SSE plc

Good morning and welcome to our interim results presentation. Before we begin, let me first address today's announcement that I intend to retire from SSE during 2025 after 11 years leading the company. It's been an immense privilege to be SSE's chief executive and I am extremely proud of what we have achieved during my time here. However, I believe the time is right for the Board to begin the search for a successor, and I'm fully committed to delivering a smooth handover that maintains momentum on our significant growth plans. Our Chair, Sir John Manzoni, will lead the appointment process, taking account of our highly capable internal team and the wider market, and we'll update you in due course. In the meantime, I, along with the rest of the executive team, remain fully focused on delivering our strategy. I'm joined this morning by Barry O'Regan, our Chief Financial Officer, and Martin Pibbworth, our Chief Commercial Officer. And, as you will hear shortly, there is plenty to be getting on with as we make the most of the significant opportunities in front of us. We'd be delighted to take your questions after we present what has been a strong start to the year as we continue to drive high-quality, sustainable earnings across the Group. I'll start with our number one priority, safety. I'm pleased to say we've seen a significant reduction in both the number of injuries and the total recordable injury rate compared with the same period last year. In April 2024, we opened an industry-leading immersive safety centre where actors bring the reality of a safety incident to life for our employees and contractors. We've already put over 6,000 employees and partners through this programme and hope this investment will continue to have a real-world impact in ensuring everyone working for SSE gets home safely. You've heard me speak before about the mission-critical role SSE has in the clean energy transition in our core markets, markets that are increasingly attractive. Decarbonisation and electrification are two defining structural trends, and while climate targets have slipped in some parts of the world and the implications of a new US administration are yet to be seen, the deployment of clean power in our home markets is accelerating. We are uniquely placed to benefit with one of the best clean energy portfolios in the world, spanning renewables, flexibility and electricity networks. These are the key enablers of net zero and energy security more broadly. Our balanced business mix provides multiple short growth options in offshore and onshore wind, hydro, carbon capture, batteries, transmission and distribution. This mix also provides deep resilience, enabling us to generate value through a variety of market conditions as we've seen in recent years. And these tailwinds are strengthening. In the UK, our biggest market, the government has put delivery of clean power in an accelerated timescale at the heart of its growth agenda. Already in the first few months of the Parliament, we've seen the new government taking bold steps at a noticeably faster pace as it seeks to put its 2030 Clean Power Mission into action. Whether it's spending, speeding up the outdated planning system for electricity infrastructure in Scotland, or long overdue support for long duration storage projects like Corrie Glass, the policy landscape is already more supportive than it was at our full year results in May. And the NISA was now handed over to government, its detailed priorities for successful pathways to clean power by 2030. They point to the pace of strategic investment that will be required for economic growth. Whichever way you look at it, SSE is ideally placed to deliver a significant proportion of any 2030 Clean Power Plan. But it isn't just a UK story. As other countries intensify their focus on clean energy, there will be opportunities in other geographies across the EU and Japan where we have a growing presence. So whether at home or abroad, SSE is a business with the right strategy, in the right markets, at the right time, with a once in a generation opportunity before us. We're now at the midpoint of our five-year fully funded investment plan that will see us target around 20 billion pounds in capex investment to drive long-term earnings growth. The Net Acceleration Programme Plus or NSAT Plus is supported by world-class assets and pipelines, balance sheet strength, capital discipline and highly capable teams. This is essentially a clean power plan. And as you'll hear throughout this presentation, we're making significant progress on delivering it. It gives us a clear pathway to deliver strong and increasingly high-quality growth, which includes increasing adjusted EPS to between 175 to 200 pence by 2027. So in summary, this is a company at the heart of the clean energy transition that is delivering investment in world class assets, creating sustainable value for shareholders and society, a carefully balanced business mix that provides deep resilience and multiple growth options and a highly disciplined approach to investment with never increasing organic pipeline of projects that offer long term value creation. Whether your eyes on today, this decade or beyond, SSE is well-placed, well-balanced and fit for the future. I'll now hand you over to Barry.

