SSE : Results presentation script

SSE plc

Preliminary Results for the year to 31 March 2023 and

Strategic Update

1. TITLE SLIDE | FY23 OVERVIEW AND RESULTS
2. Disclaimer

KEY MESSAGES AND OVERVIEW

ALISTAIR PHILLIPS-DAVIES

3. AGENDA - Part 1: FY23 OVERVIEW

Good morning everyone and welcome to our Full-year Results presentation.

I'm joined today by Finance Director Gregor Alexander and Chief Commercial Officer Martin Pibworth.

4. FY23 OVERVIEW | DELIVERY, STRENGTH AND GROWTH

In today's update, we'll outline how we are creating sustainable value from a growth-aligned strategy which is delivering for shareholders and society and promises much more for the future.

• First, in our results overview we'll cover a year of delivery in which we invested record levels well in excess of the strong profits we earned.
• We'll outline how this has given us financial strength to weather future market uncertainty, seize opportunities and create more shareholder and societal value.
• Then, in our strategic update, we will set out how we'll deliver £18bn of investment as part of our upgraded 'NZAP Plus' plan to FY27.
• And finally, we will show how we will grow value out to 2032 and beyond, thanks to the sustainable solutions we offer on energy security and climate change.

In short, SSE offers a compelling investment proposition:

• a strong balance sheet;
• solid ESG credentials;
• fantastic optionality and capability; and
• sustainable long-term value.

5. FY23 OVERVIEW | NZAP PLUS - ENHANCED PLAN TO FY27

You will have seen our NZAP Plus outlined in this morning's statement, and I will cover it in more detail later, but here is a brief overview of the main changes.

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When we launched the original NZAP back in November 2021, we made it clear that it was a floor, not a ceiling to our ambition.

We now expect to meet or exceed our original financial targets, so we have rolled the programme forward by 12 months to FY27 and upgraded the plan to account for new opportunities and a changing investment mix between businesses.

It remains a fully-funded plan but we are targeting over 40% more capex - partly due to inflation, but the majority through additional growth, spread across our Networks, Renewables and Thermal businesses.

And we have concluded after careful consideration of the balance and financial strength of the new plan, that retaining full ownership of SSEN Distribution is the right strategy at this time.

We will outline why we believe we can continue to maintain attractive returns on that investment and why our current business, bolstered by this additional investment, can deliver sustainable earnings growth over the longer term.

We are aiming higher, investing for the future in both proven and emerging technologies and assets that society will need in GB, Ireland and further afield.

6. FY23 OVERVIEW | PEOPLE / SAFETY

Before we go any further, I'd like to say few words about SSE's overriding priority, which is safety.

Our record levels of investment come with a significant rise in construction activity, and regrettably we had 16 more injures year-on-year and a small increase in our Total Recordable Incident Rate.

Getting everyone who works for SSE home safe at the end of each day remains our top priority and that focus is all the keener following the tragic death of Liam Macdonald, a young contractor working on Shetland, in June last year. We pay tribute to Liam again today.

7. FY23 OVERVIEW | STRATEGY ALIGNED TO FUTURE ENERGY SYSTEM Let me now turn to our role in the future energy system.

The key lesson for everyone from the past year is this: we must go further and faster in delivering the clean energy transition.

The war in Ukraine and the global energy crisis means decarbonisation is now not only synonymous with tackling climate change but also with security, affordability and fairness.

And this means there is now broad national and international consensus on what needs to happen.

Firstly, we need to radically increase renewables, particularly wind and solar.

Secondly, we need to transform our electricity networks to transport all that clean energy to homes and businesses.

Thirdly, we need to back it all up with low carbon flexible generation and storage.

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And finally, we need to do all of this without leaving people behind.

• Renewables.
• Networks.
• Flexible generation and storage.
• And a just transition.

These are the key ingredients of both our NZAP Plus strategy and a clean energy future. This is what we mean by creating value for shareholders and society.

8. FY23 OVERVIEW | MEASURING SUSTAINABLE PROGRESS

And we're doing this in a sustainable way. We published one of the UK's first Net Zero Transition Plans with science-based targets aligned to a 1.5°C pathway and supported by an annual shareholder vote. We also have a long-standing commitment to Fair Tax, and a leadership position on the Living Wage.

At the same time, our employee base is growing and we are championing a just transition to net zero through increasing the number of people joining us from high-carbon industries and the other elements of our sector-leading strategy in this area.

These are just some of the social and environmental credentials that are reflected in our leading ESG index ratings, and form a central plank of the compelling investment proposition that I have already mentioned.

