Download - Analyst Network Presentation Feb10
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SSE NetworksAnalysts Presentation3 February 2010
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Networks OverviewColin Hood, Chief Operating Officer
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StrategyTo deliver sustained real growth in the dividend through the efficient operation of, and investment in, a balanced range of regulated and non-regulated energy-related businesses.
Electricity Transmission
Electricity Distribution
Gas Distribution Utility Solutions and Telecoms *
* Not economically regulated
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Since privatisation…
• 30% fall in number and duration of power cuts 1990-2008• Real unit operating expenditure down 5.5% p.a. across electricity
distribution network• Real term falls in charges
– Electricity Distribution: 50% since 1990– Gas Transportation: 41% since 1994
• Higher capital investment in gas and electricity networks
– Electricity Distribution: up 100%– Electricity Transmission: up 60%
and increasing– Gas Distribution: 95% increase in
capex and repex
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Organisational Chart
Chief Operating Officer
Generation Operations
Major Projects IT
Customer Service
Group Services
Power Systems
Mark Mathieson
SGN
John Morea
Regulation
Rob McDonald
Multi-Utilities & Telecoms
Adrian Pike
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SSE’s Networks Objectives
• Safe, efficient operation of and investment in electricity networks– Mark Mathieson, Director of Distribution
• Safe, efficient operation of and investment in gas networks– John Morea, Chief Executive Officer of SGN
• Work with Ofgem to ensure economic regulation is fair– Rob McDonald, Director of Regulation
• Add to SSE’s non-regulated networks assets– Adrian Pike, Group Managing Director of Telecoms and Utility
Solutions
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Safety
• SSE’s (and SGN’s) number one priority– Industry-leading performance– Believe that all accidents are preventable– Work to be done safely and responsibly, or not at all
• High standard of safety performance supports overall business performance
– Good planning– Effective risk management– Strong supervision– Efficient operations
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SSE’s Networks Businesses
SSE Electricity Transmission/Distribution
Non-SSE / Non-SGN
SGN Gas Distribution
Electricity
12%of GB Electricity
Transmission and Distribution RAV
Gas
c.29%* of GB Gas Distribution
RAV
* SSE share 14.5%
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20
25
30
35
40
45
50
2005 2006 2007 2008 2009
Regulated Networks Operating Profit (£m)
Regulated Networks Contribution to SSE Operating Profit (%)
SSE Networks Regulated Asset Value (RAV) (£bn; net)
* Forecast
Electricity Networks24%
Other Capital Investment76%
* Excludes SGN; based on 2008-10 only
Electricity Networks’ Share of Investment Programme*
3 0 0
3 5 0
4 0 0
4 5 0
5 0 0
5 5 0
6 0 0
2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9
22.5
33.5
44.5
55.5
6
2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 10 * 2 0 13 *
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SSE’s Non-Regulated Networks*
• Utility Solutions– Embedded electricity networks– Independent gas connections– Heat infrastructure– Water and sewerage provision
* Excludes Contracting, In-area Connections and Street Lighting
• Telecoms– Capacity and bandwidth– Data Centres
Flexible deployment of employees and other SSE resources
> £200m invested capital covering both areas
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Rob McDonaldDirector of Regulation
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Agenda
• The Distribution Price Control (DPCR5)
• Transmission price control and investment
• Ofgem’s RPI-X@20 project
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DPCR 5: Key Policy Decisions (1)
• Increase in revenue: RPI + 4% p.a.