Thank you, Alistair, and good morning, everyone. I'll now take you through what was a strong start to the financial year before touching on our continued confidence in the long-term financial outlook. In the first half, the group delivered adjusted operating profit of £860 million, 24% higher than the prior year. I'll step through the business by business movements shortly, but first I want to highlight the changes in earnings mix coming through the results today. As you may have noticed in May, the higher contribution from our networks businesses this year has not only increased the predictability of results, but also reduced the level of seasonality in group profitability. And this up-weighted contribution, combined with an improvement in renewables performance that reflects weather conditions and year-on-year capacity increases, meant that these businesses delivered twice the total operating profit they did in the prior period. Meanwhile, these same weather conditions contributed to more stable markets, which saw the thermal business make a small loss in the first half. This is a strong group performance that shows the benefits of our business mix and the value from our investments starting to come true. Turning to that investment, our continued focus on networks and renewables meant around 90% of the £1.3 billion invested in the period was in these businesses and their delivery of high quality earnings. Overall, the group delivered adjusted EPS of 49.8p in line with our expectations for the period. Turning to SSEN transmissions performance, adjusted operating profit decreased by 27% to 157 million pounds. Despite growing investments and therefore underlying revenue allowances, the year-on-year reduction includes a one-off timing effect after the business benefited from full expensing accelerated capital allowances in the prior period. In addition to this economically neutral timing effect, the cost of transmissions workforce continues to grow in preparation for the major investment program Alistair will cover later, and depreciation has increased as the asset base expands. SSEN Distributions operating profit was up 188% year-on-year to £346 million. As we have flagged before, and in line with our guidance for the business for the full financial year, this is because allowed revenues include a multi-year cost inflation catch-up. This follows a sustained period of high inflation rates which were not reflected in tariffs, which are set 15 months before the start of the financial year. In renewables, we were delighted to announce that Viking reached full commercial operations in August. When combined with a full contribution from Seagreen Wind Farm and our Salisbury battery facility, the business finished the period with over one gigawatt of additional installed capacity when compared to the same six months last year. And after adverse weather in the previous summer, the period saw a return to favourable conditions, which output increasing across wind and hydro. Combined with the increase in hedge prices, these factors meant that SSE Renewables' operating profit increased by 287% year-on-year to £336 million. As we highlighted in May, we fully expected that thermal and gas storage operating profits would be significantly lower than the prior year, reflecting market prices and assumed normal volatility. The favourable weather conditions shown on the previous slide for renewables also contributed to the more stable market conditions over the summer, meaning that flexible thermal generation was not required to the same extent as in previous years. Turning to gas storage, the business continues to make a seasonal loss, which is expected to revert back to profitability for the full financial year. With already contracted increases in capacity market payments not due to start for another 18 months, the market environment outlined above drove a combined operating loss for these businesses of £44 million for the half year. In our customers' business, we are continuing to see supply margins return to more sustainable levels. In electricity, with competitive and responsible pricing in place, we have been implementing tariff decreases whilst continuing to support vulnerable customers. And while business energy was affected by lower volumes, the decrease in customer tariffs across the businesses also contributed to lower levels of bad debt provisions required. With customers' needs and expectations evolving rapidly, combined with an increasing market requirement for low-carbon power supply solutions, the importance of this business as a route to market for renewable generation will only increase. And turning very briefly to our other businesses, I would highlight that we have commenced a reorganisation of SSE Enterprise, which will see existing activities integrated into other business units for a simpler group organisational structure that provides an enhanced platform for growth. Below the line, net finance charges rose reflecting the interest on Seagreen project financing, while the fall in tax rate was driven by the full expensing capital allowance relief available on our investment programme. As we have guided to previously, we expect the benefit from full expensing to increase in line with our CapEx delivery and our current tax rate to continue to fall to an average of 12% over our five-year plan. Dividends continue to be an important part of delivering value to our investors. And in line with the plan set out 18 months ago, we've today declared an interim dividend of 21.2 pence, reflecting an increase of 6% on the prior year. and we will make the recommendation for the final dividend in May alongside publication of full year results. Our commitments to delivering on the FY27 dividend plan remains as we target dividend growth of between 5% to 10% per annum, whilst also restricting earnings dilution from the script option. The strength and stability of SSE's capital structure has been a significant part of the Group's delivery in recent years, as it has navigated volatile commodity prices, increased collateral requirements and higher interest rates. Looking forward, it is this same strength and stability that will enable the Group to increase investment in high-quality, long-term infrastructure required for the energy transition. And that increased investment has meant that adjusted net debt rose to £9.8 billion at September 24, with 94% held at fixed rates. The successful issuance by SSEN Transmission of an €850 million each year green bond in August 24 at an attractive fixed rate has solidified SSEN's status as the largest corporate issuer of green bonds in the UK. and we have replaced our existing credit facilities with enhanced sustainability linked facilities that will run to the end of the decade and provide a good liquidity base. There is a lot of detail on this slide, but ultimately not much has changed since May. We have seen the stronger performance from networks and renewables come through the results presentation today in line with our expectations of better performance. And whilst the weather conditions meant flexible thermal generation was not required to the same extent during the first half of the year, we still expect the business to benefit over the key winter months and deliver around £200 million of profits. Looking out over the medium term to FY27, the progress made to date on our investment plan means we continue to have confidence in the long-term earnings projections for our businesses. As ever, final performance for FY25 will be dependent upon market conditions, plant availability and the weather over the second half of the financial year. And therefore, consistent with the approach we have taken in the past, we will look to give specific EPS guidance later in the financial year. Finally, I wanted to return to the value creation we see out to FY27. We are now halfway through the five-year investment plan, and with around 80% of CapEx either delivered or committed, we are seeing the benefits of that capacity additions and regulatory asset growth that are a core part of that plan. And with ever-increasing investment each year, we're expecting to deliver around £20 billion of CapEx by 2027 as we progress through the plan. Whilst phasing of spend may mean we don't hit this number exactly, that does not affect our confidence in achieving our earnings targets. Crucially, we have already locked in and are delivering on the key projects that will deliver our FY27 earnings guidance. And we have done so through the selective progression of organic projects with a highly disciplined commitment to hurdle rates. This ensures delivery of attractive risk adjusted returns over any volume targets. And it is this commitment to disciplined investment that drives our confidence in achieving not only our 175 to 200p guidance, but also a higher quality of earnings for the group. This is high quality value creation that we expect to be delivering for years to come. I'll now pass you over to Martin to talk through operational performance for the energy businesses.

