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Sse Renewables DRAFT FOR DISCUSSION PURPOSES ONLY Disclaimer This financial report contains forward-looking statements about financial and operational matters. Because they relate to future events and are subject to future circumstances, these forward-looking statements are subject to risks, uncertainties and other factors. As a result, actual financial results, operational performance and other future developments could differ materially from those envisaged by the forward-looking statements. SSE plc gives no express or implied warranty as to the impartiality, accuracy, completeness or correctness of the information, opinions or statements expressed herein. Neither SSE plc nor its affiliates assume liability of any kind for any damage or loss arising from any use of this document or its contents. This document does not constitute an offer or invitation to underwrite, subscribe for, or otherwise acquire or dispose of any SSE shares or other securities and the information contained herein cannot be relied upon as a guide to future performance. Definitions These financial results for the year to 31 March 2020 are reported under IFRS (International Financial Reporting Standards), as adopted by the EU. In order to present the financial results and performance of the Group in a consistent and meaningful way, SSE applies a number of adjusted accounting measures throughout this financial report. These adjusted measures are used for internal management reporting purposes and are believed to present the underlying performance of the Group in the most useful manner for ordinary shareholders and other stakeholders. The definitions SSE uses for adjusted measures are consistently applied and are explained in the Alternative Performance Measures section before the Summary Financial Statements. In preparing this financial report SSE has been mindful of the commentary issued in May 2016 by the Financial Reporting Council on the European Securities and Markets Authority’s Guidelines on Alternative Performance Measures. SSE will monitor developing practice in the use of Alternative Performance Measures and will continue to prioritise this, ensuring the financial information in its results statements is clear, consistent and relevant to the users of those statements. Important note: SSE Energy Services On 15 January 2020, SSE completed the sale of its SSE Energy Services business to OVO Energy Limited. SSE Energy Services has been presented in these financial statements as a discontinued operation (see note 12.2 (i) of the Summary Financial Statements), therefore the results of SSE Energy Services have been excluded from the Group’s adjusted profit and loss metrics. Important note: Gas Production At 31 March 2020 SSE has assessed that SSE’s investment in Gas Production assets should be classified as held for sale and the business activity classified as a discontinued operation (see note 5.2 (i) of the Summary Financial Statements). Therefore, the results of SSE’s investments in Gas Production assets have been excluded from the Group’s adjusted profit and loss metrics. While the assets of this business are held for sale, the benefit of an internal gas hedge is being retained within the SSE Group due to the structure of the proposed disposal. Impact of planned sales on the Group’s APMs The following metrics have been adjusted in all periods presented to exclude the contribution of SSE Energy Services and SSE’s investment in Gas Production assets, which have been classified as discontinued operations as at 31 March 2020: • Adjusted EBITDA; • Adjusted operating profit; • Adjusted net finance costs; • Adjusted profit before tax; • Adjusted current tax charge; and • Adjusted earnings per share. i Table of Contents HEADLINES ............................................................................................................................................... 1 FINANCIAL PERFORMANCE IN 2019/20 AT A GLANCE ............................................................................ 3 STRATEGIC OVERVIEW ............................................................................................................................ 6 GROUP FINANCIAL REVIEW 2019/20 ...................................................................................................... 8 Operating profit performance 2019/20 .............................................................................................. 9 Investment and Capital Expenditure .................................................................................................13 SSE’s Hedging Position at 31 March 2020 .........................................................................................14 Adjusted Earnings per Share .............................................................................................................15 Dividend 2019/20 ..............................................................................................................................17 Financial management and balance ..................................................................................................17 Taxation .............................................................................................................................................22 Impacts of prior year adjustments ....................................................................................................22 Pensions ............................................................................................................................................22 GROUP FINANCIAL OUTLOOK 2020/21 AND BEYOND ..........................................................................23 BUSINESS UNIT OPERATING REVIEW ....................................................................................................29 ECONOMICALLY-REGULATED NETWORKS ............................................................................................29 SSEN TRANSMISSION .............................................................................................................................30 SSEN DISTRIBUTION ..............................................................................................................................33 INVESTMENT IN SCOTIA GAS NETWORKS (SGN) ...................................................................................37 SSE RENEWABLES ..................................................................................................................................38 SSE THERMAL ........................................................................................................................................42 GAS STORAGE ........................................................................................................................................44 SSE BUSINESS ENERGY ...........................................................................................................................45 SSE AIRTRICITY .......................................................................................................................................45 SSE ENTERPRISE .....................................................................................................................................46 ENERGY PORTFOLIO MANAGEMENT ....................................................................................................47 GAS PRODUCTION (Held for sale) .........................................................................................................48 SSE ENERGY SERVICES (Discontinued) ...................................................................................................48 ALTERNATIVE PERFORMANCE MEASURES ............................................................................................49 Financial Statements .............................................................................................................................56 Consolidated Income Statement ...........................................................................................................56 Consolidated Statement of Comprehensive Income ............................................................................57 Consolidated Balance Sheet ..................................................................................................................58 Consolidated Statement of Changes in Equity ......................................................................................59 Consolidated Cash Flow Statement.......................................................................................................60 Notes to the Preliminary Statement .....................................................................................................61 ii SSE plc Preliminary results for the year ended 31 March 2020 17 June 2020 HEADLINES Results for 2019/20* • Adjusted operating profit up 37% to £1,488.4m o Despite negative coronavirus impact of £18.2m related to electricity demand# • Reported operating profit down 40% to £963.4m • Adjusted profit before tax up 49% to £1,023.4m • Reported profit before tax down 55% to £587.6m • Adjusted earnings per share up 35% to 83.6p, within forecast 83p-88p range • Reported earnings per share down 67% to 40.6p • Net exceptional charge of £738.7m before tax: o £529.0m on discontinued operations; and o £209.7m on continuing operations (incl. £33.7m relating to coronavirus impacts on bad debts#) • Capital and investment expenditure down 5% to £1,357.4m • Adjusted net debt and hybrid capital at £10.5bn, in line with forecast • £7.7bn
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