• Pensions:– Pass through of efficient costs– Allowances based on latest valuation– 15 year deficit funding– Threat of future benchmarking
• Major change to incentive framework– Previously, different costs received different
treatment; now all costs either 100% expensed(business support costs) or 85% capitalised (network costs)
– Reduces reward for outperformance, but also penalty from under-performance
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DPCR 5: Key Policy Decisions (2)
• Number of steps to de-risk the business:– Volume driver removed– A number of re-openers (e.g. for large
projects, Traffic Management Act)– As well as pensions and incentives
• A new flagship incentive for low carbon– £500m up for grabs over 5 years– Competitive bidding for majority of this
funding
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DNO Total Cost Allowances vs. Forecast
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
ED
FE E
PN
ED
FE L
PN
ED
FE S
PN
SP
CN
West
CE Y
ED
L
EN
W
SP
Manw
eb
CN
East
CE N
ED
L
SSE
Hydro
WPD
Wale
s
WPD
SW
est
SSE
South
ern
Source: Ofgem
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DPCR 5: RORE and WACC
• Allowed WACC* = 4%, post tax real
• Lowest ever for any regulated Utility
• But – 4% calibrated or “back-calculated” on
the basis of Ofgem’s “RORE”* analysis
*RORE: Return on Regulatory EquityWACC: Weighted Average Cost of Capital
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Potential equity returns at 4.7% WACC (vanilla)
Source: Ofgem
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Opportunities for outperformance
• Some outperformance is ‘baked in’– Information Quality Incentive (IQI), some Quality of
Service (QoS), DPCR4 capex roller and DistributedGeneration (DG) incentive
– This brings the post-tax return to 4.5% (£60m)
• We then have additional potential to outperform the DPCR5 settlement– Improved operational and capital efficiency– Outperforming on a number of incentives e.g. QoS,
DG and customer satisfaction– Further opportunities are available on other
incentives
Overall we are targeting >5% post-tax real returns over DPCR5
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Transmission Price Control Review (TPCR)
• Next review period was due to commence in April 2012
• To align with RPI-X@20 review, Ofgem has announced a one year delay until April 2013
• Current price control will be subject to an “adapted” one year roll-over
• Ofgem still considering whether to move the next Gas Distribution Price Control Review (also due to commence in April 2013).
In principle, we are comfortable with Ofgem’s proposals and approach.
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Transmission Investment
• Beauly-Denny funded through specific licence provisions– Transmission Investment for Renewable
Generation (TIRG)– Based on principles of five-year price
control– However, includes ‘reopener’ provisions to
amend the allowed capex following the consentdecision
– In January 2010 TIRG approach extended for afurther three transmission investment projects
Process in place to deliver regulatory approval for large capex projects
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RPI-X@20
• Is RPI-X regulation for networks still fit for purpose?– A two year review launched Spring 2008– “Emerging Thinking” document published
20th January 2010; responses by 9th April– Recommendations to the Authority* and final
decisions by Authority summer 2010– Implementation in Transmission (& Gas?),
April 2013
SSE actively engaged in the process
*Authority: Gas and Electricity Markets Authority
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RPI-X@20: emerging thinking (1)
• Greater focus on engagement with network users
• Greater focus on network outputs rather than cost assessment
• Increased focus on allowing investment but with exposure to risk/reward of output delivery
• Incentives and revenues calibrated to costs and outputs to be delivered – no more “arbitrary financeability adjustments”
• Possibility of more aspects of the price control settlement lasting beyond 5 year “deal”
• Extension of DPCR5 equalising opex and capex incentives across all networks – possibly less focus on benchmarking
• Potential for increased competitive tendering for network investment.
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RPI-X@20: emerging thinking (2)
• Further work and thinking to be done on:
– Third Parties’ right to appeal price control
decisions;
– Possibility of forced franchising of certain
operations where network has “failed” to
deliver.
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RPI-X@20: initial reaction
• Not as fundamental as some had argued for…
• Price controls may become much more of a regulatory “contract” between networks and Ofgem
• Trade-offs between additional risks and returns are key in this environment
Largely builds on recent developments in DPCR5 and Transmission
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Questions?
