SSE plc Annual Report 2023
SSE plc Annual Report 2023
Right action.
Right now.
SSE at a glance on page 2
1SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
SSE plc Group Risk Report 2023
Managing
SSE’s risks
Just transition:
measuring progress
From action to accountability
Inside this report
SECTION I
Strategic Report 2
SSE at a glance 2
Chair’s statement 4
Chief Executive’s review 6
Our strategy 8
Our business model 10
Sector review 12
Net Zero Acceleration Programme Plus 16
A year of strategic progress 18
2030 Goals and KPIs 22-25
Our stakeholders and s172 statement 26
A sustainable approach 34
Non-financial information statement 67
Risk-informed decision making 68
Financial Review 78
Operating Review 95
SECTION II
Directors’ Report 110
SECTION III
Financial Statements 192
The purpose of this report
Strategic Report
Seeks to give a fair, balanced and understandable
record of strategic progress and summarises
operational and financial performance. It sets
out SSE’s long-term goals and associated risks,
and provides open disclosure of material issues
impacting SSE’s stakeholders and the environment.
It is complemented by the standalone Sustainability
Report 2023 which gives enhanced disclosures
of the impact of SSE’s policies, practices and
performance on people and the planet.
Directors’ Report
Demonstrates the standards of corporate governance
set by the Board and which have been applied across
the work of the Board and its Committees. This includes
details of Board decision-making and how stakeholder
views have informed the broad spectrum of Board
work, including setting strategy and assessing options
for future growth.
Financial Statements
Are prepared in accordance with UK-adopted
international accounting standards (IFRS), audited
by external auditors, and approved by the Board
as a true and fair view of the financial state of the
Company in a given year.
Electronic tagging (ESEF)
In accordance with European Single Electronic Format (‘ESEF’)
requirement that UK-listed companies publish primary financial
statements in machine-readable format, SSE’s 2023 Annual
Report and Accounts, and notes to the Financial Statements,
are published as an XHTML tagged document on sse.com
Alternative Performance Measures
SSE assesses the performance of the Group using a variety of
performance measures. These measures are not all defined
under IFRS and are therefore termed ‘non-GAAP’ measures.
A reconciliation from these non-GAAP measures to the nearest
prepared measure in accordance with IFRS is presented and
described on pages 194 to 201 . The Alternative Performance
Measures SSE uses might not be directly comparable with
similarly titled measures used by other companies.
Measurement restatements
There has been an immaterial restatement to the Financial
Statements for the year ended 31 March 2022. For further details,
please see page 209 .
Using our complete reporting suite
Throughout this report you can find links to our
complementary suite of reporting by following
these icons:
online at sse.com/annualreport2023
in other SSE publications
within another section of this report
Help us cut paper
Printing of this Annual Report is carbon balanced,
with trees planted to help offset the climate impact
of its production. While SSE has sought to reduce
the environmental impact of this publication as far
as possible, it encourages readers to opt out of
receiving printed copies and make use of SSE’s digital
reporting suite at sse.com/investors , in order to
reduce material and resources used.
Glossary
While every effort is made to explain technical terms
and abbreviations where they appear in the text of
this Annual Report, a glossary is provided to further
assist the reader on page 347 .
2 SSE plc Annual Report 2023
SSE at a glance
Together, as a Group, SSE’s businesses are
well positioned to capture the substantial
growth opportunities generated by driving
and accelerating the net zero agenda
through electricity infrastructure.
Financial highlights
In the face of exceptional
macro-economic conditions,
SSE saw strong financial
performance in 2022/23 thanks
to its resilient business model,
solid operational delivery and
good progress on its strategy.
Below-plan renewables output
was offset in the year by
thermal, flexible hydro and
gas storage assets which
were rewarded for providing
timely system backup.
Group operating profit/loss
£2,529.2m
Adjusted
£(146.3)m
Reported
Energy Portfolio Management
Procuring the fuel required for, and trading the power
output from, SSE’s generation assets, as well as trading
on behalf of its supply businesses.
Operating profit/loss
£80.4m
Adjusted
(£2,626.0)
Reported
SSE Renewables
Onshore and offshore wind; flexible, run-of-river
and pumped storage hydro; solar and battery.
SSE Thermal
Gas-fired power stations; hydrogen
carbon capture and storage; gas storage.
Balance between renewables and thermal output/earnings provides
a natural hedge against market volatility and weather variability.
Market
based
Economically
regulated
Operating profit
£580.0m
Adjusted
£446.3m
Reported
Operating profit contribution to Group
23%
Proportion of Group capex
48%
Operating profit
£1,031.9m
Adjusted
£1,089.5m
Reported
Operating profit contribution to Group
41%
Proportion of Group capex
10%
3SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Non-financial
highlights
The Total Recordable
Injury Rate safety measure
increased in the year due
a rise in contractor hours
worked on construction.
SSE continues to make a
significant contribution to
the economies it operates in
as it delivers on its ambitious
investment programme.
Profit/loss before tax
£2,183.6m
Adjusted
£(205.6)m
Reported
Dividend
96.7p
Earnings/Losses Per Share
166.0p
Adjusted
(14.7)p
Reported
Adjusted investment and capex
£2,803.3m
(after refunds, including
acquisitions)
Safety (TRIR) per 100,000
hours worked
0.19
Economic contribution
UK/ROI
£6.04bn/
€429m
SSEN Transmission
Connecting power generation
to urban areas of demand.
SSEN Distribution
Powering 3.9m homes
and businesses.
Energy Customer Solutions
Providing access to green energy for
households and businesses.
SSE Distributed Energy
inc Solar and Battery*
Balance between market-exposed and
stable, economically-regulated earnings .
Operating profit
£372.7m
Adjusted
£405.5m
Reported
Operating profit contribution
to Group
15%
Proportion of Group capex
18%
Operating profit
£382.4m
Adjusted
£382.4m
Reported
Operating profit contribution
to Group
15%
Proportion of Group capex
19%
SSE Airtricity operating profit
£5.6m
Adjusted
£5.2m
Reported
SSE Business Energy operating profit
£17.9m
Adjusted
£17.9m
Reported
Operating profit/loss
£(27.4)m
Adjusted
£33.5m
Reported
* From April 2023 the Solar and Battery business is part of
SSE Renewables.
4 SSE plc Annual Report 2023
Chair’s statement
Right
action.
Right
now.
A year of unprecedented challenge in the global
energy markets has cemented the role that SSE
and other energy providers must play in providing
long-term solutions to the challenges of national
energy security, affordability and climate change.
The actions SSE is taking now will be part
of the foundation of a transformed energy
system aligned to the sector’s 1.5°C global
warming pathway – one that is cleaner,
more affordable and more secure. In
support of those goals we are accelerating
renewables, transforming electricity
networks, providing vital flexible generation
back-up, and working hard to ensure
no-one is left behind along the way.
Responding to uncertainty
The war in Ukraine exposed Western
Europe’s dependency on imported gas.
The resulting market volatility and energy
price spikes have rightly made policy
makers and energy providers the subject
of intense scrutiny and public discourse.
Our response has been unambiguous,
focusing our efforts on where we can
make the biggest difference. By investing
record amounts – in excess of profits –
in critical national infrastructure we are
helping to address the causes rather than
the symptoms of the energy crisis.
As this Strategic Report shows, we have
successfully navigated the challenges
that came with turbulent markets and
unfavourable weather, and engaged
constructively with policy makers to ensure
that we can continue to fulfil our purpose,
and generate value for our shareholders
and society more widely.
The people driving our delivery
None of our objectives or outcomes are
possible without the dedication and hard
work of our people. The executive team
and our highly capable and committed
employees and contractors have
delivered strong operational and financial
performance in a challenging year, and
on behalf of the Board I thank them all
for their efforts.
I’d also like to express my personal gratitude
to our outgoing Finance Director, Gregor
Alexander, who leaves us in December after
more than 20 years’ excellent financial
stewardship of the Company. He should
be very proud – not only of what he has
achieved during his time at SSE – but of
the strong position in which he leaves us.
We are losing one of the FTSE’s finest
FDs but after a rigorous selection process
we have a highly capable successor in
Barry O’Regan. Barry has been integral to
SSE’s growth story for many years now,
particularly in terms of the reshaping of the
Group, and we all look forward to working
with him through the transition.
5SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Engagement with SSE colleagues was a
feature of the 2022/23 Board agenda and
I was particularly pleased that we were able
to use the time after the main business of
the AGM to meet a number of employees
face-to-face and more than 3,500 in a
virtual townhall setting to discuss the
Board’s commitment to ensuring SSE offers
a truly safe and inclusive workplace.
Getting everyone who works for SSE
home safe at the end of each working
day has always been our top priority, but it
has been a difficult year. The devastating
death in June of Liam Macdonald,
a young contractor working on Shetland,
has caused us to refocus our efforts.
A new contractor safety team has been
established to ensure our partners are
supported and performance is closely
monitored across all our large capital
projects (See pages 63 and 162 ).
Right strategy at the right time
With SSE’s opportunities for growth defined
by the imperative to decarbonise power
sectors at home and abroad, our Net Zero
Transition Plan spells out how we will
remove greenhouse gas emissions from
our own operations, supported by a
process for accountability with an annual
shareholder ‘say on climate’ resolution.
We welcomed the overwhelming support
given to our first AGM vote on SSE’s Net
Zero Transition Report in July 2022.
Since then, record levels of investment
and the sale of a minority stake in our
transmission business have provided the
platform for us to push ahead with large
capital projects, grow our development
pipeline both at home and abroad, and
implement ambitious business plans in
our regulated networks businesses.
However, we have always been clear that
our Net Zero Acceleration Programme
(NZAP) was just the start of our ambitions.
The opportunities and options for SSE to
deploy its capabilities and resources have
grown substantially since the programme
launch in November 2021.
We have since refreshed the programme
with the launch of a more stretching ‘NZAP
Plus’ which includes plans for £18bn of
investment out to 2027.
These revised plans, in the context of
SSE’s Net Zero Transition Plan, reflect the
continuing strength of our business model
and balance sheet, the urgency of climate
action and the wealth of opportunities
presented to us by the transition to net
zero and the encouraging economic and
policy tailwinds we see for the sector.
Going further, and faster
We are proud of the progress we are
making with a strategy that, over the
medium term, will help to address the
dilemmas of affordability, environment
and security of energy provision.
We are working with governments to
create policy frameworks which will
accelerate investment into much needed
infrastructure, and bring forward long-
term solutions for energy users, the
environment, and society generally.
As a long-standing Fair Tax-accredited
company, we are committed to paying the
right amount of tax, in the right place, at
the right time. And we recognise that taxing
extraordinary profits is reasonable where
those profits are actually realised. But the
bigger prize will be the fruits of large-scale
investment in clean energy, so the overall
investment climate remains important.
The UK has enjoyed a leading position in
the flows of green capital over the past
decade as a result of world-leading policy
making and a stable investment climate.
Others are now seeking to overtake, with
the US Inflation Reduction Act and the EU’s
Net Zero Industrial Plan.
The UK Review of Electricity Markets
Arrangement (REMA) and other policy
interventions offer an opportunity to put
the UK back at the leading edge and ensure
investment can be accelerated throughout
the value chain. SSE stands ready to assist
in that development.
Leaving no-one behind
A truly just transition to net zero will leave
no-one behind and that means bringing
our stakeholders with us. SSE was an early
adopter of the principles of a just transition
and we recognise that continued consensus
in favour of net zero will, in part, depend on
the fairness, perceived and experienced, of
the way in which the costs and benefits of
climate action are distributed.
It will require actions as well as words
and we will continue to take tangible steps,
for example, by recruiting people from
high-carbon industries as part of the
expected intake of the 1,000-plus new
jobs we expect to create each year.
Businesses like SSE do not operate in
isolation. We create value for society and
provide the critical infrastructure needed
for a prosperous economy. And by doing
this in a sustainable way, we secure the
right to earn a profit.
It forms a social contract that underpins a
culture of ‘doing the right thing’ and inspires
a leadership position on transparency and
disclosure that makes us accountable to all
of our stakeholders for our decision-making
and actions.
A key objective of this Strategic Report
and the associated Section 172 Statement
(See page 26 ) is to build on disclosures
we have provided in recent years and
reflect on the work being done to promote
SSE’s long-term success. Both reports are
approved by the Board in accordance with
the Companies Act 2006 and we welcome
comments on the matters covered within
the following pages.
Sir John Manzoni
Chair, SSE plc
23 May 2023
“None of our objectives or outcomes are possible
without the dedication and hard work of our
workforce. The executive team and our highly
capable and committed employees and contractors
have delivered strong operational and financial
performance in a challenging year, and on behalf
of the Board I thank them all for their efforts.”
6 SSE plc Annual Report 2023
Chief Executive’s review
Over the past year we have continued to
create value for our shareholders and
society by investing more than we make in
profits in the crucial renewables, networks
and flexible energy assets needed to unlock
a cleaner, more secure and more affordable
energy system. We delivered record capital
investment, exceeding £2.8bn including
acquisitions. I am proud of what has been
achieved in a shifting and uncertain energy
landscape, with the strength of our
balanced business mix and the quality of
our people and assets shining through.
There is no doubt that the year also
brought its challenges. But progress made
in the face of exceptional macro-economic
conditions, government intervention in
energy markets and the continued impact
of the war in Ukraine gives us immense
confidence in our strategic direction and
optimism about meeting our ambitious
2030 Goals. (See pages 22 to 23 ).
We have always said our Net Zero
Acceleration Programme (NZAP) represents
the floor, not the ceiling, of our ambitions.
Backed by excellent growth options and
strong financial performance, we are well
placed to explore further investments to
support an accelerated transition to net
zero with the revised ‘NZAP Plus’ we
announced in May 2023.
Commitment and resilience
In volatile times SSE continues to be
resilient thanks to our very deliberate mix of
market-based and economically regulated
businesses, world class assets, natural
hedges, balance sheet strength and, above
everything else, the quality of our people.
The nature of our business means everyone
at SSE has been keenly aware of, but not
immune to, the inflationary pressure of high
energy prices in the past year. With this in
mind we introduced a number of measures,
including bringing forward a proportion of
the 2023 pay settlement, to ease the burden
on employees over winter. We also know
difficult times bring emotional pressures
too, and I’m pleased that we have taken
what we learned from Covid-19 and
continued to improve the mental health and
wellbeing support we offer colleagues.
On behalf of the executive team, I would
like to thank all SSE’s direct employees and
contractors – not just for their achievements
in 2022/23 – but for their unremitting
passion, commitment and dedication to our
purpose of building a better world of energy.
No matter their role, getting everyone who
works for SSE home safe at the end of each
day remains our number one priority and
that focus is all the keener following the
Raising
the bar
on net
zero.
The first full year of SSE’s Net Zero Acceleration
Programme will be remembered as a period of
strategic gains and financial and operational progress
in a shifting and uncertain energy landscape.
7SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
tragic death of Liam Macdonald on Shetland
in June 2022. As our operational activities
increase so too does our focus on delivering
industry leading safety programmes with
our partners. (See pages 63 and 162 ).
Clean, secure, affordable energy
In 2019, we took the decision to align to the
UN’s Sustainable Development Goals (SDGs)
with four core associated 2030 Goals. The
NZAP Plus sets the pathway for SSE to meet
those broad goals in 2030. Recognising
that decarbonisation represents a radical
economic transformation affecting all
sectors of society, we continue to advance
the case for a just energy transition.
As events of the last year have shown,
accelerating the energy transition is not
only a moral imperative in the context of
the climate emergency, but is also central
to securing a reliable and affordable energy
supply. For the electricity system, there is
no trade-off between our climate ambitions
and consumer costs or maintaining security
of supply. And, by investing in energy
independence, SSE is simultaneously
tackling the crises of energy affordability
and security, as well as climate change.
