.7)
|
Operating costs
|
|
(1,577.7)
|
(270.9)
|
(1,848.6)
|
|
(1,431.6)
|
(230.4)
|
(1,662.0)
|
Debt impairment charges
|
|
(128.8)
|
-
|
(128.8)
|
|
(91.0)
|
-
|
(91.0)
|
Other operating income
|
|
116.7
|
4.6
|
121.3
|
|
1,015.0
|
89.1
|
1,104.1
|
Operating profit/(loss) before joint ventures and
associates
|
|
2,299.1
|
195.0
|
2,494.1
|
|
2,049.9
|
(2,858.5)
|
(808.6)
|
Joint ventures and associates:
|
|
|
|
|
|
|
|
|
Share of operating profit
|
|
237.5
|
-
|
237.5
|
|
531.9
|
140.7
|
672.6
|
Share of interest
|
|
(110.7)
|
-
|
(110.7)
|
|
(70.1)
|
-
|
(70.1)
|
Share of movement in
derivatives
|
|
-
|
61.4
|
61.4
|
|
-
|
202.9
|
202.9
|
Share of tax
|
|
(58.8)
|
(15.3)
|
(74.1)
|
|
(104.0)
|
(39.1)
|
(143.1)
|
Share of profit on joint ventures and
associates
|
|
68.0
|
46.1
|
114.1
|
|
357.8
|
304.5
|
662.3
|
Operating profit/(loss) from continuing
operations
|
6
|
2,367.1
|
241.1
|
2,608.2
|
|
2,407.7
|
(2,554.0)
|
(146.3)
|
Finance income
|
8
|
198.8
|
6.4
|
205.2
|
|
135.3
|
202.1
|
337.4
|
Finance costs
|
8
|
(318.3)
|
-
|
(318.3)
|
|
(396.7)
|
-
|
(396.7)
|
Profit/(loss) before taxation
|
|
2,247.6
|
247.5
|
2,495.1
|
|
2,146.3
|
(2,351.9)
|
(205.6)
|
Taxation
|
9
|
(519.0)
|
(91.7)
|
(610.7)
|
|
(355.5)
|
465.5
|
110.0
|
Profit/(loss) for the year from continuing
operations
|
|
1,728.6
|
155.8
|
1,884.4
|
|
1,790.8
|
(1,886.4)
|
(95.6)
|
Discontinued operations
|
|
|
|
|
|
|
|
|
Profit from discontinued operation,
net of tax
|
|
-
|
-
|
-
|
|
-
|
35.0
|
35.0
|
Profit/(loss) for the year
|
|
1,728.6
|
155.8
|
1,884.4
|
|
1,790.8
|
(1,851.4)
|
(60.6)
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
Ordinary shareholders of the
parent
|
|
1,554.7
|
155.8
|
1,710.5
|
|
1,728.4
|
(1,851.4)
|
(123.0)
|
Non-controlling interests
|
|
100.8
|
-
|
100.8
|
|
23.6
|
-
|
23.6
|
Other equity holders
|
|
73.1
|
-
|
73.1
|
|
38.8
|
-
|
38.8
|
|
|
|
|
|
|
|
|
|
Earnings/(losses) per share
|
|
|
|
|
|
|
|
|
Basic (pence)
|
11
|
|
|
156.7
|
|
|
|
(11.4)
|
Diluted (pence)
|
11
|
|
|
156.5
|
|
|
|
(11.4)
|
Earnings/(losses) per share - continuing
operations
|
|
|
|
|
|
|
|
|
Basic (pence)
|
11
|
|
|
156.7
|
|
|
|
(14.7)
|
Diluted (pence)
|
11
|
|
|
156.5
|
|
|
|
(14.7)
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
|
|
|
|
|
|
|
Interim dividend paid per share
(pence)
|
10
|
|
|
20.0
|
|
|
|
29.0
|
Proposed final dividend per share
(pence)
|
10
|
|
|
40.0
|
|
|
|
67.7
|
|
|
|
|
60.0
|
|
|
|
96.7
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an
integral part of the financial information in this
announcement.
Consolidated Statement of Comprehensive
Income
for the year ended 31 March 2024
|
2024
£m
|
2023
£m
|
Profit/(loss) for the year
|
|
|
Continuing operations
|
1,884.4
|
(95.6)
|
Discontinued operations
|
-
|
35.0
|
|
1,884.4
|
(60.6)
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
Items that will be reclassified subsequently to profit or
loss:
|
|
|
Net gains on cash flow
hedges
|
6.5
|
43.3
|
Transferred to assets and
liabilities on cash flow hedges
|
2.1
|
(12.7)
|
Taxation on cashflow
hedges
|
(0.3)
|
(8.1)
|
|
8.3
|
22.5
|
|
|
|
Share of other comprehensive
(loss)/income of joint ventures and associates, net of
taxation
|
(40.9)
|
342.4
|
Exchange difference on translation
of foreign operations
|
(66.6)
|
72.5
|
Gain/(loss) on net investment
hedge
|
30.9
|
(43.1)
|
|
(68.3)
|
394.3
|
|
|
|
Items that will not be reclassified to profit or
loss:
|
|
|
Actuarial loss on retirement benefit
schemes, net of taxation
|
(116.4)
|
(59.4)
|
Gains/(losses) on revaluation of
investments in equity instruments, net of taxation
|
3.5
|
(0.4)
|
|
(112.9)
|
(59.8)
|
|
|
|
Other comprehensive (loss)/gain, net of
taxation
|
(181.2)
|
334.5
|
|
|
|
Total comprehensive income for the year
|
1,703.2
|
273.9
|
|
|
|
Total comprehensive income for the year arises
from:
|
|
|
Continuing operations
|
1,703.2
|
238.9
|
Discontinued operations
|
|
|
Profit from discontinued
operations
|
-
|
35.0
|
Total comprehensive income from
discontinued operations
|
-
|
35.0
|
Total comprehensive income for the year
|
1,703.2
|
273.9
|
|
|
|
|
|
|
Attributable to:
|
|
|
Ordinary shareholders of the
parent
|
1,529.3
|
206.4
|
Non-controlling interests
|
100.8
|
28.7
|
Other equity holders
|
73.1
|
38.8
|
|
1,703.2
|
273.9
|
The accompanying notes are an
integral part of the financial information in this
announcement.
Consolidated Balance Sheet
as at 31 March 2024
|
Note
|
2024
£m
|
2023
(restated*)
£m
|
Assets
|
|
|
|
Property, plant and
equipment
|
|
16,611.5
|
15,395.9
|
Goodwill and other intangible
assets
|
|
2,324.6
|
1,960.3
|
Equity investments in joint ventures
and associates
|
|
1,963.2
|
1,975.7
|
Loans to joint ventures and
associates
|
|
1,352.9
|
1,115.4
|
Other investments
|
|
3.2
|
27.4
|
Other receivables
|
|
170.1
|
149.5
|
Derivative financial
assets
|
|
64.2
|
246.0
|
Retirement benefit assets
|
15
|
421.6
|
541.1
|
Non-current assets
|
|
22,911.3
|
21,411.3
|
|
|
|
|
Intangible assets
|
|
754.7
|
454.9
|
Inventories
|
|
343.0
|
394.9
|
Trade and other
receivables
|
|
2,654.1
|
3,245.1
|
Current tax asset
|
|
35.1
|
19.9
|
Cash and cash equivalents
|
|
1,035.9
|
891.8
|
Derivative financial
assets
|
|
536.1
|
759.2
|
Current assets
|
|
5,358.9
|
5,765.8
|
Total assets
|
|
28,270.2
|
27,177.1
|
|
|
|
|
Liabilities
|
|
|
|
Loans and other
borrowings
|
13
|
1,128.0
|
1,820.6
|
Trade and other payables
|
|
3,322.5
|
2,658.6
|
Current tax liabilities
|
|
9.3
|
9.1
|
Financial guarantee
liabilities
|
|
3.1
|
4.4
|
Provisions
|
|
52.7
|
29.4
|
Derivative financial
liabilities
|
|
345.2
|
1,021.0
|
Current liabilities
|
|
4,860.8
|
5,543.1
|
|
|
|
|
Loans and other
borrowings
|
13
|
8,005.7
|
7,239.3
|
Deferred tax liabilities
|
|
1,536.8
|
1,299.1
|
Trade and other payables
|
|
1,092.8
|
959.9
|
Financial guarantee
liabilities
|
|
36.4
|
66.5
|
Provisions
|
|
712.4
|
742.7
|
Derivative financial
liabilities
|
|
222.2
|
243.3
|
Non-current liabilities
|
|
11,606.3
|
10,550.8
|
Total liabilities
|
|
16,467.1
|
16,093.9
|
Net
assets
|
|
11,803.1
|
11,083.2
|
|
|
|
|
Equity
|
|
|
|
Share capital
|
14
|
548.1
|
547.0
|
Share premium
|
|
820.1
|
821.2
|
Capital redemption
reserve
|
|
52.6
|
52.6
|
Hedge reserve
|
|
407.6
|
441.2
|
Translation reserve
|
|
(2.6)
|
32.1
|
Retained earnings
|
|
7,345.0
|
6,657.6
|
Equity attributable to ordinary shareholders of the
parent
|
|
9,170.8
|
8,551.7
|
Hybrid equity
|
14
|
1,882.4
|
1,882.4
|
Attributable to non-controlling
interests
|
|
749.9
|
649.1
|
Total equity
|
|
11,803.1
|
11,083.2
|
*The comparative Consolidated Balance Sheet has been
restated. See notes 2.3.2 and 3.1.
The accompanying notes are an
integral part of the financial information in this
announcement.
Consolidated Statement of Changes in Equity
for the year ended 31 March 2024
|
Share
capital
|
Share
premium
|
Capital
redemption reserve
|
Hedge
reserve
|
Translation reserve
|
Retained
earnings
|
Total
attributable to ordinary shareholders
|
Hybrid
equity
|
Total
equity before non-controlling interests
|
Non-controlling interests
|
Total
equity
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
At 1 April 2023
(restated*)
|
547.0
|
821.2
|
52.6
|
441.2
|
32.1
|
6,657.6
|
8,551.7
|
1,882.4
|
10,434.1
|
649.1
|
11,083.2
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
-
|
-
|
-
|
-
|
-
|
1,710.5
|
1,710.5
|
73.1
|
1,783.6
|
100.8
|
1,884.4
|
Other comprehensive loss
|
-
|
-
|
-
|
(33.6)
|
(34.7)
|
(112.9)
|
(181.2)
|
-
|
(181.2)
|
-
|
(181.2)
|
Total comprehensive income for the
year
|
-
|
-
|
-
|
(33.6)
|
(34.7)
|
1,597.6
|
1,529.3
|
73.1
|
1,602.4
|
100.8
|
1,703.2
|
Dividends to shareholders
|
-
|
-
|
-
|
-
|
-
|
(956.4)
|
(956.4)
|
-
|
(956.4)
|
-
|
(956.4)
|
Scrip dividend related share
issue
|
1.1
|
(1.1)
|
-
|
-
|
-
|
38.6
|
38.6
|
-
|
38.6
|
-
|
38.6
|
Issue of treasury shares
|
-
|
-
|
-
|
-
|
-
|
9.2
|
9.2
|
-
|
9.2
|
-
|
9.2
|
Distributions to Hybrid equity
holders
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(73.1)
|
(73.1)
|
-
|
(73.1)
|
Credit in respect of employee share
awards
|
-
|
-
|
-
|
-
|
-
|
20.2
|
20.2
|
-
|
20.2
|
-
|
20.2
|
Investment in own shares
|
-
|
-
|
-
|
-
|
-
|
(21.8)
|
(21.8)
|
-
|
(21.8)
|
-
|
(21.8)
|
At 31 March 2024
|
548.1
|
820.1
|
52.6
|
407.6
|
(2.6)
|
7,345.0
|
9,170.8
|
1,882.4
|
11,053.2
|
749.9
|
11,803.1
|
*The comparative Statement of Changes in Equity has been
restated. See note 3.1.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2023
|
Share
capital
|
Share
premium
|
Capital
redemption reserve
|
Hedge
reserve
|
Translation reserve
|
Retained
earnings
|
Total
attributable to ordinary shareholders
|
Hybrid
equity
|
Total
equity before non-controlling interests
|
Non-controlling interests
|
Total
equity
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
At 1 April 2022
|
536.5
|
835.1
|
49.2
|
77.5
|
6.6
|
6,572.9
|
8,077.8
|
1,051.0
|
9,128.8
|
40.6
|
9,169.4
|
Impact of adoption of IFRS 17 (see
note 3.1)
|
-
|
-
|
-
|
-
|
-
|
(32.2)
|
(32.2)
|
-
|
(32.2)
|
-
|
(32.2)
|
At 1 April 2022
(restated*)
|
536.5
|
835.1
|
49.2
|
77.5
|
6.6
|
6,540.7
|
8,045.6
|
1,051.0
|
9,096.6
|
40.6
|
9,137.2
|
Profit for the year
|
-
|
-
|
-
|
-
|
-
|
(123.0)
|
(123.0)
|
38.8
|
(84.2)
|
23.6
|
(60.6)
|
Other comprehensive
income/(loss)
|
-
|
-
|
-
|
363.7
|
25.5
|
(59.8)
|
329.4
|
-
|
329.4
|
5.1
|
334.5
|
Total comprehensive income for the
year
|
-
|
-
|
-
|
363.7
|
25.5
|
(182.8)
|
206.4
|
38.8
|
245.2
|
28.7
|
273.9
|
Dividends to shareholders
|
-
|
-
|
-
|
-
|
-
|
(955.8)
|
(955.8)
|
-
|
(955.8)
|
-
|
(955.8)
|
Scrip dividend related share
issue
|
13.9
|
(13.9)
|
-
|
-
|
-
|
481.5
|
481.5
|
-
|
481.5
|
-
|
481.5
|
Issue of treasury shares
|
-
|
-
|
-
|
-
|
-
|
18.0
|
18.0
|
-
|
18.0
|
-
|
18.0
|
Distributions to Hybrid equity
holders
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(38.8)
|
(38.8)
|
-
|
(38.8)
|
Issue of Hybrid equity
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
831.4
|
831.4
|
-
|
831.4
|
Share buy back
|
(3.4)
|
-
|
3.4
|
-
|
-
|
(107.6)
|
(107.6)
|
-
|
(107.6)
|
-
|
(107.6)
|
Disposal of stake in SSEN
Transmission (see note 12)
|
-
|
-
|
-
|
-
|
-
|
868.3
|
868.3
|
-
|
868.3
|
579.8
|
1,448.1
|
Credit in respect of employee share
awards
|
-
|
-
|
-
|
-
|
-
|
18.7
|
18.7
|
-
|
18.7
|
-
|
18.7
|
Investment in own shares
|
-
|
-
|
-
|
-
|
-
|
(23.4)
|
(23.4)
|
-
|
(23.4)
|
-
|
(23.4)
|
At 31 March 2023
(restated*)
|
547.0
|
821.2
|
52.6
|
441.2
|
32.1
|
6,657.6
|
8,551.7
|
1,882.4
|
10,434.1
|
649.1
|
11,083.2
|
*The comparative Statement of Changes in Equity has been
restated. See note 3.1.
Consolidated Cash Flow Statement
for the year ended 31 March 2024
|
Note
|
2024
£m
|
2023
£m
|
Operating profit/(loss) - continuing
operations
|
6
|
2,608.2
|
(146.3)
|
Less share of profit of joint
ventures and associates
|
|
(114.1)
|
(662.3)
|
Operating profit/(loss) before jointly controlled entities
and associates
|
|
2,494.1
|
(808.6)
|
Pension service charges less
contributions paid
|
|
(9.5)
|
(19.2)
|
Movement on operating
derivatives
|
|
(443.4)
|
2,691.6
|
Depreciation, amortisation, write
downs and impairments
|
|
859.0
|
640.7
|
Impairment of joint venture
investment including shareholder loans
|
|
136.8
|
329.3
|
Charge in respect of employee share
awards (before tax)
|
|
20.2
|
18.7
|
Profit on disposal of assets and
businesses
|
12
|
(9.0)
|
(89.1)
|
Charge/(release) of
provisions
|
|
14.6
|
(114.9)
|
Credit in respect of financial
guarantees
|
|
(12.5)
|
-
|
Release of deferred
income
|
|
(13.0)
|
(13.9)
|
Cash generated from operations before working capital
movements
|
|
3,037.3
|
2,634.6
|
Decrease/(increase) in
inventories
|
|
39.6
|
(137.3)
|
Decrease/(increase) in
receivables
|
|
763.1
|
(996.0)
|
Increase in payables
|
|
243.0
|
166.7
|
Decrease in provisions
|
|
(33.9)
|
(15.3)
|
Cash generated from
operations
|
|
4,049.1
|
1,652.7
|
Dividends received from
investments
|
|
223.7
|
296.5
|
Interest paid
|
|
(67.0)
|
(199.9)
|
Taxes paid
|
|
(345.8)
|
(255.3)
|
Net
cash from operating activities
|
|
3,860.0
|
1,494.0
|
|
|
|
|
Purchase of property, plant and
equipment
|
6
|
(1,970.3)
|
(1,479.7)
|
Purchase of other intangible
assets
|
6
|
(542.2)
|
(336.4)
|
Receipt of government grant
income
|
6
|
93.4
|
-
|
Deferred income received
|
|
17.4
|
13.9
|
Proceeds from disposals
|
12
|
14.9
|
60.0
|
Purchase of businesses, joint
ventures and subsidiaries
|
|
(42.9)
|
(642.7)
|
Loans and equity provided to joint
ventures and associates
|
|
(443.6)
|
(621.8)
|
Loans and equity repaid by joint
ventures
|
|
14.6
|
61.4
|
Decrease/(increase) in other
investments
|
|
0.4
|
(19.1)
|
Net
cash from investing activities
|
|
(2,858.3)
|
(2,964.4)
|
|
|
|
|
Proceeds from issue of share
capital
|
14
|
9.2
|
18.0
|
Dividends paid to company's equity
holders
|
10
|
(917.8)
|
(474.3)
|
Share buy backs
|
|
-
|
(107.6)
|
Proceeds from divestments
|
|
-
|
1,448.1
|
Hybrid equity dividend
payments
|
14
|
(73.1)
|
(38.8)
|
Employee share awards share
purchase
|
14
|
(21.8)
|
(23.4)
|
Issue of hybrid
instruments
|
14
|
-
|
831.4
|
New borrowings
|
|
1,982.2
|
1,914.7
|
Repayment of borrowings
|
|
(1,842.7)
|
(2,242.5)
|
Settlement of cashflow
hedges
|
|
6.4
|
(12.7)
|
Net
cash from financing activities
|
|
(857.6)
|
1,312.9
|
|
|
|
|
Net
increase/(decrease) in cash and cash equivalents
|
|
144.1
|
(157.5)
|
|
|
|
|
Cash and cash equivalents at the start of
year
|
|
891.8
|
1,049.3
|
Net
increase/(decrease) in cash and cash equivalents
|
|
144.1
|
(157.5)
|
Cash and cash equivalents at the end of
year
|
|
1,035.9
|
891.8
|
The accompanying notes are an
integral part of the financial information in this
announcement.