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Electricity Networks UpdateMark Mathieson
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Agenda• Electricity distribution
– SSE approach– SSE performance– DPCR5 delivery
• Electricity transmission– Political background– Transmission upgrades– Supporting 2020 targets
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Electricity Networks Overview
• 14 distribution networks– 7 operators– SSE RAV £2.42bn; – revenue £620m
• 3 transmission networks– 3 operators– SSE RAV £375m; – revenue £55m
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SSE’s approach
Unique approach to
managing assetsSSE’s primary function is running utility operations
Lean structure - frontier delivery
Unique culture - delivery focused
Peer group contract out much of their service delivery; reduces risk…but at a premium
We are best placed to manage risk
SSE’s simple
business modelTwo customer facing activities: service interruptions and new connections
Delivered by local depots, focussed on efficient customer service
Maintenance and inspection works, delivered by Operational Production Groups
Incentive working, maximises output and efficiency
SSE manages power networks in a safe, low risk, efficient, customer-focused way
Advantages of SSE
approachSingle organisational culture and values
Everyone focused on delivering goals
Economies of scale
Reduces procurement requirement
Provides a resource pool for up-skilling
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Distribution Performance - Safety
SAFETY
• Our key value and No 1 priority
• Industry leading performance
• Best year ever since merger
• Reduction in serious incidents
0123456789
10
2006/07 2007/08 2008/09 2009/10*
Distribution Safety Perfomance
HSE Reportable / LTI Dangerous Occurences
2009/10* 10 month data Apr 09-Jan10
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CML/CI* Reward/Penalty Performance 2005-2009 (£m)
- 10 . 2 9
- 10 .15
5 .19
8 .4 6
11.9 4
3 5 .6 9
4 8 .0 4
-20 -10 0 10 20 30 40 50
CE
SP
EDF
CN
ENW
WPD
SSE
* Customer Minutes Lost / Customer Interruptions
SERVICE
• 08/09 CML/CI benefit £12.8m
• Predicting £60m over DPCR4
• Customer service reward £200k
• Winter storm performance good
• Power2serve change programme in
SSE
Distribution Performance - Service
Source: Ofgem data
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0%
20%
40%
60%
80%
100%
120%
140%
EDFE EPN
EDFE SPN
CN West
CE YEDL
ENW
EDFE LPN
SP Distribution
WPD S W
ales
CE NEDL
WPD S W
est
SP Manweb
CN East
SSE Southern
SSE Hydro
inefficient efficient
• UK networks are world class• Southern No 1 Indirect Costs 83% of industry average• Hydro No 1 Operating Costs 70% of industry average• Still a key driver for operations and future developments
EFFICIENCY
Distribution Performance - EfficiencySt
raig
ht a
vera
ge o
f ind
irect
& n
etw
ork
oper
atin
g co
sts
benc
hmar
k sc
ore
(%)
Source: Ofgem data
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DPCR5 – Delivering out-performance
• £500m competition fund to support 'smart' grid
• Innovative technologies and commercial arrangements
Low CarbonNetwork Fund
• Must hit health/load/fault output measures
• Claw back of underspend and 2.5% penalty
• Targeting out-performance in network investment
Output measures
• TOTEX delivers different benefits cw DPCR4
• Lower risk / reward profileTOTEX
• WACC must be supplemented with out-performance
to achieve required returnsWACC 4.0%
Potential to add over 50bps through improvements in these two areas
50bps out-performance already ‘baked in’ through operational excellence
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Distribution Summary
• Frontier performance delivered consistently
• DPCR5 challenging but rewarding for efficient companies
• Out-performance will be key
• SSE’s business model, past performance and future focus mean that we are best placed to deliver the required returns
• A distribution business for all seasons
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Transmission – Political Background
EU
•EU 3rd Package unbundling provisions –SHETL compliant•European Super Grid work
UK Government
• 30% Electricity from renewables by 2020-32GW additional generation
• DECC– Grid Study UK 2020 targets• OFGEM – Transmission investment
incentives
Scottish Government
• 50% Electricity from renewables by 2020- 6.6GW additional generation
• Beauly-Denny – Consent Jan 2010• National Planning Framework• North Sea and Celtic Grids
