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1.4 times, based on dividend increases that at least keep pace with RPI inflation. SSE maintains a
long term target for dividend cover of above 1.4 times, and closer to 1.5 times, based on
dividend increases which at least keep pace with RPI inflation. In making this assessment, SSE
has considered its current and projected dividend resources in the period to March 2019, the
principal risks facing the business and the control measures in place to mitigate those risks.
Balance sheet: As a long-term business, SSE believes that it should maintain a strong balance
sheet, illustrated by its commitment to robust ratios for retained cash flow and funds from
operations/debt. SSE believes that a strong balance sheet enables it to secure funding from
debt investors at competitive and efficient rates and take decisions that are focused on the long
term - all of which supports the delivery of annual increases in the dividend of at least RPI
inflation and the maintenance of an appropriate level of dividend cover.
SSE believes that its prudent financial framework and associated disciplined approach to financial
management continues to make it an attractive investment for shareholders seeking sustainable,
long-term value.
Results
SSE’s main focus is on results for the financial year as a whole. On that basis, it is encouraging that
SSE is able to confirm that it expects to deliver an annual increase in the dividend that at least keeps
pace with RPI inflation and to achieve a return to growth and adjusted earnings per share of at least
120 pence. There are three other points that illustrate SSE’s commitment to investing for the future
including for the long term benefit of customers:
At a time of greater economic uncertainty, SSE expects to invest £1.85bn across the UK and
Ireland in this financial year, which will be a record for the company;
In Wholesale, there is another record for SSE – 1,000MW of wind farm capacity under
construction or pre-construction, following the decision to go ahead with the Stronelairg
onshore wind farm near Fort Augustus; and
In Networks, SSE has made good progress with the new £1.12bn Caithness-Moray electricity
transmission link – a record investment by SSE in a single project.
These results represent the hard work and commitment of employees that is evident in every part of
the SSE group and which is demonstrated, even when faced with major challenges, on a daily basis.
Market context
At the same time, however, this results statement makes no secret of the challenges SSE faces,
especially at a time of volatile market conditions. The markets SSE operates in are constantly
changing and are subject to a number of key trends and developments, such as the legal
requirement to decarbonise electricity generation; changing commodity prices; constant evolution in
the regulatory framework to meet the changing expectations of customers; increasing competition
across the energy value chain; and changes in technology and the way energy is produced,
distributed and consumed. As a result, the energy industry is accustomed to a changing operating
environment and SSE seeks to manage this by engaging constructively and collaboratively with
elected representatives, policy-makers, regulators and other key stakeholders in all of the
jurisdictions in which it operates.
Some of the issues affecting SSE’s operations and investments included:
Changes made by the UK Government to design of the GB Capacity Market: the changes
announced earlier this year are intended to help the UK Government, National Grid and Ofgem
deliver their responsibilities for maintaining security of electricity supply. The changes made to
the functioning of the auctions, and the introduction of an auction in January 2017 for delivery in
2017/18, are welcomed. It should lead to a more effective mechanism that supports the
economics of existing thermal generation plant and may create opportunities for new gas-fired
generation which can replace coal-fired generation in the GB market.
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