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POWERING CHANGE Preliminary Results for the Year to 31 March 2021

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POWERING CHANGE Preliminary Results for the Year to 31 March 2021 POWERING CHANGE Preliminary Results for the year to 31 March 2021 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 consolidated financial results for the year ended 31 March 2021 have been prepared in accordance with International Financial Reporting Standards (‘IFRSs’) and its interpretations as issued by the International Accounting Standards Board (‘IASB’) and adopted by the European Union (‘adopted IFRS’). 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. 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. 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: Discontinued Operations – Gas Production and SSE Energy Services At 31 March 2021 SSE has assessed that its Gas Production assets should continue to be classified as held for sale (see note 12.3 of the Summary Financial Statements) and on 15 January 2020 SSE completed the sale of its SSE Energy Services business to OVO Energy Limited (see note 12.2 of the Summary Financial Statements). Both businesses have been classified as discontinued operations. The Group’s adjusted profit-based measures therefore exclude the contribution from both of these businesses in all periods presented. Important note: Other disposals At 31 March 2021 SSE has also assessed that its Enterprise Contracting and Rail business should be classified as held for sale (see note 12.3 of the Summary Financial Statements). SSE has further disposed of a 50% stake in Slough Multifuel on 2 April 2020, a 51% stake in Seagreen Wind Farm on 3 June 2020, its investment in Walney offshore wind farm on 2 September 2020, its investment in MapleCo smart-metering on 23 September 2020, its investment in Multifuel Energy on 7 January 2021 and a 10% stake in Dogger Bank Wind Farm on 26 February 2021. As these businesses do not individually constitute a separate major line of business for SSE, they have not been classified as discontinued operations, and their result continues to be included within the Group’s adjusted profit-based measures to the point of disposal. Impact of discontinued operations on the Group’s Alternative Performance Measures (‘APM’) The following Alternative Performance Measures have been adjusted in all periods presented to exclude the contribution of the Group’s Gas Production operations, which continues to be presented as a discontinued operation as at 31 March 2021, and SSE Energy Services, which was disposed on 15 January 2020: • Adjusted EBITDA; • Adjusted operating profit; • Adjusted net finance costs; • Adjusted profit before tax; • Adjusted current tax charge; and • Adjusted earnings per share. ‘Adjusted net debt and hybrid capital’, and ‘investment and capital expenditure’ have not been adjusted as the Group continues to fund the discontinued operations and will continue to do so until the date of disposal. The discontinued operations have no external debt and all intercompany funding to the disposal group continues to eliminate on consolidation, therefore no adjustments are required to the Group’s ‘adjusted net finance cost’ measure. 2 CONTENTS HEADLINES ................................................................................................................................................. 4 KEY PERFORMANCE INDICATORS FOR THE YEAR TO 31 MARCH .................................................... 6 STRATEGIC OVERVIEW ............................................................................................................................ 9 GROUP FINANCIAL REVIEW – YEAR TO 31 MARCH 2021 .................................................................. 11 GROUP FINANCIAL OUTLOOK – 2021/22 AND BEYOND .................................................................... 17 SUPPLEMENTAL FINANCIAL INFORMATION ....................................................................................... 20 BUSINESS UNIT OPERATING REVIEW .................................................................................................. 32 SSEN TRANSMISSION ............................................................................................................................. 33 SSEN DISTRIBUTION ............................................................................................................................... 36 INVESTMENT IN SCOTIA GAS NETWORKS (SGN) ............................................................................... 38 SSE RENEWABLES .................................................................................................................................. 39 SSE THERMAL .......................................................................................................................................... 44 GAS STORAGE ......................................................................................................................................... 46 SSE BUSINESS ENERGY ......................................................................................................................... 47 SSE AIRTRICITY ....................................................................................................................................... 48 SSE ENTERPRISE .................................................................................................................................... 49 ENERGY PORTFOLIO MANAGEMENT .................................................................................................... 50 ALTERNATIVE PERFORMANCE MEASURES ........................................................................................ 51 SUMMARY FINANCIAL STATEMENTS ................................................................................................... 58 3 SSE PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2021 26 MAY 2021 POWERING CHANGE THROUGH PROGRESS, PERFORMANCE, VALUE CREATION AND OPPORTUNITIES • Total Recordable Injuries during the year fell to 47, compared to 55 in the prior year. • Strong underlying operational performance, with significant progress against strategy: – The £7.5bn capex plan is on track with construction well under way at flagship SSE Renewables projects including Seagreen, Viking and the world’s largest offshore wind farm at Dogger Bank – SSEN Transmission’s totex for RIIO-T2 is set to be around £2.8bn comprising its base case for RIIO-T2 together with the Shetland HVDC link, expected to take its RAV to over £5bn by March 2026. – Subject to a range of factors including generator commitment, planning and Ofgem approval additional potential SSEN Transmission projects could grow RAV to over £6bn by March 2026. – SSEN Distribution’s ED2 draft plan to be submitted in July to include net-zero generated growth from well-evidenced, stakeholder-led proposals. – Completed transactions in the non-core asset disposal programme to date will yield over £1.5bn of cash proceeds, and SSE is set to exceed the £2bn target on completion of the prospective sale of Scotia Gas Networks (SGN). – Secured value for shareholders through its partnering approach in Renewables, delivering over £200m of cash proceeds and gains on Dogger Bank A&B stake sales alone. – Further medium- to long-term growth options continue to progress in areas such as international wind, pumped storage hydro, carbon capture and storage (CCS), hydrogen, and batteries. • Continued to develop an attractive pipeline that would see SSE reach a run rate of at least 1GW of new assets a year during the second half of this decade and now expects to exceed its target
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