Notes to the Summary FInancial Statements
for the year ended 31 March 2024
1. Financial
Information
The financial information set out
in this announcement does not constitute the Group's consolidated
financial statement for the years ended 31 March 2024 or 2023 but
is derived from those accounts. Consolidated financial statements
for the year ended 31 March 2023 were delivered to the Registrar of
Companies, and those for the year ended 31 March 2024 will be
delivered in due course. The auditors have reported on those
accounts and their reports were (i) unqualified; (ii) did not
include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report; and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006. This preliminary announcement was
authorised by the Board on 21 May 2024.
2.
Basis of preparation and
presentation
2.1 Basis of preparation
The financial information set out
in this announcement has been extracted from the consolidated
financial statements of SSE plc for the year ended 31 March 2024.
These consolidated financial statements were prepared under the
historical cost convention, excepting certain assets and
liabilities stated at fair value and the liabilities of the Group's
pension schemes which are measured using the projected unit credit
method, in conformity with the requirements of the Companies Act
2006 and in accordance with UK adopted International Accounting
Standards. This consolidated financial information has been
prepared on the basis of accounting policies consistent with those
applied in the consolidated financial statements for the year ended
31 March 2024 unless expressly stated otherwise.
The Directors consider that the
Group has adequate resources to continue in operational existence
for the period to 31 December 2025. The consolidated financial
statements are therefore prepared on a going concern basis with the
basis for that conclusion explained in the consolidated financial
statements at note A6.3.
The Summary Financial Statements
are presented in Pounds Sterling.
2.2 Basis of presentation
The Group applies the use of
adjusted accounting measures or alternative performance measures
("APMs") throughout these statements. These measures enable the
Directors to present the underlying performance of the Group and
its segments to the users of the statements in a consistent and
meaningful manner. The adjustments applied and certain terms such
as 'adjusted operating profit', 'adjusted earnings per share',
'adjusted investment and capital expenditure', 'adjusted EBITDA',
'adjusted investment, capital and acquisition expenditure' and
'adjusted net debt and hybrid capital' are not defined under IFRS
and are explained in more detail in note 4.
2.3 Changes to presentation and prior year
adjustments
The prior year comparatives at 31
March 2023 have been restated following the adoption of IFRS 17
'Insurance Contracts' ("IFRS 17") and the amendment to IAS 12
'Deferred Tax relating to Assets and Liabilities arising from a
Single Transaction' ("IAS 12").
2.3.1 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 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 2022. During the year to 31 March 2024, SSE Renewables
assumed responsibility for the development, delivery and operation
of battery storage and solar assets in Great Britain from SSE
Enterprise (formerly Distributed Energy), aligning that activity
with its international operations. In addition, the Building Energy
Management Systems ('BEMS') activity has been assumed by SSE
Business Energy. Accordingly, the result from the Group's battery
and solar business and BEMS will now be reported within SSE
Renewables and Energy Customers Solutions respectively. Comparative
segmental information in note 6 has been re-presented to reflect
the change to these segments. The impacts of the restatements are a
decrease to the adjusted operating profit of SSE Renewables (2023:
£18.2m), a decrease to the adjusted operating profit of SSE
Business Energy (2023: £2.2m) and a decrease to the adjusted
operating loss of SSE Enterprise (2023: £20.4m).
Additionally, adjusted capital expenditure has been re-presented
with an increase to SSE Renewables (2023: £74.0m), an increase to
SSE Business Energy (2023: £0.4m) and a decrease to SSE Enterprise
(2023: £74.4m). Revenue has been re-presented with an increase to
SSE Business Energy (2023: £46.0m) and a decrease to SSE Enterprise
(2023: £46.0m). Finally, note that there were two changes to the
names of segments in the year: 1) Distributed Energy was renamed
SSE Enterprise and 2) EPMI was renamed SSE Energy
Markets.
2.3.2 Derivative financial
liabilities prior year adjustment
A prior year adjustment has been
made to reflect the restatement of derivative financial liabilities
as a result of an incorrect classification split in the prior year.
The adjustment has been to present non-current derivative financial
liabilities as £243.3m (previously £1,021.0m) and current
derivative financial liabilities as £1,021.0m (previously £243.3m).
This adjustment has no impact on retained earnings, net assets or
adjusted performance measures of the Group, at any reporting
date.
2. Basis of
preparation and presentation (CONTINUED)
2.3.3 Investments presentation
change
In the current year the
classification of an investment of £24.1m has been reassessed and
reclassified from 'Other investments' to 'Equity investments in
joint ventures and associates'. The investment has been recognised
as an associate reflecting the Group's level of ownership and
influence over the investee; comparative amounts have not been
re-presented.
2.4 Changes to estimates
On 31 March 2024, the Group's
Thermal business unit reviewed the useful economic life of the
Peterhead, Keadby and Medway CCGT assets and extended their useful
lives to 2030 following the award of capacity mechanism contracts.
The change in useful economic life had no impact on the
depreciation charge for the year ended 31 March 2024, but will
reduce the depreciation charge for the year ending 31 March 2025 by
£16.4m.
3.
New accounting policies and reporting
changes
The basis of consolidation and
principal accounting policies applied in the preparation of these
Summary Financial Statements are set out below and included within
A1 Accompanying Information to the Group's consolidated Financial
Statements.
3.1 New standards, amendments and interpretations
effective or adopted by the Group
On 1 April 2023, the Group adopted
IFRS 17 and the amendments to IAS 12 on a modified retrospective
basis from the earliest period presented in these financial
statements.
The Group provides guarantees in
respect of certain activities of former subsidiaries and to certain
current joint venture investments. Prior to adoption of IFRS 17,
these contracts were designated as insurance contracts under IFRS 4
'Insurance Contracts' ('IFRS 4'). Under IFRS 4, existing accounting
practices were grandfathered and the contracts were treated as
contingent liabilities until such time as it became probable the
Group would be required to make payment to settle the obligation.
The adoption of IFRS 17 from 1 April 2022 resulted in a
reassessment of these contracts and the Group elected to apply the
valuation principles of IFRS 9 to these contracts. Adoption
resulted in the recognition of financial guarantee liabilities of
£54.9m; a £22.7m increase in equity investments in joint ventures
and associates; and a £32.2m adjustment to retained earnings. On 1
September 2022, the Group acquired a 50% joint venture investment
in Triton Power Holdings Limited ('Triton') and provided parent
company guarantees to Saltend Cogeneration Company Limited, a
subsidiary of Triton. In the comparative year to 31 March 2023, the
Group has therefore recognised a further £16.0m increase to the
Group's financial guarantee liabilities to reflect this guarantee
and a £16.0m increase to the Group's equity investment in
Triton.
During the current year to 31
March 2024, the Group recognised a net decrease in financial
guarantee liabilities of £31.4m, a reduction in the value of its
joint venture investments of £6.9m and a settlement of £12.0m
resulting in a net income statement credit of £12.5m, of which
£5.1m has been treated as exceptional. During the six month period
to 30 September 2023, the Group recognised an exceptional expense
of £50.5m in relation to guarantees provided to its former
subsidiary Enerveo Limited. During the second half of the financial
year the Group completed the reacquisition of Enerveo and reversed
the entries arising from the adoption of IFRS 17 that eliminate on
consolidation (see note 7 for further details).
The Group has identified that IFRS
17 impacts the results of its captive insurance subsidiary as it
issues insurance contracts, however only the subsidiary's
reinsurance contracts do not eliminate on consolidation. The
accounting for these contracts under IFRS 17 is immaterial to the
Group's consolidated financial statements.
The adoption of the amendments to
IAS 12 resulted in an increase of £50.1m (2023: £45.5m) to the
Group's gross deferred tax assets and gross deferred tax
liabilities recognised in relation to the Group's decommissioning
obligations and a reclassification of £79.5m of gross deferred tax
assets. Adoption had no impact on retained earnings or profits
recognised in presented periods.
In the year, the Group also
adopted the amendments to:
• IAS 1 'Presentation of Financial
Statements' and IFRS Practice Statement 2 'Making Materiality
Judgements' in relation to disclosure of accounting
policies;
• IAS 8 'Accounting Policies,
Changes in Accounting Estimates and Errors' in relation to the
definition of accounting estimates; and
• Pillar Two Model Rules
(Amendments to IAS 12) as issued on 23 May 2023, was substantively
enacted in the UK from 20 June 2023. The amendments to IAS 12
introduce a temporary mandatory relief from accounting for deferred
tax that arises from legislation implementing OECD Pillar Two. SSE
has applied the exception to recognising and disclosing information
about deferred tax assets and liabilities related to Pillar Two
income taxes.
Adoption of these other amendments
had no material impact on these Financial Statements. There were no
other standards, amendments to standards or interpretations
relevant to the Group's operations which were adopted during the
year.
3.2 New standards, amendments and interpretations
issued, but not yet adopted by the Group
On 9 April 2024, subsequent to the
balance sheet date, the IASB issued IFRS 18 'Presentation and
Disclosure in Financial Statements'. The Group will assess the
expected impact of the adoption of the standard during the
forthcoming year. A number of other standards, amendments and
interpretations have been issued but not yet adopted by the Group
within these financial statements, because application is not yet
mandatory or because UK adoption remains outstanding at the date
the financial statements were authorised for issue. These
amendments are not anticipated to have a material impact on the
Group's consolidated financial statements.
4.
Adjusted accounting
measures
The Group applies the use of
adjusted accounting measures or alternative performance measures
('APMs') throughout the Annual Report and Financial Statements.
These measures enable the Directors to present the underlying
performance of the Group and its segments to the users of the
statements in a consistent and meaningful manner. The adjustments
applied and certain terms such as 'adjusted operating profit',
'adjusted earnings per share', 'adjusted EBITDA', 'adjusted
investment and capital expenditure', 'adjusted investment, capital
and acquisition expenditure' and 'adjusted net debt and hybrid
capital' that are not defined under IFRS and are explained in more
detail below. In addition, the section 'Alternative Performance
Measures' at page 55 provides further context and explanation of
these terms.
4.1 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 to be the most useful for ordinary
shareholders of the Company and for other
stakeholders.
The performance of the reportable
segments is reported based on adjusted profit before interest and
tax ('adjusted operating profit'). This is reconciled to reported
profit before interest and tax by adding back exceptional items and
certain re-measurements (see note 4.2 below), depreciation and
amortisation expense on fair value uplifts, the share of operating
profit attributable to non-controlling interests, adjustments to
the retained Gas Production decommissioning provision and after the
removal of interest and taxation on profits from equity-accounted
joint ventures and associates.
The performance of the Group is
reported based on adjusted profit before tax which excludes
exceptional items and certain re-measurements (see note 4.2 below),
depreciation and amortisation expense on fair value uplifts, the
share of profit before tax attributable to non-controlling
interests, the net interest costs associated with defined benefit
schemes, adjustments to the retained Gas Production decommissioning
provision and taxation on profits from equity-accounted joint
ventures and associates. The interest charges or credits on defined
benefit schemes removed are non-cash and are subject to variation
based on actuarial valuations of scheme liabilities.
The Group also uses adjusted
earnings before interest, taxation, depreciation and amortisation
('adjusted EBITDA') as an alternative operating performance measure
which acts as a management proxy for cash generated from operating
activities. This does not take into account the rights and
obligations that SSE has in relation to its equity-accounted joint
ventures and associates. This measure excludes exceptional items
and certain re-measurements (see note 4.2 below), the depreciation
charged on fair value uplifts, the share of EBITDA attributable to
non-controlling interests, adjustments to the retained Gas
Production decommissioning provision, the net interest costs
associated with defined benefit schemes, depreciation and
amortisation from equity-accounted joint ventures and associates
and interest and taxation on profits from equity-accounted joint
ventures and associates. 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 off-balance sheet debt (see note
6.3.)
The Group's key performance
measure is adjusted earnings per share (EPS), which is based on
basic earnings per share before exceptional items and certain
re-measurements (see note 4.2 below), depreciation and amortisation
on fair value uplifts, adjustments to the retained Gas Production
decommissioning provision, the net interest costs/income associated
with defined benefit schemes and after the removal of deferred
taxation and other taxation items. Deferred taxation is excluded
from the Group's adjusted EPS because of the Group's significant
ongoing capital investment programme, which means that the deferred
tax is unlikely to reverse. Adjusted profit after tax is presented
on a basis consistent with adjusted EPS except for the
non-inclusion of payments to holders of hybrid equity.
The Summary Financial Statements
also include an 'adjusted net debt and hybrid capital' measure.
This presents financing information on the basis used for internal
liquidity risk management. This measure excludes obligations due
under lease arrangements and the share of net debt attributable to
non-controlling interests, and includes cash held and posted as
collateral on commodity trading exchanges, and other short term
loans. The measure represents the capital owed to investors,
lenders and equity holders other than the ordinary shareholders. As
with 'adjusted earnings per share', this measure is considered to
be of relevance to the ordinary shareholders of the Group as well
as other stakeholders and interested parties.
Finally, the financial statements
include an 'adjusted investment and capital expenditure' and an
'adjusted investment, capital and acquisition expenditure' measure.
These metrics represent the capital invested by the Group in
projects that are anticipated to provide a return on investment
over future years or which otherwise support Group operations and
are consistent with internally applied metrics. They therefore
include capital additions to property, plant and equipment and
intangible assets and also the Group's direct funding of joint
venture and associates capital projects. The Group has considered
it appropriate to report these values both internally and
externally in this manner due to its use of equity-accounted
investment vehicles to grow the Group's asset base and to highlight
where the Group is providing funding to the vehicle through either
loans or equity. The Group does not include project funded capital
additions in these metrics, nor does it include other capital
invested in joint ventures and associates. Where initial capital
funding of an equity accounted joint venture is refunded, these
refunds are deducted from the metrics in the year the refund is
received. In addition, the Group excludes from this metric
additions to its property, plant and equipment funded by Customer
Contributions and additions to intangible assets associated with
Allowances and Certificates. The Group also excludes the share of
investment and capital expenditure attributable to non-controlling
interests in controlled but not wholly owned subsidiaries, disposed
or impaired additions and refinancing proceeds and
refunds.
4. adjusted
accounting measures (CONTINUED)
4.1 Adjusted measures
(continued)
The 'adjusted investment, capital
and acquisition expenditure' measure also includes cash
consideration paid by the Group in business combinations which
contribute to growth of the Group's capital asset base and is
considered to be relevant metric in context of the Group's Net Zero
Acceleration Programme Plus. As with 'adjusted earnings per share',
these measures are considered to be of relevance to management and
to the ordinary shareholders of the Group as well as to other
stakeholders and interested parties.
Reconciliations from reported
measures to adjusted measures along with further description of the
rationale for those adjustments are included in the "Adjusted
Performance Measures" section at pages 55 to 62 before the Summary
Financial Statements.
4.2 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.
Examples of items that may be
considered exceptional include material asset, investment or
business impairment charges; reversals of historic exceptional
impairments; certain business restructuring and reorganisation
costs; significant realised gains or losses on disposal; unrealised
fair value adjustments on acquisition or disposals; and provisions
in relation to significant disputes and claims.
