i

Notes on the Condensed Interim Statements
for the period 1 April 2016 to 30 September 2016
6. Notes on the Condensed Interim Statements
for the period 1 April 2016 to 30 September 2016
Exceptional items and certain re-measurements (continued)
(i)
Exceptional items (continued)
(i) Coal-fired Generation. On 20 May 2015, the Group announced that operations at Ferrybridge would cease at 31 March 2016 and
consequently exceptional charges of £72.0m were recognised (£41.5m recognised at 30 September 2015). On 30 March 2016, the Group
announced that operations at Fiddler’s Ferry would continue and that SSE would enter ‘all or part of’ the capacity at Fiddler’s Ferry into
any 2017/18 Capacity Market auction. Despite this, further exceptional charges were recognised totalling £215.0m.
(ii) Gas-fired Generation. Following the failure of Peterhead Power Station to win a capacity contract under the Capacity Market Auction
for 2019/20 and the announcement, on 25 November 2015, that the UK Government was withdrawing funding support for the proposed
carbon capture and storage project at Peterhead Power Station, exceptional charges of £129.3m have been recognised in relation to the
assets at the site. In addition, further impairment charges of £197.1m in relation to the Group’s other main Gas-fired Generation plants in
Great Britain (Medway, Keadby and Marchwood) were recognised.
(iii) Gas Production. Impairment of the Group’s Gas Exploration and Production assets in the North Sea has been recognised
predominately due to declining wholesale gas prices. The exceptional charges recognised include (£121.2m) related to the impairment of
Greater Laggan field assets and other E&P assets at Sean, Lomond, Bacton and ECA (£40.6m).
(iv) Gas Storage. Current and forecast demand for gas storage in Great Britain continued to be impacted by reduced short term price
volatility and seasonal spreads in the wholesale gas market. Exceptional charges of £150.9m have been recognised in relation to both the
group’s assets Hornsea (Atwick) and Aldbrough.
(v) Other charges. Other exceptional charges of £21.3m were recognised in relation to impairment of system development projects,
restructuring charges and exit costs associated with the strategic exit from certain non-core activities.
The Group recognised £57.6m of exceptional net credits arising from the disposal of three onshore wind development sites to Blue Energy
(£39.3m) and the disposal of its interest in the Galloper offshore wind development (£18.3m).
(ii) Certain re-measurements
The Group enters into forward commodity purchase contracts to meet the future demands of its Energy Supply business and to optimise
the value of its Generation and other Wholesale assets. Certain of these contracts are determined to be derivative financial instruments
under IAS 39 and as such are required to be recorded at their fair value. Changes in the fair value of those commodity contracts
designated as IAS 39 financial instruments are reflected in the income statement (as part of ‘certain re-measurements’).
The Group shows the change in the fair value of these forward contracts separately as this mark-to-market movement is not relevant to
the underlying performance of its operating segments. The Group will recognise the underlying value of these contracts as the relevant
commodity is delivered, which will predominately be within the subsequent 12 to 18 months. Conversely, commodity contracts that are
not financial instruments under IAS 39 are accounted for as ‘own use’ contracts. The re-measurements arising from IAS 39 are disclosed
separately to aid understanding of the underlying performance of the Group. This category also includes income statement movement on
financing derivatives (and hedged items) as described in Note 16.
(iii) Change in UK corporation tax rates
The Finance (no.2) Act 2016 which received royal assent on 15 September 2016 enacted a Corporation tax rate of 17% from 1 April 2020,
this adds to the Finance (No.2) Act 2015 (substantively enacted in the prior financial period), which enacted a rate of 19% (currently 20%)
from 1 April 2017. As the Finance (no.2) Act 2016 has been substantively enacted it has the effect of reducing the Group’s deferred tax
liability by £98.2m, including the impact of changes recognised in the statement of other comprehensive income (£46.4m).
62