Thank you, Barry. As Alastair said earlier, accelerated clean power targets are making our markets increasingly attractive for investments. Whilst energy markets have settled at lower levels than those we experienced during the last few years, gas prices remain historically strong. Peak spark spreads are positive and the capacity mechanism is increasing over time. Our portfolio of businesses is designed to react to changes in the price environment. High wind speeds are obviously good for onshore and offshore assets. But when the wind doesn't blow, our hydro and growing battery flexibility protects renewables from overexposure to pricing events. And our thermal fleet is able to dispatch in line with the positive pricing dynamics. Our FY27 earnings guidance is based upon a long-term assumed power price for unhedged renewables that is consistently tracking below the GB base load price. This is despite historically low spark spreads and a dislocated UK carbon price impacting the future market value assessments. Both could offer upside to our price scenario. Our guidance is also underpinned by rising capacity mechanism price in GB and Ireland. But it is also based upon a measured assessment of the option value of assets that offer market flexibility. Finally, we are continuing to lock in future value through our hedging activities and, with almost half of our hedge position through gas equivalents, we would expect the outturn prices to be significantly higher once spark, carbon and traded option values are factored in. Our hedge books therefore offer a guide to an income floor rather than a locked in energy value. And it really is worth re-emphasizing the risk management quality of our energy book. No other UK competitor has day-to-day hedging and trading optionality at every price point in the merit order. This offers a level of protection and assurance to the exposures of the group that allows us to trade in additional value and supports our confidence. A key aspect of this is relentlessly converting our project pipeline to deliver high quality, sustainable earnings growth. In renewables, our delivery record has led to a 45% increase in output year on year as projects come through and generate. At Seagreen, Scotland's largest offshore wind farm, the asset is performing exceptionally well in its first full year of operations. In hydro, the plant at Tummel has been repowered and its generation potential increased with the biggest overhaul in its 91 year history and we are carrying out other improvement works across the fleet. And we've deployed our first battery projects at Salisbury, with work currently ongoing on our 320 megawatt battery projects at Monk Fryston, which is the largest of its kind in the UK under construction. We continue to create future value too. We were successful in the North Sea with Aymood and Vair, where we are looking towards financial close towards the end of 2025. In AR6 with Cloysha on Shore Wind Farm, and in RES4 with Drumner Howe. As ever, financial discipline remains paramount, and we will only pursue opportunities domestically and internationally where they meet the bar we have set on returns. Our focus on quality of earnings means that by 2027, around 50% of our renewables output will ultimately be contracted, providing reliable recurring income and optimising our level of market exposure. Completion of Viking Wind Farm over the summer, on time and on budget, represented a major milestone for SSE, whilst demonstrating our ability to deliver across a number of businesses. We took the financial investment decision on a merchant revenue basis, before locking in value through two 15-year CFD auctions, which achieved an average of £67 per MWh in today's prices. First conceived more than 20 years ago, Viking will continue to create societal and commercial value for decades, as well as leaving a legacy of enabling Shetland to access the UK grid. Viking is just one of any number of examples of SSC showcasing its skills across energy markets in terms of commercial optimization, regulatory engagements, engineering solutions, and environmental standards, whilst managing multi-supply relationships to deliver complex, highly technical projects. Seagreen offers evidence of the same, likewise KB2 or Slough Multifuel. And of course, SSCN transmissions pioneering HVDC link to Shetland, which Alistair will talk about shortly. The point is that in all of these projects, the group took a long-term approach, applied strategic insight and brought together a blend of commercial, engineering and development skills to create long-term value. In a similar way, Dogger Bank will be a world-class asset with excellent long-term prospects. As is often the case with first-of-a-kind technologies being deployed on this scale, it too has faced challenges, particularly related to the issues with the Haliade X turbines and the remedial actions required by manufacturer GE Vinnova. We are continuing to make progress on installing and commissioning at Dogger Bank A, and as I speak, the vessel is out on site preparing to start installation of the 32nd turbine. Improvements are starting to come through and we will seek to make up lost ground where possible as we target completion in the second half of 2025. For their part, GE have revised their operational procedures and quality assurance thresholds, whilst introducing additional controls to ensure the long-term performance of turbines installed and commissioned. In parallel, work continues apace on doggobank B and C. We already have most of the monopile and transition pieces in place on B and are well underway in procuring a second turbine installation vessel. Importantly, even with this delay and second vessel, we continue to expect our equity returns across all three phases will be comfortably above our hurdle rates. And as we have learned over many years of building major infrastructure projects, it's important to take a long-term view. Dogger Bank will be the world's largest offshore wind farm, able to power around 6 million homes, with an operational life in a region of 35 years. It will create real value for decades to come, whilst building deep supply chain relationships, enhancing expertise and generating further option value through a potential fourth phase at Dogger Bank D. With 5 gigawatts of renewables capacity already installed and around 2.5 gigawatts under construction, the bulk of our 9 gigawatt FY27 target is well underway. And we have been clear throughout the execution of our plan that our focus is on value over volume, with clear hurdle rates that need to be met before we take an investment decision. Building out with discipline may mean that it takes longer to take projects into construction, particularly given the turbulence of the last few years. However, with a portfolio of high quality options, we believe this is the right approach to delivering value. And as Barry highlighted in May, we do not need to take FID on the 1.5 gigawatt balance to reach our FY27 earnings target. We believe our growing 17 gigawatts of diverse early and late stage options will be required under every scenario in the future energy system, with major projects like Barrick Bank and Corrie Glass capable of making a vital contribution once policy and planning hurdles are overcome. Our projects are unique in their scale, but sites like our pump storage options offer market responsiveness qualities that we, and indeed the NISO in its recommendations to government, believe to be strategically critical. Geographically, our primary focus remains GB and Ireland, but we continue to make progress internationally with projects under construction in Hubera, Shontrix and Puglia, taking our southern European portfolio of in-construction sites to over 100 megawatts. With recent auction successes in the Netherlands and with auctions ahead in Japan, we will continue to selectively grow our international pipeline where it makes strong financial sense to do so. The critical role that flexible thermal generation will play in supporting security of supply in a future energy system is becoming better understood. Policymakers are recognising the pressing need to back up a renewables-led system and greater value is being placed on availability in a tightening market, with our fleet locking in more than £1 billion of capacity market revenues over the five-year plan. As demand grows and legacy nuclear sites retire, we expect future capacity mechanism outturns to remain strong and ensure ageing CCGTs can extend their asset lives. As with elsewhere in the group, delivery is the key focus within thermal and the business has operationally performed well, with fewer unplanned outages during the period. Strategic milestones have also been met in the first half of the year with completion, ahead of time and within budget, of the joint venture 55MW Slough Multifuel Plant. And consent has been granted for 300MW of new-build biofuel generation capacity at the Tarbert Next Generation Plant, a project that will contribute to much-needed security of supply in an increasingly tight Irish market. Looking further ahead, we remain committed to offering hydrogen and carbon capture and storage generation solutions as the business progresses a four gigawatt development pipeline that could deliver clean, flexible assets towards the end of this decade and into the early 2030s. Whilst SSE is primarily focused on the supply of electricity, it is becoming increasingly clear that the demand side can not only drive an increased need for our product, but in the form of CPPAs, it can also provide vital routes to market and underpin new generation investments. In our customers' business, we are leveraging the group's capabilities across the energy value chain to offer increasingly integrated solutions to large corporates across the UK and Ireland. These include more bespoke green contracts, longer duration sales agreements and hybrid offerings that assist end users with their own net zero ambitions. We are also continuing to supply energy and efficiency solutions to households in the vertically integrated Irish markets and having supported customers through the worst impacts of the cost of living crisis by forgoing profits, this business is returning to more normal operating conditions. Our customers' business will continue to provide an important shopfront option to our wider energy businesses in the years ahead. I'll now hand back to Alistair.