SHETL*
* Scottish Hydro Electric Transmission Limited
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Transmission Upgrades – First Phase
• First tranche of construction funding announced by Ofgem (£220m for SSE)
– Beauly-Blackhillock-Kintore– Beauly-Dounreay– Knocknagael
• Builds on SSE’s current transmission RAV (£375m)
• First step in transformation of SSE’s transmission assets
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Transmission Upgrades – Beauly-Denny
• SHETL/SPT plan to replace 220km 132kV line with 400kV line
• Consents for overhead line received on 6 January– Conditions attached; majority straightforward
• Work to determine final costs– Demonstrate they are efficient and economical
Substantial pre-construction works during 2010– Paving the way for full construction
• Full construction work likely to take 4 summers to complete
– Unlocking Scotland’s renewables potential
Transmission RAV likely to reach £1bn mid-decade
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Shetland Hub £150M
WESTERNISLES
Skye
ORKNEY
DounreayThurso
Ullapool
Foyers
Beauly
Keith Peterhead
ABERDEEN
Kintore
Elgin
Fraserburgh
DUNDEE
Tealing
PERTH
Fort William
Oban
Arran
MullTiree
Coll
Islay
Jura
Kirkwall
Shin
GrudieBridge
Errochty
Campbeltown
F. Augustus
Killin
Dunoon
Inveraray
Bute
Dunbeath
Tarland
Macduff
Braco
Port Ann
Carradale
Cassley
Cruachan
Alness
Denny
Windyhill
Afric
Stornoway
Nairn
BlackhillockKnocknag
ael
Transmission Upgrades – for 2020 (Scotland)
A Beauly Denny £400m
B Mainland upgrades £900m
C Island Links £1,000m
Total to 2020: £2,300m*
*c.15% to be invested by 2013
A
B
CC
C
BB
B
Estimated Investment Costs
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Transmission Upgrades – for 2020 (UK)
• Onshore renewables– “Bootstraps” required for UK’s 2020
target– West Coast link first; then East Coast
link– Ensure SSE gets share of investment
opportunity
• Offshore renewables– Investment required - £10bn– OFTO auction process– Sub optimal design– Different design and engineering
challenges– Involved in providing O&M services
The “bootstraps”
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Transmission Summary
• Development key to facilitate UK 2020 targets
• 2010-2020 investment will see significant construction activity
– RAV approaching £1bn
• Different projects – regulated– other discretionary opportunities
• SSE’s track record of operational innovation and low cost operation places it in a strong position for these opportunities
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Questions?
John MoreaChief Executive Officer
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Agenda
SGN revisited – June 2005
SGN today
Looking ahead
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• Three shareholders• SSE 50% - 4 seats on Board• Borealis 25% - 2 seats• Teachers’ 25% - 2 seats
• Two gas networks purchased from National Grid
• Total acquisition value £3,092m (10% premium to RAV)• £2,082m non-recourse borrowings• £1,010m funded by equity and shareholder loans (SSE £505m)
Back in June 2005
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• Assets: 75,000km of gas pipes, gas storage and compressor stations
• Customers: 5.7m domestic, commercial and industrial customers (4m Southern, 1.7m Scotland)
• People: In 2005 - 2,000 staff and c.2,000 contractors
• Value: RAV of £2.9bn in 2005
• . . . the second largest gas distribution network company in the UK
Back in 2005 – we bought:
SGN Gas Distribution(c.29% of GB Gas Distribution RAV)
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Back in 2005 – we said:
• We will create value and enhance earnings through delivering efficiencies
• Synergies across businesses through managed services• Follow the SSE business model• Build on core skills to create new business opportunities
• We will aim to create a lower risk business
• We will achieve excellence in safety and customer service
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Emergency Response
Metering
Repair
Maintenance Repex
CapexConnections
2010 - The business
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Emergency Response
Metering
Repair
Maintenance Repex
CapexConnections
2010 - The business
50,000 gas escapes p.a
Winter service flexibility
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Emergency Response
Metering
Repair
Maintenance Repex
CapexConnections
2010 - The business
30:30 programme
1,200km p.a.
