TIDMSSE
RNS Number : 4029C
SSE PLC
18 June 2021
SSE plc
Publication of Annual Report and Accounts 2021
Following its Preliminary Full-Year Results announcement on 26
May 2021, SSE plc confirms that it has today published the
following documents on the Company's website at
https://www.sse.com/investors/reports-and-results/ :
-- Annual Report and Accounts for the year ended 31 March 2021
-- Notice of Annual General Meeting 2021
-- Sustainability Report 2021
SSE's Annual General Meeting (AGM) will be held at Perth Concert
Hall, Mill Street, Perth PH1 5HZ on Thursday 22 July 2021 at
12.30pm.
With continued uncertainty around the status of the coronavirus
pandemic and prevailing restrictions, the Board strongly recommends
that shareholders do not attend the AGM in person and are instead
encouraged to join remotely via the live webcast provision which is
detailed in the Notice of AGM 2021.
Shareholders that join the AGM remotely via the live webcast are
able to participate in the meeting by voting by proxy ahead of the
meeting and through asking questions either in advance or during
the meeting. To the extent shareholders wish to attend in person
and can do so safely and in accordance with the prevailing
government guidance at the date of the meeting, the Board kindly
requests that shareholders pre-register their intentions to
attend.
Full details of how to join via the live webcast, vote by proxy,
ask questions and pre-register any intention to attend the meeting
are set out in the Notice of AGM 2021. Should any changes to the
meeting arrangements be required in light of government guidelines,
these will be communicated on the Company's website and announced
via Regulatory News Service (RNS). All shareholders are therefore
encouraged to monitor the Company's website for the most up to date
information.
In accordance with Listing Rule 9.6.1, copies of the Annual
Report and Accounts, Notice of Annual General Meeting, and Form of
Proxy for 2021 have been submitted to the Financial Conduct
Authority and will shortly be available for inspection via the
National Storage Mechanism, which can be accessed at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
A condensed set of SSE plc's Group financial statements, and
information on important events that have occurred during the year
and their impact on the financial statements, were included in
SSE's Preliminary Full-Year Results announcement issued on 26 May
2021. That information, together with the information set out in
Sections 1 to 3 below, which is extracted from the Annual Report
and Accounts 2021, constitute the material required by Disclosure
Guidance and Transparency Rule 6.3.5R to be communicated to the
media in unedited full text through a Regulatory Information
Service. This material is not a substitute for reading the full
Annual Report and Accounts 2021. Page numbers and cross-references
in the extracted information refer to page numbers and
cross-references in the Annual Report and Accounts 2021.
Section 1. Principal Risks and Uncertainties
The following information is extracted from pages 54 to 63 of
the Annual Report and Accounts 2021.
MANAGING SSE'S PRINCIPAL RISKS
The execution of SSE's strategy and delivery of its purpose is
dependent on the effective identification, understanding and
mitigation of the Group's Principal Risks.
SSE's established Risk Management Framework and the wider system
of internal control described on page 137 of the Directors' Report
continued to inform strategic decision-making in 2020/21. This,
combined with a resilient business model, helped the Group manage
and minimise the human, operational and financial impacts of
coronavirus and to meet its objective of supporting the reliable
supply of electricity to those who needed it, particularly those
tackling the pandemic.
In addition to coronavirus, SSE managed and assessed the
potential risks associated with a number of other external factors
throughout the year. Brexit gave rise to a high degree of economic,
regulatory and political change. SSE was well prepared and the
direct impacts were limited, but it continues to manage the
resulting uncertainty over carbon pricing and the establishment of
a standalone UK Emissions Trading System agreement.
SSE also appealed to the CMA on a narrow range of technical
points against Ofgem's final RIIO-T2 price control determination,
seeking to balance affordability for energy consumers with the need
to attract the investment needed for the transition to net
zero.
Against this backdrop SSE continued to deliver significant
strategic progress through its disposals and capex programmes. The
Group has been streamlined and GBP1.5bn of proceeds have been
announced through the sale of non-core assets and construction is
under way on a number of predominantly low-carbon infrastructure
projects including the world's largest offshore wind farm at Dogger
Bank.
The above factors, along with the likely longer-term impacts of
the coronavirus pandemic in the UK, Ireland and abroad and all
other influencing factors formed the basis of the full review of
SSE's Principal Risks that took place during the financial
year.
Board considerations
Effective identification, understanding and mitigation of
Principal Risks underpins the Board's approach to setting strategic
objectives for SSE and informing strategic decision making. The
Board aims to consider all material influencing factors and key
external trends in the energy market, including those relating to
climate change, technological developments and capital flow and
aims to do so in a way that reflects the expectations of SSE's key
stakeholder groups.
These material influencing factors also have an impact on the
nature and extent of risks the Board is willing to take in order to
meet these objectives, and related mitigation strategies adopted by
the Group. Material changes in the nature and potential impacts of
SSE's Group Principal Risks are regularly assessed with appropriate
mitigations implemented where necessary.
Overseeing risk
The Group Executive Committee and its sub-committees have
responsibility for overseeing SSE's Principal Risks. During the
third quarter of SSE's financial year, an assessment of each
Principal Risk is completed by the assigned oversight committee.
This assessment requires committee members to provide commentary on
contextual changes to the risks and whether they consider them to
have become more or less material during the year. In 20/21 this
commentary covered both changes specifically related to coronavirus
and those changes that are not related to the pandemic impacts.
Consideration is also given to potential emerging risks and whether
or not any of those identified have the potential to become a
Principal Risk to the business in the medium- to long-term.