The Group operates a policy
framework for establishing whether items should be considered to be
exceptional. This framework, which is reviewed annually, is based
on the materiality of the item, by reference to the Group's key
performance measure of adjusted earnings per share. This framework
estimates that any qualifying item greater than £40.0m (2023:
£40.0m) will be considered exceptional, with a potentially lower
threshold applied to strategic restructuring of activities or
discontinued operations, which will respectively be considered on a
case by case basis or will always be treated as exceptional. The
only exception to this threshold is for gains or losses on
disposal, or divestment of early-stage SSE Renewables international
or offshore wind farm development projects within SSE Renewables,
which are considered non-exceptional in line with the Group's
strategy to generate recurring gains from developer
divestments. Where a gain arises on a non-cash transaction,
the gain is treated as exceptional.
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 remeasurements on stocks of commodities
held at the balance sheet date; or movements in fair valuation of
contracts for difference not designated as government grants. The
amount recorded in the adjusted results for these contacts is the
amount settled in the year as disclosed in note 16.
This excludes commodity contracts
not treated as financial instruments under IFRS 9 where the
contracts are held for the Group's own use requirements; the fair
value of these contracts is not recorded and the value associated
with the contract is not recognised until the underlying commodity
is delivered.
The impact of changes in
Corporation Tax rates on deferred tax balances are also included
within certain remeasurements.
4.3 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.
5.
Accounting judgements and estimation
uncertainty
In the process of applying the
Group's accounting policies, management is necessarily required 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, with the
most significant financial judgement areas as specifically
considered by the Audit Committee highlighted
separately.
The Group has made no changes to
its significant financial judgement areas during the year. In the
year ended 31 March 2024 the Group completed the implementation and
migration of customers to a new billing system within the Group's
SSE Business Energy segment. The migration of customers late in the
financial year has resulted in the level of judgement applied in
the SSE Business Energy revenue accrual increasing year on year
(see 5.1 (iii) below).
5.
Accounting judgements and estimation uncertainty
(continued)
5.1 Significant financial judgements and
estimation uncertainties
The preparation of the Group's
Summary Financial Statements has specifically considered the
following significant financial judgements, some of which are also
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, specific
property, plant and equipment and investment assets to determine
whether any impairments or reversal of impairments 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 or fair value less cost to sell assessments, if more
appropriate. As well as its goodwill balances, the specific assets
under review in the year ended 31 March 2024 are intangible
development assets and specific property, plant and equipment
assets related to gas storage and thermal power generation. In
addition, the Group performed an impairment review over the
carrying value of its equity investments in Neos Networks Limited
and Triton Power Holdings Limited.
In conducting its reviews, the
Group makes judgements and estimates in considering both the level
of cash generating unit (CGU) at which common assets such as
goodwill are assessed against, as well as the estimates and
assumptions behind the calculation of recoverable amount of the
respective assets or CGUs.
Changes to the estimates and
assumptions on factors such as regulation and legislation changes
(including the Electricity Generator Levy and climate change
related regulation), power, gas, carbon and other commodity prices,
volatility of gas prices, plant running regimes and load factors,
discount rates and other inputs could impact the assessed
recoverable value of assets and CGUs and consequently impact the
Group's income statement and balance sheet.
(ii) Retirement benefit obligations -
estimation uncertainty
The assumptions in relation to the
cost of providing post-retirement benefits during the year 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 and key assumptions used, the resulting movements in
obligations and the sensitivity of key assumptions to the
obligation at note 23 in the Group's consolidated financial
statements.
(iii) Revenue recognition - Customers
unbilled supply of energy - estimation
uncertainty
Revenue from energy supply
activities undertaken by the SSE Business Energy and SSE 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 year 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
aggregated estimated customer consumption, taking account of
various factors including tariffs, consumption patterns, customer
mix, metering data, operational issues relating to the billings
process and externally notified aggregated volumes supplied to
customers from national settlements bodies. During the year, the
Group's SSE Business Energy segment completed the implementation of
a new billing system which included the migration of customer
accounts and balances. Due to the timing of the data migration,
which occurred in the second half of the financial year for the
majority of customers, the level of unbilled sales and hence the
level of judgement applied in determining the sales accrual for
these customers is higher than in previous years. The Group has
recognised a provision against this accrual to reflect that
customer billing delays may result in poorer collection
performance.
In recent years the impact of
government-backed customer support schemes has been material to the
judgement applied. However, in the current year the level of
judgement required is significantly less material.
This unbilled estimation is
subject to an internal corroboration process which compares
calculated unbilled volumes to a theoretical 'perfect billing'
benchmark measure of unbilled volumes (in GWh and millions of
therms) derived from historical consumption patterns and aggregated
metering data used in industry reconciliation processes.
Furthermore, unbilled revenue is compared to billings in the period
between the balance sheet date and the finalisation of the
financial statements which has provided evidence of a catch-up of
post implementation billings and hence support to the accrual
recognised.
Given the requirement of
management to apply judgement particularly in the current year in
relation to the impact of the data and process migration referred
to above, unbilled revenue is considered a significant estimate
made by management in preparing the financial statements. A change
in the assumptions underpinning the unbilled calculation would have
an impact on the amount of revenue recognised in any given
period.
(iv) Valuation of other receivables -
financial judgement and estimation uncertainty
The Group holds a £100m loan note
due from Ovo Energy Limited following the disposal of SSE Energy
Services on 15 January 2020. The loan is repayable in full by 31
December 2029, carries interest at 13.25% and is presented
cumulative of accrued interest payments, discounted at 13.25%. At
31 March 2024, the carrying value (net of expected credit loss
provision of £1.6m (2023: £1.5m)) is £170.1m (2023:
£149.5m).
5.
ACCOUNTING JUDGEMENTS AND ESTIMATION UNCERTAINTY
(CONTINUED)
5.1 Significant financial judgements and estimation
uncertainties (continued)
(iv) Valuation of other receivables -
financial judgement and estimation uncertainty
(continued)
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. The Group's assessment of the
recoverability of the loan note is considered a significant
financial judgement. The Group has taken appropriate steps to
assess all available information in respect of the recoverability
of the loan note. Procedures included reviewing recent financial
information of Ovo Energy Limited, including the 31 December 2022
statutory financial statements; and discussions with Ovo
management. While the carrying value is considered to be
appropriate, changes in economic conditions could lead to a change
in the expected credit loss incurred by the Group in future
periods.
(v) Impact of climate change and the
transition to net zero - financial judgement and estimation
uncertainty
Climate change and the transition
to net zero have been considered in the preparation of these
Summary Financial Statements. Where relevant, assumptions have been
applied that are consistent to a Paris-aligned 1.5OC
2050 net zero pathway. The Group has a clearly articulated Net Zero
Acceleration Programme Plus ('NZAP Plus') to lead in the UK's
transition to net zero and aligns its investment plans and business
activities to that strategy. These plans are supported by the
Group's Green Bond framework under which the Group's sixth and
seventh green bonds were issued during the year. The proceeds of
these green bonds were allocated to fund Renewable wind farm and
Transmission network projects.
The impact of future climate
change regulation could have a material impact on the currently
reported amounts of the Group's assets and liabilities. In
preparing these Summary Financial Statements, the following climate
change related risks have been considered:
Valuation of property, plant and equipment, and impairment
assessment of goodwill
In the medium term, the transition
to net zero may result in regulation restricting electricity
generation from unabated gas fired power stations. The Group's view
is that flexible generation capacity, such as the Group's fleet of
CCGT power stations, will be an essential part of the net zero
transition in order to provide security of supply to a market
increasingly dependent upon renewable sources, which are inherently
intermittent. The majority of the Group's GB CCGT fleet is nearing
the end of its economic life and it is not currently expected that
regulation to require abatement would be introduced before the
planned closure of most of those power stations. Of the net book
value held at 31 March 2024, only four assets are forecast to
continue to operate beyond 2030 being: Great Island; Keadby 2;
Marchwood (which is operated by SSE under a lease); and Saltend
Power Station within the Triton joint venture. The Group has
assessed that the useful economic lives of Peterhead, Keadby and
Medway power stations now extend to March 2030, and these changes
in end of life assumptions have been reflected in the annual
impairment process. The Group's view is that Great Island will
continue to be essential to providing security of supply in the
Irish electricity market. Keadby 2 commenced commercial operation
on 15 March 2023 and has an efficiency of around 63% making it the
most efficient plant of its type in the UK and Europe. Work is also
underway to explore how to decarbonise Keadby 2 further with the
potential to blend hydrogen into the plant. Marchwood is a 50%
equity accounted joint venture and is considered one of the most
efficient CCGTs in the UK. Saltend was acquired as part of Triton
Power 50% equity accounted joint venture and supports the long-term
decarbonisation of the UK's power system, and also contributes to
security of supply and grid stability. Initial steps are underway
at Saltend, targeting abatement by 2027 through blending up to 30%
of low-carbon hydrogen. Therefore, the Group considers that other
assets operating in the market would be more likely to close before
Keadby 2, Marchwood and Saltend and the plants will continue to be
required to balance the UK electricity market beyond 2030. As a
result, the useful economic lives of these assets have not been
shortened when preparing the 31 March 2024 financial statements.
The Group assesses the useful economic life of its property, plant
and equipment assets annually.
A significant increase in
renewable generation capacity in the Group's core markets in the UK
and Ireland could potentially result in an oversupply of renewable
electricity at a point in the future, which would lead to a
consequential decrease in the power price achievable for the
Group's wind generation assets. The Group has not assessed that
this constitutes an indicator of impairment at 31 March 2024 as the
Group's baseline investment case models assume a centrally approved
volume of new build in these markets over the life of the existing
assets. The Group's policy is to test the goodwill balances
associated with its wind generation portfolio for impairment on an
annual basis in line with the requirements of IAS 36 'Impairment of
Assets'. Through this impairment assessment, a sensitivity to power
price, which may arise in a market with significant new build, was
modelled. This scenario indicated that, despite a modelled 10%
reduction in power price, there remained significant headroom on
the carrying value in the Group's generating wind
assets.
Changes to weather patterns
resulting from global warming have also been considered as a
potential risk to future returns from the Group's wind and hydro
assets. Changes to weather patterns could result in calmer, drier
weather patterns, which would reduce volumes achievable for the
Group's wind and hydro generation assets (although noting that this
would likely lead to capacity constraints and hence higher prices).
This has not been assessed as an indicator of impairment for
operating assets in the UK and Ireland at 31 March 2024, as there
is no currently observable evidence to support that scenario
directly. The Group has performed a sensitivity to its impairment
modelling and has assessed that a 15% reduction in achievable
volume would result in significant headroom on the carrying value
of the UK and Ireland assets at 31 March 2024. The TCFD physical
risk scenarios modelled a 4% to 8% change in average mean wind
speeds in the longer term across the wind portfolio, consistent
with the impairment sensitivity performed.
5.
Accounting judgements and estimation uncertainty
(continued)
5.1 Significant financial judgements and estimation
uncertainties (continued)
(v) Impact of climate change and the
transition to net zero - financial judgement and estimation
uncertainty (continued)
Valuations of decommissioning provisions
The Group holds decommissioning
provisions for its Renewable and Thermal generation assets and has
retained a 60% share for the decommissioning of its disposed Gas
Production business. As noted above, the Group's view at 31 March
2024 is that climate change regulation will not bring forward the
closure dates of its CCGT fleet, many of which are expected to
close before 2030. Similarly, it is expected that fundamental
changes to weather patterns, or the impact of new wind generation
capacity will not bring forward the decommissioning of the Group's
wind farm portfolio.
The discounted share of the Gas
Production provision is £219.7m (2023: £201.4m). At 31 March 2024,
the impact of discounting of this retained provision is £68.3m
(2023: £64.5m), which is expected to be incurred across the period
to 31 March 2040. If the decommissioning activity was accelerated
due to changes in legislation, the costs of unwinding the
discounting of the provision would be recognised
earlier.
Defined Benefit scheme assets
The Group holds defined benefit
pension scheme assets at 31 March 2024 which could be impacted by
climate-related risks. The Trustees of the schemes have a long term
investment strategy that seeks to reduce investment risk as and
when appropriate and takes into consideration the impact of
climate-related risk.
Going concern and viability statement
The implications of near term
climate-related risks have been considered in the Group's going
concern assessment and viability statement assessment.
5.2 Other accounting
judgements - changes from prior year
On 31 March 2024, the Group's
Thermal business unit reviewed the useful economic life of the
Peterhead, Keadby and Medway CCGT assets and extended their useful
lives to 2030 following the award of capacity mechanism contracts.
The change in useful economic life has been applied prospectively
and had no impact on the results for the year ended 31 March 2024.
The depreciation charge for the year ending 31 March 2025 will be
reduced by £16.4m. There were no other changes to accounting
judgements and estimation uncertainties during the year.
5.3 Other areas of
estimation uncertainty
(i) Tax
provisioning
In the financial statements to 31
March 2024, the Group has no provision for uncertain tax positions
included in current tax liabilities (2023: £nil).
The Group applies IFRIC 23
'Uncertainty over Income Tax Treatments' in respect of uncertain
tax positions. 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 by external tax advisors. These estimates
are inherently judgemental and could change substantially over time
as disputes progress 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 ultimately paid will be different from the amounts
provided.
(ii) Decommissioning
costs
The calculation of the Group's
decommissioning provisions involves the estimation of quantum and
timing of cash flows to settle the obligation. The Group engages
independent valuation experts to estimate the cost of
decommissioning its Renewable, Thermal and Gas Storage assets every
three years based on current technology and prices. The last
independent assessment for the majority of the Group's Renewable
and Thermal generation assets was performed in the year to 31 March
2022. The last formal assessment for Gas Storage assets was
performed in the year to 31 March 2023. Retained decommissioning
costs in relation to the disposed Gas Production business are
periodically agreed with the field operators and reflect the latest
expected economic production lives of the fields.
The dates for settlement of future
decommissioning costs are uncertain, particularly for the disposed
Gas Production business where reassessment of gas and liquids
reserves and fluctuations in commodity prices can lengthen or
shorten the field life.
Further detail on the assumptions
applied, including expected decommissioning dates, and movement in
decommissioning costs during the year are disclosed at note 20 in
the Group's consolidated financial statements.
(iii) Valuation of SSE Business
Energy trade receivables
During the financial year, the
Group's SSE Business Energy segment completed the implementation of
a new billing system which included the migration of customer
accounts and balances. The migration has resulted in delays to
billings (as noted in note 5.1(iii) above) and delays to collection
activities, meaning that aged debt balances and provisions
recognised against these balances are higher than would normally be
expected. The Group's processes for recognising bad debt provisions
are based on historic collection performance adjusted for expected
future improvement or decline against this performance. In the
current year, an estimate of expected deterioration in debt
collection due to billing and collection delays has been included
within the recognised provision.
6.
Segmental information
The changes to the Group's
segments in the year are explained in note 2 and includes the
realignment of the activities of the Distributed Energy (now SSE
Enterprise) business. Comparative information has been re-presented
to reflect the change to these segments. The Group's "Corporate
unallocated" segment contains the Group's corporate central costs
which are not allocated to individual segments and includes the
contribution from the Group's joint venture investment in Neos
Networks Limited. Any impact of the acquisition of Enerveo Limited
on 22 March 2024 has been recognised within "Corporate
unallocated".
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. Revenue earned
from constructing, maintaining and renovating our transmission
network is determined in accordance with the regulatory licence,
based on an Ofgem approved revenue model and is recognised as
charged to National Grid. The revenue earned from other
transmission services such as generator plant connections is
recognised in line with delivery of that service over the expected
contractual period and at the contracted rate. On 25 November 2022
the Group sold a 25.0% non-controlling interest in this business to
the Ontario Teachers' Pension Plan.
|
Distribution
|
SSEN Distribution
|
The economically regulated lower
voltage distribution of electricity to customer premises in the
North of Scotland and the South of England. Revenue earned from
delivery of electricity supply to customers is recognised based on
the volume of electricity distributed to those customers and the
set customer tariff. The revenue earned from other
distribution services such as domestic customer connections is
recognised in line with delivery of that service over the expected
contractual period and at the contracted rate.
|
Renewables
|
SSE Renewables
|
The generation of electricity from
renewable sources, such as onshore and offshore windfarms and run
of river and pumped storage hydro assets in the UK and Ireland and
the development of similar wind assets in Japan and Southern Europe
and the development of wind, solar and battery opportunities.
Revenue from physical generation of electricity in Great Britain is
sold to SSE Energy Markets and in Ireland is sold to SSE Airtricity
and is recognised as generated, based on the contracted or spot
price at the time of delivery. Revenue from national support
schemes (such as Renewable Obligation Certificates or the Capacity
Market in Great Britain or REFIT in Ireland) may either be
recognised in line with electricity being physically generated or
over the contractual period, depending on the underlying
performance obligation.