As a business, we remain committed to
further reducing the system’s reliance on
imported fossil fuels by reinvesting additional
profits in the accelerated deployment of
crucial renewable, flexibility and network
infrastructure. By doing so, we are creating
lasting value for SSE’s stakeholders, and
society as a whole.
Delivering record investment
The NZAP Plus is the platform to achieve
these aims, giving us a pathway to invest
£38bn in GB and Ireland by the end of the
decade. SSE is on course to deliver 20% of
both the electricity networks and offshore
wind needed to meet the UK’s net zero
targets for 2030. And opportunities
associated with net zero continue to
accelerate across the value chain,
not least in SSE’s networks businesses.
Ofgem’s Accelerated Strategic Transmission
Investment (ASTI) framework announcement
clears the way for SSEN Transmission to build
the assets required to support 50GW of
offshore wind by 2030 and SSEN Distribution
is set to implement a £3.6bn RIIO-ED2
business plan agreed with Ofgem.
The final RIIO-ED2 determination sees
baseline allowances for SSEN Distribution
increasing by £300m from draft
determinations, representing a 22%
increase in allowed expenditure compared
to an equivalent period in RIIO-ED1.
While the original NZAP assumed a 25%
minority stake sale in SSEN Distribution,
we consistently review our options and
direction and the NZAP Plus plan now
reflects the decision that retaining 100% of
the business is the right strategy at this time.
A year of milestones
The first full year of the NZAP was packed
full of milestones on our flagship projects
whilst the size and diversity of our
development pipeline continues to grow.
SSE Renewables achieved first power at the
1,075MW Seagreen offshore wind project
and made significant progress on Dogger
Bank, the world’s largest offshore wind
farm, including the opening of the O&M
base in Tyneside. The UK’s most productive
onshore wind farm by output, Viking,
remains on track for operation in 2024.
The pipleline grew and further diversified
too, with the acquisition of SGRE’s onshore
development platform in Southern Europe.
It was also a particularly strong year for our
thermal business, which officially welcomed
Keadby 2 into the fleet with commercial
operations at Europe’s most efficient CCGT
commencing in March 2023. SSE Thermal’s
portfolio was further bolstered by the
acquisition of 1.3GW Triton Power with
Equinor, which holds significant CCS and
hydrogen potential and has already created
value for the Group.
In networks, SSEN Transmission oversaw
the laying of the Shetland HVDC link, which
is on course to connect the islands to the
GB energy system for the first time in 2024,
while our distribution business delivered
against a vast range of projects in both the
north and south network regions during
the final year of RIIO-ED1.
SSEN Distribution continued to embed
learnings from our Storm Arwen review
and action plan, rolling out new processes
and procedures in the Shetland ice storm
in December 2022 and Storm Otto in
February 2023. An improvement in storm
responses, and consistent ‘above and
beyond’ levels of service, received plaudits
from the government, customers and
other stakeholders.
Options for strategic growth
Enabled by record levels of investment
in 2022/23 and the sale of a minority stake
in our transmission business, we have
confidence in our ability to go even further,
faster. With renewables opportunities such
as Coire Glas, Berwick Bank and Ossian
(ScotWind), Regulated Asset Value growth
in our networks businesses, alongside
developments in CCS, hydrogen, solar
and battery technologies, we are creating
substantial growth options in the near and
medium term.
And as we explore opportunities to grow at
home, we are also building our capabilities
abroad, by exporting our renewables
expertise to Southern Europe and Japan.
Completion of the Southern European
development acquisition this year helped
drive SSE’s secured pipeline up from
10GW to nearly 14GW with significant
future prospects even before upcoming
auction processes.
An optimistic future
To close, our strategy looks even better
one year on than it did at the end of
2021/22. It is our platform for delivery
and growth, underpinned by a socially
responsible purpose and a value-creating
strategy, investing record amounts in clean,
green energy infrastructure.
Having navigated the choppy waters of
market and policy uncertainty this year,
SSE has emerged with an even clearer
vision of the role we must continue to
play in developing and building the energy
system of the future.
For there is no doubt that, in our people,
businesses and assets, we hold an important
part of the long-term solution to the energy
crisis in our hands. And, as we enter 2023/24,
we do so emboldened in our pursuit of an
energy system that is cleaner, more secure
and more affordable.
Alistair Phillips-Davies
Chief Executive, SSE plc
23 May 2023
“Backed by excellent growth options and strong
financial performance, we are well placed to explore
further investments to support an accelerated
transition to net zero with the revised ‘NZAP Plus’
we announced in May 2023.”
8 SSE plc Annual Report 2023
CO
2
CO
2
Our strategy
OUR GOALS
SSE’s 2030 Goals, aligned to the UN’s
SDGs, provide important milestones
on the journey to net zero.
OUR STRATEGY
To create value for shareholders
and society in a sustainable way
by developing, building, operating
and investing in the electricity
infrastructure and businesses
needed in the transition to net zero.
Cut carbon
intensity by 80%
Reduce scope 1 carbon intensity by 80%
by 2030, compared to 2017/18 levels,
to 61gCO
2
e/kWh.
Develop
Net Zero
OUR VALUES
All of this is underpinned
by a set of core values
designed to guide decisions
and actions in SSE.
Safety
If it’s not safe,
we don’t do it.
Service
We are a company
that customers
can rely on.
OUR PURPOSE
To provide energy needed today while
building a better world of energy for tomorrow.
More about our progress on page 22
9SSE plc Annual Report 2023
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CO
2
CO
2
CO
2
Increase renewable
energy output fivefold
Build a renewable energy portfolio
that generates at least 50TWh of
renewable electricity a year by 2030.
Enable low-carbon
generation and demand
Enable at least 20GW of renewable
generation and facilitate around
2 million EVs and 1 million heat
pumps on SSEN’s electricity networks
by 2030.
Champion a fair and
just energy transition
Be a global leader for the just transition
to net zero, with a guarantee of fair
work and commitment to paying fair
tax and sharing economic value.
Build Operate
Invest
Net Zero Acceleration Programme Plus
Efficiency
We focus on
what matters.
Sustainability
We do things
responsibly to add
long-term value.
Excellence
We continually
improve the way
we do things.
Teamwork
We work together,
respect each other
and make a difference.
OUR VISION
To be a leading energy
company in a net zero world.
10 SSE plc Annual Report 2023
Our business model
Develop
SSE identifies opportunities in domestic and overseas
markets where it can best use its capability in providing
the clean, affordable energy infrastructure needed to
decarbonise the economy.
It works with partners with relevant technical and
geographic expertise in the deployment of proven and
innovative technologies to grow a development pipeline
that creates lasting value and benefits all stakeholders.
Build
SSE consistently delivers highly complex electricity
infrastructure in a timely manner and within budget.
It draws on a proud heritage of construction
and utilises modern technologies in the building
of assets that are critical to a cleaner, cheaper,
more secure energy system.
Operate
SSE operates its assets in a responsive and
responsible way. It promotes a culture of
continuous improvement and stakeholder
engagement to provide quality customer service.
It invests in asset resilience to meet consumer
demand and strives to ensure the safety and
wellbeing of the people and places impacted
by its activities.
Invest
SSE invests in low-carbon infrastructure as part of
its net zero-focused strategy. Its investments are
fully funded and underpinned by partnering which
unlocks value, and debt secured at efficient rates.
In May 2023, SSE announced it would be enhancing
its investment programme as part of an updated
‘NZAP Plus’ amounting to £18bn of capital
expenditure.
HOW WE DO IT
WHO AND WHAT WE RELY ON
Key stakeholder groups
Employees
SSE’s strategy and success are dependent
on the shared talent, diversity, innovation
and values of the people it employs.
Direct employees
c.12k
Shareholders and
debt providers
SSE must be well-financed, with the ability
to remunerate shareholders for their
investment, secure debt at competitive
rates and grow the business.
Market cap
£19.6bn
at 31 March 2023
Energy customers
Consumers create demand for the energy
and services SSE provides and set the tone
for our purpose.
Networks and
supply customers
4.98m
Government and regulators
SSE relies on policy frameworks and
public services that support investment
in critical national infrastructure, are
fair on customers and maintain the
momentum behind net zero.
Investment in
infrastructure (capex)
£2.8bn
NGOs, communities, society
SSE needs the support of the communities
it works in and the backing of civil society
in pursuit of a just transition to net zero.
Investment in
communities
£16.5m
Suppliers, contractors
and partners
SSE relies on a healthy supply chain and
works with partners whose capabilities
offer synergies for innovative project
development and efficient ownership
structures.
Number of suppliers
c.9,000
More on pages 26 to 33
Natural environment
From wind and water used to produce
energy, to materials used to build energy
infrastructure, natural resources are
essential to SSE’s value creation.
More on pages 52 to 55
Science-based carbon
targets aligned to
1.5°C
11SSE plc Annual Report 2023
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Employees
Jobs advertised
3,732
Internal and external roles. SSE expects to create
1,000 new jobs a year up to 2026.
Shareholders and debt providers
Dividend
96.7p
SSE has a clear dividend policy and
growth opportunities to support long-term
shareholder value.
Energy customers
SSE Airtricity customer support
€25m
Most comprehensive customer support
package offered on the island of Ireland.
Government and regulators
Taxes paid UK/ROI
£502m/€53.8m
NGOs, communities, society
Community projects supported
1,160
Covering renewables and networks projects.
Suppliers, contractors, partners
Economic contribution UK/ROI
£6.04bn/€429m
PwC analysis of SSE’s contribution to GDP.
Natural environment
Scope 1 and 2 GHG emissions up
4.5%
While SSE’s total carbon emissions increased in
2022/23, emissions intensity has remained relatively
constant as investment delivers increasing levels of
renewable energy.
The developer premium that comes with SSE’s reputation for delivering
world-class assets enables it to realise value at key stages of projects
through timely sell-downs.
By extracting value in this way, SSE does not always wholly own projects
on completion but it does retain stakes and a solid asset base to support
future earnings.
SSE’s experience in managing large capital projects and navigating
regulatory and planning processes offers a competitive advantage
when it comes to securing quality development sites and required
permissions.
As a national clean energy champion, SSE takes seriously the role it
has to play in decarbonising the energy system and has published
the world’s first business strategy for a just transition to net zero.
It is providing the renewables, the enabling networks and the flexible
thermal generation that will be needed in a smooth transition.
SSE also seeks to fulfil its social contract with communities by
working with local supply chains, supporting their commitments
to decarbonisation, and addressing the impact that change is
having on the sector.
As a critical service provider, SSE works to ensure the generation
plant availability and networks resilience needed to support security
of supply in the UK and Ireland.
It also operates its assets efficiently through the implementation
of innovation, learning and technology to maximise shareholder
return and optimise customer value.
While SSE is primarily focused on providing and running large
infrastructure, it is keenly aware of the cost pressures felt by energy
users. It is committed to the supply of affordable energy and the
operation of resilient electricity networks for the benefit of customers.
SSE invests to fulfil its core purpose and support the Board’s endeavours
to promote the long-term success of the Company.
It invests to create lasting value for shareholders and society, exercising
financial discipline that commits only to projects that are expected to
offer returns that are greater than the cost of capital.
And it invests to help meet its social obligations by contributing to
GDP growth through payment of tax and creating quality jobs and
supporting the supply chain through growth of the Company.
At a Business Unit-level, SSE also invests in innovation and R&D that
is furthering the cause of decarbonisation. More detail on this can be
found in the SSE Sustainability Report 2023.
WHY WE DO IT
THE VALUE WE CREATE
12 SSE plc Annual Report 2023
Sector review
2022/23 saw deepening economic uncertainty around the world as
the post-pandemic energy crisis was exacerbated by Russia’s invasion of
Ukraine. Soaring energy prices principally driven by the cost of international
gas contributed to high inflation in economies throughout the world.
The following pages set out how SSE has responded to the opportunities
and risks emerging from a rapidly shifting energy sector landscape.
Households squeezed as impact of
war reverberates across Europe
The cost of living crisis in 2022/23 further
underlined the importance of continued
investment in homegrown sources of
energy to reduce national exposure to
external global forces.
Simultaneously, governments across
Europe and the world looked to recalibrate
and expedite their renewable energy
ambitions. In tandem with government
policy, SSE continues to take direct aim
at the long-term causes of the current
crisis by investing billions in domestic
low-carbon infrastructure.
A prudent approach to hedging throughout
the year also helped insulate the Group
from the worst short-term commercial
impacts of the market volatility.
In response to the cost pressures facing
its customers, SSE spent much of the year
working closely with policymakers to
develop and embed government support
schemes. SSE Airtricity established the
largest customer support fund in Ireland,
with provision for up to €25m in affordability
funding, before later giving each customer
a €35 rebate to honour its commitment to
not making a profit in 2022/23. Meanwhile,
SSE Business Energy applied customer
discounts to the value of £721m in the
year under the UK Government’s Energy
Bill Relief Scheme.
The cost of living is directly linked to
SSE’s exposure to the Principal Risk of
Energy Affordability – details of how
this is mitigated are on page 73 .
Navigating
through
instability
13SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Energy security tops
the political agenda
The year saw bold targets and aggressive
policy action to bolster domestic energy
security as governments set their sights
on tackling the energy crisis. The last
12 months put on stark display the
importance of clean, affordable,
homegrown energy as the solution
to countries’ reliance on volatile and
expensive international gas markets.
Wholesale prices at times in 2022 were up
to ten times higher than they were in 2021.
Cross-party political consensus crystalised
around the importance of rapidly rolling
out low-carbon technologies such as
wind, CCS, hydrogen, solar, battery and
hydro, while urgently accelerating the
buildout of enabling networks. Ofgem’s
Accelerated Strategic Transmission
Investment framework announcement in
December 2022 saw SSEN Transmission
given the green light to take forward four
further subsea HVDC links; a number of
new 400kV reinforcement projects and
a 400kV upgrade to the existing Beauly-
Denny line to unlock the rapid growth of
power generation in the North of Scotland.
Concurrently, the year saw political
attention in the UK and further afield
focus even more acutely on the need
to accelerate low-carbon infrastructure
deployment; not only to increase energy
security, but as a force for social and
economic good to bring jobs, skills,
and growth to regional heartlands that
need it most.
Analysis from SSE Thermal shows its
Keadby Carbon Capture project, which
in December 2022 became the first and
only consented CCS plant in the UK, has
the potential to bring £470m regional
Gross Value Added and 7,300 years of
combined work by all employees over
the lifetime of the asset.
Energy Infrastructure Failure is one of
SSE’s Group Principal Risks, for further
details on how this is managed please
see page 74 .
Market intervention in unprecedented times
With the cost of electricity rising
substantially in 2022/23, governments
faced exceptional fiscal pressures to
address high energy bills and the impact
of the broader cost of living crisis. In
response to the crisis, a raft of proposals
to intervene in energy markets were
considered with the aim of tackling bills
in the immediate term. Throughout the
year industry worked constructively with
policymakers to navigate the crisis and
engage on the range of potential options
under consideration.
As a Fair Tax Mark accredited company,
SSE supported the principle of the
Electricity Generator Levy (EGL) in the
UK and the wholesale electricity revenue
cap in the EU to ensure that an appropriate
amount of additional tax is paid where
extraordinary earnings are realised in the
midst of a crisis. Collectively, the industry
worked closely with UK, Irish and EU
officials through the consultative process
with a view to ensuring that the design of
the mechanisms achieved these aims
whilst protecting against unintended
consequences for security of supply
and investor confidence.