These responses are then consolidated into reports, one for each
Principal Risk, which are presented back to the committees along
with the results of provisional viability testing and analysis of
relevant, current management information and key information
relating to Business Unit Principal Risks and Controls. These
reports form the basis for the committees to discuss and confirm
the risk trend (more, less or equally material), overall
effectiveness of the risk control and monitoring environment, and
whether any additional control improvement actions are required.
This is an inclusive and iterative process that results in
considered and objective outputs and a robust assessment of
Principal Risks.
The outputs from these committee assessments are then presented
to the Group Executive Committee for full review, with any emerging
risks or additional material changes resulting from this being
proposed to the Board.
2020/21 review outcome
Following the 2020/21 annual review process, the number of
Principal Risks to the Group remains at 11 but there are two
revisions of note.
The "Large Capital Projects Quality" risk has been redefined and
renamed "Large Capital Projects Management". This broadens the risk
definition in response to changes in the operating environment and
reflects the increase in value of SSE's Large Capital Projects
portfolio over the next 10 years.
The emerging risk "Joint Venture and Partner Management"
previously identified during 2019/20 was retained by the Board. The
importance of joint ventures and partner management continues to
increase in SSE as its Business Units pursue their strategic and
business objectives in association with other companies and
organisations, in some cases in international markets. An
additional review of this emerging risk will be undertaken by the
Group Risk Committee in Q2 of the financial year 21/22.
Important revisions have also been made to the descriptions of
each of the other Principal Risks to take account of key
developments and corresponding mitigations that were introduced
during the year. Full details of the Group Principal Risks are
available on pages 57 to 63.
Group Principal Risks
SSE operates in fast-moving markets that are under normal
circumstances subject to a high degree of political, regulatory and
legislative intervention. It is therefore essential that SSE's Risk
Management Framework is dynamic and flexible, allowing decision
makers to focus on material risk information that may have an
impact, whether positive or negative, on strategic objectives.
The Board and Group Executive Committee look for as complete a
perspective as possible when assessing the Principal Risks that
face the Group. The graphic above [set out on page 55 of the Annual
Report 2021] illustrates SSE's 11 Group Principal Risks positioned
on a relative basis against the output of the Principal Risk Self
Assessment process (based on changes in the context and prevalence
of each risk) and the potential impact on Group Viability based on
critical risk scenarios developed with business experts.
In addition, Principal Risks that were considered by their
oversight committees to have increased in materiality during the
year are shown in red , those that have not changed significantly
are shown in blue and those that have reduced in materiality are
shown in green .
Risk Appetite Statement
No business is risk free and indeed the achievement of SSE's
strategic objectives necessarily involves taking risk. SSE will
however only accept risk where it is consistent with its core
purpose, strategy and values; is well understood; can be
effectively managed; with consideration of stakeholder expectations
and offers commensurate reward.
The sectors in which SSE operates continue to be subject to a
high degree of political, regulatory and legislative risk as well
as risks arising from other developments and change including
technology, the impact of competition, stakeholders' evolving
expectations and climate change.
Furthermore, each of SSE's Business Units have differing levels
of exposure to additional risks. For example, the SSEN Transmission
and Distribution businesses are largely economically regulated and
are characterised by relatively stable, inflation linked cash flows
while the SSE Renewables business benefits from cash flows linked
to government-mandated renewables subsidies. Those Business Units
that generate and trade energy are also exposed to significant
medium- to long-term energy market and commodity risks in
operational and investment decision making.
The key elements of SSE's Strategic Framework - including the
focus on regulated energy networks and renewable sources of energy,
particularly clean electricity, complemented by flexible thermal
generation and business energy sales - and its financial objective
in relation to dividend growth are fully reflective of its risk
appetite.
Fundamentally:
-- SSE is focused on creating value in a sustainable way from
developing, building, operating and investing in the energy
infrastructure and businesses needed in the transition to net zero.
This provides a complementary portfolio of business activities
whilst keeping the depth of focus on a single sector - energy.
-- SSE has a clear understanding of the risks and opportunities
in the Great Britain and Ireland energy markets and these markets
therefore continue to provide the Group's geographic focus, with
any expansion into other markets being subject to especially
rigorous scrutiny.
-- Safety is SSE's first value and it has no appetite for risks
brought on by unsafe actions, nor does it have any appetite for
risks brought on by insecure actions including those relating to
cyber security. In areas where SSE is exposed to risks for which it
has little or no appetite, even though it has implemented high
standards of control and mitigation, the nature of these risks mean
that they cannot be eliminated completely.
In determining its appetite for specific risks, the Board is
guided by three key principles:
1. Risks should be consistent with SSE's core purpose, financial objectives, strategy and values;
2. Risks should only be accepted where relevant approvals have
been attained through the Governance Framework to confirm
appropriate reward is achievable on the basis of objective evidence
and in a manner that is consistent with SSE's purpose, strategy and
values; and
3. Risks should be actively controlled and monitored through the
appropriate allocation of management and other resources,
underpinned by the maintenance of a healthy business culture.
The Board has overall responsibility for determining the nature
and extent of the risk it is willing to take and for ensuring that
risks are managed effectively across the Group.
Viability Statement
SSE is a purpose-led company involved principally in the
generation, transmission and distribution of electricity; and also
in the supply of energy and related services to customers. Its
strategy is to create value for shareholders and society in a
sustainable way by developing, building, operating and investing in
the electricity infrastructure and businesses needed in the
transition to net zero. The delivery of SSE's purpose and execution
of its strategy depends on the skills and talent of a diverse
workforce, the quality of its assets and the effective
identification, understanding and mitigation of risk.
