Values and Vision

Our core values focus explicitly on achieving sustainable growth:

SAFETY
We believe all accidents are preventable, so we do everything safely and responsibly or not at all.

SERVICE
We give our customers service we are proud of and make commitments that we deliver.

EFFICIENCY
We keep things simple, do the work that adds value and avoid wasting money, materials, energy or time.

SUSTAINABILITY
We operate ethically, taking the long term view to achieve growth while safeguarding the environment.

EXCELLENCE
We strive to get better, smarter and more innovative and be the best in everything we do.

TEAMWORK
We support and value our colleagues and enjoy working together as a team in an open and honest way.

Our strategy and vision

Purpose, strategy and principles
SSE’s core purpose is to provide the energy people need in a reliable and sustainable way.  In line with this, its strategy is to deliver sustained real growth in the dividend payable to shareholders through the efficient operation of, and investment in, a balanced range of market-based and economically-regulated businesses in energy production, storage, distribution, supply and related services, mainly in the UK and Ireland.

Implementation of this strategy continues to be founded on SSE’s well-established financial principles. 
These principles are the:

• effective management of core businesses;
• maintenance of a strong balance sheet;
• rigorous analysis to ensure investments are well-founded and, where appropriate, innovative;
• deployment of a selective and disciplined approach to acquisitions; and
• use of purchase in the market of the Company’s own shares as the benchmark against which financial decisions are taken.
  
  

It is the application of these principles which supports the fulfilment of SSE’s first responsibility to shareholders: the delivery of sustained real dividend growth.

SSE’s strategy provides it with three key advantages:

• while energy is at their core, SSE has a diverse range of businesses;
• within those businesses, SSE has a diverse range of assets; and
• to add to those assets, SSE has a diverse range of investment options.
  
  

SSE is the only energy company listed on the London Stock Exchange that owns and operates economically-regulated businesses, such as electricity networks, and market-based businesses, such as electricity generation and energy supply, in the UK.  This means it is able to pursue operational, investment or acquisition opportunities throughout the electricity and gas sector to achieve consistently the levels of profitability required to support sustained real dividend growth.

It also means that SSE is able to derive stable and more predictable levels of profit from some of its activities and more variable levels from others (which, in turn, have greater potential for growth).  As a result of this balance, SSE has greater resilience to risks associated with shorter-term trends or issues within its sector or the wider economy than do other companies with less diversity within their business model.


Future environment
The need to secure energy to heat and power homes, organisations and businesses, and the need to safeguard the environment for future generations, means the framework within which energy companies operate is, and will remain, a major public policy issue in the UK and Ireland and in the EU as a whole.

The context for energy policy in the UK and Ireland, SSE’s principal areas of operation, is set by the EU 2020 Climate and Energy Package, adopted in April 2009, and the EU Renewable Energy Directive, which came into force in May 2009.  The Directive requires Member States to deliver on average 20% of their final energy consumption by 2020 using renewable energy sources.  The UK target is that 15 percent of all energy (electricity, heat and transport) should come from renewables by 2020. This target is the most challenging of any EU Member State because, to achieve it, around 30% of the electricity consumed in the UK will have to come from renewable sources, compared with just 5.5% at present; for Ireland a similar step-change in renewable energy output will be necessary.

In February 2010, the second report of the UK Industry Taskforce on Peak Oil & Energy Security, of which SSE is a member, was published.  Called The Oil Crunch, the report said ‘it seems inevitable that global demand will move to a point where it consistently exceeds supply.  The effect must be a structural increase in oil prices, coupled with the prospects of oil shortages and a consequent increase in market volatility.  The only questions are “how soon and by how much?”.  At the same time, some analysis suggests that natural gas produced from shale could become an increasingly important source of energy over the next decade.

In addition, the period to 2020 will see:

• the closure of a number of coal- and oil-fired power stations by 2015, under the EU’s Large Combustion Plant Directive; 
• many nuclear power stations reaching the end of their design lives, with a number of advanced gas-cooled reactor (AGR) stations scheduled to close from 2014 onwards;
• the age and relative efficiency of a number of older gas-fired power stations becoming an increasingly significant issue; and
• the growing use of electricity to meet heat and transport needs so that its share of total energy demand increases significantly.
  
  

In July 2009, Ernst & Young estimated that £199bn of investment is needed by 2025 to meet the UK’s energy goals.  In October 2009, the UK energy regulator, Ofgem, published a comprehensive review of Britain’s energy supplies which concluded that investment of up to £200bn is needed to secure energy supplies and meet carbon emissions targets (excluding UK Continental Shelf gas production).  It updated its review in February 2010 and stated that ‘the risks to gas security of supply remain high in the latter half of this decade’.  