Ongoing dialogue continues to focus
on the need to ensure the impacts of
intervention do not interfere with the
industry’s ability to deliver record levels
of investment to address the underlying
causes of the energy crisis. The European
Union’s strong signal on the time-limited
nature of the revenue cap was therefore
welcomed by industry, while the UK
Government has recognised the future of
the EGL must be considered in the context
of protecting investor confidence.
SSE’s Principal Risks of Energy
Affordability and Political and
Regulatory Change are interconnected.
See pages 73 and 76 for details of
how SSE’s manages its exposure to
these risks.
14 SSE plc Annual Report 2023
International
competition heats up
The momentum behind efforts to
decarbonise is fuelling international
competition for flows of green capital.
Governments around the world have
joined the race to attract inward green
investment, including the US’s Inflation
Reduction Act (IRA). Passed by Congress in
2022, it introduces generous and unlimited
tax credits for clean energy investments.
The scope and scale of the legislation is
beyond anything seen before, amounting
to over $250bn in public support for new
energy projects in the coming years.
In response, other jurisdictions raced to
send unambiguously positive messages to
investors, with the European Commission
instituting a wide-ranging scheme of its
own. The REPowerEU programme seeks
to ramp up the bloc’s domestic renewable
energy generation capacity to 1,236GW
by 2030. This was positive news for SSE’s
recently acquired Southern European
development platform which already
offers a secured pipeline of 2.2GW with
additional future prospects.
Greater choice for investors, combined
with attractive support packages around
the world, put the onus on the UK to
respond, keep capital flowing and retain its
leadership position on low-carbon energy.
March’s Powering up Britain plan set out
an initial slew of policy pledges and green
funding, with the Chancellor earmarking
a further announcement in the Autumn
Statement to maintain the country’s
relative attractiveness in an increasingly
competitive global investment climate.
For more details on how SSE mitigates
its exposures to its Principal Risks of
Climate Change and Speed of Change
please see pages 72 and 77 .
Supply chains tested as costs climb
As global demand for low-carbon projects
exponentially grows, so too must the
supply chain to deliver it. In the next seven
years, the UK alone is targeting more than
100GW of renewables capacity. Like other
industries that have experienced high
growth, the massive expansion of projects
to date is already putting pressure on
supply chains – with significant demand
growth still to come.
Over the last 12 months, capital costs for
low-carbon generation projects have risen
on average between 20% and 30%, with
asset costs in some cases exceeding 50%.
These cost increases are due to several
factors linked to the supply chain as well as
inflation in construction costs, commodity
price increases and interest rate hikes.
After decades of driving down costs, in
the case of offshore wind from £140/MWh
to less than £40/MWh, a clear inflection
point was reached in 2022/23. Industry
and government are beginning to think
differently about procuring renewables
with a focus on value and deliverability,
not simply cost. The UK, like other
countries, will need to build all its projects
if it is to meet its energy security and net
zero targets; a race to the bottom on costs
risks projects not being built and supply
chain investments going elsewhere.
At the same time, history shows that
the costs and benefits of such radical
transitions are not distributed fairly
without careful planning and there is an
important role for government working
alongside the private sector.
A joined-up, collaborative approach
between government, industry and society
is required in 2023/24 and beyond to build
sustainable homegrown supply chains to
service growth in demand and unlock
economic opportunity in all regions.
Supply chain pressures influence
SSE’s exposure to its Principal Risk of
Large Capital Projects Management.
See page 75 .
Sector review continued
15SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Adapting to extreme
weather events
As the world adapts to more extreme
weather patterns associated with climate
change the energy sector finds itself on
the front line. Changes in rainfall and
wind patterns are felt right across the SSE
Group, with lower levels of wind impacting
SSE Renewables’ output for the second
year running in 2022/23.
Prolonged spells of still, dry weather
conditions in winter tested the resilience
of Europe’s energy system to the full, while
several weather events this year caused
significant damage to parts of SSEN’s
network in the North of Scotland. SSE has
established crisis management measures
to mitigate against the impact of severe
weather events on critical national
infrastructure and employs meteorological
expertise to forecast weather events.
SSE’s forecasting allows it to mobilise
operational teams in advance of major
events, while informing trading positions
taken by the Energy Portfolio Management
business and purchasing decisions made
by SSE’s Procurement team. Climate
adaptation strategies have become an
increasingly important aspect of
government and business decision-
making. For SSE, boosting weather
resilience and assessing climate adaptation
requirements are essential to the ongoing
resilience of all its operational businesses.
Extreme weather influences SSE’s
exposure to its Principal Risks of Energy
Infrastructure Failure and Portfolio
Exposure. See pages 74 and 76 .
Global opportunities emerge
as net zero resolve hardens
COP27 may have concluded with the
target of 1.5°C in critical condition, but the
global commitment to renewable energy
is stronger than ever.
The message from Sharm el Sheikh was
clear: the energy sector must lead the way
this decade to keep 1.5°C alive. As it did in
Glasgow, SSE played its part on the world
stage, once again making the case for the
decarbonisation of the energy system to
go further, faster.
Meeting the objectives of the Paris
Agreement calls for us to halve global
greenhouse gas emissions by 2030 –
just seven years to replace swathes of
high-emission technologies with low-
carbon alternatives. In terms of energy,
this means leaving behind a traditional
system designed around fossil fuels and
installing a new one – as fast as we can.
Aiming for 61% of total electricity
generation to come from renewables by
2030, the International Energy Agency
(IEA) estimates that renewable energy
capacity will have to triple, with a huge
chunk of this growth to come from wind,
solar and hydro. Beyond the installation
of renewable power, this also means
installing transmission lines, building
local smart grids and electricity storage,
and rolling out technologies that enable
system flexibility.
Climate Change remains a Principal Risk
for SSE. For further details on how this is
managed, see page 72 .
For more detail on the work SSE is doing to meet the
challenges of the energy sector of tomorrow, go to
www.sse.com/annualreport2023/.
SSE’s place in the future energy world
16 SSE plc Annual Report 2023
Transmission 30%
Distribution 20%
Renewables 40%
Thermal and other 10%
Optimal pathway
to growth
Net Zero Acceleration Programme Plus
The demand for what SSE has to offer in building a
cleaner, more secure and more affordable energy
system is growing steadily.
In May 2023, 18 months on from its initial launch, the
NZAP was revised to reflect SSE’s increasing investment
and earnings, and the wealth of opportunities created
as the world pursues net zero.
The new NZAP Plus includes investment of £18bn
over the five years to 2027 and a balanced allocation
of investment across the Group.
The added investment means SSE’s total capital
expenditure equates to around £10m a day spent on
critical national infrastructure. The plan also features
revised growth targets to 2027 for SSE Renewables,
SSEN Transmission and SSEN Distribution.
The NZAP Plus means more value for shareholders
and society, more financial strength, more investment,
more jobs, and more growth to come over the next
decade.
Further details on SSE’s NZAP Plus can be found in the
Financial Review on page 83 and on sse.com .
SSE made clear that the Net Zero Acceleration Programme (NZAP) it
launched in November 2021 was a floor, not a ceiling to its ambitions.
NZAP Plus is a
platform to maximise
stakeholder value
into the 2030s
Balanced capital investment in
upgraded, fully-funded plan...
Sharper focus on climate solutions
Supporting SSE’s 2030 Goals with around 90%
expected to be invested in renewables and
networks, the substantial majority of the NZAP
Plus is focused on climate solutions that are
aligned to a 1.5°C pathway and also aligned to the
Technical Screening Criteria of the EU Taxonomy.
Updated dividend plan
Dividend rebase to 60p from 2024 continues
to balance income to shareholders with funding
and a strong investment grade credit rating.
NZAP Plus also targets dividend growth of
5%-10% from 2024 to 2027.
Renewables
~40%
Electricity networks
~50%
£18bn
17SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Offshore wind
Onshore wind
Hydro
Solar
Battery
SSE ownership
Minority interest
FY22 FY27
~4GW
>9GW
£8.2bn
£12-14bn
£14-16bn
FY22 FY27
… delivering accelerated growth at
attractive returns out to 2027…
… with 2030
Goals aligned
to four UN SDGs …
See page 22 for SSE’s progress against these
… enhanced 2032 growth
targets in the NZAP Plus …
… and a Net Zero Transition Plan
for net zero emissions on scopes
1 and 2 by 2040, and scope 3 by
2050 at the latest.
Renewables Electricity networks
Net capacity
>9GW
Gross RAV CAGR
~14%
Net installed renewables capacity
>16GW
Net low-carbon flexible thermal
>2GW
Net networks RAV
>£20bn
Science-based carbon targets aligned to
1.5°C
Pipeline
>15GW
Adjusted EPS CAGR
13-16%
Forecast annual dividend growth
5%-10%
Net debt/EBITDA
3.5-4.0x
Medium-term targets Long-term targets
18 SSE plc Annual Report 2023
A year of strategic progress
Building for clean,
secure, affordable energy
The complexity of building large energy
infrastructure assets, often in harsh
physical environments, poses risks to
delivery timelines but, working with its
construction partners, SSE managed to
make significant progress on flagship
projects across its renewables and
low-carbon thermal portfolio in 2022/23.
The first offshore platform was installed
at Dogger Bank (3,600MW, 40% SSE stake),
the world’s largest wind farm currently
under construction, in April 2022 and it
is on schedule to deliver first power in
summer 2023, assuming normal weather
and resolution of delays to the supply
of nacelles.
Seagreen (1,075MW, 49% SSE stake),
overcame difficult weather conditions
and installation vessel availability problems
in 2022/23. The world’s deepest fixed-
bottom offshore wind farm, it achieved
first power in August 2022 and is due for
completion in summer 2023.
Onshore, Viking wind farm (443MW) on
Shetland passed a number of milestones
in the past year, with 70km of access tracks
completed, all 103 bases installed and the
first of the turbines installed in April 2023.
Flexible thermal generation plant like
SSE’s Keadby 2 power combined-cycle
gas turbine (CCGT) station in North
Lincolnshire will also be needed to
meet net zero ambitions.
After four-and-a-half years in construction,
Keadby 2 entered commercial operation in
March 2023. Fitted with a Siemens Energy
9000HL 50Hz turbine, Keadby 2 is the most
efficient CCGT plant of its type in Europe
and work is already under way exploring
the potential for hydrogen blending at
the plant.
The wellbeing of those working on SSE’s
large capital projects continues to be a key
focus, with measures taken at Group level
in early 2023 to improve the support given
to contracting partners and monitor safety
on construction sites.
Delivering
on net zero
SSE has a clear strategy that is
aligned to net zero, but delivery
of it is best seen through the
progress made, and milestones
marked over the course of the
year, by the Group’s individual
Business Units.
19SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Pursuing opportunities
at home and abroad
The UK is currently one of the world’s
leading offshore wind markets, but
international momentum behind net zero
means favourable policy environments exist
in other jurisdictions where SSE Renewables
can deploy its developer capability.
The acquisition of a Southern European
development platform in 2022 increased
SSE’s secured pipeline from 11GW to
around 14GW.
The platform has 3.8GW of onshore
wind pipeline and prospects and a
further 1.4GW of hybridisation potential
in co-located solar across Spain, France,
Italy and Greece. Around 2.4GW is secured
pipeline in Southern Europe, with material
land or permitting rights and construction
scheduled to get under way on projects in
France and Spain in Summer 2023.
In Japan, the SSE-Pacifico platform is
preparing projects for offshore auctions
in a market with huge potential whilst
in Northern Europe and the US, SSE is
working with local partners to gear up
for future auctions.
Closer to home, Coire Glas, a pumped
storage hydro project that has long been
on the drawing board awaiting a supportive
policy environment for long-duration
electricity storage, moved a step closer to
reality in March 2022 with a commitment
by SSE to £100m of exploratory work. The
project, which received planning consent
from the Scottish Government in 2020,
would more than double Britain’s total
current electricity storage capacity. Subject
to good development progress and
prevailing policy, SSE hopes to make
a final investment decision in 2024.
A framework for
transmission growth
SSEN Transmission operates one of the
fastest growing regulated electricity
networks in Europe. The second year of
RIIO-T2 saw delivery milestones on the
Shetland HVDC (see separate case study)
and SF
6
-free Kintore substation projects.
Progress was also made through Ofgem’s
Uncertainty Mechanism on additional
investments in an East Coast HVDC link,
Argyll reinforcement works and a Skye link.
Looking further out, and subject to the
right generator commitments and planning
and Ofgem approvals, the business expects
gross Regulated Asset Value to exceed
£15bn by FY31.
This projection is based on confidence
provided by Ofgem’s Accelerated Strategic
Transmission Investment framework and its
updated Holistic Network Design, which
recognise the need for significant networks
investment to meet the UK’s ambition for
50GW of offshore wind by 2030.
The ASTI announcement in December 2022
means SSEN Transmission can now take
forward four further subsea HVDC links;
a number of new 400kV reinforcement
projects and a 400kV upgrade to the
existing Beauly-Denny line.
At the same time, it is vital to recognise the
importance of effective engagement with
communities as this transformational
infrastructure roll-out progresses.
SSEN Transmission is therefore working
closely with impacted communities
and other local stakeholders to ensure
their views are heard and factored into
decision making.
This growth trajectory is underpinned by
the proceeds of a minority 25% stake sale
in SSEN Transmission in November 2022,
which unlocked the premium value in
the business and helped rebalance SSE’s
mix of regulated and market-based
revenue streams.
20 SSE plc Annual Report 2023
A year of strategic progress continued
Powering communities
through RIIO-ED2
The RIIO-ED2 regulatory price control for
2023-2028 is an important step on the
road to net zero and throughout the past
year SSEN Distribution worked to reach a
settlement that balances the needs of
customers and the environment.
The Final Determination published by
Ofgem on 30 November 2022 quantified
the outputs that need to be delivered and
the funding (allowances) SSEN Distribution
is provided to do so.
The resulting £3.6bn RIIO-ED2 business
plan sees baseline allowances increasing
by £300m from the Draft Determinations,
representing a 22% increase in allowed
expenditure compared to an equivalent
period in RIIO-ED1.
The business plan was stakeholder-led,
with more than 25,000 people having a
say in its development. It opens the way
for significant investment in the local
network infrastructure that will accelerate
decarbonisation of streets and homes;
improve reliability and services for
customers; and build the smart, flexible
network of the future.
While the original plan contained 64
outputs, the Final Determination reduced
the funding in the core plan by around
12%. This required a recalibration of what
the business can deliver and further
extensive engagement with affected
stakeholders on the likely impacts.
This follow-up engagement included detail
of Uncertainty Mechanisms (UMs) that will
enable SSEN Distribution to further invest
in the network to facilitate growing net
zero ambitions.
Connecting
Scotland’s islands
Scotland’s three main island groups hold
untapped reserves of renewable energy
and unlocking that potential moved closer
in 2022/23 thanks to progress made on
SSEN Transmission’s HVDC link to Shetland
and Ofgem’s ‘minded to’ decision on a
subsea connection to Orkney.
The £660m Shetland HVDC link involves
around 260km of cabling, all but 10km of
which will be in the sea. The project also
requires a 320/132kV substation and HVDC
convertor station at Upper Kergord and an
HVDC switching station at Noss Head in
Caithness to connect to the mainland.
The first 100km of cable was successfully
installed in July 2022 by a specialist vessel,
the NKT Victoria. A further 60km was laid
in March 2023 and the remainder will be
in place in the North Sea later this year,
completing the full subsea link.
On track for completion by Summer
2024, the link will enable 600MW of
clean, renewable electricity generation
to connect – including Viking Energy
Wind Farm.
The proposal for Orkney would enable
the connection of up to 220MW of new
renewables and consists of a new
substation at Finstown and around
57km of subsea cable connecting at
Dounreay in Caithness.
21SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Backing up the energy
system of tomorrow
SSE recognises that more than just
renewables will be needed in the transition
to net zero. It is pursuing carbon capture
and storage, hydrogen and battery
technologies to provide much-needed
system flexibility.
SSE Thermal is working with partners in
low-carbon industrial clusters in the
Humber and the northeast of Scotland to
bring forward a range of projects that can
provide crucial system back up.
Keadby 3 Carbon Capture Power Station in
the Humber was the first CCS power plant
project in the country to receive planning
permission. At the same site, development
work is under way on Keadby Hydrogen
Power Station, the world’s first major 100%
hydrogen-fired power station.
The neighbouring Aldbrough Hydrogen
Pathfinder project will unite hydrogen
production, storage and power generation
in one location by the middle of the decade.
The project moved a step closer to fruition
when it secured UK Government backing
through its Net Zero Hydrogen Fund.
And the proposed Aldbrough Hydrogen
Storage Facility, one of the largest of its
kind, could be in operation by early 2028.
In Aberdeenshire, SSE Thermal is working
with Equinor to develop the low-carbon
power station at Peterhead, with the plant
potentially becoming Scotland’s first
flexible power station equipped with
carbon capture technology.
Although no power CCS projects in
the Humber or Scotland were taken
forward in the first phase of the UK’s
cluster sequencing process, in March the
Government launched processes for both a
track one expansion and track two, meaning
there will be further opportunities ahead.
SSE will also energise its first 50MW
battery storage facility at Salisbury in
September 2023 with construction also
due to commence in July at its first 30MW
solar project at Littleton.
Both projects in England are part of a
near-2GW pipeline of solar and battery
projects. This also includes a 150MW
battery storage site getting under
way at SSE’s former coal-fired plant
at Ferrybridge, in Yorkshire, which is
expected to be operational in late 2024.
For more information on SSE’s progress
against its net zero-focused strategy go
to sse.com/news-and-views/.
22 SSE plc Annual Report 2023
Accelerating business ambition
SSE’s 2030 Goals are focused on addressing the challenge of
climate change, while ensuring this is done in a just and fair way
that creates and shares value with stakeholders. The imperative
to accelerate action to deliver net zero was further heightened in
2023, as the Intergovernmental Panel on Climate Change (IPCC)
published its ‘final warning’ on the climate crisis and the urgent
action that needs to be taken in order to avoid irreversible damage
from climate change.
With updated 2030 Goals in early 2022 reflecting an accelerated
decarbonisation pathway, financial year 2022/23 was marked as a
year of delivery. SSE continued to deliver on its net zero ambitions
at pace, investing a record £2.8bn in the first full year of its original
2021 to 2026 £12.5bn Net Zero Acceleration Programme (NZAP).
Measures of progress
Reinforcing SSE’s commitment to the achievement of its 2030
Goals, performance against them is linked to the long-term
incentive element of executive remuneration. 2022/23 is the first
year progress is measured against SSE’s new, more stretching 2030
Goals announced in February 2022. A summary of this progress is
outlined opposite, with more detail available in the Remuneration
Committee’s Report from page 166 .
2030 Goals
SSE’s core business goals for 2030, aligned to
four UN Sustainable Development Goals (SDGs)
most material to its business activities, provide
important milestones on the journey to net zero
and place sustainability firmly at the heart of
SSE’s business strategy.
Progress
in action
Cut carbon
intensity by 80%
Increase renewable
energy output
fivefold
Enable low-carbon
generation and
demand
Champion a fair
and just energy
transition
More on page 35
23SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Reduce Scope 1 carbon intensity by 80% by 2030,
compared to 2017/18 levels, to 61gCO₂e/kWh.
The scope 1 GHG intensity of electricity generated
remained relatively stable, falling by 2% between 2021/22 and
2022/23. Progress was made in renewables growth
and in developing lower-carbon thermal generation options.
While SSE Thermal’s Keadby 3 Carbon Capture Power Station
project was not progressed to the final stages of the UK
Government’s Cluster Sequencing Process, a similar
development at Peterhead attracted the Government’s
‘Tier 2’ status. Keadby 2 began commercial operations in
March 2023, which is Europe’s most efficient CCGT. SSE
Thermal also secured 10-year capacity contracts – subject
to planning permission and final investment decisions – for
two new low-carbon power stations fuelled by sustainable
biofuel in Ireland.
254gCO
2
e/
kWh
Scope 1 GHG intensity of electricity generated
17%
Decrease in Scope 1 GHG intensity of generated
electricity from the 2017/18 baseline
UN SDG
Build a renewable energy portfolio that
generates at least 50TWh of renewable
electricity a year by 2030.
Having experienced exceptionally still and dry conditions
in the prior year, SSE’s renewable generation volumes
in 2022/23 rose by 7% but were 13% behind plan due to
Seagreen project delays and unfavourable weather. SSE
Renewables made progress with its key flagship projects.
First power was achieved at the 1,075MW Seagreen offshore
wind project (49% SSE stake) and progress was made on
Dogger Bank offshore wind farm (3,600MW, 40% SSE stake).
Onshore, the 443MW Viking wind farm was successful in
securing a Contract for Difference (CfD) in July 2022 and
construction has progressed well, with the first turbine
successfully installed in April 2023.
UN SDG
10.2TWh
Renewable generation output 2022/23*
2.6GW
Renewable energy capacity in
construction at 31 March 2023
* Includes pumped storage, biomass and constrained
off wind in GB.
Enable at least 20GW of renewable generation and
facilitate around 2 million EVs and 1 million heat
pumps on SSEN’s electricity networks by 2030.
At the end of 2022/23, there was just over 9GW of renewable
capacity connected to SSEN Transmission’s network, up
from 7.9GW the previous year. In the same period, SSEN
Distribution had around 208,500 pure electric vehicles or
plug-in hybrid vehicles registered in its licence areas and
had connected around 52,500 heat pumps to its networks.
SSEN Distribution continued to progress several key
innovation projects with partners to support flexible
markets and future infrastructure provision for the
mass adoption of electric vehicles (EVs).
UN SDG
>9GW
Renewable generation capacity connected
to SSEN Transmission network
c.52,500
Heat pumps connected to SSEN Distribution’s network
c.208,500
Pure electric or plug-in hybrid vehicles registered
in SSEN Distribution’s licence areas
Be a global leader for the just transition to net zero,
with a guarantee of fair work and commitment to
paying fair tax and sharing economic value.
Over 2022/23, SSE continued to drive action towards a just
transition, publishing two new reports detailing its progress
and thought leadership around the topic. SSE’s commitment
to fair tax was reaffirmed as it became the first company to
transition from the Fair Tax Foundation’s UK HQ Multinational
accreditation to the Foundation’s new Global Multinational
Business Standard. SSE implemented the annual increase in
the real Living Wage, which was brought forward by two
months in recognition of the cost-of-living crisis, and
continued to work towards rolling out its Living Hours
commitment across its supply chain.
UN SDG
1
st
year
Accredited with the Fair Tax Foundation’s
new Global Multinational Business Standard
10
th
year
Of being a real Living Wage accredited employer
24 SSE plc Annual Report 2023
81.0
85.7
96.7
2023
2022
2021
166.0
(14.7)
94.8
241.2
78.4
206.3
2023
2022
2021
2,183.6
(205.6)
1,158.1
3,476.3
948.9
2,418. 0
2023
2022
2021
7,423
8,209
9,556
2023
2022
2021
912.0
2,067.8
2,803.3
2023
2022
2021
580.0
446.3
568.1
427.8
382.4
382.4
351.8
351.8
372.7
405.5
380.5
380.5
Adjusted
2023
Reported
2023
Adjusted
2022
Reported
2022
Key Performance Indicators
SSE uses a number of financial and non-financial measures to track
progress against its strategy to create value by developing, building,
operating and investing in electricity infrastructure and businesses
needed for net zero.
Resilience
and growth
COMBINED NETWORKS REGULATED ASSET
VALUE (£M)
ADJUSTED INVESTMENT, CAPITAL
AND ACQUISITIONS (£M)
DIVIDEND PER SHARE
(PENCE)
ADJUSTED AND REPORTED EARNINGS/LOSSES
PER SHARE (PENCE)
ADJUSTED AND REPORTED PROFIT/LOSS
BEFORE TAX (£M)
ADJUSTED AND REPORTED OPERATING PROFIT
BY BUSINESS (£M)
Financial KPIs
Strategic relevance: SSE has a growth-enabling
dividend plan that remunerates shareholders for
their investment in the Company.
Performance: The recommended full-year
dividend for 2022/23 is in line with SSE’s five-year
dividend plan to 2023.
Strategic relevance: SSE’s purpose is built on the
strategic logic of electricity businesses and assets
that share common skills and capabilities in pursuit
of net zero.
Performance: Combined, SSE’s renewables and
electricity networks businesses accounted for
53% of Group adjusted operating profit.
Strategic relevance: Adjusted EPS gives a
meaningful measure of financial performance
over the medium term.
Performance: Results in 2022/23 are attributable
to strong performance of SSE’s business mix in
volatile market conditions.
Strategic relevance: SSE’s ownership of three
economically-regulated electricity networks
gives the Group steady, index-linked revenue.
Performance: Inflation in 2022/23, combined
with acceleration of network build-out and
reinforcement, contributed to higher RAV
values in the year.
Strategic relevance: SSE’s objective is to earn a
sustainable level of profit over the medium term.
Performance: The reported figure for 2022/23
reflects a significant adverse fair value movement
on derivatives in the year.
Strategic relevance: SSE applies strict financial
discipline that supports investment in assets that
are expected to provide returns that are greater
than the cost of capital.
Performance: The good progress made
in execution of the Net Zero Acceleration
Programme resulted in a record investment
year for the Group in 2022/23.
Adjusted Reported
Transmission Distribution Renewables
Adjusted Reported
25SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
1,995.3
2,251.3
3,3 82.1
2023
2022
2021
837.5
997.0
674.3
458.4
421.0
502.0
364.8
456.1
495.5
543.8
614.4
614.4
Adjusted
2023
Reported
2023
Adjusted
2022
Reported
2022
10,242
9,496
10,227
2023
2022
2021
256
259
254
2023
2022
2021
60,550
47,130
42,370
2023
2022
2021
0.15
0.17
0.19
2023
2022
2021
£502m
€53.8m
£335m
€46.4m
£379m
€20.4 m
2023
2022
2021
£6.04bn
€429m
£5.98bn
€417m
£5.36bn
€415m
2023
2022
2021
ADJUSTED AND REPORTED CAPEX BY CORE
BUSINESS, BEFORE REFUNDS (£M)
ADJUSTED EBITDA
(£M)
Strategic relevance: Extracting interest, tax,
depreciation and amortisation from earnings
provides a useful measure of SSE’s operational
performance.
Performance: EBITDA in 2022/23 reflects the
strong operational performance achieved by
SSE’s balanced mix of businesses.
Strategic relevance: The primary focus of SSE’s
capex plans is investment in the low-carbon
electricity assets and infrastructure needed to
achieve net zero.
Performance: SSE’s renewables and networks
businesses accounted for around 81% of capex
in the year.
Transmission Distribution Renewables UK Ireland UK Ireland
Non-financial KPIs
TOTAL RECORDABLE INJURY RATE PER
100,000 HOURS WORKED (EMPLOYEES
AND CONTRACTORS COMBINED)
JOBS SUPPORTED IN UK AND IRELAND
SCOPE 1 GHG INTENSITY
(GCO
2
E/KWH)
ECONOMIC CONTRIBUTION IN UK/IRELAND*TAXES PAID IN THE UK/IRELAND
RENEWABLE GENERATION OUTPUT
(GWH)*
Strategic relevance: Taxes support the public
services everyone relies on. SSE is accredited to
the Fair Tax Foundation’s Global Multinational
Business Standard and believes in paying the
right amount of tax, at the right time and in
the right place.
Performance: An increase in total taxes
paid reflects increased profitability and
corresponding corporation taxes paid
during 2022/23.
Strategic relevance: SSE depends on a healthy
and thriving economy to enable its business
success, which is why it calculates the value
it adds to UK and Irish GDP each year.
Performance: SSE’s GDP contribution in its
home markets remained fairly consistent
between 2021/22 and 2022/23.
* Previous years figures have been adjusted to
current prices.
Strategic relevance: Safety is SSE’s No 1 value
and getting everyone home safe after each
working day remains its top priority.
Performance: There was a rise in contractor
hours worked in construction, which
represents a higher-risk environment than
normal operations. Data includes the sad
death in June 2022 of a young contractor,
Liam Macdonald, working on Shetland.
Strategic relevance: Renewables assets and
increasing renewables output over time are
core to SSE’s business strategy, which is
centred around the net zero transition.
Performance: Volumes increased slightly
year-on-year but output finished behind
plan due to variable weather and Seagreen
project delays.
* Includes pumped storage, biomass and
constrained off wind in GB.
Strategic relevance: As a significant generator
of electricity, SSE must reduce the impact
of its operations and has set science-based
targets aligned to a 1.5°C pathway.
Performance: SSE’s scope 1 GHG intensity
reduced slightly by 2% between 2021/22 and
2022/23. SSE remains on track to achieve its
target to reduce intensity by 80% between
2017/18 and 2030.
Strategic relevance: SSE relies on the people
that work for it in order to operate, with its
activities supporting jobs in both urban and
rural areas.
Performance: Through its operations in the
UK and Ireland, SSE supported 39,940 and
2,430 jobs respectively.
More information
SSE’s social contribution
See pages 56 to 66
Financial Review
See pages 78 to 94
SSEN Transmission
Operating Review
See pages 96 to 97
SSEN Distribution
Operating Review
See pages 98 to 99
SSE Renewables
Operating Review
See pages 100 to 102
26 SSE plc Annual Report 2023
Our stakeholders
Section 172
statement
A sustainable strategy is one that serves
the interests of people and planet.
Through delivery of its strategy SSE fulfils
an unwritten social contract, under which
society provides human capital and the
right to earn a profit and in return the
Company safely and reliably provides
energy, invests in critical infrastructure,
creates jobs and contributes to GDP.
Central to this contract are SSE’s key
stakeholders; identified as the people,
communities and organisations with an
interest in its purpose, strategy, operations
and actions and who may be affected by
them. The relationship with key stakeholders
is two-way and an overview of the
reciprocal nature is set out in SSE’s business
model and across the pages 28 to 33 .
Strategic stakeholder engagement
underpins the understanding of issues
material to each group and includes a
combination of business-led and Board-
level interaction. This approach is reflective
of legislative and regulatory requirements
and is designed to ensure all views are
heard. The result is stakeholder influence
within, and validity of, business plans and
Employees
SSE’s strategy and success are
dependent on the shared talent,
diversity, innovation and values
of the people it employs.
Shareholders and debt
providers
SSE must be well-financed, with the
ability to remunerate shareholders
for their investment, secure debt at
competitive rates and grow the business.
Energy customers
Consumers create demand for the
energy and services SSE provides
and set the tone for our purpose.
Government
and regulators
SSE relies on policy frameworks and
public services that support investment
in critical national infrastructure, are
fair on customers and maintain the
momentum behind net zero.
NGOs, communities
and civil society
SSE needs the support of the
communities it works in and the
backing of civil society in pursuit
of a just transition to net zero.
Suppliers, contractors
and partners
SSE relies on a healthy supply chain
and works with partners whose
capabilities offer synergies for
innovative project development
and efficient ownership structures.
supporting objectives. Situations will exist
where not every stakeholder interest can
be addressed in full, however stakeholder
regard continues to the greatest extent
possible in decision-making at every level.
The framework set by the Board in which
decision-making takes place is explained
on page 124 .
This statement, and the following
stakeholder pages, summarise how the
Board has upheld SSE’s social contract
through the discharge of its duties under
Section 172 of the Companies Act 2006.