As required within provision 41 of the UK Corporate Governance
Code the Board has formally assessed the prospects of the Company
over the next 3 financial years to the period ending March 2024.
The Directors have determined that as this time horizon aligns with
the Group's current capital programme and is within the strategy
planning period, a greater degree of confidence over the
forecasting assumptions modelled can be established.
In making this statement the Directors have considered the
resilience of the Group taking into account its current position,
the impacts of the coronavirus outbreak, the Principal Risks facing
the Group and the control measures in place to mitigate each of
them. In particular the Directors recognise the significance of the
strong balance sheet, and total committed lending facilities of
GBP1.5bn - with GBP200m committed to October 2025 and GBP1.3bn
committed to March 2026. The Group is an owner and operator of
critical national infrastructure and has a proven ability to
maintain access to capital markets during stressed economic
conditions. The Group has demonstrated this through securing
GBP2.5bn of funding since April 2020 including the issuance of a
dual tranche GBP500m Eurobond in March 2021, its fourth Green bond
in 5 years.
The Group has a number of highly attractive and relatively
liquid assets - including a regulated asset base which benefits
from a strong regulated revenue stream as well as the operational
wind portfolio - which provide flexibility of options. This has
been demonstrated through the success of the programme of disposals
set out by the Group in June 2020 with already agreed disposals of
non-core assets expected to yield over GBP1.5bn in net proceeds, of
which over GBP1.4bn cash proceeds have been received to date.
To help support this Statement, over the course of the year a
suite of severe but plausible scenarios has been developed for each
of SSE's Principal Risks. These scenarios are based on relevant
real life events that have been observed either in the markets
within which the Group operates or related markets globally.
Examples include critical asset failure (for Energy Infrastructure
Failure); changes to key government energy policies (for Politics,
Regulation & Compliance); and the impact of the loss of key
systems (for Cyber Security and Resilience).
Scenarios are stress tested against forecast available financial
headroom which this year also considered sensitivities resulting
from the coronavirus pandemic. Further details can be found in A6.3
(Accompanying Information to the Financial Statements in the Annual
Report and Accounts). In addition to considering these in
isolation, the Directors also consider the cumulative impact of
different combinations of scenarios, including those that
individually have the highest impact.
Upon the basis of the analysis undertaken, and on the assumption
that the fundamental regulatory and statutory framework of the
markets in which the Group operates does not substantively change,
the Directors have a reasonable expectation that the Group will be
able to continue to meet its liabilities as they fall due in the
period to March 2024.
group principal risks
CLIMATE CHANGE
Oversight:
Group Executive Committee
What is the risk?
The risk that SSE's strategy, investments or operations are
deemed to have an unacceptable future impact on the natural
environment and on national and international targets to tackle
climate change.
Material influencing factors:
-- The impact of physical risks associated with climate change,
such as severe adverse weather that causes damage or interrupts
energy supply or generation.
-- The speed of technological developments.
-- Transitional risks relating to developments in political and
regulatory requirements around the products and services that SSE
provides.
Material influencing factors most impacted by coronavirus:
-- Fast developing stakeholder needs and expectations in
relation to efficient, innovative and flexible products and
services.
-- Ensuring the continuation of Large Capital Projects which are
fundamental to Group net zero targets.
-- Global and domestic policies including those published by the
UK's Committee on Climate Change relating to the 6th carbon budget
for the period 2032 and 2037.
-- Political and regulatory engagement.
Strategic link:
Build
Operate
Invest
Develop
Key developments:
-- In its role as a principal partner to the UK Government at
COP26, SSE will strive to continue to build its reputation as a
responsible UK-listed company, delivering in the public interest
and a key enabler of net zero ambitions. More information on COP26
can be found in the Sustainability Report.
-- In November 2020, SSE became the first company to publish its
Just Transition Strategy. This strategy outlines SSE's 20
principles for achieving a socially just transition to net zero and
details these in action. More information on SSE's Just Transition
strategy is available on sse.com.
Key developments associated with coronavirus:
-- In May 2020, SSE published "A Greenprint for building a
cleaner, more resilient economy". The publication highlights SSE's
policy proposals to build a greener more resilient economy while
driving progress to net zero. Continued focus on SSE's vision to be
a leading energy company in a net zero world and its strategic
objectives ensure that it is best placed to play its part in
long-term economic recovery. Further details are available on page
18.
Key mitigations:
-- Policy Link: SSE Climate Change Policy.
-- SSE provides transparent disclosures to allow its
stakeholders to properly assess its performance in managing climate
related issues. The Group believes it met the TCFD reporting
recommendations in full in 2020 ahead of the UK Government 2022
deadline.
-- The Group Executive Committee is responsible for implementing
the Group strategy set by the Board and driving climate-related
performance programmes across the organisation. The Chief
Sustainability Officer is responsible for advising the Board, Group
Executive Committee and businesses on climate-related matters and
provides support in the implementation of relevant initiatives
across the Group.
-- In March 2019, SSE's Remuneration Committee took the decision
that from 2019/20 onwards 20% of the total Annual Incentive Plan
(AIP) for Executive Directors would be determined by the progress
made in meeting SSE's four 2030 Business Goals which are focused on
addressing the challenge of climate change.
COMMODITY PRICES
Oversight:
Group Risk Committee
What is the risk?
The risk associated with the Group's exposure to fluctuations in
both the physical volumes and price of key commodities, including
electricity, gas, CO2 permits, oil and related foreign exchange
values.