Thank you, Martin. We'll now turn to our electricity networks businesses. And firstly, SSEN Transmission, which is one of the fastest growing networks businesses in Europe and where we continue to make strong progress on the £20 billion pathway to 2030 programme. I'll come on to the Shetland Link in a moment, but let me start with what is the biggest single transmission project undertaken to date in the UK. Following Ofgem approval for a nominal spend of around £4.3 billion, ground has been broken on the Eastern Green Link 2, a project that will eventually provide a 500km link from the north-east of Scotland to Yorkshire. Meanwhile, in Orkney, all major supply chain contracts have been signed for a new high-voltage alternating current system. Consent has also been granted to upgrade the Argyll and Kintyre network to 275kV, which is crucial to enabling renewables across the region and ensuring security of supply. The pioneering 260km subsea Shetland link shows what can be achieved at pace. The innovative £660 million project was delivered on time and within budget and in conjunction with renewables delivering Viking Wind Farm. On the mainland it connects to the first multi-terminal HVDC switching station of its kind in Europe, a technology which will be a core component in the electrification of our economy. The experience gained in this project consolidates our industry-leading HVDC expertise and sets the business up for growth. We've shown you this slide before, but it is worth repeating. We are already making real progress here, and the tailwinds are strengthening. The NISO recently set out its recommendations on the accelerated grid investment needed to enable the UK Government's Clean Power Target, providing unprecedented clarity on the scale of the task. And Transmission's upcoming Rio T3 plan will be at the heart of it, with a blueprint for upgrading and reinforcing the high-voltage network in the north of Scotland. With much of the work within the upcoming price control already built into our licence conditions, and with potential for that to increase still further, it is vital that the final settlement supports debt and equity investment. In the run-up to submission of our business plan next month, we're working with Ofgem to ensure we arrive at a framework that best serves the needs of all stakeholders. Our asks of the regulator are clear and transparent. Firstly, we're looking for Ofgem to aim up from the top end of the cost of equity range published in their methodology decision. Secondly, they should set lower asset lives and capitalisation rates that would support cash flows. And finally, the overall framework should be consistent with maintaining strong credit ratings. SSEN distribution is 18 months into the delivery of the Rio ED2 price control period, which includes an ambitious capital expenditure programme that is growing and modernising our asset base. With major upgrades underway and supply chain locked in across a number of projects, we expect CAPEX to continue to increase following a 20% growth in financial year 24. This acceleration will bring with it improved performance and better customer service, as well as increased regulated asset value. In addition to our baseline plan, there is the potential for further upside under the uncertainty mechanisms, with over £130 million effectively secured out of a total of up to £700 million on offer across the price control period. And while we are growing the network, we are also making it smarter, targeting five gigawatts of flexible capacity by the end of Rio ED2 and earning early rewards for delivering flexibility services under the DSO incentive. Looking ahead, future energy scenarios point to a significant role for smart, flexible distribution networks. To do this, we need to build capacity and demand side flexibility. This is a significant growth opportunity for distribution, comparable to what we are seeing play out in transmission now, albeit with different phasing. Distribution has published the first strategic development plans of any DNO as we seek to ensure the business is well placed to capitalise on a shift from a reactive to proactive regime. In the meantime, we look forward to the upcoming recommendations from the National Infrastructure Commission, which we hope will build on positive signals from the NISO about the need for faster delivery of strategic distribution investment. We operate in a highly dynamic sector, but right now it is electricity networks where the race to net zero is offering the best opportunities. The premium assets SSE has across the transmission and distribution businesses are key to the growing quality and sustainability of the group's earnings profile, providing predictable index linked returns over the long term. SSE's unique position as a key enabler of renewables potential of the North Sea is providing double digit additions to RAV annually over the course of the five year plan to financial year 27. And this growth is only accelerating. Clean power can only be delivered with modernised electricity networks. Accelerated transmission growth is already in the construction and delivery phase and distribution will be next. This morning, we presented the details behind a strong start to the year. Excellent progress up to the halfway point in the NSAT Plus programme gives us added confidence in our 175 to 200 pence adjusted EPS target for financial year 27, with clear visibility of growth within our renewables and electricity networks plans. Let me sum up with a brief reminder of why SSE is at the heart of the energy transition. The role we will play in the 2030 Clean Energy Plan presents an unprecedented growth opportunity. We've deliberately built a business that is mission critical to the electrification of the economy with world class assets across renewables, flexibility and networks. And we are creating real value through our focus on delivery, the resilience and optionality of our business mix, and a combination of underlying balance sheet strength and capital discipline that allows us to pursue growth when and where the value is greatest. This is the right business, in the right markets, at the right time. Thank you, and we'd be delighted to take your questions now. Over to the operator, please.

Thank you, dear participants. As a reminder, if you wish to ask a question, please press star 11 on your telephone keypad and wait for your name to be announced. To withdraw a question, please press star 11 again. Please stand by, we'll compare the Q&A roster. This will take a few moments. And now we're going to take our first question, and it comes from Mark Freshney from UBS. Your line is open. Please ask your question.

Hello, thank you for taking my questions. Firstly, something you haven't mentioned much in the presentation is just on Berwick Bank, which could be an immensely attractive project and you own 100% of it. Planning for the offshore part has been very frustrating. Can you update us on what the issues are and when you might expect resolution and the final consent? And my second question is just on ambitions outside of the UK and Ireland. Clearly, you have an option for an offshore wind farm in the Netherlands. But given sentiment and presumably valuations in Europe and North America are low, how do you think about potentially deploying balance sheet capacity there and exploring opportunities there at potentially a low point in the valuation cycle? Thank you.

That's great. I'll just touch on the second one and then I'll give Martin a go at both of them. So I think you're right. You've seen valuations come down to more predictable levels and easy levels to digest. We've obviously got a portfolio and a growing portfolio of overseas assets currently. We're very focused on converting those into built assets that can start earning us money. But we all remain optimistic. vigilant as to what other opportunities are available. I think at the moment the focus is definitely organic but we wouldn't rule out M&A where we can see value in Europe and I think despite the fact we've got a fully funded plan we do have an enormous array of opportunities in our current markets and with the acquisitions that we've already made the Siemens Gamesa business in Europe and also the business Pacifico over in Japan. So I think we've got to be mindful of the fact that they will all require quite a lot of capital over the balance of this decade. But Martin Berwick, anything you want to say on Europe?