50% contractors
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Emergency Response
Metering
Repair
Maintenance Repex
CapexConnections
2010 - The business
£160 million p.a.
1 in 20 peak day
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Emergency Response
Metering
Repair
Maintenance Repex
CapexConnections
2010 - The business
40,000 p.a.
Connecting fuel poor communities
Multi-skilled approach
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Emergency Response
Metering
Repair
Maintenance Repex
CapexConnections
2010 - The business
Multi-skilled
Smarter working
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Emergency Response
Metering
Repair
Maintenance Repex
CapexConnections
2010 - The business
350,000 calls p.a.
97% response within one hour
Utilise downtime
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Emergency Response
Metering
Repair
Maintenance Repex
CapexConnections
2010 - The business
New business opportunities
Owner and operator
Fill downtime
SMART metering
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2010 – The leadership
• Experienced management team• CEO came from SSE (Director of Distribution) • Team offer operational and strategic leadership• Following SSE operational model and benefiting from managed
service agreement
• Supportive Board• Board comprise a strong combination of operational and financial
expertise• Long-term perspective and significant levels of continuity
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2010 – The synergies
• Managed services agreement• Treasury and internal audit• Regulation / media / payroll
• Depots • Location sharing at Oxford, Isle of Wight, Portsmouth and Poole• Common training centres• Re-instatement• Equipment and vehicle sharing
• Procurement and warehousing• 450 common lines of stock and shared facilities• Discounts through high volume and established suppliers
• IT systems• Back-office systems
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Creating value - Financials
• Cash yield for shareholders 8%• Cash returned to shareholders since acquisition £400 million
• Equity return on acquisition: IRR 14%
• RAV – at March 2010 £3.9bn* (c.£2.9bn at acquisition June 2005)
• Credit ratings’ all stable outlook• Moody’s – Baa1 S&P – BBB Fitch – BBB+• Supported by strong ratios: Gearing 75% of RAV; FFO net interest cover 3.3
• Consistent comments ratings are supported by:• Low risk nature of gas distribution operations• Continued focus on core regulated activity• Predictability of cash flows from a transparent regime• Operational benefits from SSE
• Out-performance on regulatory settlement expected to be > 5% post tax real* estimated nominal RAV value
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Gas Distribution NetworkAt Sale2005 (1)
2005/06Actual
2006/07Actual
2007/08Actual (2)
OverallMovement
SGN - Scotland 7 3 3 1 +6
Northern Gas Networks 2 =1 1 2 -
SGN - Southern 6 5 4 3 +3
Nat Grid (West Mids) 1 =1 2 4 -3
Wales & West Utilities 8 6 6 5 +3
Nat Grid (East England) 4 4 5 6 -3
Nat Grid (North West) 5 7 8 7 -2
Nat Grid (London) 3 8 7 8 -5
Ofgem top down ranking
Creating value - Operating efficiency
(1) Nat Grid analysis (2) Ofgem analysis March 2009
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Achieving excellence -Safety• Corporate objective to be the: “Leading
company on gas safety”
• Significant reduction in incidents since network sale
• 2009 LTI rate 0.13 per 100,000 hours worked (0.6 in 2005)
• 2009 Injuries to members of the public 4 (36 in 2007)
• Class 1 RTCs down 50% since 2007
• Company Value: “We all take responsibility for our own safety and for the safety of others”
• Top on Ofgem DRS (Discretionary Rewards Scheme) awards 2008/09 -£550,000 for various initiatives
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Achieving excellence -Customer service
• Top in Ofgem customer satisfaction surveys – Q1 2010• Net promoter score programme – emergency and repair at ‘world-class’
levels• Focus on complaint level reductions and Innovation led improvements• Commitment based management – keeping our promises
energywatch complaint volumes
0
10
20
30
40
50
60
2005Q1
2005Q2
2005Q3
2005Q4
2006Q1
2006Q2
2006Q3
2006Q4
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
SGN Total
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Lowering risk - PCR