Material influencing factors:
-- Weather associated seasonal fluctuations in demand, supply
and generation capabilities - which may not be in line with
historical trends, and which may or may not be associated with
climate change - both in GB and globally. Further detail is
available on page 27 of the Strategic Report.
-- Generation technology advancements.
-- Global and domestic political change, including the impacts
of Brexit and the implications of a second Scottish Independence
Referendum.
-- European generation outputs and availability.
-- International and national agreements on climate change.
-- International flows of fuel.
Material influencing factors most impacted by coronavirus:
-- Fluctuations in foreign exchange values.
-- Fluctuations in the global supply and demand of fuel.
-- Global economic growth.
-- Geopolitical events.
Strategic link:
Operate
Key developments:
-- Managing the impacts of geopolitical events including those
relating to Brexit.
Key developments associated with coronavirus:
-- Managing the impacts of a continued significant reduction in
energy demand.
-- Managing the impacts of significant fluctuations in commodity
prices and foreign exchange values.
Key mitigations:
-- Policy Link: An asset-by-asset approach to hedging strategy
that ensures trading positions cannot have a material impact on SSE
Group earnings. The latest update on SSE's hedging approach can be
found in the Financial Review section of this report.
-- The Energy Markets Risk Committee monitors the effectiveness
of Group hedging arrangements.
-- SSE uses VaR and PaR measures to monitor and control
exposures. Trading limits are reviewed regularly by the Energy
Markets Risk Committee, with consideration given to changes in the
material influencing factors noted above, before being approved by
the Board.
-- SSE's Energy Economics team provides commodity price
forecasts which are used to inform decisions on trading strategy
and asset investment.
-- SSE utilises hedging instruments to minimise exposure to
fluctuations in foreign exchange markets, details of which are
available in the Financial Statements section of the Annual Report
and Account.
CYBER SECURITY AND RESILIENCE
Oversight:
Group Risk Committee
What is the risk?
The risk that key infrastructure, networks or core systems are
compromised or are otherwise rendered unavailable.
Material influencing factors:
-- Software or hardware issues, including telecoms network and
connectivity and power supplies.
-- Ineffective operational performance, for example, breach of
information security rules or poor management of resilience
expertise.
-- Employee and contractor understanding and awareness of
information security requirements.
Material influencing factors most impacted by coronavirus:
-- Geopolitical events.
-- Malicious cyber attack.
Strategic link:
Operate
Invest
Develop
Key developments:
-- Continuation of work to ensure the successful technological
separation of systems associated with divestments, including the
sale of SSE Energy Services to Ovo, in a secure manner without
interruption to services.
Key developments associated with coronavirus:
-- Ensuring the continued security and resilience of Critical
National Infrastructure given the heightened threat of malicious
cyber attack, particularly the increased volume and sophistication
of ransomware attacks.
-- Continued maintenance of secure onsite systems and facilities
in preparation for the gradual return to the office environment of
those staff currently working from home.
Key mitigations:
-- Policy Link: SSE Cyber Security Policy and SSE Data and
Information Policy.
-- Key technology and infrastructure risks are incorporated into
the design of systems and are regularly appraised with risk
mitigation plans recommended.
-- SSE conducts regular internal and third party testing of the
security of its information and operational technology networks and
systems.
-- Continued strengthening and embedding of the cyber risks and
controls framework to continue to identify threats and reduce
exposures through, for example, improved use of data analytics and
further migration from unsupported systems.
-- Significant longer term Security Programme investment and
planning which seeks to strengthen the resilience of the systems on
which SSE relies.
-- IT Service Assurance works with individual business units to
form and agree appropriate service level agreements for business
critical IT services.
-- Business continuity plans are reviewed in response to changes
in the threat to the Group and regularly tested.
ENERGY AFFORDABILITY
Oversight:
Group Executive Committee
What is the risk?
The risk that energy customers' ability to meet the costs of
providing energy, or their ability to access energy services is
limited, giving rise to negative political or regulatory
intervention that has an impact on SSE's core regulated Networks
and Renewables businesses.
Material influencing factors:
-- Technology changes and innovations.
-- Supply chain cost management.
-- Public policies, including those aimed at reducing carbon
emissions and energy consumption.
-- Accessibility to energy and related services for all.
-- Required investment in the upgrading of the UK's energy
infrastructure to achieve net zero.
-- Political interventions.
Material influencing factors most impacted by coronavirus:
-- Macro-economic impacts on household and business incomes.
-- Fluctuations in the cost of fuels.
-- Supplier and customer failures and related bad debt.
Strategic link:
Build
Operate
Invest
Develop
Key developments:
-- Ensuring energy consumers are provided with affordable energy
and accessible energy services throughout and following the
transition to net zero are key objectives of SSE's Just Transition
strategy published in November 2020.
Key developments associated with coronavirus:
-- Following the outbreak of coronavirus in the UK in March
2020, and in line with the commitments of the C-19 Business Pledge,
SSE adapted its approach to grant funding to make funds immediately
available to communities who required them. By June 2020 over GBP1m
had been provided to 250 communities to support the emergency
response to the pandemic.
Key mitigations:
-- Policy Link: SSE Sustainability Policy
-- During the financial year, SSEN attained the British Standard
for inclusive service provision (BS 18477) for the sixth year in a
row. This recognition, from business standards company BSI, is
achieved through rigorous assessments to ensure SSEN's policies,
procedures and services are accessible and fair to all
customers.