Yeah, well, just to clear your point, obviously, we made our acquisition in Southern Europe a couple of years ago. I mean, maybe that's gone a bit slower than we expected, partly because of grid and consenting issues. That's not unusual or unique to us, but it is a 4.3 gigawatt pipeline that we've just said in the presentation we see the strategic need for, and obviously, If anything, since we made that acquisition, most European countries have increased their renewables ambition and the timescales for that. On Berwick Bank, it's a 4.1 gigawatt wind farm in three phases. The Section 36 consent was submitted two years ago in December 2022. That is with the Scottish consenting authorities. We still await their decision, but we are hopeful that we'll get a determination before the closure of the AR7 eligibility window.

Okay. Does that help, Mark?

Perfect. Thank you very much. Thank you.

Thank you.

Thank you. Now we're going to take our next question, and it comes from the line of Rob Pullen from Morgan Stanley. Your line is open. Please ask your question.

Hi. Good morning, everyone, and thanks for taking the questions. I mean, well, the first one I suppose is, well, congrats, Alastair, on the news that you'll be having an easier life. I think you've been a great servant to SSE, and I think it's a shame to see you go sort of at this juncture where things are really starting to accelerate. So, I mean, the first question on that, we know obviously it's a slightly different message to when Gregor left So if you could just maybe lift a little bit in terms of what the passages new are and in terms of the succession plan and how that pans out. The second one, just to pick up on Dogger Bank, if we could, you're talking about underway in terms of procuring a second installation vessel. I appreciate there's lots of commercial sensitivity, but could you give a bit of a steer as to when all of this could be boxed up and put behind us, given obviously a lot of market focus on this particular project, which is relatively small within the wider portfolio of the SSE story, given what's going on in networks? Thank you very much.

Fine, I'll let Martin deal with Dogger. Succession, yeah, look, I've been at SSE for 27 years and over 11 of them now as CEO. I think we're getting to within touching distance of the 27 targets. And I think the key thing for the board and for the company is not only that 27 delivery, but what we do over the balance of the decade and beyond. And so I felt now was the right time for the company for me to... let the board have the opportunity to basically ensure there was a smooth succession process, give them plenty of notice on that and for them to hopefully supplement the fantastic team that we've got in any way they feel necessary and appoint my successor. So I'm around until sometime later in 2025. I remain very focused with the rest of the executive team on delivering that strategy and delivering 2027. And we'll let Sir John and Cornferry go through the process that they need to. We'll run a full and transparent process to make sure that we get the best talent possible. And in the meantime, we'll carry on and I'll make sure that there's a smooth transition as and when the board decides. uh decide what the best course is going forward um but look yeah uh pastors knew yes uh i suppose uh that one came up on cnbc this morning so i'm not intending leaving the workforce uh hope to contribute a bit to the productivity of the uk going forward but no idea what that is and i'll just remain very focused with the team on doing doing what i need to um then dogger uh yeah morning rob just very briefly um we're in advanced discussions on the second vessel and we hope to conclude those shortly

Okay, thanks, guys. I will turn it over.

Thank you.

Thank you. Now we're going to our next question. And it comes from Peter Bistiga from Bank of America. Your line is open. Please ask your question.

Yeah, good morning, and thank you, and also congratulations and best wishes to Alistair from my side. I wanted to focus a little bit more on Dogger Bank, if I may. So, firstly, you know, following on from Rob's question on the installation vessel, you know, we've seen vessel rates increase, you know, significantly. You know, had to do another impairment recently on higher rates. I know you're not going to comment specifically on this, but can you at least reassure us that when you say returns are comfortably above hurdle rates, that comment factors in the high vessel costs that you anticipate? And also, you know, can you talk a little bit about what the knock-on effects of the delay that you've had at Dogger Bank will be on timeline of Dogger B and C? So, you know, I'm just wondering how much, you know, of that delay can you sort of claw back with those kind of future projects? And then just one final point. Uh, on, you know, the timeline and process from G, the Nova's perspective. Um, are you completely comfortable there? Or is there any risk of, um, uh, uh, issues there that could further impact your project timeline? Thank you.

Sure. Okay. Um. Barry's going to run you through the returns, but obviously will have taken account of all the evidence and issues that are there. And I don't think you can assume that vessel rates are necessarily higher than we might have expected or otherwise. So I just wouldn't I'd just be careful about making assertions or assumptions. But Barry, if you run through the assumptions, yeah, yeah.

Yeah, no, thanks, Peter. Yeah, look, as you'd expect, we've been around the model in quite a bit of detail and, you know, we've baked in what we consider to be the reasonable cost in that. I think, you know, standing back, clearly there is an impact on returns because of the delays. But what we've said is, you know, that is still comfortably above our hurdle rates. And look, there's a few reasons in that, you know, we've spoken before about the, you know, the higher inflation coming through in the CFD and the low fixed inflation. interest rates coming through as well. But also, as project delivery moves to the right, so does the timing of our equity injection into the project also move to the right. We also have project contingencies we've mentioned before. Clearly, we're now going through them. There's obviously, in a standard contract like that, there will be liquidated damages there as well, which I'm not going to get into the detail on that. And then also, you know, the longer the commissioning period goes on for it means you're delaying the start of triggering the CFD rate. So those turbines that are in that pre-commissioning period are getting that higher merchant power price. So you put all that together and, you know, we're comfortable that we are comfortably above our offshore hurdle rate with delivery in the second half of 2025.

And just anything on GE?

So I think, first, you asked about Doggerbank B and Doggerbank C timescales. So we've always said each project will follow a year after. That still remains the guidance, so therefore Doggerbank B, second half of 26, Doggerbank C, second half of 27. In terms of GE, I mean, it's probably... Fair to say we have very detailed and consistent meetings with senior project management. We have weekly performance and planning reviews with them. We think those are going quite well. They share their detailed plans and we discuss those. I've also had meetings with the CEO. So we have very good relationships and very good contacts in terms of how the project is going. And obviously there have been some issues, but as we said in our presentation, the revised operational quality assurance, thresholds have slowed down installation, but that is all factored into our second half of next year guidance for Dogger Bank A. Excellent.