• Material reduction in risk• Regulatory certainty achieved for 2008 to 2013 price control period
and reduces earnings volatility going forward • Removal of volume driver on allowed revenue• Shrinkage gas moves to an indexed allowance• Allowance for efficiently incurred pensions costs (ongoing and deficit
repair)• Cost allowances reflect regional variations and real price effects• Capital overspends treatment
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Creating value – Investment
• Investment and RAV• Between 2005 and 2013 network investment will total £2.7bn*• Opening RAV £3.5bn April 2008 - Closing RAV forecast £4.6bn March 2013
• Repex• 30:30 HSE targets – approx 3,800km of pipe abandoned since 2005 • Work undertaken by mix of in-house and third party contractors
• Cost of capital - 4.32% post-tax real; with out-performance expect to achieve > 5%
• Incentive schemes to provide opportunity for out-performance
• Capex• Record of major construction projects delivered to time and cost• Farningham/Hadlow (£54m); Hardwick/Marsh Gibbon (£32m); Broxburn (£5.8m)• Conventional low-risk investment programme to reinforce and extend network
• New business opportunities – looking at bio-gas
*Total repex and capex
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Delivering on our promises
Promise made Delivered
We will create value and enhance earnings through delivering efficiencies
Synergies across businesses through managed servicesFollow the SSE business modelDevelop on core skills to create new business opportunities
We will aim to create a lower risk business
We will achieve excellence in safety and customer service
Record of delivery
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Questions?
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SSE Multi-Utilities and Telecoms AssetsAdrian PikeGroup Managing Director
- 66 -- 66 -
SSE’s Non-Regulated Networks*• Utility Solutions
– Embedded electricity networks– Independent gas connections – Heat infrastructure– Water and sewerage provision
* Excludes Contracting, In-area Connections and Street Lighting
• Telecoms– Capacity and bandwidth– Data Centres
Flexible deployment of employees and other SSE resources
> £200m invested capital covering both areas
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Electricity Networks
• Embedded electricity networks - nationwide “out-of-area” coverage
• Operated under SSE Power Distribution licences
• Full turnkey solution: design, build, own, operate and maintain
• Construction by SSE Contracting - retaining construction margin
• London Docks - 1st network in 1999
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In construction
Energised
Electricity Network Growth
• 72 networks • 54 energised• 18 in construction with a total
built-out capacity of 605 MW
0
10
20
30
40
50
60
70
80
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100
10
20
30
40
50
60
70
80
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100
10
20
30
40
50
60
70
80
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100
10
20
30
40
50
60
70
80
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100
10
20
30
40
50
60
70
80
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Connections cumulative
0
10
20
30
40
50
60
70
80
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100
10
20
30
40
50
60
70
80
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100
10
20
30
40
50
60
70
80
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Networks cumulative
- 69 -
Gas Connections
• Independent Gas Transporter (IGT) – IGT licence issued in 1997
• Forerunner of SSE’s holding in SGN
• Full national coverage
• In-house construction
• Predominantly big housing developments, with some commercial / industrial
- 70 -
Gas Connections Growth
• 102k connections • 65k complete• 37k awaiting build-out
0
20
40
60
80
100
120
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Gas connections cumulative (000’s)
- 71 -
Water Insets
• First new UK water company in 18 years
– Licensed for distribution and supply– Clean and waste water infrastructure– Limited to England and Wales– Trades under local consumer supply brands
(e.g. Southern Electric)
- 72 -
Water Growth
• Old Sarum, Salisbury inset licensed in 2007
• Four inset appointments issued • Four in consultation process