-- SSE Airtricity continues to focus on helping customers reduce
their carbon output and to save on energy costs. Through
partnerships with local authorities, the Sustainable Energy
Authority Of Ireland (SEAI) and others, SSE Airtricity Energy
Services has been delivering large-scale energy efficiency retrofit
projects for homes across Ireland.
-- SSE continues to advocate its belief that modernisation of
the energy market is best delivered by a cost-effective privatised
system that is properly regulated.
ENERGY INFRASTRUCTURE FAILURE
Oversight:
Group Executive Committee
What is the risk?
The risk of national energy infrastructure failure, whether in
respect of assets owned by SSE or those owned by others which SSE
relies on, that prevents the Group from meeting its
obligations.
Material influencing factors:
-- Severe adverse weather that causes damage or interrupts
energy supply or generation.
-- Government policy regarding the operation of the energy
network which relates to security of supply.
-- Transition to net zero.
-- Failures in any aspect of the GB national critical
infrastructure.
-- Continuing access to the European energy markets and
continued inclusion of Northern Ireland in the all-island Single
Electricity Market.
Material influencing factors most impacted by coronavirus:
-- Appropriate asset management and necessary upgrading works of
both generation and network assets.
-- Malicious attack on the GB energy infrastructure.
-- Energy network balancing mechanisms.
-- Continued availability of competent personnel.
-- Continued availability of key systems.
Strategic link:
Build
Operate
Invest
Develop
Key developments:
-- Continued progress in developing and building electricity
network flexibility and infrastructure to facilitate net zero.
Key developments associated with coronavirus:
-- The successful implementation and continuation of
comprehensive crisis management and business continuity plans
designed to protect and ensure the ongoing security of energy
supplies. The frontline healthcare response was prioritised, with
connections accelerated for temporary hospitals and research
centres, and a dedicated phone line set up for hospitals, health
centres and cares homes to ensure optimisation of incident
response.
-- SSE's electricity networks business continues to use its well
established Priority Services Register to provide additional
support to vulnerable customers, working closely with local
agencies to ensure those who are vulnerable, or shielding can be
reached as quickly as possible in the event of an electricity
network fault. A dedicated team was also established to proactively
call customers who may have been at risk of social isolation during
the periods of lockdown.
Key mitigations:
-- Policy Link: Business Unit Asset Management Policies.
-- SSE's dedicated Engineering Centre of Excellence reviews and
develops plans to ensure the ongoing integrity of its generation
assets is maintained.
-- Targeted investment plans to ensure the ongoing health and
integrity of network assets.
-- Crisis management and business continuity plans are in place
across the Group. These are tested regularly and are designed for
the management of, and recovery from, significant energy
infrastructure failure events. Where there are material changes in
infrastructure (or the management of it) additional plans are
developed.
-- SSE continues to be an active participant in national
security forums such as the Centre for the Protection of National
Infrastructure (CPNI).
FINANCIAL LIABILITIES
Oversight:
Group Risk Committee
What is the risk?
The risk that funding is not available to meet SSE's financial
liabilities, including those relating to its defined benefit
pension schemes, as these fall due under both normal and stressed
conditions without incurring unacceptable costs or risking damage
to its reputation.
Material influencing factors:
-- Ongoing commitment to an Investment Grade credit rating.
Material influencing factors most impacted by coronavirus:
-- Global macro-economic changes and subsequent volatility in
foreign exchange markets.
-- Fluctuations in interest rates and inflation which influence
borrowing costs.
-- Defined benefit pension scheme performance including the
impact of fluctuations in gilt yields on the value of scheme
liabilities.
Strategic link:
Invest
Key developments:
-- Proceeds in the region of GBP1.5bn have been announced
towards the GBP2bn planned disposal programme target set in June
2020.
Key developments associated with coronavirus:
-- In spite of the impact on the macro economy caused by the
pandemic, in March 2021 SSE issued its fourth Green bond in 5 years
with the issuance of a dual tranche GBP500m Eurobond. SSE is the
UK's largest corporate issuer of green bonds and is the only UK
corporate to launch multiple green bonds. During the year SSE also
set out a new framework for issuing innovative
sustainability-linked bonds in the future.
Key mitigations:
-- Policy Link: SSE Financial Management Policy.
-- Committed borrowings and facilities are available at all
times equal to at least 105% of forecast borrowings over a rolling
6 month period.
-- SSE seeks to maintain a diverse and innovative portfolio of
debt to avoid over-reliance on any one market. This allows it to
build relationships with, and create competition between, debt
providers.
-- Each of SSE's defined benefit pension schemes has a Board of
Trustees which acts independently of the Group.
LARGE CAPITAL PROJECTS MANAGEMENT
Oversight:
Group Large Capital Projects Committee
What is the risk?
The risk that SSE develops and builds major assets that do not
realise intended benefits or meet the quality standards required to
support economic lives of typically 15 to 30 years within forecast
timescales and budgets.
Material influencing factors:
-- Appropriate contractual arrangements.
-- New or unproven technology.
-- Appropriate and effective budget management.
-- All aspects of supply chain management, including those
relating to human rights, modern slavery and labour standards, as
well as those impacts associated with Brexit.
Material influencing factors most impacted by coronavirus:
-- Availability of competent contractors.
Strategic link:
Build
Invest
Develop
Key developments:
-- Following an independent assessment against ISO 20400 by
supply chain experts Action Sustainability in early 2020, SSE has
developed and begun implementation of a three-part plan designed to
mature its approach to sustainable procurement. For further details
please see the Sustainability Report .
