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NETWORKS Networks Key Performance Indicators Sep 16 Sep 15 ELECTRICITY TRANSMISSION Transmission adjusted and reported operating profit - £m 135.6 142.4 Regulated Asset Value (RAV) - £m 2,522 2,009 Capital expenditure - £m 269.3 289.3 ELECTRICITY DISTRIBUTION Electricity distribution adjusted and reported operating 181.0 178.6 profit - £m Regulated Asset Value (RAV) - £m 3,209 3,133 Capital expenditure - £m 111.6 113.2 Electricity Distributed TWh 18.1 18.3 Customer minutes lost (SHEPD) average per customer 27 24 Customer minutes lost (SEPD) average per customer 23 21 Customer interruptions (SHEPD) per 100 customers 34 31 Customer interruptions (SEPD) per 100 customers 26 24 SCOTIA GAS NETWORKS SGN adjusted operating profit (SSE’s share) - £m 139.3 130.6 SGN reported operating profit (SSE’s share) £(m) 93.1 60.5 Regulated Asset Value (SSE’s share) - £m based on 50% 2,555 2,477 shareholding Capital and replacement expenditure (SSE’s share)- £m 84.5 79.9 Uncontrolled gas escapes attended within one hour % 98.7 98.6 SGN gas mains replaced – km 457 484 Owning, operating and investing in Networks SSE is the only energy company in the UK to be involved in electricity transmission, electricity distribution and gas distribution. Its five economically-regulated energy network companies consist of a 100% ownership of Scottish Hydro Electric Transmission (SHE Transmission), Scottish Hydro Electric Power Distribution (SHEPD) and Southern Electric Power Distribution (SEPD) and, since 26 October 2016, a 33.3% stake in both Scotland Gas Networks and Southern Gas Networks (SGN). SSE’s interests in economically-regulated energy networks support the delivery of a balanced range of assets, operational efficiency disciplined investment. The RAV of SSE’s five existing Networks companies is now on course to reach close to £9bn by 2020, net of the recent disposal of a 16.7% stake in SGN (this is consistent with the forecast of £10bn RAV by 2020 in place prior to the disposal). Through Price Controls, Ofgem sets the framework through which network companies can earn index-linked revenue through charges levied on users to cover costs and earn a return on regulated assets. While the RIIO Price Control mechanism is complex, it provides for revenue to be strongly linked to the delivery of customer-focused commitments, against which performance is measured and can be rewarded or penalised. These economically-regulated, lower-risk businesses provide relative predictability and stability for SSE and balance its activities in the competitive Wholesale and Retail markets. While the overall shape of the networks may evolve, as the recent expansion of electricity transmission and sale of part of a stake in SGN show, they remain core to SSE’s strategy in the short, medium and long-term and contribute significantly to its ability to deliver annual dividend increases. 29
Adopting a clear and distinctive identity through Scottish and Southern Electricity Networks In September 2016, SSE’s three electricity networks businesses adopted a common trading name as Scottish and Southern Electricity Networks (SSEN). This new name and an accompanying rebranding process were developed following extensive engagement with customers, employees and other stakeholders. This change responds to the operating environment under the RIIO price controls which incentivises all network operators to engage effectively with their customers and stakeholders in developing and implementing their business plans. SSEN believes that adopting a clearer, simpler and more distinctive identity will help to deliver improved accountability to the communities it serves, supporting its performance against key incentives. Putting stakeholders at the heart of decision-making Scottish and Southern Electricity Networks is also establishing a Stakeholder Advisory Panel to work alongside its Board to help scrutinise business performance and effectiveness in meeting its commitments under the RIIO-T1 and RIIO-ED1 price controls. The Panel will consist of a Chair and up to eight people, who are being recruited to reflect a broad range of external interests, skills, knowledge and experience. Through its work, the panel will bring stakeholder insight and challenge to SSEN’s decision-making at the highest level, helping to drive improvement in key processes and outcomes for customers. Financial performance in Networks During the 6 months to 30 September 2016, total adjusted operating profit in Networks was £455.9m, compared to £451.6m in the same period last year, with the principal movements as follows: Electricity Transmission: in line with expectations for 2016/17 outlined in SSE’s FY2015/16 Financial Results, adjusted and reported operating profit decreased by £6.8m to £135.6m reflecting the phasing of capital expenditure and revenue associated with the growing asset base; Electricity Distribution: adjusted and reported operating profit rose very slightly, by £2.4m to £181.0m, with the full benefit of previous under-recoveries of revenue still expected to be reflected in the second half of the year; and Gas Distribution: SSE’s share of SGN’s adjusted operating profit rose by £8.7m to £139.3m, reflecting the profiling of revenue and continued good performance of the business. Reported operating profit has increased by £32.6m to £93.1m due to the impact of the change in Corporation Tax rate, as well as the underlying improvement in performance. Electricity Transmission Scottish and Southern Electricity Networks, operating under licence as Scottish Hydro Electric Transmission plc, is responsible for maintaining and investing in the electricity transmission network in the north of Scotland. Delivering a major programme of investment Since the start of the RIIO T1 price control in 2013, Scottish and Southern Electricity Networks’ capital investment in its transmission network has totalled £1.66bn. With its committed pipeline of investment, it expects to increase its RAV from £2.3bn as at September 2016 to around £3bn by March 2018. Good progress continues to be made with the delivery of SSEN’s flagship Caithness-Moray transmission link which, with an agreed value of £1,118m (2013/14 prices), is its largest single investment to date. In September 2016, the first part of the new Blackhillock substation, near Keith, was energised on schedule. Manufacture of the subsea cable has now been completed and a specialised cable-laying vessel is due to install this on the Moray Firth seabed during 2017. The 30
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Page 3 and 4: Table of Contents Overview ........
Page 5 and 6: Sep 16 Sep 15 Sep 14 Adjusted Opera
Page 7 and 8: Distribution. This means the Regula
Page 9 and 10: Further Information Inside Informat
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Page 21 and 22: Adjusted net debt excludes finance
Page 23 and 24: WHOLESALE Wholesale Key Performance
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Page 29 and 30: sources. This makes SSE the largest
Page 31: significant consequences as it all
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Page 37 and 38: Supporting resilient communities As
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Page 45 and 46: With a significant self-delivery ca
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Page 55 and 56: Consolidated Cash Flow Statement fo
Page 57 and 58: Notes on the Condensed Interim Stat
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