During the year ended 31 March 2024,
Renewables has taken responsibility for the development, delivery
and operation for battery storage and solar assets in Great Britain
from SSE Enterprise, aligning that activity with its international
operations.
|
Thermal
|
SSE Thermal
|
The generation of electricity from
thermal plants including CCGTs and the Group's interests in
multifuel assets in the UK and Ireland. Revenue from physical
generation of electricity in Great Britain and Ireland is sold to
SSE Energy Markets and is recognised as generated, based on the
contract or spot price at the time of delivery. Revenue from
national support schemes (such as the Capacity Market) and
ancillary generation services may either be recognised in line with
electricity being physically generated or over the contractual
period, depending on the underlying performance
obligation.
|
Gas Storage
|
The operation of gas storage
facilities in Great Britain, utilising capacity to optimise trading
opportunity associated with the assets. Contribution arising
from trading activities is recognised as realised based on the
executed trades or withdrawal of gas from caverns.
|
Energy Customer Solutions
|
SSE Business Energy
|
The supply of electricity and gas to
business customers in Great Britain and smart buildings (BEMS)
activity. Revenue earned from the supply of energy is recognised in
line with the volume delivered to the customer, based on actual and
estimated volumes, and reflecting the applicable customer tariff
after deductions or discounts.
|
SSE Airtricity
|
The supply of electricity, gas and
energy related services to residential and business customers in
the Republic of Ireland and Northern Ireland. Revenue earned
from the supply of energy is recognised in line with the volume
delivered to the customer, based on actual and estimated volumes,
and reflecting the applicable customer tariff after deductions or
discounts. Revenue earned from energy related services may
either be recognised over the expected contractual period or
following performance of the service, depending on the underlying
performance obligation.
|
6. Segmental information
(continued)
Business Area
|
Reported Segments
|
Description
|
SSE
Enterprise
|
SSE Enterprise
|
The provision of low carbon energy
solutions to customers; behind-the-meter solar and battery
solutions, EV charging activities, private electric networks and
heat and cooling networks. As noted above, during the year, the
front of the meter battery storage and solar asset activity in
Great Britain was transferred to SSE Renewables and smart buildings
(BEMS) activity was transferred to SSE Business Energy.
|
SSE
Energy Markets
|
SSE Energy Markets
|
The provision of a route to market
for the Group's Renewable and Thermal generation businesses and
commodity procurement for the Group's energy supply businesses in
line with the Group's stated hedging policies. Revenue from
physical sales of electricity, gas and other commodities produced
by SSE is recognised as supplied to either the national settlements
body or the customer, based on either the spot price at the time of
delivery or trade price where that trade is eligible for "own use"
designation. The sale of commodity optimisation trades is presented
net in cost of sales alongside purchase commodity optimisation
trades.
|
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,
share of profits attributable to non-controlling interests, the net
interest costs/income associated with defined benefit pension
schemes, adjustments to the retained Gas Production
decommissioning, the impact of depreciation on fair value uplifts
and after the removal of taxation and interest on profits from
joint ventures and associates.
Analysis of revenue, operating
profit, capital expenditure and earnings before interest, taxation,
depreciation and amortisation ('EBITDA') by segment is provided on
the following pages. All revenue and profit before taxation arise
from operations within the UK and Ireland.
6. Segmental information
(continued)
6.1 Revenue by segment
|
Reported
revenue
|
Inter-segment revenue
(i)
|
Segment
revenue
|
Reported
revenue
|
Inter-
segment
revenue (i)
|
Segment
revenue
|
|
2024
£m
|
2024
£m
|
2024
£m
|
2023
(restated*)
£m
|
2023
£m
|
2023
(restated*)
£m
|
Continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SSEN Transmission
|
885.2
|
-
|
885.2
|
656.1
|
-
|
656.1
|
SSEN Distribution
|
1,004.0
|
45.9
|
1,049.9
|
1,102.7
|
81.0
|
1,183.7
|
|
|
|
|
|
|
|
SSE
Renewables
|
335.5
|
876.3
|
1,211.8
|
334.8
|
602.7
|
937.5
|
|
|
|
|
|
|
|
SSE
Thermal
|
571.0
|
3,123.9
|
3,694.9
|
740.4
|
3,863.8
|
4,604.2
|
Gas
storage
|
11.2
|
2,948.4
|
2,959.6
|
12.2
|
5,147.5
|
5,159.7
|
|
|
|
|
|
|
|
Energy Customer Solutions
|
|
|
|
|
|
|
SSE Business Energy
|
3,183.2
|
48.5
|
3,231.7
|
3,359.5
|
59.4
|
3,418.9
|
SSE Airtricity
|
2,021.2
|
170.0
|
2,191.2
|
1,776.9
|
233.1
|
2,010.0
|
|
|
|
|
|
|
|
SSE
Enterprise
|
91.9
|
23.6
|
115.5
|
93.1
|
20.1
|
113.2
|
SSE Energy Markets:
|
|
|
|
|
|
|
Gross trading
|
15,074.3
|
7,951.4
|
23,025.7
|
24,700.6
|
11,972.4
|
36,673.0
|
Optimisation trades
|
(12,785.1)
|
(2,674.2)
|
(15,459.3)
|
(20,351.8)
|
(937.3)
|
(21,289.1)
|
SSE
Energy Markets
|
2,289.2
|
5,277.2
|
7,566.4
|
4,348.8
|
11,035.1
|
15,383.9
|
Corporate unallocated
|
64.8
|
250.9
|
315.7
|
66.2
|
232.1
|
298.3
|
Total SSE Group
|
10,457.2
|
12,764.7
|
23,221.9
|
12,490.7
|
21,274.8
|
33,765.5
|
*The comparative segment revenue has been restated. See note
2.3.1.
(i)
Significant inter-segment revenue is derived from the sale of power
and stored gas from SSE Renewables, SSE Thermal, Gas Storage and
SSE Enterprise to SSE Energy Markets; use of system income received
by SSEN Distribution from SSE Business Energy; SSE Business Energy
provides internal heat and light power supplies to other Group
companies; SSE Energy Markets provides power, gas and other
commodities to SSE Business Energy and SSE Airtricity; and
Corporate unallocated (SSE Services and related parties) provides
corporate and infrastructure services to all segments as well as
third parties. All are provided at arm's length.
Revenue by geographical location
on continuing operations is as follows:
|
|
2024
|
2023
|
|
|
£m
|
£m
|
UK
|
|
8,797.6
|
10,899.8
|
Ireland
|
|
1,659.6
|
1,590.9
|
|
|
10,457.2
|
12,490.7
|
6. Segmental information
(continued)
6.2 Operating profit/(loss) by
segment
|
2024
|
|
Adjusted operating profit
reported to the Board
|
Depreciation on fair value
uplifts
|
Joint venture/ Associate
share of interest and tax
|
Adjustments to Gas
Production decommissioning provision
|
Non-controlling
interests
|
Before exceptional items and
certain re-measurements
|
Exceptional items and
certain re-measurements
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SSEN Transmission
|
419.3
|
-
|
-
|
-
|
139.8
|
559.1
|
-
|
559.1
|
|
SSEN Distribution
|
272.1
|
-
|
-
|
-
|
-
|
272.1
|
-
|
272.1
|
|
SSE
Renewables
|
833.1
|
(19.0)
|
(145.7)
|
-
|
(0.7)
|
667.7
|
(37.4)
|
630.3
|
|
SSE
Thermal
|
736.1
|
-
|
(13.1)
|
-
|
-
|
723.0
|
(78.6)
|
644.4
|
|
Gas
Storage
|
82.8
|
-
|
-
|
-
|
-
|
82.8
|
(125.0)
|
(42.2)
|
|
Energy Customer Solutions
|
|
|
|
|
|
|
|
|
|
SSE Business Energy
|
95.8
|
-
|
-
|
-
|
-
|
95.8
|
-
|
95.8
|
|
SSE
Airtricity
|
95.0
|
-
|
(0.5)
|
-
|
-
|
94.5
|
-
|
94.5
|
|
SSE
Enterprise
|
(25.6)
|
-
|
-
|
-
|
-
|
(25.6)
|
-
|
(25.6)
|
|
SSE
Energy Markets
|
38.9
|
-
|
-
|
-
|
-
|
38.9
|
551.1
|
590.0
|
|
Corporate
|
|
|
|
|
|
|
|
|
|
Corporate unallocated
|
(88.8)
|
-
|
-
|
(9.9)
|
-
|
(98.7)
|
4.6
|
(94.1)
|
|
Neos Networks
|
(32.3)
|
-
|
(10.2)
|
-
|
-
|
(42.5)
|
(73.6)
|
(116.1)
|
|
Total SSE Group
|
2,426.4
|
(19.0)
|
(169.5)
|
(9.9)
|
139.1
|
2,367.1
|
241.1
|
2,608.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6. Segmental information
(continued)
6.2 Operating profit/(loss) by segment
(continued)
|
2023
(restated*)
|
|
Adjusted operating profit
reported to the Board
|
Depreciation on fair value
uplifts
|
Joint venture/ Associate
share of interest and tax
|
Adjustments to Gas
Production decommissioning provision
|
Non-controlling
interests
|
Before exceptional items and
certain re-measurements
|
Exceptional items and
certain re-measurements
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SSEN Transmission
|
372.7
|
-
|
-
|
-
|
32.8
|
405.5
|
-
|
405.5
|
|
SSEN Distribution
|
382.4
|
-
|
-
|
-
|
-
|
382.4
|
-
|
382.4
|
|
SSE Renewables
|
561.8
|
(18.8)
|
(103.0)
|
-
|
(1.9)
|
438.1
|
(10.0)
|
428.1
|
|
SSE Thermal
|
1,031.9
|
(10.0)
|
(60.4)
|
-
|
-
|
961.5
|
128.0
|
1,089.5
|
|
Gas Storage
|
212.5
|
-
|
-
|
-
|
-
|
212.5
|
36.7
|
249.2
|
|
Energy Customer Solutions
|
|
|
|
|
|
|
|
|
|
SSE Business Energy
|
15.7
|
-
|
-
|
-
|
-
|
15.7
|
-
|
15.7
|
|
SSE
Airtricity
|
5.6
|
-
|
(0.4)
|
-
|
-
|
5.2
|
-
|
5.2
|
|
SSE Enterprise
|
(7.0)
|
-
|
-
|
-
|
-
|
(7.0)
|
(6.1)
|
(13.1)
|
|
SSE Energy Markets
|
80.4
|
-
|
-
|
-
|
-
|
80.4
|
(2,706.4)
|
(2,626.0)
|
|
Corporate
|
|
|
|
|
|
|
|
|
|
Corporate unallocated
|
(87.0)
|
-
|
-
|
50.5
|
-
|
(36.5)
|
9.7
|
(26.8)
|
|
Neos Networks
|
(39.8)
|
-
|
(10.3)
|
-
|
-
|
(50.1)
|
(5.9)
|
(56.0)
|
|
Total SSE Group
|
2,529.2
|
(28.8)
|
(174.1)
|
50.5
|
30.9
|
2,407.7
|
(2,554.0)
|
(146.3)
|
|
|
|
|
|
|
|
|
|
|
|
|
*The comparative operating profit by segment information has
been restated. See note 2.3.1.
6. Segmental information
(continued)
6.3 Earnings before interest, taxation,
depreciation and amortisation ('EBITDA')
|
|
2024
|
|
Adjusted operating profit
reported to the Board
(note 6.2)
|
Depreciation on fair value
uplifts
|
Depreciation/
impairment/
amortisation before exceptional charges
|
Joint Venture / Associate
share of depreciation and amortisation
|
Release of deferred
income
|
Share of non-controlling
interest depreciation and amortisation
|
Adjusted
EBITDA
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Continuing operations
|
|
|
|
|
|
|
|
SSEN Transmission
|
419.3
|
-
|
130.1
|
-
|
(2.0)
|
(32.5)
|
514.9
|
SSEN Distribution
|
272.1
|
-
|
194.8
|
-
|
(9.9)
|
-
|
457.0
|
SSE
Renewables
|
833.1
|
(19.0)
|
171.9
|
121.6
|
-
|
-
|
1,107.6
|
SSE
Thermal
|
736.1
|
-
|
104.0
|
40.6
|
-
|
-
|
880.7
|
Gas
Storage
|
82.8
|
-
|
12.4
|
-
|
-
|
-
|
95.2
|
Energy Customer Solutions
|
|
|
|
|
|
|
|
SSE Business Energy
|
95.8
|
-
|
9.1
|
-
|
-
|
-
|
104.9
|
SSE Airtricity
|
95.0
|
-
|
5.1
|
-
|
-
|
-
|
100.1
|
SSE
Enterprise
|
(25.6)
|
-
|
10.2
|
-
|
(0.5)
|
-
|
(15.9)
|
SSE
Energy Markets
|
38.9
|
-
|
5.1
|
-
|
-
|
-
|
44.0
|
Corporate
|
|
|
|
|
|
|
|
|
Corporate unallocated
|
(88.8)
|
-
|
82.2
|
-
|
(0.6)
|
-
|
(7.2)
|
Neos Networks
|
(32.3)
|
-
|
-
|
46.6
|
-
|
-
|
14.3
|
Total SSE Group
|
2,426.4
|
(19.0)
|
724.9
|
208.8
|
(13.0)
|
(32.5)
|
3,295.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note that the Group's 'Net Debt to
EBITDA' metric is derived after removing the proportionate EBITDA
from the following debt-financed Beatrice and Seagreen joint
ventures. This adjustment is £179.6m (2023: £146.9m) resulting in
EBITDA on continuing operations for inclusion in the Debt to EBITDA
metric of £3,116.0m (2023: £3,235.2m).
For 31 March 2024 the £724.9m
(2023: £704.2m) combined depreciation, impairment and amortisation
charges included non-exceptional impairments net of reversals
totalling £33.0m (2023: £43.9m).
6. Segmental information
(continued)
6.3 Earnings before interest, taxation,
depreciation and amortisation ('EBITDA')
(continued)
|
|
2023
(restated*)
|
|
Adjusted operating profit
reported to the Board
(note 6.2)
|
Depreciation on fair value
uplifts
|
Depreciation/
impairment/
amortisation before exceptional charges
|
Joint Venture / Associate
share of depreciation and amortisation
|
Release of deferred
income
|
Share of non-controlling
interest depreciation and amortisation
|
Adjusted
EBITDA
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Continuing operations
|
|
|
|
|
|
|
|
SSEN Transmission
|
372.7
|
-
|
114.1
|
-
|
(2.1)
|
(9.7)
|
475.0
|
SSEN Distribution
|
382.4
|
-
|
182.2
|
-
|
(10.6)
|
-
|
554.0
|
SSE Renewables
|
561.8
|
(18.8)
|
179.8
|
92.8
|
(0.1)
|
-
|
815.5
|
SSE Thermal
|
1,031.9
|
(10.0)
|
114.5
|
60.8
|
-
|
-
|
1,197.2
|
Gas Storage
|
212.5
|
-
|
16.5
|
-
|
-
|
-
|
229.0
|
Energy Customer Solutions
|
|
|
|
|
|
|
|
SSE Business Energy
|
15.7
|
-
|
4.7
|
-
|
-
|
-
|
20.4
|
SSE Airtricity
|
5.6
|
-
|
6.9
|
-
|
-
|
-
|
12.5
|
SSE Enterprise
|
(7.0)
|
-
|
6.8
|
-
|
(0.2)
|
-
|
(0.4)
|
SSE Energy Markets
|
80.4
|
-
|
6.0
|
-
|
-
|
-
|
86.4
|
Corporate
|
|
|
|
|
|
|
|
|
Corporate unallocated
|
(87.0)
|
-
|
72.7
|
-
|
(0.9)
|
-
|
(15.2)
|
Neos Networks
|
(39.8)
|
-
|
-
|
47.5
|
-
|
-
|
7.7
|
Total SSE Group
|
2,529.2
|
(28.8)
|
704.2
|
201.1
|
(13.9)
|
(9.7)
|
3,382.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*The comparative EBITDA by segment information has been
restated. See note 2.3.1.
6. Segmental information
(continued)
6.4 Capital and investment expenditure by
segment
|
Capital additions to
intangible assets
2024
£m
|
Capital additions to
property, plant and equipment
2024
£m
|
Capital
additions to intangible assets
2023
£m
|
Capital
additions to property, plant and equipment
2023
£m
|
Continuing operations
|
|
|
(restated*)
|
(restated*)
|
SSEN Transmission
|
12.8
|
784.7
|
7.2
|
536.6
|
SSEN Distribution
|
20.3
|
636.8
|
15.2
|
486.8
|
|
|
|
|
|
SSE Renewables
|
355.1
|
433.8
|
731.5
|
340.5
|
|
|
|
|
|
SSE Thermal
|
83.3
|
24.6
|
20.8
|
44.5
|
Gas Storage
|
-
|
0.8
|
-
|
6.3
|
Energy Customer Solutions
|
|
|
|
|
SSE Business
Energy
|
43.7
|
-
|
38.9
|
0.4
|
SSE
Airtricity
|
14.1
|
0.7
|
10.5
|
-
|
|
|
|
|
|
SSE Enterprise
|
26.4
|
32.4
|
16.2
|
37.0
|
|
|
|
|
|
SSE Energy Markets
|
723.4
|
-
|
809.9
|
-
|
|
|
|
|
|
Corporate unallocated
|
35.1
|
57.6
|
38.4
|
48.0
|
Total SSE Group
|
1,314.2
|
1,971.4
|
1,688.6
|
1,500.1
|
Increase in prepayments related to
capital expenditure
|
-
|
215.1
|
-
|
6.8
|
Tarbert temporary generation
additions
|
-
|
93.4
|
-
|
-
|
Decrease/(increase) in trade
payables related to capital expenditure
|
2.5
|
(84.6)
|
(31.8)
|
132.2
|
Customer funded additions
|
-
|
(152.0)
|
-
|
(80.9)
|
Lease asset additions
|
-
|
(73.0)
|
-
|
(78.5)
|
Less non-cash items:
|
|
|
|
|
Allowances and
certificates
|
(346.6)
|
-
|
(208.4)
|
-
|
Assets acquired through
acquisitions
|
-
|
-
|
(515.2)
|
-
|
Net
cash outflow
|
970.1
|
1,970.3
|
933.2
|
1,479.7
|
*The comparative capital and investment expenditure by
segment information has been restated. See note
2.3.1.