Key developments associated with coronavirus:
-- Despite the challenges associated with the pandemic the Group
reached Final Investment Decisions (FID) on a number of significant
projects including the Seagreen 1 and Dogger Bank A and B offshore
windfarms.
Key mitigations:
-- Policy Link: SSE's Large Capital Projects Governance
Framework manual ensures that all major capital investment projects
for the Group are governed, developed, approved and executed in a
consistent and effective manner, with full consideration of best
practice project delivery. The manual, which was reviewed in detail
during the year, with support from a specialist third party,
provides common standards across the Group and incorporates
continuous improvement practices.
-- The Large Capital Project Services function employs dedicated
quality and assurance teams who perform in-depth quality
reviews.
-- In major projects, SSE generally manages insurance placement
by organising owner controlled insurance. This strategy allows it
to have greater control and flexibility over the provisions in
place. SSE also sees the insurance market as an important source of
information on the reliability of technology and uses this to
inform the design process of major projects.
PEOPLE AND CULTURE
Oversight:
Group Executive Committee
What is the risk?
The risk that SSE is unable to attract, develop and retain an
appropriately skilled, diverse and responsible workforce and
leadership team, and maintain a healthy business culture which
encourages and supports ethical behaviours and decision-making.
Material influencing factors:
-- Rewarding employee contributions through fair pay and
benefits.
-- Recognition of the value and benefit of having an inclusive
and diverse workforce.
-- A responsible employer ethos. For full details please see the
Sustainability Report .
-- Clearly defined roles, responsibilities and accountabilities
for all employees.
-- Availability of career development opportunities and
appropriate succession planning that recognises potential future
skills shortages.
-- Clear personal objectives and communication of the SSE SET of
values.
-- A focus on ethical business conduct and creating a culture in
which employees feel confident to speak up when they suspect
wrongdoing.
Material influencing factors most impacted by coronavirus:
-- The health and wellbeing of all employees. For full details
please see the Sustainability Report .
-- Clear and well structured employee communications.
Strategic link:
Invest
Key developments:
-- "Championing the real living wage" is one of SSE's 2030 goals
and it has been accredited Living Wage employer in the UK since
2013 and since 2016 in Ireland. In March 2021 SSE gained
accreditation as a Living Hours employer, this is a new
accreditation, currently in a pilot phase, from the Living Wage
Foundation in the UK which recognises that people cannot earn a
real Living Wage unless fair wages are also accompanied by secure
and sufficient work. Further details are available in the
Sustainability Report and on page 47 of this Report.
Key developments associated with coronavirus:
-- In May 2020 a pulse survey completed by around 8,000
employees was conducted in order to understand employee's immediate
concerns and priorities in the new working environment. Targeted
actions were agreed and implemented, including: flexible working
patterns and caring days; and reminders of the available support
offered by the employee assistance programme. Further surveys have
been conducted throughout the year the results of which will be
used to inform how SSE plans future ways of working.
Key mitigations:
-- Policy Link: SSE Employment Policy and SSE Whistleblowing
Policy.
-- SSE has a detailed Inclusion and Diversity plan, progress
against which is reviewed and monitored by SSE's Group Executive
Committee on a regular basis. Further details are available in the
Sustainability Report and on pages 126 to 127 of the Directors'
Report.
-- There are a wide range of tools and services available to all
employees to support mental health and wellbeing, including those
provided as part of the Employee Assistance Programme. Full details
are available in the Sustainability Report.
-- "Doing the Right Thing, a guide to ethical business conduct",
explicitly outlines the steps employees should take to ensure their
day-to-day actions and decisions are consistent both with SSE's
values and ethical business principles. SSE employees can report
incidents of wrongdoing through both internal and external
mechanisms. SSE uses an independent "Speak Up" phone line and email
service, hosted externally by SafeCall, through which incidents can
be reported.
-- The Audit Committee reviews all key accounting judgements
made as part of the preparation of the Annual Report and
Accounts.
-- SSE's business leaders are required to undertake regular
succession planning reviews. At a Group level, SSE continues to
develop its approach to the management of talent.
POLITICS, REGULATION AND COMPLIANCE
Oversight:
Group Risk Committee
What is the risk?
The risk from changes in obligations arising from operating in
markets which are subject to a high degree of regulatory,
legislative and political intervention and uncertainty.
Material influencing factors:
-- Changes to regulatory frameworks.
-- International and national agreements such as the 2015 Paris
Agreement on Climate Change and The Climate Change Act 2008.
Material influencing factors most impacted by coronavirus:
-- Government intervention into the structure of the energy
sector.
-- Constitutional uncertainty, including relating to any second
independence referendum in Scotland.
-- Changes in financial, employment, safety and consumer
legislation and regulation and the impact of these changes on
business as usual activities.
Strategic link:
Operate
Key developments:
-- Publication of the Prime Minister's 'Ten point plan for a
green industrial revolution' setting out increased policy ambition
to drive a green recovery and the long-awaited Energy White
Paper.
Key developments associated with coronavirus:
-- SSE's Greenprint published in May 2020 outlines SSE's green
recovery policy proposals, highlighting 5 priority areas it
believes the UK to focus on in order to build a greener, more
resilient economy while driving progress to net zero. These
priorities are: net zero by 2040; strategic investment in networks;
clean industrial revolution; leading the charge on EVs; and, green
buildings for green jobs. Further details are available on page 18
of the Strategic Report.
Key mitigations:
-- Policy Link: SSE Political and Regulatory Engagement
Policy.