The coming decade will also see, in Great Britain, the installation of ‘smart’ meters in every home, to allow the quantity and value of electricity and gas used by the customer to be continuously monitored and to ensure that information about its use and cost is available to the customer and exchanged with the supplier through two-way electronic communications.

The new UK government has agreed to implement a programme of measures to fulfil its ambitions for a ‘low-carbon and eco-friendly economy’.  It has agreed to seek to increase the target for energy from renewable sources, subject to the advice of the Climate Change Committee.  It also proposes to establish an emissions performance standard that will prevent coal-fired power stations being built unless they are equipped with sufficient carbon capture and storage (CCS) to meet an emissions performance standard.    SSE is confident it will be able to continue to work with MPs from all parties to ensure UK energy policy can deliver secure, affordable and lower-carbon energy.


Economic development
Investment on the scale required demonstrates how the transition to a low carbon economy represents a substantive opportunity to create jobs in the UK and Ireland.  For example, in October 2009, SSE selected Glasgow as the location for its new Centre of Engineering Excellence for Renewable Energy, in partnership with the University of Strathclyde.  This will lead to the creation of around 300 skilled professional ‘green’ jobs being created over the next three years.  Already, SSE directly employs over 800 people in the development or operation of projects or programmes to reduce the carbon dioxide impact of energy production and consumption.

The Offshore Valuation Group, an informal collaboration of government and industry organisations, concluded, in May 2010, that the rapid development of the UK’s offshore resource – using fixed wind, floating wind, tidal stream, tidal range and wave technologies – could ‘generate the electricity equivalent of one billion barrels of oil per year, or the same as the average annual output of UK North Sea oil and gas over the past four decades’.  It estimates that the supply chain necessary to achieve this would have annual revenues of over £60bn in 2050 and could employ around 145,000 people in manufacturing, installation, operations and maintenance.


Priorities for SSE
SSE welcomes the focus on sustainability and security in energy, and believes that the EU Climate and Energy Package and Renewable Energy Directive, the prospect of an ‘oil crunch’, the requirement to safeguard energy supplies and the introduction of ‘smart’ meters will mean the following priorities will feature in its business activities:

• Generation: developing new capacity to produce electricity in a sustainable way that supports the transition to a lower-carbon economy;
• Supply: helping to keep electricity and gas bills as affordable as possible by offering ways to enable and encourage customers to be more efficient in their use of energy;
• Fuel Production and Storage: securing gas supplies to meet future energy needs and helping maintain dependable supplies by providing more storage capacity for the UK, as imports of gas rise;
• Networks: ensuring the distribution of energy remains reliable through investment in networks, as sources and use of electricity and gas change; and
• Services: meeting customers’ requirements for energy products and services that are needed for the transition to a lower-carbon economy.
  
  

As the UK becomes increasingly dependent on imports of energy, and as the need for action to replace its ageing infrastructure and to de-carbonise its economy continues to intensify, the importance and value of efficient electricity generation and energy storage, distribution, supply and services will all increase.  SSE, as the broadest-based energy company in the UK and the fastest-growing energy company in Ireland, is in a good position to help provide the services and infrastructure that energy customers in the UK and Ireland will need and thus secure continuing, sustained real dividend growth.


Outlook for 2010/11 and beyond
The economic outlook for 2010/11 continues to be uncertain.  In this context, SSE offers three key advantages, enabling it to deliver a consistent financial performance:

• its core purpose is to provide energy, which is something that people need, rather than want;
• its strategy of maintaining a balanced range of economically-regulated and market-based energy businesses reduces the risk associated with any particular business activity and provides a broad platform from which to maintain sustained real dividend growth; and
• its over-riding financial goal – sustained real dividend growth – is straightforward and moderate.
  
  

Taking account of the current and future environment and its impact on the energy sector in the UK and Ireland, SSE’s operational priorities during 2010/11 are to:

• carry out all work in a safe and responsible manner, with a lower Total Recordable Injury Rate;
• deliver maximum efficiency throughout all business activities;
• maintain and build on sector-leading performance in all aspects of customer service, from energy supply to energy networks;
• increase the total number of energy supply and home services customer accounts across the Great Britain and Ireland markets, while supporting progress towards increased energy efficiency;
• ensure power stations maintain a high level of availability to generate electricity in response to customers’ needs and market conditions; and
• focus on cost control and customer relationship management to sustain its energy services businesses through the current period of economic uncertainty.
  
  

Its investment priorities are to:

• deliver additional assets in renewable energy, electricity networks and gas storage which contribute to secure and lower-carbon supplies of energy;
• meet other key milestones in its investment programme in generation, electricity networks and gas storage; and
• take forward the additional options that it has identified for investment from the middle of this decade onwards.
  
  

The delivery of a strong operational performance and the achievement of its investment priorities should enable SSE to discharge its first responsibility to shareholders: to deliver its full-year dividend target.