9. FY23 OVERVIEW | RECORD INVESTMENT

Finally, the last financial year shows how we're currently realising our potential. Our investment plans are not hypothetical - we have been spending to bring forward critical infrastructure, create jobs and support communities.

We invested £2.8bn, a record level of capex and investment for SSE which represents a 36% increase on FY22.

Much of that spend was on flagship capital projects in networks and renewables, notably the Shetland HVDC link, Seagreen, and our expansion into Southern Europe.

But we also invested in current and future flexibility, be it Triton Power, our battery portfolio or early-stage development spend on future hydrogen, carbon capture and hydro pumped storage options.

With alignment to societal tailwinds we have a major opportunity to leverage our unique capabilities, world-class assets and balance sheet strength to deliver decades of sustainable growth.

I'll now hand over to Gregor…

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FINANCIAL AND OPERATIONAL PERFORMANCE GREGOR ALEXANDER

• 10. AGENDA - Part 2: FY23 RESULTS

• thanks Alistair.

I'll now talk through what is clearly a year of strong financial and operational performance.

11. FY23 RESULTS | SEGMENTS

You will have seen our Preliminary Results statement this morning so rather than go through the numbers line-by-line I will focus on the drivers behind the 65% of Group adjusted operating profit contributed by our main generation businesses and the 30% from regulated networks.

To summarise: earnings from our thermal, flexible hydro and gas storage assets, which were rewarded for providing timely backup, more than offset broadly flat performance in renewables which included the impact from Seagreen delays and the Electricity Generator Levy.

As Martin will mention later, we expect flexibility to be a key requirement of energy markets over the decade ahead and have plans for continued investment in this area.

This balanced portfolio of market-focused assets was well supported by regulated income from electricity networks that provide a strong foundation.

12. FY23 RESULTS | OVERVIEW

At Group-level we saw:

• Adjusted operating profit increase by 66% to £2.5bn;
• Adjusted profit before tax increase by 90% to £2.2bn;
• And adjusted EPS was 166p, in line with the upgraded guidance from our pre-close statement.

These are strong profits that show the value of the business mix we have carefully created. But they are also profits with a purpose; and we are delivering on our commitment to reinvest back into critical infrastructure projects.

13. FY23 RESULTS | ADJUSTED AND REPORTED

The effect of the volatile market conditions can be seen in the strong adjusted operating profit that was mainly driven by our flexible generation fleet and gas storage assets.

A year ago, we reported a £2.1bn net derivative asset on our Balance Sheet which reflected the impact of the market volatility on our forward commodity contracts - not underlying

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performance. So, it is no surprise to see this asset unwind in the year - resulting in the net remeasurement loss shown - to leave a £260m net liability on derivatives this year end.

The change in volatility - and resulting IFRS 9 measurement impact - highlights exactly why we exclude these remeasurements from SSE's adjusted profit measures.

In September, we reported a £141m gain on acquisition of Triton Power, reflecting the higher price environment upon completion. With most of that uplift earned in the second half of the year

- and after derivative remeasurements - the net uplift has reduced to around £21m.

And finally, we have included an adjustment for the first time this year to remove 25% of SSEN Transmission's operating profit from our adjusted results, as these are ultimately attributable to the minority interest shareholder of that business.

14. FY23 RESULTS | TRANSMISSION (1)

SSE's regulated electricity networks represent the backbone of the Company and they are increasingly becoming engines of long-term growth.

This year saw a solid financial performance in Transmission with operating profit broadly flat versus the prior year, as higher allowed revenues were offset by lower-than-expected volumes, higher operating costs, and the 25% minority interest which we exclude from our adjusted metrics.

15. FY23 RESULTS | TRANSMISSION (2)

SSEN Transmission has a central role in net zero. It is one of the fastest growing regulatory networks in Europe, underpinned by one of the most well-respected regulatory frameworks.

For the last three consecutive years the business has consistently been awarded 100% of the available incentive against the Energy Not Supplied reliability measure.

Meanwhile, we have seen excellent progress on a significant investment programme which includes the Shetland HVDC link, North-East Scotland upgrade and the final circuit connecting Seagreen offshore wind farm to the grid.

The base plan has been supplemented by uncertainty mechanisms that are all making good progress at various stages of their Ofgem processes, and the business is focused on preparing to deliver its share of the Accelerated Strategic Transmission Investment framework - known as the ASTI programme - announced by Ofgem last year.

Based on the latest view of the business we expect average annual operating profit, net of the minority interest, to be at least £400m across the five years to FY27.

However, the current regulatory period marks the beginning of many years of growth as the network helps to connect the vast array of renewables under development in the North of Scotland.

16. FY23 RESULTS | DISTRIBUTION (1)

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