-- The Group has dedicated Corporate Affairs, Regulation, Legal
and Compliance departments that provide advice, guidance and
assurance to each business area regarding the interpretation of
political, regulatory and legislative change. These teams take the
lead in engagement with regulators, politicians, officials, and
other such stakeholders.
-- SSE has a clear Political Engagement Statement that sets out
principles for any employees who make representations to
institutions of governments or to legislatures on the Company's
behalf.
-- The Group puts in place dedicated project teams to manage all
aspects of significant regulatory and legislative change including
those relating to Brexit.
-- There is regular engagement with the Board and Group
Executive Committee on political and regulatory developments which
may impact SSE's operations or strategy. Further details are
available on page 111 of the Directors' Report.
SAFETY AND THE ENVIRONMENT
Oversight:
Group Safety, Health and Environment Committee
What is the risk?
The risk of harm to people, property or the environment from
SSE's operations.
Material influencing factors:
-- Clear and appropriately communicated safety processes.
-- Regular and documented training.
-- Adverse weather.
-- The size, scale, complexity and number of projects under
way.
-- Challenging geographic locations.
-- Appropriate task and asset risk assessment.
Material influencing factors most impacted by coronavirus:
-- Safety culture - "if it's not safe, we don't do it".
-- Clear, effective and regular communications of all relevant
safety updates.
-- Competent employees and contractors.
Strategic link:
Build
Operate
Key developments:
-- During the year 271 Safe Days were achieved, compared to 247
the previous year; in addition the Total Recordable Injury Rate
(TRIR) fell to 0.15 per cent per 100,00 hours worked. Further
details are available on page 142 of the Directors' Report.
Key developments associated with coronavirus:
-- Following its deployment in early 2020, SSE's Business
Continuity Framework has been used to manage the Group's response
to the pandemic. All employees who can do so continue to work from
home. Coronavirus testing was introduced at an early stage when
needed for critical workers whose attendance on site was essential
to ensure continued operations and, hygiene and social distancing
measures were established and maintained in order to ensure safe
working conditions.
Key mitigations:
-- Policy Link: SSE Safety and Health Policy and SSE Environment
Policy.
-- Safety is the Group's number one value with Board oversight
being provided by the Safety Health and Environment Advisory
Committee.
-- Crisis management and business continuity plans are in place
across the Group. These are tested regularly and are designed for
the management of, and recovery from, significant safety and
environmental events.
-- Each business carries out regular SHE assurance reviews of
the risks faced, the controls in place and the monitoring that is
undertaken.
-- SSE's dedicated Engineering Centre of excellence reviews and
develops plans to ensure that the integrity of its generation
assets is maintained.
-- Full environmental impact assessments are carried out for all
major projects, to ensure adverse environmental impacts are well
understood and minimised.
SPEED OF CHANGE
Oversight:
Group Executive Committee
What is the risk?
The risk that SSE is unable to keep pace with the speed of
change affecting the sector and markets in which it operates and so
fails to meet the evolving expectations of its stakeholders or
achieve its strategic objectives.
Material influencing factors:
-- Fast developing customer needs and expectations in relation
to efficient, innovative and flexible products and services.
-- Technological developments and innovation.
-- Net zero strategic goals.
-- Increased competition from market entrants including
international oil companies.
-- Longer term capital investment plans and budgets.
Material influencing factors most impacted by coronavirus:
-- The size, scale and number of change programmes underway,
including those relating to regulatory or legislative
requirements.
-- Geopolitical events.
-- Governance and decision-making frameworks within the
Group.
Strategic link:
Build
Operate
Invest
Develop
Key developments:
-- In February 2021 - as part of SSE's strategy to seek to bring
its expertise in renewables to international markets where it sees
value - it was announced that SSE Renewables and Acciona S.A., a
leading Spanish Renewable energy developer, owner and operator, had
signed an exclusivity agreement regarding plans for the formation
of a 50/50 joint venture to enter the emerging Spanish and
Portuguese offshore wind markets.
Key developments associated with coronavirus:
-- In order to ensure the safety of its employees and to
implement social distancing measures required in response to the
coronavirus outbreak, around two thirds of SSE's workforce continue
to work from home on a full-time basis. SSE's ability to sustain
this significant change in working arrangements with minimal impact
on productivity is a result of the major financial investment and
the wider efforts over previous years to provide modern, flexible
working for its employees.
Key mitigations:
-- Policy Link: SSE Operating Model Policy.
-- The Board sets the risk appetite of the Group and approves
and regularly reviews the Group's commercial strategy, business
development initiatives and long term options ensuring alignment of
risk appetite and strategic objectives.
-- SSE's revised Group operating model has been designed to
ensure dynamic and efficient decision making, empowered and
accountable delivery of Business Unit strategies and to fulfil
SSE's purpose to provide energy needed today while building a
better world of energy for tomorrow. Details of SSE's decision
making framework are available on page 104 of the Directors
Report.
-- The Group Executive Committee is responsible for ensuring
that Business Unit strategies are consistent and compatible with
the overarching Group strategy and its vision to be a leading
energy provider in a net zero world.
EMERGING RISK: JOINT VENTURE AND PARTNERSHIP MANAGEMENT
Oversight:
Group Executive Committee
Overview:
An essential tenet of SSE's Risk Management process is the
consideration of potential emerging risks and whether or not any of
those identified has the potential to become a Group Principal Risk
in the medium to long term. As such, following the 2020/21 review
process the emerging risk "Joint Venture and Partner Management"
was updated and retained. The Group Executive and Group Risk
Committees will continue to be monitored over the course of the
year.
What is the risk?