Very clear. Thank you.

Thank you.

Thank you. Now we're going to take our next question. And it comes from the line of Deepav and Kastel from Burstein. Your line is open. Please ask your question.

Thank you so much. And Alistair, wishing you a more relaxed retired life to start with. I have two questions. Sorry to labor about Dogger Bank, but it's a clarification to the answers you provided. And the second one was on Rio. Let me start with Rio. So I've seen that you very explicitly now outlined an expectation of more than 10% nominal equity return in Rio 3. I believe this is new and in the past you've not sort of done that. So could you sort of explain, I mean, this implies that you do expect some outperformance. So maybe if you could just walk us through the bridge of how much is the, you know, allowed returns plus outperformance and your inflation assumption in that 10%. And on Dogger Bank, just to be clear and to clarify, you've got this vessel contracted till the end of 26th. But seemingly, Dogger Bank C will go on to second half of 27. So is the expectation that this second vessel is what would enable you to, A, accelerate your build-out rate for ABC, and then also help you cover the last leg of Dogger Bank C? And I think with GE Vernova for one of the other projects, they have provided for some vessel contingency costs for the other project. I was wondering whether they would be pitching for some of these extra vessel costs, which are partially because of the quality problems and issues with their commissioning installation.

Okay. If we start with Daga and then probably myself and Barry will both have a go at the 10%. I've got a simple view. Barry might have a more complex and detailed view.

So just on vessels deeper morning, by the way, so we'd expect clearly as a second vessel arrives some overlap with the existing vessel. And obviously in our plans that we've just talked about and our delivery plans, there is an assumption about how those vessels operate and install through the period. So, yes, that second vessel will be there, obviously, for Doggerbank Sea.

So do you want to look at the tab of the second vessel?

I think in terms of going through all the plans we have and all the knowledge that we have about what's going on I don't think we see material differences in the rates going forward and I think at the moment we would also say B and C in terms of returns will be above our hurdle rate so I think I I think that's kind of where we are. So we're clear on timing, we're clear on hurdle rates. I think if we start going into individual assumptions, you'll decide that one is positive and one is negative and all the rest, and without going through hundreds of them, which is obviously what we do and why we have specialist teams, it's very difficult. I think you've just got to accept that the returns we see as being reasonable and we've got a current timeframe and sort of speculating on where we are with... individual providers and everything else. If there's anything material which was material to our earnings we would definitely put it out there, we'll let you know. On the Rio 10%, at my simple level we've just been clear with the regulator and government that if they want investability in the transmission network they need to be looking at a 10% nominal rate. That is what is required in the international markets if you're going to get transmission assets away in terms of that level of investment. And, you know, you end up with a 6% to 7% cost of equity, 2% or 3% on inflation and maybe 1% on outperformance in some way. And you can cut it in various ways, but ultimately you need to be aiming at that kind of level for that kind of...

and and and and that's all i've said about it publicly but barry yeah look i think that's the key point look but we're focused on the overall framework deeper so it's obviously the cost of equity and there's the cash measures as well that alistair talked about uh earlier on and look yeah so the cost of equity it's a real number Cost of equity is a real number that's in the Ofgem methodology. Clearly, you need that inflation, and then there's incentives and outperformance on top of that. But look, we're in detailed discussions with Ofgem at the moment, so I don't think you'd expect us to give any more specifics around at this stage, but it is part of that overall framework that we're very much focused on.

All right, thank you.

Thank you.

Now we're going to take our next question. And the question comes to the line of Harry Wybert from BNP Paribas Exxon. Your line is open. Please ask your question.

Hi, good morning, everyone. Thanks for taking my questions and a bad night. Congrats and best wishes to Alistair. First question, actually, on one of the comments you made, Alistair, being in touching distance on the 2027 targets. And it's been a little while since you've done a capital market today style update, and a lot has changed since you last set your 2027 guidance range. So that sort of piqued my interest. Do you think you're going to do another strategic update in the near term and before your departure, Alistair? And I just wondered if there'd be a send-off here, and if you feel like you're in good shape versus 2027 targets, could that be an opportunity perhaps to bring something positive to the markets? I'm fishing there, but I'd be interested in your thoughts. And then secondly, we have the press on a tie-up with EDP. You know, I guess there's a limit to what you're going to be prepared to say on this, but you mentioned you might be interested in sort of opportunistic bolt-on renewable deals earlier. So institutionally as SSE, would you consider a transformational deal or tie-up, or is this just normal course press speculation? Thank you.

okay uh uh on an update i think we'll provide an update um whenever we think is appropriate i don't think you should have anything to do with my timing or or any other timing for that matter we have a fully funded plan out to 27 currently and we're working hard to make sure we deliver that and also as i've indicated clearly we've got our eyes on uh what we don't need to do after 2030 um and beyond and At the right time, we'll do whatever we need to do around capital markets updates and things of that nature. But there's a fully funded plan there and there's a lot of focus on delivery and we're delighted with the strong results we've had in the first half. Press speculation, we just don't really comment on it. I don't think there's anything more we can say on that. More generally on our aspect, I think we're always looking to create value institutionally. If there's a good deal to be done, we'll do it. I suppose the most recent one, Triton, was a very good deal for us. And we continue to look at assets as they come along. We've got a fantastic growth pipeline. We've got a lot to do to go and deliver that over the period out to 2030, let's say, just because I suppose that's roughly when the government's around and that's their clean power plan. And we remain very focused on that organic plan. But as we've demonstrated in the past with SGRE, Pacifico, Triton, if there are assets out there that we think are attractive and give us the right opportunity to grow, then we'll take that opportunity.

Okay, great, Joe. Thank you.

Thank you. Now we're going to take our next question. And the question comes from the line of James Brandt from Deutsche Bank. Your line is open. Please ask your question.