In doing so, it promotes the long-term
success of the Company for the benefit
of SSE’s six key stakeholder groups
by considering:
(a) The likely consequences of any decision
in the long term.
(b) The interests of the Company’s
employees.
(c) The need to foster the Company’s
business relationships with suppliers,
customers and others.
(d) The impact of the Company’s
operations on the community
and the environment.
(e) The desirability of the Company
maintaining a reputation for high
standards of business conduct.
(f) The need to act fairly between
members of the Company.
Detail of how s172 and stakeholder
factors have influenced Board decision-
making in the year can be found on
pages 127 to 129 .
Creating lasting
societal value
Our key
stakeholder groups
27SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Considering long-term consequences
s172 link (a)
As a long-term business, SSE’s actions have far-reaching impact
which is recognised in SSE’s strategic approach of creating value
for shareholders and society. Four 2030 Goals and a clear net
zero-focused strategy frame decision-making, and provide
important interim milestones to 2050. These parameters, set by
the Board, are reflected within strategy work and objectives, which
extends to: capital investment; the Group budget; dividend plans;
and future resourcing requirements. SSE’s Risk Management
Framework, including the Group’s Principal Risks, the identification
of emerging risks and the Group’s Risk Appetite statement further
shape long-term perspectives.
Relevant S172(a) disclosures
Pages 8 to 9 Board-agreed purpose, vision and strategy.
Pages 126 to 129 Board strategy work and decisions 2022/23.
Pages 68 to 77 Approach to risk-informed decision-making.
Protecting communities and environment
s172 link (d)
SSE recognises the serious threat that climate change poses to the
natural world, and therefore to communities and the economy.
Climate change features across all areas of the Board agenda, and
SSE commits to open and transparent disclosure to allow proper
assessment of its environmental performance and the potential
impact of various climate scenarios on future financial performance.
Relevant S172(d) disclosures
Pages 36 to 55 Accelerating climate action and Protecting
the natural environment.
Page 130 to 131 Board-level oversight of sustainability
and climate.
Page 156 Audit Committee and TCFD.
Pages 162 to 165 SSE’s SSHEAC.
Fostering stakeholder relationships
s172 links (b, c)
Constructive two-way dialogue with SSE’s key stakeholders,
including employees, suppliers, customers and communities,
tracks priorities and identification of issues as they arise. Supporting
conversations and strategic engagement reflect an operating
model based on autonomous Business Units with decision-making
authority. The Board creates the correct conditions for this approach
by setting SSE’s long-term direction, overarching decision-making
framework and culture. This is in line with the Board’s own
understanding of stakeholder needs, as advocated through SSE’s
Just Transition Strategy and engagement surrounding the future
of the energy system.
Relevant S172(b,c) disclosures
Page 124 SSE’s decision-making framework.
Pages 28 to 33 Stakeholder engagement and actions.
Pages 56 to 66 Ensuring a just transition.
Setting culture and conduct
s172 link (e, f)
The Board leads and monitors SSE’s culture, by setting the
tone and framework within which agreed values and accepted
behaviours can be embraced by employees. This includes a safe
and inclusive working environment that encourages doing the
right thing, through responsible business conduct and making
a positive difference for stakeholders.
Relevant S172(e,f) disclosures
Pages 137 to 138 Board focus on culture.
Pages 58 to 63 SSE’s approach to fair and decent work,
inclusion and diversity, and health, safety and wellbeing.
28 SSE plc Annual Report 2023
How we engage
Group engagement
• Multi-channel Leader-led Engagement
Programme with in-person and virtual
interactions.
• Employee voice soundings through
annual survey of all colleagues.
• Assessment of employee sentiment
and engagement with strategy through
post-communication polling.
• Analysis of data from exit surveys.
• Engagement with trade unions.
• SSE’s employee offering: reward, benefits,
inclusivity, flexibility in context of rising
cost of living.
Board engagement
• Participation in Leader-led Engagement
Programme.
• Active support of SSE’s I&D strategy
through involvement in awareness
activities with SSE’s Belonging Groups.
• Employee-focused work by the
non-Executive Director for Employee
Engagement and subsequent feedback
to the Board.
• Site visits and hosting of employees
at Board events.
Material issues in 2022/23
• SSE’s employee offering: reward,
benefits, inclusivity, flexibility in
context of rising cost of living.
• Ways of Working in the post-pandemic
workplace.
• Agreement with trade union partners
on pay progression.
• Employee wellbeing, support and
resilience.
• Giving all employees a voice and
taking action in response to key
issues identified in the Great Place
to Work survey.
• Engagement with SSE’s Inclusion
and Diversity strategy.
• Engagement with SSE’s approach
to a just transition to net zero.
Priorities for 2023/24
• Ensuring a safe, inclusive and
flexible workplace.
• Attraction and retention of talent.
• Maintaining culture in a rapid growth
phase and amidst international
expansion.
More on pages 58 to 63
Our stakeholders continued
Employees
• In response to the cost of
living crisis an interim salary
increase of 5% for all eligible
employees was agreed from
1 October 2022 (see page
179 ).
• To maximise the opportunity
presented by full Board
attendance at the AGM, an
all-employee Q&A session
followed the main business
of the day (see page 135 ).
• Following relaxation of
covid restrictions, the Board
resumed a full programme
of engagement across sites
(see pages 135 and 163 ).
2022/23
Actions
MEASURING ENGAGEMENT AND VALUE CREATED
Employee engagement score Combined attendance at in-person
and virtual employee events
Employee sentiment towards SSE’s
net zero-focused strategy
43,000
employees attended
92%
Why we engage
Engagement helps
SSE attract, retain and
develop a talented
workforce now and
for the future.
Input to SSE
Talent, skills, values
and human capital.
Value created
Inclusive, fulfilling
and high-performing
workplace.
2021
82%
2022
82%
2023
84%
29SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
How we engage
Group engagement
• Responding to queries from shareholders
and debt providers and holding meetings
with all types of investors on an ongoing
basis.
• Engagement with environmental, social
and governance (ESG) ratings agencies
used by many investors and debt providers
to gauge sustainability credentials.
Board engagement
• A programme of Director-investor
meetings covering key financial
announcements, long-term priorities
and specific issues at investors’ request.
• Participation in virtual and physical
investor conferences.
• Dedicated ESG webinars and conference
participation and an annual review of
SSE’s performance in a dozen investor-
led ESG reviews and ratings.
• Monthly Board updates on investor
and financial market sentiment.
• Detailed reporting of shareholder
feedback during and after Half-
and Full-year Results roadshows.
• Bi-annual updates from SSE’s brokers.
• Executive Director engagement with credit
ratings agencies used by debt providers.
• Engagement with shareholders at SSE’s
Annual General Meeting.
More on pages 132 to 133
Material issues in 2022/23
• Financial and ESG performance
compared to market expectations.
• Benefits and detriments of a balanced
business mix including the merits of
flexible generation and gas storage.
• Optimising capital allocation across
SSE’s Business Units including the sale of
a minority stake in SSEN Transmission.
• High and turbulent gas and power
prices, their impact on SSE and
government policy, including the
Electricity Generator Levy.
• Progress against, and alignment to,
a 1.5°C climate pathway.
• The effect of competition, cost
pressures and supply chain constraints
on returns in renewables investment.
• The level of protection SSE has against
rising inflation and interest rates.
• SSE’s refinancing requirements and
liquidity availability.
Priorities for 2023/24
• Timely engagement on the progression
of SSE’s ongoing investment programme
and financial and investment targets.
• Continued evolution and refinement of
SSE’s strategy, governance and policies.
• Alignment of green and hybrid bond
strategy, debt terms, maturity and
covenants to NZAP Plus targets.
• Responding to changing shareholder
perceptions and market environment,
sharing feedback internally.
• Positive shareholder vote on the annual
Net Zero Transition Report.
• Provided deeper insight
into the SSE Renewables
and SSEN Transmission
businesses, including
exposure to wider
management through a
two-day investor event
(see page 132 ).
• Chair and Chief Sustainability
Officer held a virtual ESG
investor seminar focusing on
the 2022 Net Zero Transition
Report (see page 133 ).
• Re-established physical
overseas roadshows with
Executive Directors following
investor demand.
• Initiated an annual Chair
roadshow focused on
Corporate Governance.
• Engaged with debt providers
to raise £1.7bn of new hybrid
capital and long-term debt
over the last 12 months.
2022/23
Actions
Dividend Per Share Earnings Per Share One-to-one investor sessions
2022/23
2023
2022
2021
81.0p
85.7p
96.7p
2023
2022
2021
78.4p
94.8p
166.0p
182
Why we engage
To enable informed
decisions from those
that invest in and lend
to SSE through open
communication.
Input to SSE
Ensure financial stability,
provide stewardship
perspectives and
feedback on strategic
priorities.
Value created
Sustainable return on
long-term investment
through capital growth
and dividends and
achieving 2030 Goals.
Shareholders and debt providers
30 SSE plc Annual Report 2023
How we engage
SSE directly serves energy customers
in the domestic (all-island Ireland) and
business-to-business (UK and Ireland)
energy supply markets and provides
grid connection to non-direct networks
customers in its Distribution and
Transmission operating licence areas.
Group engagement
• Dedicated panels to ensure the
perspectives of vulnerable customers
are considered and forums to engage
with large business customers.
• Monitoring a wide range of indicators of
performance and customer sentiment.
• Working with third parties to actively
identify and make provision for customer
vulnerability, including through
encouraging eligible customers to be
added to the Priority Services Register.
Board engagement
• Updates from SSE’s customer facing
Business Units on the influence of
customer factors driving business
direction and propositions.
• Monitoring of customer performance
to ensure delivery of an appropriate
level of service and investment.
More on pages 64 to 65
Material issues in 2022/23
Networks customers
• Benefits and costs of RIIO-ED2
settlement.
• Increased resilience and greater
support for all household customers
in vulnerable situations.
• Improved customer service/connections
processes in Distribution.
• Impact of extreme storms with a
particular focus on investment,
communications and support for
vulnerable customers.
• Impact of potential rota load
disconnections (RLD).
Energy supply customers
• Affordable and accessible energy in the
context of ongoing market volatility and
increasing international instability.
• Energy efficiency and the cost of energy
for business customers.
• Continued focus on the best way for
businesses to decarbonise, highlighting
the cost-reduction benefits with energy
costs on the rise.
• Providing clarity to businesses on how
to access energy bill support.
• Decisions relating to prices and profits.
Priorities for 2023/24
• Safe, reliable and efficient delivery of
service to networks customers.
• Cost of living pressures on direct retail
customers.
• GB domestic retail brand separation
finalisation.
Our stakeholders continued
• SSE Airtricity announced
measures in response to the
cost of living crisis, and made
no profit, returning €35 to
every customer in April 2023
(see pages 64, 82 and 107 ).
• SSEN Distribution responded
to two storms which
impacted its network,
working to restore power
to customers swiftly (see
page 98 ).
• SSEN Distribution led the
creation of a new Priority
Services Register website,
to better support customers
(see page 65 ).
2022/23
Actions
MEASURING ENGAGEMENT AND VALUE CREATED
Customers on SSEN Distribution’s
Priority Services Register (PSR)
Stakeholder engagement events
held by SSEN Distribution
SSE Airtricity’s support scheme on the
island of Ireland was worth up to
€25m
Why we engage
Dialogue aims to
support the transition to
a decarbonised energy
system in a fair and
affordable way.
Input to SSE
Customer priorities,
expectations and
ultimate remuneration.
Value created
Reliable and inclusive
provision of service.
Energy customers
2021
770,844
2022
768,104
2023
853,416
2021
870
2022
827
2023
715
31SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
How we engage
Group engagement
• Primarily through SSE’s Political
Engagement Policy under which it
makes representations to the institutions
of government in a politically-neutral
way consistent with the Company’s core
purpose and strategy.
• Ongoing dialogue with the industry
regulator Ofgem on networks price
controls, market design and carbon
pricing, and support for low-carbon
energy technologies.
• Participation in UK trade delegations
abroad.
• Events, panel discussions, round tables
and thought-leadership publications to
engage policy-makers and regulators
with energy issues.
Board engagement
• Oversight of the implementation of
SSE’s Political Engagement Policy and
corresponding advocacy priorities.
• Monitoring of engagement activity and
responses to regulators to ensure that
strategic, financial, investment and
operating frameworks align to the
external landscape.
More on page 13
Material issues in 2022/23
• Accelerating infrastructure delivery
to improve energy security and
decarbonise the sector.
• Strategic investment in networks
to facilitate net zero and improve
energy resilience.
• Navigating the energy crisis to support
consumers and businesses facing high
energy costs whilst protecting investor
confidence in the UK.
• Policy frameworks to bring forward
investment in CCS and hydrogen.
• The evolution of the electricity
market and support mechanisms
to continue to deliver investment in
energy infrastructure.
• Building support for Coire Glas and the
need for policy support mechanisms
for long duration storage.
Priorities for 2023/24
• Engagement with all parties on SSE’s
net zero-focused advocacy priorities.
• Engagement with governments and
regulators in the emerging overseas
markets in which SSE has an interest.
• Ensuring electricity market design
reforms being considered in the UK and
EU support cost-effective renewables
and network investments.
• Policy support for flexible energy
solutions including long duration
energy storage and CCS and hydrogen
technologies.
• Consenting and progression of
low-carbon investment programme.
• Direct engagement with
the UK Government on
formulation of the temporary
Energy Generator Levy in
an effort to secure the best
short-term outcomes
for SSE’s stakeholders
(see page 39 ).
• Engagement with UK
Government on its Review
of Electricity Market
Arrangements to ensure
the best long-term outcomes
for SSE’s stakeholders and
net zero.
• Working with the Irish
Government on the provision
of Emergency Generation
capacity at Tarbert to 2028
and implementation of
the EU revenue cap
(see page 105 ).
2022/23
Actions
Meetings with political or regulatory
stakeholders
Stakeholder mentions of SSE and
its projects
Shared platforms with stakeholder
representatives
81 65 34
Why we engage
Constructive
engagement aims
to ensure fair and
effective energy sector
frameworks for energy
customers and investors.
Input to SSE
Public policy and
regulatory frameworks.
Value created
Considered and expert
sector views; investment
in delivery of
government priorities.
Government and regulators
32 SSE plc Annual Report 2023
How we engage
Group engagement
• Partnering with key NGOs to deliver
social and environmental benefits for
the communities in which SSE operates.
• Community consultation events
throughout the year to gather feedback
on projects and business plans.
• Collaboration with academic
partnerships to inform strategic
decision-making and knowledge
sharing on policy, energy systems
and innovation.
Board engagement
• Review of SSE’s 2030 Goals set aligned
to UN Sustainable Development Goals
framework and oversight of associated
strategic delivery plans.
• Due consideration of the local
community benefits of large
capital project investment.
Material issues in 2022/23
• Net zero transition planning, considering
both social and nature interdependencies.
• The cost of energy, particularly in the
context of the cost of living crisis.
• Socio-economic and environmental
impact of SSE’s investments in
communities that host low-carbon
infrastructure.
• Policies and practices that support
a just and fair transition to net zero.
• Employment standards, including Living
Wage, safe workplaces and inclusion
and diversity.
• Responsible behaviour on tax policies
and tax transparency.
• The allocation and impact of SSE’s
community investments.
• Impacts on the natural environment.
Priorities for 2023/24
• Creation of quality green jobs in support
of a just transition.
• Response to storms, network resilience.
• Community support schemes that
address vulnerability.
• Constructive dialogue on the
development of large capital projects.
• The impact of SSE’s activities on nature
and eco-systems.
More on page 57
Our stakeholders continued
• Multi-stakeholder event held
to promote just transition
(see page 56 ).