The reshaped SSE Group features an increasing number of
significant Joint Ventures (operated and non-operated) both in the
UK and Ireland and in other carefully selected geographic
locations. SSE must ensure that joint venture structures,
governance and operations are robust in order to protect the
investments made.
Key mitigations:
-- Policy Link: SSE Joint Venture Management Policy
-- The Group Risk Committee will undertake an additional
detailed review of this emerging risk in Q2 of FY 21/22. The output
of this review will be reported to the Group Executive Committee
for further consideration.
Section 2. Directors' Responsibility Statement
The following information is extracted from page 169 of the
Annual Report and Accounts 2021.
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE
ANNUAL REPORT AND THE FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report
and the Group and parent Company financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Group and parent
Company financial statements for each financial year. Under that
law they are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies to the
European Union and applicable United Kingdom law, and have elected
to prepare the parent Company financial statements in accordance
with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law) including
Financial Reporting Standard 101, 'Reduced Disclosure
Framework'.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and parent Company and of
their profit or loss for that period. In preparing each of the
Group and parent Company financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them
consistently;
-- make judgements and estimates that are reasonable, relevant
and reliable;
-- state whether they have been prepared in accordance with
applicable accounting standards;
-- assess the Group and parent Company's ability to continue as
a going concern, disclosing, as applicable, matters related to
going concern; and
-- use the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to cease
-- operations, or have no realistic alternative but to do
so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the parent Company and enable them
to ensure that its financial statements comply with the Companies
Act 2006. They are responsible for such internal control as they
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error, and have general responsibility for taking such
steps as are reasonably open to them to safeguard the assets of the
Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors' Report,
Directors' Remuneration Report and Corporate Governance Statement
that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in
other jurisdictions.
Responsibility statement of the Directors in respect of the
annual financial report
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the consolidation
taken as a whole; and
-- the strategic report includes a fair review of the
development and performance of the business and the position of the
issuer and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
We consider the annual report and accounts, taken as a whole, is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group's position and
performance, business model and strategy.
Alistair Phillips-Davies Gregor Alexander
Chief Executive Finance Director
25 May 2021
Section 3. Related Party Transactions
The following information is extracted from Accompanying
Information A5. on page 271 of the Annual Report and Accounts 2021.
A condensed version of this extract was published as Note 18 in the
Preliminary Results Statement for the year ended 31 March 2021.
A5. Related party transactions
The immediate parent and ultimate controlling party of the Group
is SSE plc (incorporated in Scotland). Balances and transactions
between the Company and its subsidiaries, which are related parties
of the Company, have been eliminated on consolidation and are not
disclosed in this note. Details of transactions between the Group
and other related parties are disclosed below.
Trading transactions
The following transactions took place during the year between
the Group and entities which are related to the Group, but which
are not members of the Group. Related parties are defined as those
in which the Group has control, joint control or significant
influence over.
2021 2021 2021 2021 2020 2020 2020 2020
Sale Purchase Amounts Amounts Sale Purchase Amounts Amounts
of goods of goods owed owed of goods of goods owed owed
and services and services from to and services and services from to
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ------------- ------------- -------- -------- ------------- ------------- -------- --------
Joint ventures:
Seabank Power Ltd 75.2 (86.7) 0.1 (16.8) 44.3 (66.1) 0.1 (5.8)
Marchwood Power
Ltd 45.3 (142.3) 0.6 (11.2) 13.6 (96.2) 0.2 (6.8)
Scotia Gas
Networks
Ltd 29.9 (13.1) 17.3 (1.1) 39.5 (113.7) 12.1 (16.4)
Clyde Windfarm
(Scotland)
Ltd 4.3 (116.1) 0.1 (38.2) 4.2 (118.0) 1.3 (41.3)
Beatrice Offshore
Windfarm
Ltd 5.3 (43.7) 1.1 (5.3) 7.1 (40.8) 1.9 (3.3)
Stronelairg
Windfarm
Ltd 1.9 (44.7) - (17.1) 2.2 (55.4) 0.4 (16.3)
Dunmaglass
Windfarm
Ltd 0.9 (22.2) - (6.6) 0.9 (24.5) - (6.7)
Neos Networks Ltd 38.0 (26.3) 41.4 (1.4) 14.4 (59.5) 11.8 (11.6)
Other Joint
Ventures 22.5 (193.8) 54.8 (1.9) 45.3 (205.5) 12.8 (60.5)
Associates - (16.2) - - - (36.7) - -
------------------ ------------- ------------- -------- -------- ------------- ------------- -------- --------
The transactions with Seabank Power Limited and Marchwood Power
Limited relate to the contracts for the provision of energy or the
tolling of energy under power purchase arrangements. Scotia Gas
Networks Limited has operated the gas distribution networks in
Scotland and the South of England from 1 June 2005. The Group's gas
supply activity incurs gas distribution charges while the Group
also provides services to Scotia Gas Networks in the form of a
management service agreement for corporate services, stock
procurement services and the provision of the capital expenditure
on the development of front office management information
systems.
The amounts outstanding are trading balances, are unsecured and
will be settled in cash. No guarantees have been given or received.
No provisions have been made for doubtful debts in respect of the
amounts owed by related parties. Aggregate capital loans to joint
ventures and associates are shown in Note 16.
ENDS
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
ACSSFUFSAEFSEDM
(END) Dow Jones Newswires
June 18, 2021 07:00 ET (11:00 GMT)
Sse (LSE:SSE)
Historical Stock Chart
From Apr 2024 to May 2024
Sse (LSE:SSE)
Historical Stock Chart
From May 2023 to May 2024