Hi, good morning, everyone, and also congratulations to Alastair, and thank you for your long-serving leadership. I have three questions, if that's okay. Firstly, on the dividend, you see growth of the dividend by 6% at the half year. which is obviously a kind of interesting marker in a way because it's the first period after the rebasing. And it's at the kind of low end of the 5% to 10% targeted range. So I was just wondering whether you could kind of talk through what you're thinking is there, why 6% is the right number, and if there's any kind of criteria you would use to assess whether you would be at the low end or the high end of the range. Second question is on emissions trading. I was wondering whether you could just share your insights, because obviously we still have quite a low UK carbon price. We obviously have a new government. I haven't heard Ed Miliband talk very much about emissions trading, but maybe I've missed it, maybe he has. But I was just wondering whether you had any insights in what the new government was thinking about emissions trading, whether you thought that they would kind of tighten the scheme up, We could see high carbon prices at some point in the UK, given how ambitious the decarbonisation agenda is. And then thirdly, if there's any update on power market reform in terms of timing or any kind of messages you're getting from the government, and obviously particularly around the idea of kind of localised pricing, that'd be great. Thank you very much.

Perfect. I'll let Barry start on dividend. Martin will pick up the other two.

Yeah, look, thanks, James. So, look, on the dividend, look, we obviously have an established dividend policy of, you know, growing by 5% to 10% per annum to FY27. And, you know, in terms of the criteria, we reflect on, you know, it needs to be sustainable, you know, based on sustainable earnings performance, but more importantly, enabling us to, you know, fund our... very attractive long-term growth prospects. So, you know, we've set the interim dividend accordingly, but I think the important point here is there's been no decision will be made on the full-year dividend until we have the full-year results, and we'll come back to that in May.

Okay, morning. So, yeah, I mean, firstly, on locational marginal pricing, we probably don't have any more kind of colour on timing than you already have. We expect DESNES to make kind of policy recommendations in perhaps the spring of next year. And obviously we'll watch that closely. Just for completeness, our position clearly hasn't changed. We think locational marginal pricing would be off-putting or damaging for investment at a point when clearly a Clean Power 2030 plan is encouraging the opposite. And we're not alone in that view from developers or generators either. And we particularly believe, given... the progress that's being made on networks build and also i should add the progress that's been made on policy in terms of cap and floor for long duration storage and perhaps some of the uh medium term need uh for this uh goes away as these assets get built um and that is a position that's as i say it's not unique in the markets um then in terms of carbon um You're right, clearly the delta between UK carbon and EU carbon remains high. I think we've said in the past that we expect over time that to narrow. Again, that opinion hasn't really changed. We also haven't heard the government talk too much about that. But clearly there's a few policy things in the background that may kind of accelerate that conversation, including how CBAMs work, et cetera, and how they impact UK and European carbon markets. So we continue to watch that very closely.

Interesting.

Thank you.

Thank you.

Thank you. Now we're going to take our next question. And the question comes to the line of Dominic Nash from Barclays. Your line is open. Please ask your question.

Good morning. And I'll reiterate what the previous hand is about. announcement. A few questions from me. It's probably sort of two, probably three, so apologies for that, but they're all linked. And it's all about, I guess, firstly, sort of the dunk or flouter or however you want to pronounce it, that we're kind of currently seeing and linked to the sort of NISO sort of Clean Power 2030 targets. So just to put it in context, clearly the balancing costs are very high in the UK. I think about £11 a megawatt hour on average. And there's a significant sort of push to build more renewables. So is there a risk, first of all, you're putting the cart before the horse? And then the questions that come out of this is, when do you see balancing costs or the economic sort of rent that your thermal power picks up and you're balancing and you're peaking pump hydro pickup? When you see this peaking, is it going to be sort of 2030? Is it going to be It keeps on rising if it peaks at all. The second thing is when you build your new wind farms, what sort of curtailment levels are you now putting through in your base case, which is clearly going to be part of that sort of balancing one? And then sort of the final question, so policy for this, which is on the other side of the equation, those that benefit your CCGTs in particular. Have you, I mean, you've seen the presentation that you've got plans for decarbonizing by 2030. What do you need to do? What future proof have they got and what are the costs involved on getting the CCGTs ready to take advantage of this sort of? sort of volatile world we're moving into.

Thank you. Okay. A pretty good set of questions there. Just because I cover the networks a bit, I think one of the key things on constraint costs is to make sure that we build the networks so we can get the power from where it is available to come from, i.e. the renewable resources and or wherever you cite low carbon flexible to the demand centres. So build of networks is critical, which is what's been talked about generally, and obviously you can see a lot of that coming through, particularly in transmission and starting to come through to some extent in distribution. But otherwise, I think flex income peaking, curtailment levels in wind farms and CCGTs.

Morning, Dominic. So, again, just for context, clearly the Clean Power Plan had an enormous amount of renewable investment assumptions in their offshore wind going up to somewhere between 43 and 50 gigawatts and onshore wind effectively doubling. And there was also in there an assumption of 35 gigawatts of CCGTs providing a 5% load factor. So I guess that implies that by 2030 there is still informational rent available for CCGTs on the market and certainly as the system is looking to balance all of that we'd expect the need for our CCGTs to still be there. Just wrapping in your third question slightly into that, you asked about what do we need to keep our CCGTs available and reliable. We are well engineered on our CCGTs. Our reliability, I think, is market leading and our legacy fleet has been performing very well. We mentioned that in our presentation and we continue to invest in making sure those are very good engineering solutions that are reliable and can come on at short notice and hit what our national grid might need. So I don't see that changing. Obviously, the capacity mechanism and the way that works is important to remunerating the cost of providing that high level of quality engineering. But obviously, we mentioned in our presentation, we also believe long-term capacity mechanism prices should stay strong for that reason. And then on constraint levels and balancing costs, and obviously, we're not going to tell you completely what's in a model but obviously we are aware of balancing costs in the UK and we have always said that as much as a wind fleet might be exposed to intermittency costs that is why you need flexible generation including not just the thermal but pump storage and flex hydro and indeed increasingly for us batteries behind that to balance that off and so that is the risk management quality of the book we talk about and how we'd see that the thing around.

Is there a last one on CCGT? I think I've dealt with that on the... Yeah, that's fine. Dominic, comfortable? We've picked them all off?