Capital additions do not include
assets acquired in acquisitions, assets acquired under leases or
assets constructed that the Group were reimbursed by way of a
government grant. During the year construction commenced on a
temporary generation plant at the Group's Tarbert site for which
the Group received reimbursements totalling £93.4m from government
bodies (presented separately on the cash flow statement). Capital
additions to intangible assets includes the cash purchase of
emissions allowances and certificates (2024: £427.9m; 2023:
£596.8m). These purchases are presented in the cash flow statement
within operating activities since they relate to the obligation to
surrender the allowances and certificates in line with operating
volumes of emissions. Other non-cash additions comprise
self-generated renewable obligation certificates.
6. Segmental information
(continued)
6.4 Capital and investment expenditure by
segment
31 March
2024
|
|
Capital additions to
intangible assets
£m
|
Capital additions to
property, plant and equipment
£m
|
Capital Investment relating
to Joint Ventures and Associates (i)
£m
|
Allowances and
certificates
(ii)
£m
|
Customer funded
additions
(iii)
£m
|
Lease asset additions
(iv)
£m
|
Share of non-controlling
interests
(v)
£m
|
Adjusted
Investment and Capital
Expenditure
£m
|
Continuing operations
|
|
|
|
|
|
|
|
|
SSEN Transmission
|
12.8
|
784.7
|
-
|
-
|
-
|
(2.5)
|
(199.4)
|
595.6
|
SSEN Distribution
|
20.3
|
636.8
|
-
|
-
|
(152.0)
|
-
|
-
|
505.1
|
|
|
|
|
|
|
|
|
|
SSE Renewables
|
355.1
|
433.8
|
324.5
|
-
|
-
|
(16.3)
|
-
|
1,097.1
|
|
|
|
|
|
|
|
|
|
SSE Thermal
|
83.3
|
24.6
|
51.4
|
(59.7)
|
-
|
-
|
-
|
99.6
|
Gas Storage
|
-
|
0.8
|
-
|
-
|
-
|
-
|
-
|
0.8
|
|
|
|
|
|
|
|
|
|
Energy Customer Solutions
|
|
|
|
|
|
|
|
|
SSE
Business
Energy
|
43.7
|
-
|
-
|
-
|
-
|
-
|
-
|
43.7
|
SSE
Airtricity
|
14.1
|
0.7
|
-
|
-
|
-
|
-
|
-
|
14.8
|
|
|
|
|
|
|
|
|
|
SSE Enterprise
|
26.4
|
32.4
|
-
|
-
|
-
|
(7.8)
|
-
|
51.0
|
|
|
|
|
|
|
|
|
|
SSE Energy Markets
|
723.4
|
-
|
-
|
(714.8)
|
-
|
-
|
-
|
8.6
|
|
|
|
|
|
|
|
|
|
Corporate unallocated
|
35.1
|
57.6
|
14.1
|
-
|
-
|
(46.4)
|
-
|
60.4
|
Total SSE Group
|
1,314.2
|
1,971.4
|
390.0
|
(774.5)
|
(152.0)
|
(73.0)
|
(199.4)
|
2,476.7
|
i)
Represents equity or debt funding provided to joint ventures or
associates in relation to capital expenditure
projects.
ii)
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 alternative performance
measure.
iii) Represents removal
of additions to electricity and other networks funded by customer
contributions.
iv) Represents
removal of additions in respect of right of use assets recognised
on the commencement date of a lease arrangement.
v) Represents
the share of capital additions attributable to non-controlling
interests.
6. Segmental
information (continued)
6.4 Capital and investment expenditure by
segment
|
31 March 2023
(restated*)
|
|
Capital additions to
intangible assets
£m
|
Capital additions to
property, plant and equipment
£m
|
Capital Investment relating
to Joint Ventures and Associates (i)
£m
|
Allowances and
certificates
(ii)
£m
|
Customer funded
additions
(iii)
£m
|
Acquired through business
combinations
(iv)
£m
|
Lease asset additions
(v)
£m
|
Share of non-controlling
interests
(vi)
£m
|
Adjusted
Investment and Capital
Expenditure
£m
|
Continuing operations
|
|
|
|
|
|
|
|
|
|
SSEN Transmission
|
7.2
|
536.6
|
-
|
-
|
-
|
-
|
(1.6)
|
(46.7)
|
495.5
|
SSEN Distribution
|
15.2
|
486.8
|
-
|
-
|
(80.9)
|
-
|
(0.1)
|
-
|
421.0
|
|
|
|
|
|
|
|
|
|
|
SSE Renewables
|
731.5
|
340.5
|
391.8
|
-
|
-
|
(515.2)
|
(37.1)
|
-
|
911.5
|
|
|
|
|
|
|
|
|
|
|
SSE Thermal
|
20.8
|
44.5
|
87.9
|
-
|
-
|
-
|
-
|
-
|
153.2
|
Gas Storage
|
-
|
6.3
|
-
|
-
|
-
|
-
|
-
|
-
|
6.3
|
|
|
|
|
|
|
|
|
|
|
Energy Customer Solutions
|
|
|
|
|
|
|
|
|
|
SSE
Business
Energy
|
38.9
|
0.4
|
-
|
-
|
-
|
-
|
-
|
-
|
39.3
|
SSE
Airtricity
|
10.5
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
10.5
|
|
|
|
|
|
|
|
|
|
|
SSE Enterprise
|
16.2
|
37.0
|
-
|
-
|
-
|
-
|
(2.9)
|
-
|
50.3
|
|
|
|
|
|
|
|
|
|
|
SSE Energy Markets
|
809.9
|
-
|
-
|
(805.2)
|
-
|
-
|
-
|
-
|
4.7
|
|
|
|
|
|
|
|
|
|
|
Corporate unallocated
|
38.4
|
48.0
|
18.7
|
-
|
-
|
-
|
(36.8)
|
-
|
68.3
|
Total SSE Group
|
1,688.6
|
1,500.1
|
498.4
|
(805.2)
|
(80.9)
|
(515.2)
|
(78.5)
|
(46.7)
|
2,160.6
|
*The comparative capital and investment expenditure by
segment information has been restated. See note
2.3.1.
i)
Represents equity or debt funding provided to joint ventures or
associates in relation to capital expenditure
projects.
ii)
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 alternative performance
measure.
iii) Represents
removal of additions to electricity and other networks funded by
customer contributions.
iv)
Represents removal of additions achieved through business
combination; for SSE Renewables additions of £515.2m refer to note
12. Note that the Group's Adjusted Investment, Capital and
Acquisitions metric includes the £642.7m cash consideration paid
for Business Combinations and totals £2,803.3m.
v)
Represents removal of right of use assets recognised on the
commencement date of a lease arrangement.
vi)
Represents the share of capital additions attributable to
non-controlling interests.
7.
Exceptional items and certain
re-measurements
|
2024
£m
|
2023
£m
|
Continuing operations
|
|
|
Exceptional items
|
|
|
Asset impairments and related
charges
|
(270.9)
|
(233.6)
|
Net gains on acquisitions/disposals
of businesses and other assets
|
4.9
|
233.2
|
Total exceptional items
|
(266.0)
|
(0.4)
|
Certain re-measurements
|
|
|
Movement on operating derivatives
(note 16)
|
452.2
|
(2,708.2)
|
Movement in fair value of commodity
stocks
|
9.1
|
(9.0)
|
Movement on financing derivatives
(note 16)
|
6.1
|
201.9
|
Share of movement on derivatives in
jointly controlled entities (net of tax)
|
46.1
|
163.8
|
Total certain re-measurements
|
513.5
|
(2,351.5)
|
|
|
|
Exceptional items and certain re-measurements on continuing
operations before taxation
|
247.5
|
(2,351.9)
|
Taxation
|
|
|
Taxation on other exceptional
items
|
23.3
|
(34.1)
|
Taxation on certain
re-measurements
|
(115.0)
|
499.6
|
Taxation
|
(91.7)
|
465.5
|
|
|
|
Total exceptional items and certain re-measurements on
continuing operations after taxation
|
155.8
|
(1,886.4)
|
|
|
|
Discontinued operations
|
|
|
Exceptional items
|
|
|
Gas production asset impairments and
related credits
|
-
|
35.0
|
Exceptional items and certain re-measurements on discontinued
operations after taxation
|
-
|
35.0
|
Exceptional items and certain
remeasurements are disclosed across the following categories within
the income statement:
|
2024
£m
|
2023
£m
|
Continuing operations
|
|
|
Cost of sales:
|
|
|
Movement on operating derivatives
(note 16)
|
452.2
|
(2,708.2)
|
Movement in fair value of commodity
stocks
|
9.1
|
(9.0)
|
|
461.3
|
(2,717.2)
|
Operating costs:
|
|
|
Asset impairments and
reversals
|
(270.9)
|
(233.6)
|
Other exceptional provisions and
charges
|
-
|
3.2
|
|
(270.9)
|
(230.4)
|
Operating income:
|
|
|
Net gains on acquisition/disposals
of businesses and other assets
|
4.6
|
89.1
|
|
4.6
|
89.1
|
Joint ventures and associates:
|
|
|
Net gains on acquisition of a joint
venture
|
-
|
140.7
|
Share of movement on derivatives in
jointly controlled entities (net of tax)
|
46.1
|
163.8
|
|
46.1
|
304.5
|
Operating profit/(loss)
|
241.1
|
(2,554.0)
|
|
|
|
Finance income
|
|
|
Movement on financing derivatives
(note 16)
|
6.1
|
201.9
|
Interest income on deferred
consideration receipt
|
0.3
|
0.2
|
|
6.4
|
202.1
|
Profit before tax on continuing operations
|
247.5
|
(2,351.9)
|
Discontinued operations
|
|
|
Gas Production asset impairments and
related credits
|
-
|
35.0
|
Profit before tax on discontinued
operations
|
-
|
35.0
|
7. Exceptional items and
certain re-measurements (continued)
7.1 Exceptional items
7.1.1 Exceptional items in the year
ended 31 March 2024
In the year to 31 March 2024, the
Group recognised a net exceptional charge of £266.0m arising from
its continuing operations. The net exceptional charge is primarily
due to an exceptional impairment charge relating to the Group's gas
storage assets of £134.1m, an exceptional impairment of £63.2m
against the carrying value of the Group's investment in Triton
Power Holdings Limited and an exceptional impairment charge of
£73.6m against the Group's investment in Neos Networks.
The net exceptional
charges/(credits) recognised can be summarised as
follows:
|
|
|
Property, plant and
equipment
£m
|
Provisions and other
charges
£m
|
Investment in joint
ventures
£m
|
Other
assets
£m
|
Total charges/
(credits)
£m
|
|
Triton Power 50% joint venture -
investment impairment charge (i)
|
|
|
-
|
-
|
63.2
|
-
|
63.2
|
Gas Storage - impairment charge
(ii)
|
|
|
134.1
|
-
|
-
|
-
|
134.1
|
Neos Networks 50% joint venture -
impairment charge (iii)
|
|
|
-
|
-
|
73.6
|
-
|
73.6
|
Enerveo acquisition (iv)
|
|
|
-
|
(18.3)
|
-
|
13.7
|
(4.6)
|
Other credits (v)
|
|
|
-
|
-
|
-
|
(0.3)
|
(0.3)
|
Total exceptional items continuing
operations
|
|
|
134.1
|
(18.3)
|
136.8
|
13.4
|
266.0
|
(i) Triton
Power 50% joint venture - investment impairment
charge
The Group has recognised an
impairment charge of £63.2m against the carrying value of the
Group's investment in Triton Power Holdings Limited, reflecting
future market price assumptions. The impairment was recognised in
the first half of the year and, due to indicators of impairment
existing at 31 March 2024, a formal impairment review was also
performed as at that date. As a result of this assessment, the
Group has not recognise any further charges or reversals to the
investment carrying value of the Group's investment in Triton Power
Holdings Limited.
(ii) Gas Storage -
impairment charge
The Group performed a formal
impairment review at 31 March 2024 to reassess the carrying value
of its Gas Storage operations at Aldbrough and Atwick. As a result
of the assessment, the Group recognised an exceptional impairment
charge of £85.7m to the carrying value of the assets at Aldbrough
and £48.4m to the carrying value of the assets at
Atwick.
(iii) Neos Networks 50%
joint venture - impairment charge
At 31 March 2024, the Group has
performed a formal impairment assessment on the carrying value of
its 50% joint venture investment, including shareholder loan
balances, in Neos Networks Limited. The assessment indicated that
the recoverable amount of the investment and shareholder loan
receivable balances are impaired by £73.6m.
(iv) Enerveo
acquisition
On 22 March 2024, the Group
purchased the entire share capital of Enerveo Limited from Aurelius
Antelope Limited for cash consideration of £1.0m. Enerveo Limited
is a former subsidiary of SSE plc and the reacquisition reduces the
Group's potential exposure to risk arising from performance
guarantees provided by the Group. At 30 September 2023, the Group
had recorded an exceptional charge of £50.5m in relation to its
projected exposure in relation to these guarantees as part of its
adoption of IFRS 17. On reacquisition this risk has been reduced
and the exceptional charge recognised in the 6 months to 30
September 2023 has been reversed. Due to provisions that the Group
had previously recognised for amounts due from Enerveo and
Aurelius, the completion of the transaction has resulted in an
exceptional credit of £4.6m being recognised on acquisition.
Further detail on the transaction is included in note
12.
(v) Other
credits
At 31 March 2024, the Group
recognised further exceptional credits of £0.3m relating to the
unwind of discounting on deferred consideration recognised on the
part disposal of SSE Slough Multifuel Limited in the year ending 31
March 2021.
7.1.2 Exceptional items in the year
ended 31 March 2023
In the year to 31 March 2023, the
Group recognised a net exceptional charge of £0.4m arising from its
continuing operations. The net exceptional charge was primarily due
to a net impairment of £150.9m in relation to the Group's 50%
investment in Triton Power Holdings Limited (see 7.1.2.iv below for
further analysis of amounts recognised in relation to Triton),
offset by an exceptional gain of £89.1m from the sale of land at
Fiddler's Ferry, an impairment reversal of £45.7m related to the
Group's Gas Storage operations at Aldbrough and an impairment
reversal of £17.8m in relation to the Group's Great Island combined
cycle gas turbine ('CCGT') plant in Ireland.
In discontinued operations, the
Group recognised an exceptional gain of £35.0m relating to a
provision release associated with the disposal of its Gas
Production assets, which completed on 14 October 2021.
7. Exceptional items and certain re-measurements
(continued)
7.1 Exceptional items (continued)
7.1.2 Exceptional items in the year ended 31 March 2023
(continued)
The net exceptional
charges/(credits) recognised can be summarised as
follows:
|
Property, plant and
equipment
£m
|
Provisions and other
charges
£m
|
Investment in joint
ventures
£m
|
Cash and cash
equivalents
£m
|
Other
receivables
£m
|
Total charges/
(credits)
£m
|
|
Thermal Electricity Generation
(i)
|
(17.8)
|
-
|
-
|
-
|
-
|
(17.8)
|
Gas storage (ii)
|
(45.7)
|
-
|
-
|
-
|
-
|
(45.7)
|
Fiddler's Ferry (iii)
|
24.1
|
(53.2)
|
-
|
(60.0)
|
-
|
(89.1)
|
Triton Power 50% joint venture -
investment acquisition and impairment (iv)
|
-
|
-
|
150.9
|
-
|
-
|
150.9
|
Neos Networks 50% joint venture -
investment impairment charge (v)
|
-
|
-
|
5.9
|
-
|
-
|
5.9
|
Other credits (vi)
|
-
|
(1.5)
|
-
|
(2.1)
|
(0.2)
|
(3.8)
|
Total exceptional items continuing
operations
|
(39.4)
|
(54.7)
|
156.8
|
(62.1)
|
(0.2)
|
0.4
|
Gas Production (vii)
|
-
|
(35.0)
|
-
|
-
|
-
|
(35.0)
|
Total exceptional items discontinued
operations
|
-
|
(35.0)
|
-
|
-
|
-
|
(35.0)
|
Total exceptional items
|
(39.4)
|
(89.7)
|
156.8
|
(62.1)
|
(0.2)
|
(34.6)
|
(i) Thermal
Electricity Generation - impairment reversal
At 31 March 2023, the Group
carried out a formal impairment review to reassess the carrying
value of its GB CCGT power stations and the Group's Great Island
CCGT plant in Ireland. As a result of the review, the Group
recognised an exceptional impairment reversal of £17.8m to the
carrying value of the Group's Great Island CCGT plant.