• SSE invested £16.5m in
communities across the UK
and Ireland (see page 57 ).
• SSE contributed a total of
£6.47bn to the UK and Irish
economies and supported
42,370 jobs (see page 57 ).
2022/23
Actions
MEASURING ENGAGEMENT AND VALUE CREATED
Communities directly engaged with
through SSE Renewables’ community
investment funds
Strategic academic partnerships SSE Airtricity’s donation to
EnergyCloud will help divert
surplus energy to up to
150 5 10,000
fuel poor homes
Why we engage
Working openly
and progressively
seeks to support the
achievement of shared
goals with both social
and environmental
benefit.
Input to SSE
Distinctive social,
environmental and
energy-related
perspectives.
Value created
Robust social contract
through which value
is shared.
NGOs, communities and civil society
33SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
How we engage
Group engagement
• SSE’s primary method of engagement
is through its Supplier Relationship
Management (SRM) programme. This
is aligned to SSE’s Business Units and
encompasses around 40 suppliers who
are key to the growth and success of
business ambitions.
• A forum of 21 supply chain partners,
called the Powering Net Zero Pact,
supports collaborative, pre-competitive
work on sustainability challenges.
• Monthly engagement sessions with
sustainability professionals in supply
chain organisations, led by Business Unit
Sustainability and Procurement and
Commercial sustainability teams.
• Consultations with strategic suppliers,
senior leaders, Business Units and
internal Procurement and Commercial
teams on current and future supply
chain needs.
Board engagement
• SSE’s Executive Directors meet with
suppliers and strategic partners,
including shareholders in joint ventures.
• Regular Board updates on joint venture
project strategy and progress in
domestic and international markets.
Material issues in 2022/23
• Leadership on net zero, circular
economy, human rights, social and
environmental impacts.
• Collaborative working with supply chain
partners to support strategic delivery
and supply chain capacity in areas such
as SSEN Transmission growth, RIIO-ED2,
ScotWind and hydrogen production.
• Inward investment and local content
opportunities across the supply chain.
• Alignment of supply chain partners
and other sector leaders to minimise
resource gaps.
• Positioning SSE as a ‘customer of
choice’ within the energy sector.
• Mitigation of potential human rights risk.
Priorities for 2023/24
• Implementation of new contractor
safety strategy.
• UK supply chain resilience.
• Ongoing interaction through Supplier
Relationship Management programme.
• Promotion of Powering Net Zero Pact
and circular economy.
• Continued focus on industry
understanding of Scope 3 emissions.
• Driving cross-sector collaboration
on net zero delivery and mitigation
of human rights risks.
• Monitoring supply chain risk areas such
as human rights and modern slavery.
More on page 66
• Collaboration with partners
on SHE performance with
the establishment of central
team in 2022/23 to drive
forward a strategy to support
performance among
principal contractors working
on large capital projects
(see page 164 ).
• Launch of the Coalition
for Wind Industry Circularity
to support the re-use,
refurbishment and re-
engineering of broken
wind turbine parts
(see page 55 ).
• Continued engagement on
supply chain learnings at
COP27 (see page 66 ).
2022/23
Actions
Participants in SSE’s Supplier
Relationship Management
programme
Members of the Powering
Net Zero Pact
Leadership status maintained
for supply chain engagement
with CDP for its 2022 submission
2023
2022
2021
28
34
45
21
(vs 11 2022)
Why we engage
Fostering healthy
reciprocal relationships
helps SSE to ensure it
achieves the greatest
all-round value from
its investments and
activities.
Input to SSE
Quality goods and
services and investment.
Value created
Sustainable
relationships,
value creation and
partnership expertise.
Suppliers, contractors and partners
34 SSE plc Annual Report 2023
Embedding
sustainability
A sustainable approach
“It is impossible to be sustainable without
taking action to tackle climate change. But it is
possible to tackle climate change in a way that
is unsustainable for people and nature. That is
why, while SSE is wholly focused on finding
the profitable solutions to the problem of
climate change, it is seeking to do so in a
way that adds value to communities and
the wider environment too.”
Rachel McEwen
Chief Sustainability Officer
SSE’s approach to
sustainability reporting
SSE integrates the principles of long-term
sustainability within its business strategy.
Factoring in environmental and social
considerations to business activities is
central to creating and sharing value with
stakeholders, and for ensuring the continued
success of the Company. Stakeholders
are vested in SSE’s sustainability impacts,
and SSE is committed to providing
comprehensive and transparent non-
financial disclosures.
SSE’s most material environmental and
social disclosures, including climate-related
issues – specifically, reporting against
Task Force on Climate-related Financial
Disclosures (TCFD) recommendations –
nature and ensuring a fair and just energy
transition, are integrated into this Annual
Report. SSE’s Sustainability Report 2023 is
the sister document to the Annual Report
2023, providing enhanced disclosure of
SSE’s policies, practices and performance
against key economic, social and
environmental impacts and goals.
Further disclosures can be found at
sse.com/sustainability .
SSE’s approach to sustainability 35
Accelerating climate action
Climate-related financial disclosures
and GHG emissions performance 36 to 51
Protecting the natural environment
Responsible resource use and managing
impacts on nature and biodiversity 52 to 55
Ensuring a just transition
Workforce disclosures, including inclusion
and diversity, and how SSE creates and
shares value with customers, communities
and supply chain 56 to 66
Driven by SSE’s strategy “...creating value for shareholders and society...”
Aligned to shared value global framework United Nations Sustainable Development Goals (SDGs)
Four highly material SDGs linked to SSE’s 2030 Goals
Three further material SDGs linked to SSE’s Environmental Strategy
SSE’s 2030 Goals
Cut carbon
intensity by 80%
Increase renewable
energy output fivefold
Enable low-carbon
generation and demand
Champion a fair and
just energy transition
Resource use Natural environment
35SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
A sustainable business strategy
The UN’s 17 Sustainable Development
Goals (SDGs) are the global blueprint for a
sustainable future and provide a powerful
framework to align SSE’s strategic business
objectives with societal ones.
Since 2019, SSE has aligned its business
strategy to the SDGs most material to its
business. The schematic below depicts the
flow of sustainability from SSE’s objective
set in its strategy statement to “create value
for shareholders and society”, with UN
SDGs providing the framework to guide
the creation of that shared value. Within
this framework SSE has identified four
SDGs which are highly material to the
business, and to which it has linked its
four core 2030 Goals, and a further three
material SDGs, which are focused on the
environment and guide the pillars of SSE’s
environment strategy. More information on
SSE’s sustainability framework can be found
in the Sustainability Report 2023 .
Focusing on the most
material issues
SSE’s stakeholders expect meaningful
information relating to its social and
environmental impacts. That means
disclosures must be focused on the issues
most material to its business activities.
This principle is further reinforced through
recent developments in standardised
sustainability reporting frameworks
which require disclosures against material
sustainability-related issues.
Over 2022/23, SSE undertook a double
materiality assessment, supported by a
third-party, with the objective of confirming
the environmental, social and governance
(ESG) issues most material to its business
activities. Following a process of stakeholder
consultation and analysis, the assessment
identified 21 sustainability issues material to
SSE. The top five of these material issues are
outlined below, alongside where further
detail can be found.
1. Carbon emissions (see pages 49 to 51 ).
2. Sustainable energy generation
(see pages 100 to 102 ).
3. Affordable and reliable energy
(see pages 64 and 65 ).
4. Supply chain management
(see page 66 ).
5. Skilled workforce (see page 58 ).
The results confirm that SSE’s approach to
sustainability remains focused on the most
material issues from both an internal and
external perspective. Carbon emissions align
to the SDG 13, sustainable energy generation
and affordable and reliable energy align to
the SDG 7 and SDG 9. The issues arising from
supply chain management and a skilled
workforce predominantly align to SDG 8.
Full detail of both the process and the results
of the double materiality assessment can be
found in SSE’s Sustainability Report 2023 .
Aligning with external
frameworks
SSE is a signatory to the United Nations
Global Compact (UNGC), incorporating the
Ten Principles of the UNGC into its approach
to business, and aligns disclosures and KPIs
in its Sustainability Report to international
non-financial reporting standards, including
the Global Reporting Initiative (GRI) and the
SASB Standards. SSE also actively engages
with key investor ESG ratings agencies
and investor-led initiatives. Detail of SSE’s
performance in these ratings can be
found at sse.com/sustainability .
Developments in standardised sustainability
disclosures have continued at pace over
2022/23, including the International
Sustainability Standards Board (ISSB)
consultation on its first two frameworks,
expected to be finalised in summer 2023,
and the EU Corporate Sustainability
Reporting Directive (CSRD) coming
into force in January 2023. While these
frameworks will not impact SSE this year,
SSE continues to monitor developments
and remains mindful of these frameworks
in its 2022/23 reporting, working towards
preparedness for upcoming disclosure
requirements.
36 SSE plc Annual Report 2023
A sustainable approach continued
Accelerating
climate action
The climate emergency requires urgent action. That is why SSE’s net zero
ambitions place climate action front and centre of its strategy. SSE aims
to support the transition to a decarbonised power system and align with
a 1.5°C global warming pathway.
Climate change represents both a risk
and an opportunity to the energy sector.
That is why, since 2018, SSE structures its
climate disclosures against the Task Force
on Climate-related Financial Disclosures
(TCFD) recommendations. Climate
disclosures provide a channel to elevate
climate challenges informing decisions
and driving change to deliver a net
zero economy.
Mandated climate-related
financial disclosure in the UK
The Financial Conduct Authority
(FCA) listing rule LR 9.8.6 R(8) requires
organisations to report against the TCFD
recommendations, recommended
disclosures and the Annex and guidance
(published 2021) in annual reports.
SSE believes that whilst it is compliant
with the listing rule there is still opportunity
for increasing maturity across all TCFD
disclosure requirements. SSE continues to
Climate-related financial disclosures
Task Force on Climate-related
Financial Disclosures (TCFD)
recommendations
Governance
Disclose the organisation’s
governance around
climate-related risks
and opportunities.
More on pages 37 and 38
Compliant
Strategy
Disclose the actual and
potential impacts of
climate-related risks and
opportunities on the
organisation’s businesses,
strategy, and financial
planning where such
information is material.
More on pages 39 to 47
Compliant
Risk Management
Disclose how the
organisation identifies,
assesses, and manages
climate-related risks.
More on page 48
Compliant
Metrics and Targets
Disclose the metrics and
targets used to assess
and manage relevant
climate-related risks and
opportunities where such
information is material.
More on pages 49 to 51
Compliant
actively seek feedback from shareholders
and stakeholders on best practice on
TCFD disclosures.
SSE has considered climate change in the
preparation of the financial statements
as at 31 March 23 on pages 192 to 347
and further information has been included
in note 4.1(v) Impact of climate change
and the transition to net zero – financial
judgement and estimation uncertainty
on pages 213 to 214 .
37SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Board oversight of climate issues
Responding to the challenge of climate
change is central to SSE’s strategy and, as
a result, the SSE Board considers climate
change as it establishes SSE’s purpose,
vision and strategy.
Throughout 2022/23 climate matters were
assessed in dedicated strategy sessions
and during Board meetings. Board sessions
considered both transitional and physical
climate-related opportunities and risks and
took this into account in the decisions it
made (see page 131 ).
The Board is supported by a series of
Board-level and Executive-level governance
committees in carrying out its role to
oversee climate-related opportunities
and risks. This is set out in the governance
pathways below.
SSE has a set of 19 Group Policies applicable
across its entire organisation, of which
Climate Change and Sustainability are
two. Policies are reviewed and endorsed
by the Group Executive Committee and
approved by the Board annually.
Compliance with Group policies is also
considered as part of the annual review of
the effectiveness of the System of Internal
Control (see page 159 ).
The Board’s Schedule of Reserved
Matters; the Terms of Reference of
the Board Committees and the Group
Executive Committee; and the role
profiles for key Board roles present the
division of responsibilities across SSE
relating to climate matters (sse.com
and pages 114 to 141 ).
Board climate expertise
and training
Collectively, and individually, members
of the Board possess a depth of long-
standing energy sector experience. The
specific expertise required to lead SSE’s
net-zero aligned strategy within the
external operating context, including
considering of the impact of climate
change, is set out in the SSE’s skills
matrix on page 115 . Amongst other
matters, knowledge deemed material to
the Board’s role includes clean energy
technologies and climate science,
alongside understanding of the policy
framework required to support society
transition to a net zero world. The skills
matrix details the individual non-Executive
Directors who support these attributes.
The Executive Directors are deemed to
meet all of the criteria in the skills matrix
and lead the delivery of SSE’s strategy,
science-based targets and a set of 2030
Goals, which is supported by extensive
engagement on climate-related issues
with SSE’s stakeholders.
Governing climate-related risks and opportunities
Structured governance pathways
TCFD Governance
recommendations:
Governance
a) Describe the board’s
oversight of climate-related
risks and opportunities.
b) Describe management’s role
in assessing and managing
climate-related risks and
opportunities.
Board Level
Executive
Level
Business Level
Board of Directors
Sets SSE’s purpose, vision and strategy.
Oversees SSE’s material sustainability matters including climate change.
Nomination Committee
Responsible for Board appointments to
support SSE’s strategy.
Safety, Sustainability, Health and
Environment Advisory Committee
Oversees SSE’s climate adaptation and
resilience plans.
Group Executive Committee
Implements SSE’s strategy which includes
climate change policies and practice.
Audit Committee
Oversees SSE’s climate-related financial disclosures
in SSE’s Annual Report.
Remuneration Committee
Responsible For Remuneration Policy that includes
climate factors.
Group Risk Committee
Reviews the processes, controls and content
of climate-related financial disclosures.
TCFD Steering Group
Advises on the development of comprehensive, fair, balanced and understandable
climate-related financial disclosures.
TCFD Working Group
Responsible for the production of SSE’s climate-related opportunity and risk disclosures with
appropriate stakeholder input.
See the Corporate Governance framework on page 122 .
38 SSE plc Annual Report 2023
In 2022/23, SSE’s Board alongside
members of the executive team received
updates on climate reporting (including
the Taskforce on Climate-related Financial
Disclosures (TCFD) and Corporate
Sustainability Reporting Directive (CSRD)),
as well as deep dives on technical topics
including the future of hydrogen, the
role of carbon capture and storage and
distribution networks and net zero. These
are detailed in the discussion of how the
Board sets SSE’s strategy on page 125 .
Role of senior management
Strategy is implemented by the Group
Executive Committee through SSE’s
Business Units. This includes ensuring
that business decisions are aligned with
SSE’s strategy and objectives, such as its
2030 Goals and science-based targets.
As Chair of the Group Executive Committee
the Chief Executive is responsible for
climate-related initiatives. The Chief
Executive agrees the annual objectives
for the Chief Sustainability Officer who
is a direct report. The Chief Sustainability
Officer advises the Board, Group Executive
Committee, Group Risk Committee and
Business Units on climate-related matters
and progress against SSE’s Net Zero
Transition Plan.
The Group Risk Committee (GRC)
monitors all Group risks on a regular
basis and ensures that the Business Units
are managing the risks for which they
are responsible. The GRC has overall
responsibility for ensuring the right
mechanisms are in place for managing
all risks, including climate-related risk
and opportunities.
Reporting to the GRC is a TCFD Steering
Group, comprising representatives from
Group Finance, Group Risk, Investor
Relations, Company Secretary, Corporate
Affairs and Sustainability, focused on
advising, steering and governing the
development of fair, balanced and
understandable climate-related financial
disclosures. The TCFD Working Group
supports the TCFD Steering Group to
produce SSE’s TCFD disclosures.