Yeah, I apologize, there's a bit of a ramble, but what is the curtailment? I don't think you answered, what do you think your curtailment sort of modelled in is in your wins at the moment?

So what I was saying on that is, obviously, you see, we won't obviously disclose that, but we see the balancing issues on wind, we would argue, as a very good risk management book, is moderated or netted off by the flexibility we have on the other side. And part of our build on batteries is to increase the value of that protection.

OK, thank you.

Thank you.

Thank you. Now we're going to take our next question. And the question comes to the line of Charles Swaby from HSBC. Your line is open, please ask a question.

Hi, good morning there, and thank you very much for taking my question. I have two. One, first on thermal, we seem to be a little less confident on delivering above the 200 million this year. I was wondering if that takes into consideration the poor wind conditions we had over October, November? And then the second one on offshore, I was wondering if you could give us updates on the plan for Sea Green 1A in the UK and our current islands in terms of if you think Sea Green will be available for the next AR auction or any thoughts on how you get these to market. Thanks.

OK, yeah, sure. Do you want a thermal forecast?

Yeah, Charles, thank you. Yes, look, we said in May we expected thermal to deliver, you know, greater than 200 million in a low volatile scenario. But really what we've seen over the first six months of the year was extremely low and volatility and low running in our thermal division. So, you know, reflecting that. We feel it's more sensible now to say that would be around the 200 million mark. Now, that's not to say clearly that that can change. Clearly, terminal can respond very quickly to market conditions, but it's very much based on what we saw over the first six months and how we performed over that period.

Yeah. And then just on your question. So firstly, on Arclay, say we are we continue to work on exploring CPPA solutions for route to market for Arclay. And obviously, we've got our we're looking for secure our final consent and then all being well with point to, again, the. long-term policy backdrop, which is highly constructive for offshore wind in Ireland, and we still think ARCLOS should be a lead project. And then I think the other question is Seagreen 1A, which in theory could qualify into AR7, but that'll be a decision for Seagreen.

Great, thank you very much. Thank you. And now we're going to take our last question for today. And it comes from the line of Ahmed Farman from Jefferies. Your line is open. Please ask a question.

Yes, thank you for taking my question. Firstly, as there are questions from my side as well, maybe I wanted to start with you. Could you give us a little bit of your perspective on the work you're doing or the work you've done to secure supply chains for the delivery of your electricity transmission plan and what sort of visibility you have or you're working to get both on pricing and volume. Maybe a second question on the thermal business. I know you sort of made comments around the $200 million. But I just was wondering, you know, if you could give us a little bit of an update on what you're seeing currently in the market and into the winter in terms of the spark thread, in terms of electricity demand. Give us a sense of the balance of risk around the thermal business outlook. Thank you.

Yes, sure. OK, so I think the critical things on transmission and we will be putting our business plan out in around a month or so, just under a month from now for the next review period, which will run from April 26 through to March 31. You've probably seen that we've put out the Asty and Lottie projects. There was a slide in the pack on that that I called out, having shown that before with the 11 projects. We have procured those projects in the sense of having locked in all the major components of the supply chain so we can deliver them. We haven't locked down all of the costs and that's partially because not all of them have received full planning consent and so there may still be some alterations to them but we obviously have where we've got all the consents and have started moving forward. For instance with East and Green Link 2 that again we called out, we have pinned down the costs and we have essentially agreed those and gone through consultation with Ofgem on those. So I think all costs are not pinned down because that's subject to some tendering. But we have actually pinned down the supply of all the key components, HVDC cables and things of that nature. There are some aspects of probably the underlying spend, repairs and maintenance, testing, monitoring, things like that, the sort of certain spend that we might have. um that that we will have a very good view on going forward and in a normal process of a price control we'll almost we'll also have to take a view because we'll have to commit to off gym on those certain items um that we know what the costs are going to be and then there'll be another part of it which is the uncertain stuff which is um some of what you see coming out of the niso plan and what we anticipate coming out of the extended niso plan into the 2030s well we haven't locked all that down yet i think we have good relationships with um with suppliers in respect of that. And we obviously have a good track record and good frameworks. And I think we're ahead of a lot of people. I would say tenants in Europe were probably ahead of anybody else in procuring, you know, certainly some of the big HVDC. But after that, I think our procurement is advanced as anybody else within Europe and certainly anybody within the UK. So there's a very, very big slug. of what you'll end up with in that business plan that we have locked down but there still are some significant uncertainties in there and we can obviously talk a bit more about that when we come out with that business plan in a month or so's time.

And then just on spark spreads and thermal I mean obviously the summer was very high renewables we've obviously reported that now results are positive for renewables but was pretty benign in terms of volatility in spark spreads for thermal. Obviously, we've seen a different set of circumstances emerge over the last two to three weeks where I believe we've seen the second and third highest daily spark spreads over the last two years being set in the markets. And indeed, our thermal fleet has been running at much higher load factors as a result over the last two to three weeks and indeed is running right now. That's obviously a set of conditions, which I think Dominic referred to as Duncan Flauter earlier. And therefore, right now, the market isn't necessarily pricing that in going forward. So we still see Q1 peak spark spreads at around £10, which is probably about the number I was talking about in the summer.

Okay. Does that cover it, Ahmed?

Yeah, thank you.

Okay, that's great. Thank you. Moderator, any more questions?

There are no further questions. I would now like to hand the conference over to the management team for any closing remarks.

OK, that's great. All right. Thank you all for your questions and thanks to our moderator. Before we go, I'd like to leave you with a few closing thoughts. We're very pleased with the interim results presented today, but we see them as part of a much bigger strategic picture. Our main focus is on further EPS growth at the full year and we'll update you on our expectations in due course. In the meantime, it's back to the task of growing the business and delivering on the investment plan that is behind our confidence in the financial year 27 adjusted EPS target of 175 to 200 pence. I believe that the company is extremely well positioned to thrive as the race to clean power in 2030 gathers pace. And my success will benefit from the support of a hugely talented, diverse and dedicated senior leadership team when that time comes. So thanks again. We look forward to speaking to many of you in the weeks to come.