SSE Plc – Trading Statement

HEADLINES

SSE plc's Annual General Meeting takes place today, Thursday 18 July in Perth.  This trading statement:

·    Provides an overview of the performance of SSE's businesses in the first quarter of this financial year;

·    States that SSE's outlook for the financial year 2019/20 remains unchanged from the outlook given in May 2019, despite lower than forecast renewable energy output in the first three months; and

·    Re-iterates SSE's intention to recommend a full-year dividend of 80 pence per share for 2019/20, in line with the five-year dividend plan set out in May 2018.

SSE Chief Executive Alistair Phillips-Davies said:

“The early months of our financial year have brought some short-term challenges and some encouraging longer-term developments, but the key months of our financial year lie ahead.  I am confident we will make good progress in delivering against our strategic priorities, including the five- year dividend plan out to 2023.

“The fact the UK has become the first major economy to legislate for net zero emissions by 2050 is a key development in the fight against climate change  and reinforces SSE's strategic focus on regulated electricity networks and renewable energy, and our commitment to creating value through the low carbon transition.”

FINANCIAL OUTLOOK FOR 2019/20

The key months in SSE's financial year are still to come, but the overall outlook provided in May 2019 in relation to adjusted operating profit across a number of SSE's business units in 2019/20 remains unchanged.  This is despite lower than expected output of renewable energy in the three months to 30 June, with the shortfall in output equivalent to less than 4% of the annual forecast total.  As stated in May, the outlook for adjusted operating profit includes suspended Capacity Market payments totalling £148m. Group adjusted net finance costs and group capital and investment expenditure in 2019/20 continue to be in line with that set out in May.   

DIVIDENDS

SSE believes that its dividends should be sustainable, based on the quality and nature of its assets and operations, the earnings derived, and the value created from them and the longer-term financial outlook.  It remains committed to its dividend plan for the five years to March 2023, as set out in May 2018, including a full-year dividend of 80 pence per share for 2019/20.

Q1 PERFORMANCE AND KEY DEVELOPMENTS

Safety

SSE believes sustainable value creation is only possible in a safe working environment. The combined Total Recordable Injury Rate for SSE's employees and employees of contractors working on its sites was 0.14 per 100,000 hours worked in the 12-month period ending 30 June 2019, compared with 0.20 in the same period in 2018.

SSEN Distribution

In April, SSEN Distribution joined together with key local and national industry partners to launch Project LEO (Local Energy Oxfordshire), one of the most wide-ranging and holistic smart grid trials ever conducted in the UK.  An industry-first, Project LEO aims to replicate and trial aspects of the Distribution System Operator models being explored by industry, government and Ofgem.

SSEN Transmission

In June SSEN Transmission published its draft Business Plan for the RIIO T2 Price Control, 'A Network for Net Zero'.  It includes details of SSEN Transmission's 'Certain View' of the next Price Control period which sets out that a minimum total expenditure of £2.2bn is required over the five-year Price Control period to maintain and grow the north of Scotland transmission network to meet the certain needs of current and future electricity generators and customers. This could see the Regulatory Asset Value of SSEN Transmission increase to over £5bn by 2026.

SSE Renewables

The increase in output of electricity from renewable sources, summarised in the table above, largely reflects the delivery of new wind farm capacity since June 2018.  However, the weather across the UK and Ireland meant renewable output in the three months to June 2019 was around 400 GWh, or close to 20%, lower than expected in a typical year (including generation constrained off).  This represents less than 4% of the annual forecast total output.

SSE Renewables is involved in three projects eligible to enter the 2019 Contracts for Difference auction, which is expected to take place in the coming weeks.

Thermal Generation

In June SSE announced proposals to close the remaining operational capacity of 1,510MW at Fiddler's Ferry, its last remaining coal-fired power station. SSE is now in consultation with employees and trade unions with a view to closing the station by 31 March 2020.  If Fiddler's Ferry is closed, SSE will cease being a generator of electricity from coal.

The UK Capacity Market continues to be suspended pending the outcome of the European Commission investigation into the legality of payments under state aid rules; but capacity agreement holders are expected to honour existing agreements and BEIS intends to make retrospective payments and levy penalties once a positive State Aid decision is received. 

 SSE ENERGY SERVICES

Executive Chair Katie Bickerstaffe and Interim Chief Financial Officer Gordon Boyd took up their new roles with SSE Energy Services on 23 June 2019.  Their mandate is to deliver a new future for the business outside of the SSE Group and continue progress towards a listing or new ownership by the second half of calendar year 2020.

SSE Energy Services