Aligning incentives to
climate outcomes
SSE’s approach to Executive
Director remuneration reflects
the role of sustainability and
climate-related considerations
within SSE’s purpose and
strategy, with sustainability-
linked metrics and targets
forming an element of
performance-related pay.
The framework of SSE’s 2030
Goals has been used since 2019
to assess performance, which
was linked to the performance
based Annual Incentive Plan
until 2021/22. The updated
Directors’ Remuneration Policy,
approved by shareholders
at the 2022 AGM, has seen
performance against these
Goals now linked to the
longer-term Performance
Share Plan, which will vest for
the first time in 2025. More
information can be found in
the Remuneration Committee
Report on pages 173 and 183 .
Climate governance activity in 2022/23
Some of the key governance-based decisions taken in the year are presented in the timeline below. Further detail of net
zero-linked strategic decisions made during the year can be found on pages 126 to 129 .
Safety, Health
and Environment
Committee
review of climate
adaptation plans.
Recommended Board
approval of SSE’s
updated Net Zero
Transition Plan.
Group Risk Committee
approval of SSE’s
governance and
controls for SSE’s
TCFD disclosures.
Recommended Board
approval of SSE’s Just
Transition priorities for
2023/24.
Board approval
of management-
sponsored climate
resolution proposed
at the 2022 Annual
General Meeting.
SSHEAC review
of climate adaptation
plans.
Board approval of the
updated Net Zero
Transition Plan.
Audit Committee
approval of SSE’s
approach to climate-
related financial
disclosures and
associated assurance
arrangements.
Board approval
of SSE’s Just Transition
priorities for 2023/24.
MAY 2022 OCT 2022 FEB 2023 MAR 2023
Board-level
Executive-level
A sustainable approach continued
Accelerating climate action continued
39SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Providing profitable solutions
to climate change
SSE’s purpose is to build a better world of
energy for tomorrow and, by doing this,
SSE is helping directly to address the
energy transition to net zero. It achieves
this through its strategy of developing,
building, operating and investing in the
electricity infrastructure and businesses
needed to decarbonise the power sector.
SSE’s goal is to achieve net zero GHG
emissions across its scope 1 and scope 2
emissions by 2040 (subject to security of
supply requirements) and for remaining
scope 3 emissions by 2050. These long-
term net zero ambitions are supported
by interim science-based targets aligned
to a 1.5°C pathway.
A plan for a net zero transition
SSE’s Net Zero Transition Plan, available
at sse.com/sustainability , sets out for
stakeholders the key actions SSE will take to
drive progress towards its net zero ambitions
and its interim science-based targets aligned
to a 1.5°C pathway. SSE’s first Net Zero
Transition Report, published June 2022,
presented SSE’s progress against its plan
and was received by shareholders through
its climate resolution at its Annual General
Meeting with 98.92% of votes in favour.
A strategy to support net zero
The Plan was updated in November 2022 to
take account of feedback from shareholders
and other stakeholders. Changes involved
the inclusion of SSE’s joint acquisition of
Triton Power (see more information on
pages 103 to 105 ); the addition of
cross-cutting issues to recognise the
importance that climate adaptation and
resilience and the just transition play in the
transition to net zero; and, an enhanced
definition of net zero to SSE and further
explanations on the role of neutralisation
technologies in achieving net zero.
To ensure its Plan remains relevant and
comprehensive, SSE develops and iterates
its content and its active involvement in the
UK’s Transition Plan Taskforce, ensuring it
can both influence and learn from
emerging best practice.
With climate-related disclosure provided
within SSE’s Annual Report and Sustainability
Report, its annual Net Zero Transition Report
provides a summary and navigation tool
from which shareholders vote each year.
SSE’s Net Zero Transition Report can
be found at sse.com/sustainability .
Progress in 2022/23 is disclosed across
this Annual Report and SSE’s Sustainability
Report 2023 .
TCFD Strategy
recommendations:
Strategy
a) Describe the climate-related
risks and opportunities the
organisation has identified
over the short, medium,
and long term.
b) Describe the impact
of climate-related risks
and opportunities on the
organisation’s businesses,
strategy, and financial
planning.
c) Describe the resilience of the
organisation’s strategy, taking
into consideration different
climate-related scenarios,
including a 2°C or lower
scenario.
Throughout the year SSE worked
constructively with policymakers to
navigate the energy crisis and engage
on the range of potential political
interventions under consideration.
As a responsible business, SSE believes that
electricity generators have a role to play in
bringing down energy prices, but in a way
that protects investor confidence in the
energy sector and energy security more
broadly. As a Fair Tax Mark accredited
company SSE also believes in paying its
fair share of tax.
SSE supported the principle of the
Electricity Generator Levy (EGL) in the UK
and the wholesale electricity revenue cap
in the EU to ensure that an appropriate
amount of additional tax on extraordinary
earnings – where they materialise –
are paid at a time when consumers are
experiencing abnormally high prices.
Alongside other industry participants
and stakeholders, SSE worked closely
with the UK and Irish government officials
through their consultative process with
a view to ensuring that the design of
the mechanisms achieved these aims
whilst protecting against unintended
consequences for security of supply
or investor confidence.
Engagement was well received and helped
inform practical implementation of the
policy in a number of important aspects.
SSE will continue to work constructively
with all parties to respond to the energy
crisis, without impacting industry’s ability
and appetite to deliver the unprecedented
levels of private capital needed to address
the main cause of the energy crisis – our
dependence on imported fossil fuels.
Addressing the causes of the crisis, rather
than the short-term symptoms, will
ultimately require policy frameworks
that support long-term investment.
Engagement in action
Government and regulators
Engaging on policy interventions
40 SSE plc Annual Report 2023
Target Short term (to 2025) Medium term (2025–2035) Long term (2035–2050)
Engage with 50%
of suppliers by
spend to set an
SBT by 2024.
Reduce the carbon
intensity of scope 1
GHG emissions by
80% by 2030, from
2017/18 baseline.
Reduce absolute
scope 1 and 2 GHG
emissions by 72.5%
by 2030 from a
2017/18 base year.
Reduce absolute
GHG emissions from
use of products sold
by 50% by 2034 from
a 2017/18 base year.
Net zero for SSE’s
scope 1 and 2
emissions by 2040.
Net zero for all SSE’s
remaining scope 3
emissions by 2050.
S3 S1 S2S1 S3 S2S1 S3
2025 2035
2050
S1
Scope 1
S2
Scope 2
S3
Scope 3
Note: for definitions of scopes 1, 2 and 3 SSE follows the GHG Protocol.
For further information on SSE’s GHG and Water reporting criteria see sse.com/sustainability .
Net Zero Transition Plan pathway
A sustainable approach continued
Accelerating climate action continued
Advocating for climate action
SSE actively and positively advocates for
more ambitious climate change policy to
achieve net zero and conducts its advocacy
in line with the goals of the Paris Agreement
and its own net zero strategy.
In 2022/23 SSE’s climate advocacy was
focused on the acceleration of renewables
deployment to deliver net zero and avoid
future cost-of-living crises. The importance
of progress on decarbonising thermal
generation, heat, and transport has also
been an advocacy priority for the Group
in 2022/23.
To maintain momentum towards achieving
net zero ambitions in the UK SSE engaged
the UK’s Department for Environment and
Rural Affairs on matters relating to climate
adaptation and resilience planning, and
responded to UK government consultations
on the Electricity Networks Strategic
Framework and the Review of Electricity
Market Arrangements (REMA). In Ireland,
SSE successfully advocated for an increase
to the 2030 offshore wind target from 5GW
to 7GW and responded to the Government’s
hydrogen strategy for Ireland.
SSE also supported the Transition Plan
Taskforce preparers and users working
group to develop guidance on Transition
Plans and is now a member of the TPT’s
Delivery Group after involvement with the
TPT sandbox (testing) exercise.
Detail of advocacy activities undertaken
across 2022/23 can be found throughout
the Strategic Report of this Annual
Report (pages 2 to 109 ) and in SSE’s
Sustainability Report 2023 available
on sse.com/sustainability .
Aligning capital deployment
to a 1.5°C pathway
SSE supports the integration of standardised
and robust sustainability considerations
into all of its investment decisions. This is
achieved through internal investment criteria
which tests capital investment decisions
against SSE’s commitment to its core 2030
Goals, including the targeted reductions
in GHG emissions consistent with a 1.5°C
Paris-aligned pathway as verified by the
Science Based Targets initiative.
In November 2021, SSE announced its
Net Zero Acceleration Programme which
committed to enhanced investment in
renewables, networks and flexibility, whilst
beginning to export SSE’s renewables
capabilities overseas. With rising ambitions
in key markets, combined with an increasing
focus on energy security, SSE has upgraded
this strategic programme for the period
2022 to 2027, referred to as ‘NZAP Plus’,
to invest more capital into the low-carbon
electricity infrastructure needed by society.
With around 90% of the NZAP Plus
expected to be invested in either
renewables or networks, the substantial
majority of the investment plan is directly
focussed on climate solutions to achieve
SSE’s 2030 Goals, the four material UN
Sustainable Development Goals (SDGs)
which underpin them and is aligned to
the Technical Screening Criteria of the EU
Taxonomy. The remaining 10% includes
investment in low-carbon flexible service
technologies, such as the two recently
announced Biofuel projects in Ireland,
as well as other capital investment such
as maintenance spend and investment in
Group IT infrastructure.
Financing climate strategies
SSE understands that investors seek robust
mechanisms through which they can
ensure their investments are sustainable
and take account of climate-related risks.
To support both its own developments and
the growth of green finance, SSE also has
pursued a strategy of issuing green bonds,
when appropriate, to fund its investments.
In July 2022, SSE issued a €650m seven-
year Green Bond, the proceeds of which
were allocated to help fund SSE Renewables’
flagship onshore and offshore wind projects
which are currently under construction or
recently completed. This marks SSE’s fifth
Green Bond in six years and reaffirms its
status as one of the largest issuer of Green
Bonds from the UK corporate sector. It
remains the only UK corporate to offer
multiple Green Bonds and this latest
issuance brings SSE’s total outstanding
green bonds to over £2.5bn. More
information can be found at sse.com/
greenbond .
Material climate impacts
The most material climate-related
opportunities and risks are described
in detail on pages 42 to 45 and have
the potential to significantly impact SSE’s
business, strategy and financial planning.
The opportunities (pages 42 and 43 ) relate
to the role that renewables, transmission and
distribution electricity networks, and thermal
generation play in supporting the transition
to net zero. The material risks (pages 44 and
45 ) are associated with the physical
impacts of extreme or changing weather
conditions on renewable and network
operations; alongside transition risks
related to renewable wholesale prices
and resilience of thermal power generators
to changing policy.
41SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Further information on each climate-
related opportunity and risk is also
presented in SSE’s CDP Climate Change
Programme submission, available at
sse.com/sustainability .
Conducting climate
scenario analysis
In 2022/23, SSE conducted scenario
analysis of its material climate-related
opportunities and risks. SSE introduced
‘impact pathways’ to map each potential
climate event and its effect on SSE’s
business activities. To calculate the
potential financial impact a combination
of data sources were used involving
historical internal business data, external
independent climate-related scenario
data alongside current and approved
forecast financial data.
Transition risk scenario frameworks: to
quantify the potential financial impact
of the climate transition opportunities or
risks two external independent climate-
related scenarios were drawn from to
inform scenario analysis:
1. International Energy Association’s (IEA)
Net Zero Emissions by 2050 scenario
shows a pathway to limit global
temperature to 1.5°C and aligns with the
International Panel on Climate Change
(IPCC) sixth assessment report; and IEA
Stated Policies Scenario (STEPS) which
reflects current policy settings based
on ‘sector by sector’ and ‘country by
country’ assessments of the specific
policies that are in place, as well as
those that have been announced by
governments around the world and is
consistent with a global temperature
rise of 2.5°C.
2. National Grid Future Energy Scenarios
which involve four different, credible
pathways for the future of energy
between now and 2050. SSE uses
the ‘Leading the Way’ and ‘Consumer
transformation’ pathways, which are
aligned to the UK Net Zero emissions
by 2050 target that aims to keep global
temperature rise to below 1.5°C, for its
1.5°C scenario. SSE uses the National
Grid Future Energy Scenario ‘Falling
short’ pathway for its 2.5°C scenario,
this does not achieve the UK net zero
emissions by 2050 target and is
therefore assumed to represent a
pathway that leads to a warmer global
temperature outcome of 2.5°C.
Physical risk scenario frameworks: to
quantify the potential financial impact
of the physical risk of climate change,
SSE used the UK Met Office’s climate
projections (UK CP18) tool. The UK CP18
data aligns to the International Panel on
Climate Change’s (IPCC) Sixth Assessment
Report Representative Concentration
Pathways (RCPs). For the 1.5°C scenario,
SSE used the Met Office Climate
Projections 1.6°C temperature pathway
which is consistent with the IPCC RCP
2.6 pathway. The 4°C scenario draws
from the UK Met Office 4.3°C temperature
pathway which is consistent with the
IPCC RCP 8.5 pathway.
General climate change trends project an
increased chance of warmer, wetter winters
and hotter, drier summers along with an
increase in the frequency and intensity
of extremes. These trends are projected
to occur from the middle of the century
onwards. As a result, SSE has modelled
the physical risks of climate change in
2050 and 2080 to reflect the longer term
nature of changes in climate. In addition,
for these physical risks SSE has used
climate projection data associated with
a 1.5°C and 4°C temperature change to
assess the impact of a more extreme
warming scenario.
42 SSE plc Annual Report 2023
A sustainable approach continued
Accelerating climate action continued
Understanding climate-related opportunities and risks
The purpose of TCFD disclosures is to demonstrate the resilience of a company to climate change. An important way to consider that
resilience, is to define climate-related opportunities and risks and subject them to different climate outcomes. The next four pages are
dedicated to helping stakeholders understand SSE’s resilience under varying scenarios and timeframes. This analysis does not represent
a prediction of the future, simply a tool to understand a plausible spectrum of outcomes.
Pages 42 and 43 assesses SSE’s climate opportunities and pages 44 and 45 considers SSE’s identified climate risks.
Potential financial impact of assessed climate opportunities
Opportunities 2030 ( EBIT £bn) 2050 (EBIT £bn)
1.5°C 2.5°C 1.5°C 2.5°C
1. Accelerated wind investment
1
0.48 – 0.66 0.35 – 0.47 1.09 – 1.50 0.63 – 0.86
2. Accelerated transmission growth
2
0.46 – 0.62 0.21 – 0.28 1.10 – 1.50 0.82 – 1.11
3. Valuable flexible hydro
1
0.00 – 0.01 0.00 – 0.01 0.15 – 0.20 0.13 – 0.17
4. Valuable flexible thermal
1
0.14 – 0.20 0.66 – 0.99 0.05 – 0.07
5. Driving distribution transformation
3
0.09 – 0.12 0.04 – 0.06 0.31 – 0.42 0.28 – 0.37
The potential financial impact of all scenarios is stated in GBP billion (£bn) based on one-year annualised earnings before interest and tax (EBIT) and presented as a
range to reflect sensitivities applied to each climate scenario. For each opportunity, the annualised EBIT is adjusted for the capacity or other growth assumptions from
the noted scenarios. Further adjustments for price changes based on increased system capacity were made for opportunities 1 and 3.
1 The 1.5°C scenario draws from the IEA Net Zero Emissions by 2050 pathway and from the IEA STEPS pathway for the 2.5°C scenario.
2 The 1.5°C scenario draws from the National Grid Future Energy Scenario ‘Leading the way’ pathway and from the National Grid Future Energy Scenario ‘Falling
short’ pathway for the 2.5°C scenario.