(ii) Gas Storage -
impairment reversal
At 30 September 2022, the Group
recognised an impairment reversal of £201.1m on its Aldbrough Gas
Storage facility due to future market price assumptions observable
at that time. The Group also performed a formal impairment review
at 31 March 2023 to reassess the carrying value of its Gas Storage
operations at Atwick and Aldbrough. As a result of the assessment,
the Group recognised an exceptional impairment of £155.4m to the
carrying value of the assets at Aldbrough, resulting in a net
impairment reversal for the year of £45.7m. The impairment
previously recognised in relation to Atwick was fully reversed in
the year ended 31 March 2022, and no impairment was required for
the financial year ended 31 March 2023.
(iii) Fiddler's Ferry -
land sale
On 30 June 2022, the Fiddler's
Ferry site was sold to Peel NRE Developments Limited for cash
consideration of £60.0m. The Group carried a decommissioning
provision for the site of £53.2m and a residual asset of £24.1m,
both of which were disposed of as part of the sale. As a result,
the Group recognised an exceptional gain of £89.1m on
disposal.
(iv) Triton Power 50%
joint venture - acquisition and impairment
On 1 September 2022, the Group
acquired 50% of the share capital of Triton Power Holdings Limited
from Energy Capital Partners for headline consideration of £341.0m,
shared equally with co-venturers Equinor (see note 12). The
purchase price was agreed based on prices prevalent in the market
during the summer, prior to completion of the transaction on 1
September 2022. The Group assessed that, due to movements in near
term observable power prices between the transaction agreement date
and the completion date, the fair value of the acquisition was
£140.7m greater than the acquisition price. This bargain purchase
was recognised as an exceptional gain in the Group's half year
results to 30 September 2022. During the second half of the year
ended 31 March 2023, the Group realised a significant proportion of
the acquired fair value of the business through trading operations
of the joint venture. As a result, the future recoverable value of
the investment was lower at 31 March 2023 than at 1 September 2022
and the Group therefore recognised an impairment charge at 31 March
2023 of £291.6m.
A summary of exceptional items
recognised in relation to Triton in the financial year to 31 March
2023 is set out below:
|
Financial statement line item charge/(credit) is included
within
|
Exceptional items and
certain re-measurements
£m
|
Recognition of bargain
purchase
|
Joint venture and associates share of
profit
|
(140.7)
|
Impairment of investment
|
Operating
costs
|
291.6
|
Total exceptional items
|
|
150.9
|
Mark-to-market movement on operating
derivatives
|
Joint venture and
associates share of movement on derivatives
|
(213.9)
|
Share of tax on mark-to-market
movement on operating derivatives
|
Joint venture and
associates share of tax
|
41.9
|
Total certain re-measurements
|
|
(172.0)
|
Total exceptional items and certain
re-measurements
|
|
(21.1)
|
|
|
|
|
7. Exceptional items and certain re-measurements
(continued)
7.1 Exceptional items (continued)
7.1.2 Exceptional items in the year ended 31 March 2023
(continued)
(v) Neos Networks
50% joint venture - investment impairment and adjustments to
consideration
At 31 March 2023, the Group
assessed that the recoverable amount of its investment in Neos
Networks was impaired by £37.7m, of which £5.9m was treated as
exceptional. £5.9m of the impairment related to the fair value gain
previously recognised on acquisition of the joint venture
investment in March 2019, which was treated as an exceptional item.
This reversal was recognised separately within exceptional items
for consistent presentation. The balance of the impairment charge,
being £31.8m, was recognised as part of adjusted operating
profit.
(vi) Other
credits
At 31 March 2023, the Group
recognised further exceptional credits of £3.8m relating to
reversal of previously recognised exceptional charges or
judgements. These included i) reassessment of separation cost
provisions associated primarily with the disposals of SSE Energy
Services and SGN (credit of £9.7m), ii) credit of £0.2m in relation
to the unwind of discounting on deferred consideration recognised
on the part disposal of SSE Slough Multifuel Limited in the year
ending 31 March 2021, iii) reassessment of impairments associated
with Heat Networks assets credit of £0.4m, partially offset by iv)
£6.5m charge recognised in relation to provisions in connection
with the sale of the Contracting and Rail business in June
2021.
Exceptional items within discontinued operations in the year
ended 31 March 2023
(vii) Gas Production - gain on
disposal
On 4 November 2022, RockRose
Energy Limited received HMRC clearance in respect of tax treatment
in relation to the Group's disposal of its Gas Production business
to Viaro Energy (through its subsidiary RockRose Energy Limited),
which completed on 14 October 2021. The Group had indemnified
RockRose Energy Limited in relation to certain tax liabilities that
it might suffer as a result of the transaction, and this formed
part of the provision which was recognised on the disposal of the
Gas Production business. The HMRC clearance indicated that no such
tax liabilities arise for RockRose Energy Limited and as a result
the Group released the £35.0m provision relating to the indemnity
as an adjustment to the loss on disposal recognised. The adjustment
was recognised in discontinued operations in the year ended 31
March 2023.
7.2 Certain re-measurements
The Group, through its SSE Energy
Markets business, enters into forward commodity purchase (and
sales) contracts to meet the future demand requirements of its SSE
Business Energy and SSE Airtricity supply businesses, to optimise
the value of its SSE Renewables and SSE Thermal power generation
assets or to conduct other trading subject to the value at risk
limits set out by the Energy Markets Risk Committee. Certain of
these contracts (predominantly electricity, gas and other commodity
purchase 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
(predominantly electricity sales contracts) are accounted for as
'own use' contracts and are not recorded at their fair value.
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 with changes in value recognised
within 'certain re-measurements'. In addition, the mark-to-market
valuation movements on the Group's contracts for difference
contracts entered into by SSE Renewables that are not designated as
government grants, and which are measured as Level 3 fair value
financial instruments are also included within 'certain
re-measurements'.
Changes in the fair value 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
businesses.
At 31 March 2024, changes in
global commodity markets and in SSE's contractual positions have
resulted in a positive net mark-to-market remeasurement on
commodity contracts designated as financial instruments, contracts
for difference contracts and trading inventory of £461.3m (gain)
(2023: £2,717.2m (loss)). It should be noted that the net IFRS 9
position on operating derivatives at 31 March 2024 is an asset of
£51.4m (2023: £386.9m liability).
The mark-to-market gain in the
year has resulted in a deferred tax charge of £115.0m (2023:
£499.6m credit), which has been reported separately as part of
certain re-measurements. In addition, the Group has recognised
gains of £6.1m (2023: £201.9m gain) on the remeasurement of certain
interest rate and foreign exchange contracts through the income
statement, gains on the remeasurement of cash flow hedge accounted
contracts of £6.5m (2023: £43.3m gain) in other comprehensive
income and a loss on the equity share of the remeasurement of cash
flow hedge accounted contracts in joint ventures of £40.9m (2023:
£342.4m gain).
The re-measurements arising from
IFRS 9 and the associated deferred tax are disclosed separately to
aid understanding of the underlying performance of the
Group.
8.
Finance income and costs
|
2024
|
2023
|
|
Before exceptional items and
certain re-measurements
£m
|
Exceptional items and
certain re-measurements
£m
|
Total
£m
|
Before
exceptional items and certain re-measurements
£m
|
Exceptional items and certain re-measurements
£m
|
Total
£m
|
Finance income:
|
|
|
|
|
|
|
Interest income from short term
deposits
|
60.3
|
-
|
60.3
|
17.5
|
-
|
17.5
|
Interest on pension scheme assets
(i)
|
26.2
|
-
|
26.2
|
16.2
|
-
|
16.2
|
Other interest
receivable:
|
|
|
|
|
|
|
Joint ventures and
associates
|
78.4
|
-
|
78.4
|
67.6
|
-
|
67.6
|
Other receivable
|
33.9
|
0.3
|
34.2
|
34.0
|
0.2
|
34.2
|
|
112.3
|
0.3
|
112.6
|
101.6
|
0.2
|
101.8
|
Total finance income
|
198.8
|
0.3
|
199.1
|
135.3
|
0.2
|
135.5
|
Finance costs:
|
|
|
|
|
|
|
Bank loans and overdrafts
|
(77.4)
|
-
|
(77.4)
|
(50.1)
|
-
|
(50.1)
|
Other loans and charges
|
(274.3)
|
-
|
(274.3)
|
(339.1)
|
-
|
(339.1)
|
Notional interest arising on
discounted provisions
|
(25.2)
|
-
|
(25.2)
|
(22.1)
|
-
|
(22.1)
|
Lease charges
|
(25.8)
|
-
|
(25.8)
|
(29.4)
|
-
|
(29.4)
|
Less: interest capitalised
(ii)
|
84.4
|
-
|
84.4
|
44.0
|
-
|
44.0
|
Total finance costs
|
(318.3)
|
-
|
(318.3)
|
(396.7)
|
-
|
(396.7)
|
Changes in fair value of financing
derivatives at fair value through profit or loss
|
-
|
6.1
|
6.1
|
-
|
201.9
|
201.9
|
Net
finance costs
|
(119.5)
|
6.4
|
(113.1)
|
(261.4)
|
202.1
|
(59.3)
|
Presented as:
|
|
|
|
|
|
|
Finance income
|
198.8
|
6.4
|
205.2
|
135.3
|
202.1
|
337.4
|
Finance costs
|
(318.3)
|
-
|
(318.3)
|
(396.7)
|
-
|
(396.7)
|
Net
finance costs
|
(119.5)
|
6.4
|
(113.1)
|
(261.4)
|
202.1
|
(59.3)
|
i) The
interest income on net pension assets for the year ended 31 March
2024 of £26.2m (2023: £16.2m) represents the interest earned under
IAS 19.
ii) The capitalisation
rate applied in determining the amount of borrowing costs to
capitalise in the year was 4.20% (2023: 4.11%).
Adjusted net finance costs are
arrived at after the following adjustments:
|
2024
|
2023
|
|
£m
|
£m
|
Net
finance costs
|
(113.1)
|
(59.3)
|
(add)/less:
|
|
|
Share of interest from joint
ventures and associates
|
(110.7)
|
(70.1)
|
Interest on pension scheme
liabilities
|
(26.2)
|
(16.2)
|
Movement on financing derivatives
(note 16)
|
(6.1)
|
(201.9)
|
Exceptional item
|
(0.3)
|
(0.2)
|
Share of net finance cost
attributable to non-controlling interests
|
4.7
|
2.1
|
Adjusted net finance costs
|
(251.7)
|
(345.6)
|
|
|
|
Notional interest arising on
discounted provisions
|
25.2
|
22.1
|
Lease charges
|
25.8
|
29.4
|
Hybrid coupon payment (note
14)
|
(73.1)
|
(38.8)
|
Adjusted net finance costs for interest cover
calculations
|
(273.8)
|
(332.9)
|
9.
Taxation
9.1 Analysis of charge recognised in the income
statement
|
2024
|
2023
|
|
Before exceptional items and
certain re-measure-ments
|
Exceptional items and
certain re-measure-ments
|
Total
|
Before
exceptional items and certain re-measure-ments
|
Exceptional items and certain re-measure-ments
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Current tax
|
|
|
|
|
|
|
Corporation tax
|
366.1
|
(36.5)
|
329.6
|
292.3
|
(20.9)
|
271.4
|
Adjustments in respect of previous
years
|
(25.6)
|
31.8
|
6.2
|
(22.0)
|
5.3
|
(16.7)
|
Total current tax
|
340.5
|
(4.7)
|
335.8
|
270.3
|
(15.6)
|
254.7
|
Deferred tax
|
|
|
|
|
|
|
Current year
|
155.3
|
128.2
|
283.5
|
72.9
|
(444.6)
|
(371.7)
|
Adjustments in respect of previous
years
|
23.2
|
(31.8)
|
(8.6)
|
12.3
|
(5.3)
|
7.0
|
Total deferred tax
|
178.5
|
96.4
|
274.9
|
85.2
|
(449.9)
|
(364.7)
|
|
|
|
|
|
|
|
Total taxation charge/(credit)
|
519.0
|
91.7
|
610.7
|
355.5
|
(465.5)
|
(110.0)
|
9.2 Adjusted current tax charge
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:
|
2024
£m
|
2024
%
|
2023
£m
|
2023
%
|
Group tax charge/(credit) and effective
rate
|
610.7
|
25.6
|
(110.0)
|
12.7
|
Add: reported deferred tax
(charge)/credit and effective rate
|
(274.9)
|
(11.5)
|
364.7
|
(42.0)
|
Reported current tax charge and
effective rate
|
335.8
|
14.1
|
254.7
|
(29.3)
|
Effect of adjusting items
|
|
1.3
|
|
41.0
|
Reported current tax charge and
effective rate on adjusted basis
|
335.8
|
15.4
|
254.7
|
11.7
|
add:
|
|
|
|
|
Share of current tax from joint
ventures and associates
|
38.5
|
1.8
|
89.6
|
4.1
|
Less:
|
|
|
|
|
Current tax credit on exceptional
items
|
4.7
|
0.2
|
15.6
|
0.7
|
Share of current tax attributable to
non-controlling interests
|
(8.0)
|
(0.3)
|
(1.1)
|
(0.1)
|
Adjusted current tax charge and effective
rate
|
371.0
|
17.1
|
358.8
|
16.4
|
10. Dividends
10.1 Ordinary dividends
|
Year ended 31 March
2024
|
Year
ended 31 March 2023
|
|
Total
£m
|
Settled via
scrip
£m
|
Pence per ordinary
share
|
Total
£m
|
Settled
via scrip
£m
|
Pence
per ordinary share
|
|
|
|
|
|
|
|
Interim - year ended 31 March
2024
|
218.3
|
8.8
|
20.0
|
-
|
-
|
-
|
Final - year ended 31 March
2023
|
738.1
|
29.8
|
67.7
|
-
|
-
|
-
|
Interim - year ended 31 March
2023
|
-
|
-
|
-
|
313.2
|
159.0
|
29.0
|
Final - year ended 31 March
2022
|
-
|
-
|
-
|
642.6
|
322.5
|
60.2
|
|
956.4
|
38.6
|
|
955.8
|
481.5
|
|
The final dividend of 67.7p per
ordinary share declared in respect of the financial year ended 31
March 2023 (2022: 60.2p) was approved at the Annual General Meeting
on 20 July 2023 and was paid to shareholders on 21 September 2023.
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.
10 Dividends
(continued)
10.1 Ordinary dividends
(continued)
For dividends paid in relation to
the financial year ended 31 March 2022 and in relation to the
subsequent years to 31 March 2026, the Group's approved policy is
to repurchase shares to reduce the scrip's dilutive effects, if the
scrip take-up exceeds 25% of the full year dividend in any given
year. The overall scrip dividend take-up for the financial year
ended 31 March 2023 was 18.0%, and SSE has therefore not initiated
a share buy-back in the current year. For the financial year ended
31 March 2022 the overall scrip take-up was 38.3% and therefore
under the share buyback programme 6.9m of shares were repurchased
and cancelled during the year ended 31 March 2023 for total
consideration of £107.6m (including stamp duty and
commission).
An interim dividend of 20.0p per
ordinary share (2023: 29.0p) was declared and paid on 8 March 2024
to those shareholders on the SSE plc share register on 12 January
2024. Shareholders were able to elect to receive ordinary shares
credited as fully paid instead of the interim cash dividend under
the terms of the Company's scrip dividend scheme.
The proposed final dividend of
40.0p per ordinary share based on the number of issued ordinary
shares at 31 March 2024 is subject to approval by shareholders at
the Annual General Meeting and has not been included as a liability
in these financial statements. Based on shares in issue at 31
March 2024, this would equate to a final dividend of
£438.5m.
11. Earnings per Share
11.1 Basic earnings per share
The calculation of basic
earnings/(losses) per ordinary share at 31 March 2024 is based on
the net profit/(loss) attributable to ordinary shareholders and a
weighted average number of ordinary shares outstanding during the
year ended 31 March 2024.