0
1
2
3
4
5
6
7
2008 2009 2010
Inset pending
Inset granted
Water insets
- 73 -
Heat
• Renewable Heat Incentive (RHI) will stimulate growth
• Generate, distribute and supply sustainable heat under an “ESCo” style arrangement– Generation through CHP, Biomass or Heat
Pumps– Combination of residential and commercial/
industrial opportunities– Woolwich Arsenal operational with a further
two developments at advanced negotiations
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Utility Solutions Customers
- 75 -
Multi Utility Value
• Long Term Contracts 30 to 40 years• Gross capital investment to
date of £114m• Developers contribute to construction
of assets (typically 60% of cost)• Typical IRRs of circa 8% post tax real
(based on net capex)• Projected value of
SSE Utility Solutions: £100m • Contractor margin retained in SSE
- 76 -
Telecoms – Creating SSE’s Third Network
• 1993 – Public Telecommunications Operator licence received• 1997 – Commercial development of telecoms started• 2000 – £40m investment in installing fibre on 2,000km of SSE
electricity network– Connecting regional centres in response to customer
demand • 2003 – Acquisition of Neos for £9.7m, UK’s first national Ethernet
provider– Local area Network technology
• 2007 – Disposal of mobile sites business for £79m• 2007 – Acquisition of TeliaSonera fibre network £12.5m and Co-Lo
sites• 2008 – Acquisition of London and South East networks• 2009 – Acquisition of data centre £4.5m• 2010 – Acquisition of Geo’s Northern network
Telecoms – SSE Now Has UK’s Fourth-Largest Owned Network
• 7,494km fibre network– 4,921km owned– 2,573km leased
• Full UK coverage• Operated and maintained internally• 3,600km microwave radio
- 77 -
Telecoms – Other SSE Infrastructure
• 9 UK City Metro Fibre Networks – Designed to serve large urban areas
• 10 Dedicated UK Co-location sites– Providing space for customers’
telecoms equipment
• 120 UK Points of Presence (PoPs)– Allowing customers to access a
wider network
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- 79 -
Telecoms – Providing customers with Capacity and Bandwidth Services (24/7 Operation)
• Ethernet– High performance, flexible
• SDH Leased Lines– High capacity, fully resilient core
• Wavelength– High capacity connectivity
• Dark Fibre– Virtually unlimited bandwidth
• Co-Location– Support customers’ fibre requirements
- 80 -
Data Centres
• What is a Data Centre?
– a highly secure building – secure power – secure telecoms
connectivity – providing a home for
customer racks, storage devices and high speed IT machines
- 81 -
Fareham Data Centre
• 90,000ft2 “state of the art” facility• Modular Pod architecture, flexible
and quick to deploy• Ultra energy efficient contained
aisle cooling
- 82 -
Data Centre Strategy
• Develop a number of Data Centres in the next 5 years through the following key points:
– Power security
– In-house delivery
– Energy efficiency
– Most financially stable UK operator
- 83 -
Telecoms and Data Centre Customers
- 84 -
Telecoms and Data Centre Value
• Growth via:
– Small tactical acquisitions
– Organic growth
• Now number 4 in UK
• Positive P&L contribution
• Data Centres offer significant growth opportunities
• Value in excess of £150m
- 85 -
Summary
• A growing asset base in utility solutions and telecoms throughout the UK
• Naturally compliments SSE’s regulated businesses
• Significant growth opportunities in all areas
• Supports and enhances other group activities
• Value estimated at over £250m
Safety Service Efficiency Sustainability Excellence Teamwork
- 86 -
Questions?
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ConclusionsColin Hood, Chief Operating Officer
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Key Points
• Regulated networks are a key feature of SSE’s strategy
• Engagement with the regulation process is crucial
• RPI-X@20 builds on recent regulatory developments
• SSE targeting over 5% post tax real returns in DPCR5
• Transmission RAV on course to reach £1bn mid-decade
• SGN demonstrates SSE’s ability to work with JV partners
• Non-regulated businesses allow deployment of core skills
• All SSE’s networks have potential for growth into the future
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Delivering the DividendFu
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Forecast