11.2 Adjusted earnings per share
Adjusted earnings/(losses) per
share has been calculated by excluding the charge for deferred tax,
interest on net pension liabilities under IAS 19, retained Gas
Production decommissioning costs, the depreciation charged on fair
value uplifts, the share of profit attributable to non-controlling
interests and the impact of exceptional items and certain
re-measurements (note 7).
|
Year ended 31 March
2024
|
Year ended 31 March
2024
|
Year
ended 31 March 2023
|
Year
ended 31 March 2023
|
Continuing operations
|
Earnings
£m
|
Earnings per
share
pence
|
(Losses)/earnings
£m
|
(Losses)/earnings per share
pence
|
|
|
|
|
|
Basic earnings/(losses) on continuing operations used to
calculate adjusted EPS
|
1,710.5
|
156.7
|
(158.0)
|
(14.7)
|
Exceptional items and certain
re-measurements (note 7)
|
(155.8)
|
(14.3)
|
1,886.4
|
175.4
|
Basic excluding exceptional items and certain
re-measurements
|
1,554.7
|
142.4
|
1,728.4
|
160.7
|
Adjusted for:
|
|
|
|
|
Decommissioning Gas
Production
|
9.9
|
0.9
|
(50.5)
|
(4.7)
|
Depreciation charge on fair value
uplifts
|
19.0
|
1.7
|
28.8
|
2.7
|
Interest on net pension scheme
assets/(liabilities)
|
(26.2)
|
(2.4)
|
(16.2)
|
(1.5)
|
Deferred tax (note 9)
|
178.5
|
16.3
|
85.2
|
7.9
|
Deferred tax from share of joint
ventures and associates
|
20.3
|
1.9
|
14.4
|
1.3
|
Deferred tax on non-controlling
interest
|
(25.6)
|
(2.3)
|
(4.1)
|
(0.4)
|
Adjusted
|
1,730.6
|
158.5
|
1,786.0
|
166.0
|
Basic
|
1,710.5
|
156.7
|
(158.0)
|
(14.7)
|
Dilutive effect of outstanding share
options
|
-
|
(0.2)
|
-
|
-
|
Diluted
|
1,710.5
|
156.5
|
(158.0)
|
(14.7)
|
Reported earnings/(losses) per share
|
2024
|
2024
|
2023
|
2023
|
|
Earnings
£m
|
Earnings per
share
pence
|
(Losses)/earnings
£m
|
(Losses)/earnings
per share
pence
|
Basic
|
|
|
|
|
Earnings/(losses) per share on
continuing operations
|
1,710.5
|
156.7
|
(158.0)
|
(14.7)
|
Earnings per share on discontinued
operations
|
-
|
-
|
35.0
|
3.3
|
Earnings/(losses) per share attributable to ordinary
shareholders
|
1,710.5
|
156.7
|
(123.0)
|
(11.4)
|
Dilutive effect of outstanding share
options
|
-
|
(0.2)
|
-
|
-
|
Diluted earnings/(losses) per share attributable to ordinary
shareholders
|
1,710.5
|
156.5
|
(123.0)
|
(11.4)
|
.
11. EARNINGS PER SHARE (CONTINUED)
11.2 Adjusted earnings per share
(continued)
The weighted average number of
shares used in each calculation is as follows:
|
31 March
2024
Number of
shares
(millions)
|
31 March
2023
Number
of shares
(millions)
|
|
|
|
For basic and adjusted earnings per
share
|
1,091.8
|
1,075.6
|
Effect of exercise of share
options
|
1.5
|
1.7
|
For diluted earnings per
share
|
1.093.3
|
1,077.3
|
11.3 Dividend cover
The Group's adjusted dividend
cover metric is calculated by comparing adjusted earnings per share
on continuing operations to the projected dividend per share
payable to ordinary shareholders.
|
2024
|
2024
|
2024
|
2023
|
2023
|
2023
|
|
Earnings per
share
|
Dividend per
share
|
Dividend
Cover
|
(Losses)/Earnings per share
|
Dividend
per share
|
Dividend
cover
|
|
(pence)
|
(pence)
|
(times)
|
(pence)
|
(pence)
|
(times)
|
|
|
|
|
|
|
|
Reported earnings/(losses) per share
(continuing operations)
|
156.7
|
60.0
|
2.61
|
(14.7)
|
96.7
|
(0.15)
|
Adjusted earnings per share
(continuing operations)
|
158.5
|
60.0
|
2.64
|
166.0
|
96.7
|
1.72
|
12. Acquisitions AND disposals
12.1 Acquisitions
12.1.1 Current year
acquisitions
Enerveo acquisition
On 22 March 2024, the Group
completed the acquisition of Enerveo Limited ('Enerveo') from
Aurelius Antelope Limited ('Aurelius') for cash consideration of
£1.0m. Enerveo (formerly named SSE Contracting Limited) is a former
subsidiary of the Group that was disposed to Aurelius on 30 June
2021. Under the terms of the sale agreement in 2021, SSE retained
performance guarantees over certain contracts delivered by Enerveo.
In the six months ended 30 September 2023, the Group recognised an
exceptional charge of £50.5m in relation to its estimated
settlement costs in relation to these guarantees in accordance with
IFRS 9, which included cash advances to Enerveo of £12.3m. In the
previous financial year the Group had also recognised provisions
for amounts due from Enerveo and Aurelius totalling
£12.2m.
On completion of the transaction
on 22 March 2024, the Group reversed the exceptional charge of
£50.5m recognised in the first half of the financial year. Due to
the consolidation of liabilities retained by Enerveo which SSE had
made provision against, the reacquisition of Enerveo resulted in a
gain of £4.6m, which has been recognised as an exceptional item in
the year. Following completion, SSE has restructured and settled
external liabilities totalling £15.2m and settled certain balances
of £30.9m due to SSE companies which are included in the acquired
balances below. At 31 March 2024, the goodwill balance of £5.6m
implied by the transaction was written off. This write-off has been
included within the total gain of £4.6m referred above. SSE is
currently conducting a review to develop and then implement a
longer-term strategy for each part of the business. The following
table summarises the assets and liabilities acquired in the
transaction.
|
Fair value at 22
March
2024
£m
|
Assets acquired and liabilities assumed:
|
|
Property, plant and
equipment
|
11.7
|
Intangible assets
|
2.5
|
Inventories
|
3.9
|
Trade and other
receivables
|
40.1
|
Prepayments and accrued
income
|
55.1
|
Cash
|
13.2
|
Trade and other payables
|
(91.0)
|
Deferred income
|
(20.0)
|
Lease liabilities
|
(12.8)
|
Provisions
|
(7.3)
|
Total net liabilities
acquired
|
(4.6)
|
Goodwill
|
5.6
|
Cash consideration
|
1.0
|
12. ACQUISITIONS AND DISPOSALS (CONTINUED)
12.1 Acquisitions (continued)
12.1.2 Prior year acquisitions
European onshore renewables development
platform
On 1 September 2022 the Group
completed the 100% acquisition of a European onshore renewable
energy development platform from Siemens Gamesa Renewable Energy
("SGRE") for cash consideration of £519.5m. The SGRE portfolio is
mainly located in Spain with the remainder across France, Italy and
Greece.
The intangible development assets
acquired were late-stage windfarm development costs. The goodwill
recognised represents early stage intangible development costs that
do not qualify for separate recognition as set out in the table
below.
|
Fair value at 1
September
2022
£m
|
Assets acquired and liabilities assumed:
|
|
Intangible development
assets
|
104.4
|
Inventories
|
3.0
|
Trade and other
receivables
|
20.3
|
Cash
|
11.5
|
Trade and other payables
|
(3.5)
|
Deferred tax liability
|
(27.0)
|
Total net assets acquired
|
108.7
|
Goodwill
|
410.8
|
Cash consideration
|
519.5
|
Triton Power - 50% joint venture
acquisition
On 1 September 2022, the Group
announced that SSE Thermal and Equinor had completed the
acquisition of Triton Power Holdings Limited from Energy Capital
Partners for headline consideration of £341m shared equally. The
headline consideration included £96m of loans which were settled on
completion of the transaction and replaced with shareholder loans
of £48.0m each from SSE and Equinor. The Group's share of the cash
consideration paid for the equity investment was therefore £123.2m
after completion adjustments. Triton Power operates the 1.2GW
Saltend Power Station in the Humber along with two smaller plants,
Indian Queens Power Station, a 140MW OCGT in Cornwall, and Deeside
Power Station, a decommissioned CCGT in north Wales.
Other asset acquisitions
During the year ended 31 March
2023, the Group made other smaller asset acquisitions (of special
purpose vehicles as opposed to businesses) for cash consideration
of £19.8m and deferred consideration of £34.9m. The total cash
consideration for business combinations of £642.7m is included in
the Group's Adjusted investment, capital and acquisition
metric.
12.2 Disposals
12.2.1 Current year disposals
There have been no significant
disposals in the current year.
12.2.2 Prior year disposals
During the year ended 31 March
2023 the Group recognised a gain of £868.3m within equity from the
sale of a 25% non-controlling equity stake in its SSEN Transmission
business (being the company Scottish Hydro Electric Transmission
plc) and an exceptional income statement gain of £89.1m from the
disposal of the Fiddler's Ferry site.
25% non-controlling equity stake in Scottish Hydro Electric
Transmission plc: On 30 November
2022, the Group completed the disposal of a 25% non-controlling
equity stake in Scottish Hydro Electric Transmission plc ('SHET')
to Ontario Teachers' Pension Plan ('OTPP') for cash consideration
of £1,465.0m, less transactions costs of £16.9m, at which time the
consolidated carrying value of SHET's net assets was £2,319.3m. As
the transaction did not result in a loss of control, the Group
recognised a gain of £868.3m within equity attributable to owners
of the parent company. The Group considered the rights and
obligations and operating protocols arising from the disposal and
has determined that the non-controlling interest in SHET has the
characteristics of equity and has classified the non-controlling
interest as such.
12. ACQUISITIONS AND DISPOSALS
(CONTINUED)
12.2 Disposals (continued)
12.2.2 Prior year disposals
(continued)
|
30
November 2022
£m
|
|
|
Carrying value of non-controlling
interests disposed
|
(579.8)
|
Cash consideration paid by
non-controlling interest holder
|
1,465.0
|
Transaction costs
|
(16.9)
|
Excess of consideration received recognised in
equity
|
868.3
|
Fiddler's Ferry land sale: On
30 June 2022, the Fiddler's Ferry site was sold to Peel NRE
Developments Limited for cash proceeds of £60m. The Group released
a decommissioning provision related to the site, which resulted in
an exceptional gain on disposal of £89.1m.
12.2.3 Prior year disposal
reconciliation
The following table summarises
disposals of subsidiaries, businesses and assets during the prior
financial year, including other assets and investments disposed of
as part of the normal course of business but before recognition of
impairment charges, which are noted in the relevant respective
notes to the financial statements.
|
|
|
|
2023
|
|
|
|
|
Total
|
|
|
|
|
£m
|
Net
assets disposed:
|
|
|
|
|
Property, plant and
equipment
|
|
|
|
24.1
|
Provisions
|
|
|
|
(88.2)
|
Net
assets
|
|
|
|
(64.1)
|
|
|
|
|
|
Proceeds of disposal:
|
|
|
|
|
Consideration
|
|
|
|
60.0
|
Net
proceeds
|
|
|
|
60.0
|
Gain on disposal
|
|
|
|
124.1
|
|
|
|
|
|
Presentation:
|
|
|
|
|
Continuing operations
|
|
|
|
|
Income statement exceptional gain
|
|
|
|
89.1
|
|
|
|
|
89.1
|
Discontinued operations
|
|
|
|
|
Income statement exceptional credit
|
|
|
|
35.0
|
SSE
Group
|
|
|
|
124.1
|
|
|
|
|
|
Net
proceeds of disposal
|
|
60.0
|
Net
cash proceeds
|
|
60.0
|
Plus net cash proceeds from sale of
non-controlling interest in SHET
|
|
1,448.1
|
Net
cash proceeds
|
|
1,508.1
|
|
|
|
|
|
|
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 31
March 2024, the Group's long-term credit rating was BBB+ positive
outlook for Standard & Poor's and Baa1 stable 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.
During the year SSE plc issued an
8 year €750m Green Bond at coupon of 4.0%. The bond has been left
in Euros as a net investment hedge for the Group's Euro denominated
subsidiaries. In the year, SSE plc also redeemed US Private
Placement debt of combined £155.0m and a €700m Eurobond with a
coupon at 1.75%. In January 2024 Scottish Hydro Electric
Transmission plc issued a 20 year £500m Green Bond at a coupon of
5.5%.
SSE's adjusted net debt and hybrid
capital was £9.4bn at 31 March 2024, compared with £8.9bn at 31
March 2023.
The Group has an established
€1.5bn Euro commercial paper programme (paper can be issued in a
range of currencies and swapped into Sterling) and as at 31 March
2024 there was £840m commercial paper outstanding (2023: £919m).
During the year ended 31 March 2024, the Group issued new debt
instruments totalling £1,982m and redeemed £1,744m of maturing debt
in the year. The Group also continues to have access to £3.5bn of
revolving credit facilities (2023: £3.5bn), which includes £750m
relating to Scottish Hydro Electric Transmission plc (2023: £750m)
(see 13.2.1). As at 31 March 2024 there were no (2023: £100m)
drawings against these committed facilities (2023: 3%
utilisation).
The Group capital
comprises:
|
2024
£m
|
2023
£m
(restated*)
|
Total borrowings (excluding lease
obligations)
|
8,726.2
|
8,654.0
|
Less: Cash and cash
equivalents
|
(1,035.9)
|
(891.8)
|
Net debt (excluding hybrid
equity)
|
7,690.3
|
7,762.2
|
Hybrid equity
|
1,882.4
|
1,882.4
|
External net debt attributable to
non-controlling interests
|
(490.2)
|
(434.2)
|
Cash held/(posted) as collateral and
other short term loans
|
353.2
|
(316.3)
|
Adjusted net debt and hybrid capital
|
9,435.7
|
8,894.1
|
Equity attributable to shareholders
of the parent
|
9,170.8
|
8,551.7
|
Total capital excluding lease
obligations
|
18,606.5
|
17,445.8
|
*The comparative has been
restated. See note 3.1.
Under the terms of its major
borrowing facilities, the Group is required to comply with the
following financial covenant:
· Interest Cover
Ratio: The Group shall procure that
the ratio of Operating Profit to Net Interest Payable for any
relevant period is not less than 2.5 to 1.
The following definitions apply in
the calculation of these financial covenants:
· "Operating
Profit" means, in relation to a
relevant period, the profit on ordinary activities before taxation
(after adding back Net Interest Payable) of the Group for that
relevant period but after adjusting this amount to exclude any
exceptional profits (or losses) and, for the avoidance of doubt,
before taking account of any exceptional profits (or losses) and
excluding the effect of IFRS 9 remeasurements.
· "Net Interest
Payable" means, in respect of any
relevant period, interest payable during that relevant period less
interest receivable during that relevant period.
In summary, the Group's intent is
to balance returns to shareholders between current returns through
dividends and long-term capital investment for growth. In doing so,
the Group will maintain its capital discipline and will continue to
operate within the current economic environment prudently. There
were no changes to the Group's capital management approach during
the year.
13. SOURCES OF FINANCE (CONTINUED)
13.2 Loans and other borrowings
|
2024
£m
|
2023
£m
|
Current
|
|
|
Short-term loans
|
1,044.5
|
1,738.5
|
Lease obligations
|
83.5
|
82.1
|
|
1,128.0
|
1,820.6
|
Non-current
|
|
|
Loans
|
7,681.7
|
6,915.5
|
Lease obligations
|
324.0
|
323.8
|
|
8,005.7
|
7,239.3
|
|
|
|
Total loans and borrowings
|
9,133.7
|
9,059.9
|
|
|
|
Cash and cash equivalents
|
(1,035.9)
|
(891.8)
|
Unadjusted net debt
|
8,097.8
|
8,168.1
|
Add/(less):
|
|
|
Hybrid equity (note 14)
|
1,882.4
|
1,882.4
|
External net debt attributable to
non-controlling interests (see below)
|
(490.2)
|
(434.2)
|
Lease obligations
|
(407.5)
|
(405.9)
|
Cash held/(posted) as collateral and
other short term loans
|
353.2
|
(316.3)
|
Adjusted net debt and hybrid capital
|
9,435.7
|
8,894.1
|
The adjustment relating to the
non-controlling interest share of Scottish Hydro Electric
Transmission plc external net debt is £490.2m at 31 March 2024
(2023: £434.2m) and relates to 25% of external loans of £2,088.0m
(2023: £1,744.8m) net of cash and cash equivalents of £127.4m
(2023: £7.8m). Cash and cash equivalents (which are presented as a
single class of asset on the face of the balance sheet) comprise
cash at bank and short term highly liquid investments with a
maturity of three months or less.
13.2.1 Borrowing facilities
The Group has an established
€1.5bn Euro commercial paper programme (paper can be issued in a
range of currencies and swapped into Sterling) and as at 31 March
2024 there was £840m commercial paper outstanding (2023:
£919m).
The Group also continues to have
access to £3.5bn of revolving credit facilities (2023: £3.5bn). As
at 31 March 2024 there were no drawings against these committed
facilities (2023: £100m). The details of the five committed
facilities as at 31 March 2024 are:
· a
£1.3bn revolving credit facility for SSE plc maturing March 2026
(2023: £1.3bn);
· a
£0.2bn bilateral facility for SSE plc maturing October 2026 (2023:
£0.2bn);
· a
£0.75bn facility for Scottish Hydro Electric Transmission plc
maturing November 2026 (2023: £0.75bn);
· a
£0.25bn facility for Scottish Hydro Electric Distribution plc and
Southern Electric Power Distribution plc maturing November 2026
(2023: £0.25bn); and
· a
£1.0bn committed facility for SSE plc maturing February 2025 (2023:
£1.0bn).
The £1.3bn revolving credit
facility and £0.2bn bilateral facility are both in place to provide
back-up to the commercial paper programme and support the Group's
capital expenditure plans. The Transmission and Distribution
related facilities, both of which have 1 year extension options at
the borrower's discretion, were entered into to help cover the
capital expenditure and working capital of those businesses. Both
facilities were extended to November 2026 in the year and have a
further year option. The £1bn committed facility for SSE plc was
entered into to provide cover for potential cash collateral
requirements, if periods of extreme volatility return to the
commodity markets. The facility had a 1 year extension option at
the lender's discretion that was extended for a year to February
2025. There were no drawings on the SSE plc and Distribution
facilities at 31 March 2024 and 31 March 2023 and no drawings on
the £750m Transmission facility at 31 March 2024 compared to £100m
at 31 March 2023.
During the year SSE plc issued an
8 year €750m Green Bond at a coupon of 4.0%. The bond has been left
in Euros as a net investment hedge for the Group's Euro denominated
subsidiaries. Additionally Scottish Hydro Electric Transmission plc
issued a 20 year £500m bond at a coupon of 5.5%. In the year
SSE plc also redeemed US Private Placement debt of combined £155m
and a €700m Eurobond with a coupon at 1.75%, and Scottish Hydro
Electric Transmission plc repaid £100m of facility
advances.
13. SOURCES OF FINANCE (CONTINUED)
13.2 Loans and borrowings (continued)
13.2.1 Borrowing facilities (continued)
The weighted average incremental
borrowing rate applied to lease liabilities during the year was
4.98% (2023: 5.02%). Incremental borrowing rates applied to
individual lease additions in the year ranged between 3.70% to
5.25% (2023: 4.03% to 5.06%).
13.3 Reconciliation of net increase in cash and cash
equivalents to movement in adjusted net debt and hybrid
capital
|
2024
|
2023
|
|
£m
|
£m
|
Increase/(decrease) in cash and cash
equivalents
|
144.1
|
(157.5)
|
(Less)/add:
|
|
|
New borrowing proceeds
|
(1,982.2)
|
(1,914.7)
|
New hybrid equity
proceeds
|
-
|
(831.4)
|
Repayment of borrowings
|
1,744.0
|
2,148.1
|
Non-cash movement on
borrowings
|
166.0
|
(216.2)
|
Increase in external net debt
attributable to non-controlling interests
|
56.0
|
434.2
|
(Decrease)/increase in cash
held/posted as collateral and other short-term loans
|
(669.5)
|
241.6
|
Increase in adjusted net debt and hybrid
capital
|
(541.6)
|
(295.9)
|
14. Equity
14.1 Share capital
|
Number
(millions)
|
£m
|
Allotted, called up and fully
paid:
|
|
|
At 31 March 2023
|
1,093.9
|
547.0
|
Issue of shares (i)
|
2.3
|
1.1
|
At 31 March 2024
|
1,096.2
|
548.1
|
i.
Shareholders were able to elect to receive ordinary shares in place
of the final dividend of 67.7p per ordinary share (in relation to
year ended 31 March 2023) and the interim dividend of 20.0p (in
relation to the current year) under the terms of the Company's
scrip dividend scheme. This resulted in the issue of 1,779,529 and
493,654 new fully paid ordinary shares respectively (2023:
18,241,941 and 9,413,103). In addition, the Company issued 0.8m
(2023: 1.9m) shares during the year under the savings-related share
option schemes (all of which were settled by shares held in
Treasury) for a consideration of £9.2m (2023:
£18.0m).
Under the share buyback programme
in the year to 31 March 2023, 6.9m of shares were repurchased and
cancelled for a total consideration of £107.6m (including stamp
duty and commission). The nominal value of share capital
repurchased and cancelled is transferred out of share capital and
into the capital redemption reserve. The scrip dividend take-up for
the financial year ended 31 March 2023 was 18.0%, which is below
the 25.0% required by the share buyback programme, therefore there
have been no share buybacks in the current financial year ended 31
March 2024.
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.
Of the 1,096.2m shares in issue,
2.8m 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 year, on behalf of the
Company, the employee share trust purchased 1.3m shares for a total
consideration of £21.8m (2023: 1.4m shares, consideration of
£23.4m) to be held in trust for the benefit of employee share
schemes. At 31 March 2024, the trust held 6.9m shares (2023: 6.5m)
which had a market value of £113.9m (2023: £118.0m).
14.2 Hybrid Equity
|
2024
|
2023
|
|
£m
|
£m
|
GBP 600m 3.74% perpetual
subordinated capital securities (i)
|
598.0
|
598.0
|
EUR 500m 3.125% perpetual
subordinated capital securities (i)
|
453.0
|
453.0
|
EUR 1,000m 4.00% perpetual
subordinated capital securities (ii)
|
831.4
|
831.4
|
|
1,882.4
|
1,882.4
|
(i) 2 July 2020 £600m and €500m
Hybrid Capital Bonds
The 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 £600m hybrid bond is 14
April 2026 and then every 5 years thereafter. The date for the
first potential discretionary redemption of the €500m hybrid
capital bond is 14 July 2027 and then every 5 years thereafter. For
the £600m Hybrid the discretionary coupon payments are made
annually on 14 April and for the €500m Hybrid the coupon payments
are made annually on 14 July.
14. EQUITY
(CONTINUED)
14.2 Hybrid Equity (continued)
(ii) 12 April 2022 €1,000m Hybrid
Capital Bonds
The hybrid capital bond issued in
April 2022 has 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 is 21 April 2028 and then every
5 years thereafter. The discretionary Hybrid coupon payments
are made annually on 21 April.
(iii) Coupon Payments
In relation to the £600m hybrid
equity bond a discretionary coupon payment of £22.4m (2023: £22.4m)
was made on 14 April 2023 and for the €500m hybrid equity bond a
discretionary coupon payment of £16.5m (2023: £16.4m) was made on
14 July 2023. The first discretionary coupon payment on the €1bn
hybrid equity bond of £34.2m was paid on 21 April 2023.
The coupon payments in the year to
31 March 2024 consequently totalled £73.1m (2023:
£38.8m).
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.
14.3 Equity attributable to non-controlling
interests
This relates to equity
attributable to non-wholly owned but controlled subsidiaries which
are consolidated within the financial statements of the Group. At
31 March 2024 the amount attributable to non-controlling interests
is £749.9m (2023: £649.1m), which relates to SHET of £709.1m (2023:
£606.5m) and SSE Pacifico £40.8m (2023: £42.6m). The profit and
loss attributable to non-controlling interests for the year ended
31 March 2024 is £100.8m gain (2023: £23.6 gain), which relates to
SHET £101.5m gain (2023: £25.5m) and SSE Pacifico £0.7m loss (2023:
£1.9m loss).
15. Retirement Benefit Obligations
15.1 Valuation of combined pension schemes
|
Quoted
|
Unquoted
|
Value
at 31 March
2024
|
Quoted
|
Unquoted
|
Value
at 31
March 2023
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
Equities
|
196.9
|
-
|
196.9
|
94.3
|
-
|
94.3
|
Government bonds
|
1,215.3
|
-
|
1,215.3
|
1,381.6
|
-
|
1,381.6
|
Corporate bonds
|
-
|
-
|
-
|
122.8
|
-
|
122.8
|
Insurance contracts
|
-
|
500.3
|
500.3
|
-
|
532.4
|
532.4
|
Other investments
|
1,102.7
|
-
|
1,102.7
|
1,057.5
|
-
|
1,057.5
|
Total fair value of plan assets
|
2,514.9
|
500.3
|
3,015.2
|
2,656.2
|
532.4
|
3,188.6
|
Present value of defined benefit
obligation
|
|
|
(2,593.6)
|
|
|
(2,647.5)
|
Surplus in the schemes
|
|
|
421.6
|
|
|
541.1
|
Deferred tax thereon (i)
|
|
|
(105.4)
|
|
|
(135.3)
|
Net pension asset
|
|
|
316.2
|
|
|
405.8
|
(i) Deferred
tax rate of 25% applied to net pension surplus position (2023:
25%).
|
Balance sheet
presentation
2024
|
Balance
sheet presentation
2023
|
|
£m
|
£m
|
|
|
|
Retirement benefit asset
|
421.6
|
541.1
|
Net
pension asset
|
421.6
|
541.1
|
15. RETIREMENT BENEFIT OBLIGATIONS
(CONTINUED)
15.1 Valuation of combined pension schemes
(continued)
Movements in the defined benefit assets and obligations
during the year:
|
2024
|
2023
|
|
Assets
£m
|
Obligations
£m
|
Total
£m
|
Assets
£m
|
Obligations
£m
|
Total
£m
|
|
|
|
|
|
|
|
At
1 April
|
3,188.6
|
(2,647.5)
|
541.1
|
4,311.2
|
(3,726.3)
|
584.9
|
|
|
|
|
|
|
|
Included in Income Statement
|
|
|
|
|
|
|
Current service cost
|
-
|
(16.2)
|
(16.2)
|
-
|
(28.2)
|
(28.2)
|
Past service cost
|
-
|
(2.4)
|
(2.4)
|
-
|
(5.7)
|
(5.7)
|
Interest income/(cost)
|
148.5
|
(122.3)
|
26.2
|
114.8
|
(98.6)
|
16.2
|
|
148.5
|
(140.9)
|
7.6
|
114.8
|
(132.5)
|
(17.7)
|
Included in Other Comprehensive Income
|
|
|
|
|
|
|
Actuarial gain/(loss) arising
from:
|
|
|
|
|
|
|
Demographic assumptions
|
-
|
29.3
|
29.3
|
-
|
71.7
|
71.7
|
Financial assumptions
|
-
|
53.7
|
53.7
|
-
|
1,099.8
|
1,099.8
|
Experience assumptions
|
-
|
(46.2)
|
(46.2)
|
-
|
(135.1)
|
(135.1)
|
Return on plan assets excluding
interest income
|
(192.0)
|
-
|
(192.0)
|
(1,115.6)
|
-
|
(1,115.6)
|
|
(192.0)
|
36.8
|
(155.2)
|
(1,115.6)
|
1,036.4
|
(79.2)
|
Other
|
|
|
|
|
|
|
Contributions paid by the
employer
|
28.1
|
-
|
28.1
|
53.1
|
-
|
53.1
|
Scheme participant's
contributions
|
0.1
|
(0.1)
|
-
|
0.1
|
(0.1)
|
-
|
Benefits paid
|
(158.1)
|
158.1
|
-
|
(175.0)
|
175.0
|
-
|
|
(129.9)
|
158.0
|
28.1
|
(121.8)
|
174.9
|
53.1
|
|
|
|
|
|
|
|
Balance at 31 March
|
3,015.2
|
(2,593.6)
|
421.6
|
3,188.6
|
(2,647.5)
|
541.1
|
Charges/(credits) recognised:
|
|
|
|
2024
|
2023
|
|
£m
|
£m
|
Service costs (charged to operating
profit)
|
18.6
|
33.9
|
|
18.6
|
33.9
|
(Credited)/charged to finance
costs:
|
|
|
Interest on pension scheme
assets
|
(148.5)
|
(114.8)
|
Interest on pension scheme
liabilities
|
122.3
|
98.6
|
|
(26.2)
|
(16.2)
|
16. Financial risk management
16.1 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.
SSE has 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 Chief Financial Officer (the
"Group Energy Markets Exposures Risk Committee") and the Board
Sub-committee chaired by Non-Executive Director Tony Cocker (the
"Energy Markets Risk Committee (EMRC)"). These Committees oversee
the Group's management of its energy market exposures, including
its approach to hedging.
During the year ended 31 March
2024, the Group continued to be exposed to the economic conditions
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 certain mitigation of these
exposures.
Exposure to the commodity,
currency and interest rate risks noted arise in the normal course
of the Group's business and derivative financial instruments are
entered into to hedge exposure to these risks. The objectives and
policies for holding or issuing financial instruments and similar
contracts, and the strategies for achieving those objectives that
have been followed during the year are explained within A6
Accompanying Information to the Group's consolidated financial
statements.
The net movement reflected in the
income statement can be summarised as follows:
|
2024
£m
|
2023
£m
|
Operating derivatives
|
|
|
Total result on operating
derivatives (i)
|
(573.1)
|
(2,980.2)
|
Less: amounts settled
(ii)
|
1,025.3
|
272.0
|
Movement in unrealised derivatives
|
452.2
|
(2,708.2)
|
|
|
|
Financing derivatives (and hedged items)
|
|
|
Total result on financing
derivatives (i)
|
370.6
|
81.3
|
Less: amounts settled
(ii)
|
(364.5)
|
120.6
|
Movement in unrealised derivatives
|
6.1
|
201.9
|
|
|
|
Financial guarantee liabilities
|
|
|
Total result on financial guarantee
liabilities (iii)
|
12.5
|
-
|
Net
income statement impact
|
470.8
|
(2,506.3)
|
(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
year represent the result on derivatives transacted which have
matured or been delivered and have been included within the total
result on derivatives.
(iii) Total result on financial
guarantee liabilities in the income statement represents the total
amounts credited or (charged) to the income statement in respect of
the unwind of the financial liabilities and new or expiring
contracts.
16. Financial risk management
(continued)
16.2 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.
|
2024
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
Financial Assets
|
|
|
|
|
Energy derivatives
|
357.7
|
121.6
|
0.5
|
479.8
|
Interest rate derivatives
|
-
|
113.0
|
-
|
113.0
|
Foreign exchange
derivatives
|
-
|
7.5
|
-
|
7.5
|
Unquoted equity
investments
|
-
|
-
|
3.2
|
3.2
|
|
357.7
|
242.1
|
3.7
|
603.5
|
|
|
|
|
|
Financial Liabilities
|
|
|
|
|
Energy derivatives
|
-
|
(327.1)
|
(101.3)
|
(428.4)
|
Interest rate derivatives
|
-
|
(95.8)
|
-
|
(95.8)
|
Foreign exchange
derivatives
|
-
|
(43.2)
|
-
|
(43.2)
|
Loans and borrowings
|
-
|
(0.9)
|
-
|
(0.9)
|
|
-
|
(467.0)
|
(101.3)
|
(568.3)
|
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 2024. There were no significant
transfers out of Level 2 into Level 3 and out of Level 3 into Level
2 during the year ended 31 March 2024.
|
2023
|
|
Level
1
|
Level
2
|
Level
3
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
Financial Assets
|
|
|
|
|
Energy derivatives
|
-
|
743.9
|
22.0
|
765.9
|
Interest rate derivatives
|
-
|
227.8
|
-
|
227.8
|
Foreign exchange
derivatives
|
-
|
11.5
|
-
|
11.5
|
Unquoted equity
investments
|
-
|
-
|
27.4
|
27.4
|
|
-
|
983.2
|
49.4
|
1,032.6
|
|
|
|
|
|
Financial Liabilities
|
|
|
|
|
Energy derivatives
|
(189.6)
|
(939.4)
|
(23.8)
|
(1,152.8)
|
Interest rate derivatives
|
-
|
(92.6)
|
-
|
(92.6)
|
Foreign exchange
derivatives
|
-
|
(18.9)
|
-
|
(18.9)
|
Loans and borrowings
|
-
|
(154.6)
|
-
|
(154.6)
|
|
(189.6)
|
(1,205.5)
|
(23.8)
|
(1,418.9)
|
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 2023.
17. Capital commitments
|
2024
|
2023
|
|
£m
|
£m
|
Capital expenditure:
|
|
|
Contracted for but not
provided
|
1,389.2
|
1,035.6
|
Contracted for but not provided
capital commitments include the fixed contracted costs of the
Group's major capital projects. In practice contractual variations
may arise on the final settlement of these contractual costs. The
increase from the prior year relates primarily to Transmission
projects.
18. Related party transactions
The following transactions took
place during the year 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.
|
2024
|
2023
|
|
Sale of goods and
services
|
Purchase of goods and
services
|
Amounts owed
from
|
Amounts owed
to
|
Sale of
goods and services
|
Purchase
of goods and services
|
Amounts
owed from
|
Amounts
owed to
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Joint ventures:
|
|
|
|
|
|
|
|
|
Marchwood Power Limited
|
42.6
|
(63.2)
|
-
|
(13.0)
|
122.4
|
(228.5)
|
-
|
(16.8)
|
Clyde Windfarm (Scotland)
Limited
|
5.6
|
(153.9)
|
-
|
(48.7)
|
4.8
|
(280.5)
|
0.1
|
(49.5)
|
Beatrice Offshore Windfarm
Limited
|
4.8
|
(75.5)
|
2.0
|
(6.8)
|
4.7
|
(176.5)
|
1.0
|
(8.7)
|
Stronelairg Windfarm
Limited
|
2.5
|
(75.6)
|
-
|
(20.8)
|
2.4
|
(146.2)
|
-
|
(21.7)
|
Dunmaglass Windfarm
Limited
|
1.1
|
(32.2)
|
-
|
(8.6)
|
1.1
|
(66.4)
|
-
|
(9.1)
|
Neos Networks Limited
|
3.8
|
(28.5)
|
6.1
|
(4.7)
|
3.8
|
(23.8)
|
46.2
|
(5.8)
|
Seagreen Wind Energy
Limited
|
19.8
|
(113.4)
|
11.3
|
(11.7)
|
35.2
|
(44.4)
|
22.9
|
(7.5)
|
Doggerbank A, B, C and D
|
36.5
|
-
|
10.7
|
-
|
25.4
|
-
|
7.6
|
-
|
Other Joint Ventures
|
18.0
|
(209.4)
|
6.7
|
(63.9)
|
14.0
|
(219.2)
|
1.1
|
(50.8)
|
|
|
|
|
|
|
|
|
|
The transactions with Marchwood
Power Limited relate to the contracts for the provision of energy
or the tolling of energy under power purchase
arrangements.
The amounts outstanding are
trading balances, are unsecured and will be settled in cash. No
provisions have been made for doubtful debts in respect of the
amounts owed by related parties.