3 The 1.5°C scenario draws from the National Grid Future Energy Scenario ‘Consumer transformation’ pathway and from the National Grid Future Energy Scenario
‘Falling short’ pathway for the 2.5°C scenario.
Resilience after scenario analysis
Climate change scenarios present different possible futures and are based on independent projections from external scenario providers
including the International Energy Agency (IEA), National Grid Future Energy Scenarios and the Intergovernmental Panel on Climate
Change (IPCC). Scenarios are not forecasts and should not be relied upon for decision making. The scenarios are designed for SSE
to test its resilience against a range of different future states and inform strategic decision making.
The scenario analysis completed by SSE on its material climate opportunities indicates that SSE, its strategy and financial plans are resilient
under a range of climate-related scenarios, including a 1.5°C and 2.5°C temperature pathway. Due to SSE’s strategy to focus on the transition
to a net zero world, opportunities under a 1.5°C scenario represent greater growth than those under a 2.5°C temperature pathway.
Climate opportunity impacts
With five relevant material climate opportunities identified, each is defined with its impact on strategy described below:
1. Accelerated wind investment
Context
UK and international binding net zero targets
supported by renewable capacity growth plans
and targets provide an opportunity to invest
in the growth of SSE’s installed onshore and
offshore wind generation capacity.
Key assumptions included the wind capacity
projections from the IEA Net Zero Emissions
by 2050 and STEPS scenarios, SSE’s current
and pipeline wind investment projections and
internal wind capture price factors.
Impact to SSE
As part of the scenario analysis, SSE assessed its
current and pipeline wind portfolio to understand
the potential opportunity of accelerated wind
investment to the business in 2030 and 2050.
The 1.5°C scenario indicated a significantly
greater opportunity in 2030, with a range of
£0.48bn to £0.66bn and an opportunity of more
than double that in 2050 with a range of £1.09bn
to £1.50bn, when compared to a warmer 2.5°C
scenario for the same time horizons.
Strategic alignment
Under the NZAP Plus, SSE anticipates that around
5GW of additional net capacity will be added
across the five-year plan, with net installed
capacity exceeding 9GW by March 2027. This
investment strategy aligns to the opportunities
arising from a 1.5°C scenario.
43SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
2. Accelerated transmission growth
Context
All net zero pathways for the UK require new
sources of renewable wind generation, at scale,
in the north of Scotland. This energy must be
transported to the regions of demand, requiring
significant expansion of the north of Scotland
electricity transmission network.
Projected renewables generation capacity for
Scotland from the National Grid Future Energy
Scenarios ‘Leading the way’ and ‘Falling short’
and SSE’s investment in the north of Scotland
electricity transmission network assumptions
have been used in the scenario analysis.
Impact to SSE
As part of the scenario analysis, SSE assessed
the current and future capital investment plans
for its SSEN Transmission business. The National
Grid ‘Leading the way’ Future Energy Scenario
indicated a significantly greater opportunity in
2030 and 2050, with ranges of £0.46bn to
£0.62bn and £1.10bn to £1.50bn respectively,
when compared to the ‘Falling short’ scenario.
Strategic alignment
While SSEN Transmission has completed the first
year of its five-year RIIO-T2 investment plan,
making progress with key strategic investments
under the Ofgem uncertainty mechanism,
the scale of growth to 2030 has become clear.
Ofgem’s ‘Pathway to 2030’ identified £7bn of
further investment required in the north of
Scotland establishing confidence that both
national climate targets can be met, and that
SSEN Transmission’s growth will more closely
align with the ‘Leading the way’ climate scenario.
3. Valuable flexible hydro
Context
A renewables-led electricity system will require
support from flexible generators that provide
system services, such as short-term reserve,
frequency and long-duration storage services.
The opportunity exists to use low-carbon flexible
hydro capacity and invest in pumped storage
capacity to support the GB electricity system.
Key assumptions included the projected hydro
generation capacity from the IEA Net Zero
Emissions and STEPS scenarios, SSE’s renewable
investment projections and internal price factors
to take account of market volatility.
Impact to SSE
The scenario analysis assessed the optimisation of
SSE’s existing hydro assets and the development
of Coire Glas a large scale, long-duration pumped
storage project. The 1.5°C scenario indicated a
greater opportunity for SSE’s hydro assets in 2050
reflecting the impact of investing in Coire Glas,
with a range of £0.15bn to £0.20bn, when
compared to the warmer 2.5°C scenario.
Strategic alignment
SSE seeks to invest in its existing 1.5GW of
hydro capacity as well as develop pumped
storage capacity at Coire Glas as part of its
current five-year investment programme. This
investment strategy is therefore aligned to the
opportunities arising from a 1.5°C scenario.
4. Valuable flexible thermal
Context
A renewables-led electricity system requires
support from flexible generators that provide
system services, such as short-term reserve,
frequency, security of supply and price stability.
There is the opportunity to repurpose SSE’s
existing gas-powered electricity generators,
as well as invest in new low-carbon thermal
generation assets.
Natural gas with carbon capture and storage
generation projections from the IEA Net Zero
Emissions by 2050 and STEPS scenarios and SSE’s
current and future investment plans in low-
carbon thermal generation assumptions have
been used in the scenario analysis.
Impact to SSE
The scenario analysis assessed current and
future capital investment plans for SSE’s
Thermal business. The 1.5°C scenario indicated
a significantly greater opportunity in 2050, with a
range of £0.66bn and £0.99bn, when compared
to a warmer 2.5°C scenario. The opportunity
highlights that investment in low-carbon thermal
technologies in the short and medium term
present greater growth in the long term.
Strategic alignment
SSE is actively developing options to decarbonise
its fleet, most notably in carbon capture and
storage and hydrogen technologies. Projects
include carbon capture and storage projects as
part of the UK cluster sequencing programme
at Keadby in the Humber and Peterhead in the
North of Scotland alongside hydrogen projects at
Keadby and Saltend and the repurposing of SSE’s
Aldbrough Gas Storage site for the safe storage of
hydrogen. These plans are therefore aligned to
the opportunities arising from a 1.5°C scenario.
5. Driving distribution transformation
Context
To deliver net zero targets across all sectors
and countries requires a shift to zero emission
vehicles and electric heating. In the UK this
requires the transformation of the distribution
system to ensure the system is fit to manage the
potential five to ten-fold increase in annual load
expected between now and 2038.
Projected electricity consumer demand from the
National Grid Future Energy Scenarios ‘Consumer
transformation’ and ‘Falling short’ and SSEN
Distribution’s investment plans to support the
electrification of the energy system have been
used in the scenario analysis.
Impact to SSE
As part of the scenario analysis, SSE assessed
the current capital investment plans for its
SSEN Distribution business. The National Grid
‘Consumer transformation’ Future Energy
Scenario indicated a significantly greater
opportunity in 2030 and 2050, with ranges of
£0.09bn to £0.12bn and £0.31bn to £0.42bn
respectively, when compared to the ‘Falling
short’ scenario.
Strategic alignment
SSEN Distribution’s current RIIO-ED2 business
plan for 2023 to 2028 sets out the flexibility and
network investment required to accelerate net
zero and therefore is aligned to the opportunities
arising from a 1.5°C scenario.
Link to strategy
Develop Operate Build Invest
44 SSE plc Annual Report 2023
A sustainable approach continued
Accelerating climate action continued
Potential financial impact of assessed physical risks of climate change
To SSE, climate-related risk expresses itself in two ways: through the physical risk associated with a climate changed world; and through
the transition risks associated with policy or market change. The tables presented on pages 44 and 45 present SSE’s material climate-
related risks alongside the potential financial impact against a series of climate scenarios. The impacts described are designed to aid
understanding of SSE’s climate risks and are not intended to be forward looking guidance.
Physical climate risks from a changed climate
Risks 2050 (EBIT £bn) 2080 (EBIT £bn)
1.5°C 4°C 1.5°C 4°C
1. Variable renewable generation risk
1
(0.10) – (0.14) (0.13) – (0.17) (0.15) – (0.20) (0.20) – (0.27)
2. Storm, wind and heat damage to networks assets risk
2
(0.07) – (0.09) (0.07) – (0.10) (0.13) - (0.18) (0.15) - (0.20)
The potential financial impact of all scenarios is stated in GBP billion (£bn) based on one-year annualised earnings before interest and tax (EBIT) and presented as a
range to reflect sensitivities applied to each climate scenario. Storm, wind and heat damage to networks assets risk is stated in GBP billion (£bn) based on one year
annualised storm costs. External climate models have inherent limitations, with a lack of data on extreme climate events, and lower confidence levels on certain
climate variables such as wind. SSE’s assessments account for uncertainties by extracting average wind speed data to assess the impact.
1 The 1.5°C scenario draws from the IEA Net Zero Emissions by 2050 pathway and the UK Met Office Climate Projections (UK CP18) 1.6°C temperature pathway
which is consistent with the IPCC RCP 2.6 pathway. The 4°C scenario draws the IEA Net Zero Emissions by 2050 pathway and the UK Met Office CP18 4.3°C
temperature pathway which is consistent with the IPCC RCP 8.5 pathway.
2 The 1.5°C scenario draws from the National Grid Future Energy Scenario ‘Consumer transformation’ pathway and the UK Met Office Climate Projections (UK CP18)
1.6°C temperature pathway which is consistent with the IPCC RCP 2.6 pathway. The 4°C scenario draws the National Grid Future Energy Scenario ‘Falling short’
pathway and the UK Met Office CP18 4.3°C temperature pathway which is consistent with the IPCC RCP 8.5 pathway.
Resilience after scenario analysis
The scenario analysis completed by SSE on its material climate physical risks indicates that SSE is reasonably resilient to identified climate-
related scenarios including 1.5°C and 4°C pathways. For SSE, the potential financial impact at a 1.5°C pathway presents a lower risk in the
scenarios than a 4°C pathway. This reflects the potential impact of greater global warming and the associated weather impacts of sustained
higher temperatures and extreme weather events (including storms, heat waves and flooding) associated with a warming world.
Due to SSE’s strategy and the key controls that it employs to manage and mitigate the climate risks, SSE is positioned well to respond to
the risks presented in both a 1.5°C pathway and 4°C pathway.
Physical climate risk impacts
1. Variable renewable generation
Context
Longer term changes in climate patterns cause
sustained higher temperatures that may result
in lower rainfall and reduced wind levels. These
changes may impact SSE’s renewable output
and associated earnings in the short, medium
and long term.
Key assumptions included the IEA Net Zero
Emissions by 2050 wind generation projections
and the Met Office UK Climate projections for
average wind speed times.
Impact to SSE
This is a perennial risk that impacts SSE.
For instance, in the first half of 2021/22 SSE
experienced one of the driest and calmest summer
periods (April to September) on record which
reduced adjusted operating profit through the
summer period and impacted financial plans for
the year. For the future, with a five-fold increase
in renewables capacity by 2031 and prospects
beyond 2031, this risk will continue to impact SSE.
The 4°C scenario indicated a greater risk in 2050,
with a range of £0.13bn and £0.17bn and a more
significant risk in 2080 with a range of £0.20bn to
£0.27bn, when compared to a 1.5°C scenario for
the same time horizons.
Strategic alignment
The technical and geographical nature of SSE’s
renewable capacity alongside meteorological
monitoring, crisis management and business
continuity plans are some of the ways that SSE
manages and mitigates its business against this risk.
2. Storm, wind and heat damage to networks assets
Context
Increased severity of extreme weather events,
such as storms, floods and heat waves bring
prolonged extreme temperatures, wind or
rainfall. This may damage or stress network
assets and result in additional costs to repair
and maintain the network and the loss of
incentive revenue for distribution operators.
Projected electricity consumer demand from
National Grid Future Energy Scenarios ‘Consumer
transformation’ and ‘Falling short’, Met Office UK
Climate projections for average wind speed times
and internal assumptions on the projected
frequency of extreme storms and heat waves
have been used in the scenario analysis.
Impact to SSE
This risk has the potential to impact SSE’s
networks assets in the medium and long term.
For example, in the 2021/22 winter season, SSE
experienced five storms named by the Met Office
that became Red Alert events and impacted over
100,000 customers with many impacted for a
multi-day period.
The 4°C scenario indicated a more significant risk
in the longer term, with a range of £0.15bn to
£0.20bn when compared to a 1.5°C scenario
for the same time horizons.
Strategic alignment
A programme of investment into the
strengthening and improvement of SSE’s
networks alongside meteorological modelling,
crisis management and business continuity plans
are some of the ways that SSE manages and
mitigates its business against this risk.
45SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Potential financial impact of assessed transition risks
Transition risks arising from policy and market change
Risks 2030 (EBIT £bn) 2050 (EBIT £bn)
1.5°C 2.5°C 1.5°C 2.5°C
3. Accelerated gas closure risk
1
(0.34) – (0.51) (0.17) – (0.26)
4. Wind capture market risk
2
(0.11) – (0.15) (0.03) – (0.04) (0.38) – (0.52) (0.10) – (0.14)
The potential financial impact for the accelerated gas closure risk is stated in GBP billion (£bn) based projected Net Present Value for each gas-fired power station and
the wind capture market risk is stated in GBP billion (£bn) based on one-year annualised earnings before interest and tax (EBIT). All scenarios are presented as a range
to reflect sensitivities applied to each climate scenario. Further adjustments for price changes based on increased system capacity were made for risk 4.
1 The 1.5°C scenario draws from the National Grid Future Energy Scenario ‘Leading the way’ pathway and from the National Grid Future Energy Scenario ‘Falling
short’ pathway for the 2.5°C scenario.
2 The 1.5°C scenario draws from the IEA Net Zero Emissions by 2050 pathway and from the IEA STEPS pathway for the 2.5°C scenario.
Resilience after scenario analysis
The scenario analysis completed by SSE on its material climate transition risks indicates that SSE is resilient to identified climate-related
scenarios including 1.5°C and 2.5°C pathways. For SSE, the potential financial impact at a 1.5°C pathway presents a greater risk than
the 2.5°C pathway in these climate scenarios. This reflects the potential impact of climate policy in the 1.5°C scenario which may bring
forward the closure of unabated thermal generation to 2030 or earlier and potentially impact future earnings. Whilst the wind capture
market risk has the potential in the 1.5°C scenario to have a greater impact on SSE’s current renewable capacity and future new renewable
capacity and potential future earnings. Due to SSE’s strategy and the key controls that SSE employs to manage and mitigate the climate
risks, SSE is positioned well to respond to the risks presented in both a 1.5°C pathway and 2.5°C pathway.
Climate transition risk impacts
3. Accelerated gas closure
Context
More aggressive climate change policy may bring
forward the closure of unabated gas generation
from 2030.
Key assumptions included the National Grid
Future Energy Scenarios ‘Leading the way’ and
‘Falling short’ for installed unabated natural gas
generation capacity decline projections in 2030
and 2035 and the net present value of existing
gas-fired power stations with a life expectancy
post 2030.
Impact to SSE
SSE’s existing 5.3GW fleet of installed gas- and
oil-fired generation will be nearing the end of its
expected life by the end of the 2020s. However,
2.3GW of Combined Cycle Gas Turbine (CCGT)
capacity will still be in operation in 2030. The
climate scenario analysis assessed the impact of
this capacity not being able to generate beyond
2030 without low-carbon abatement technology.
Under the 1.5°C scenario all remaining gas-fired
capacity closes by 2030 whilst the 2.5°C scenario
assumes some gas-fired power stations are still
able to operate beyond 2030 but expects any
remaining power stations to close by 2035. The
1.5°C scenario indicated a greater risk in 2030,
with a range of £0.34bn and £0.51bn when
compared to a warmer 2.5°C scenario for the
same time horizon.
Strategic alignment
To mitigate this risk, SSE is in the process
of repurposing existing thermal assets and
developing low-carbon thermal technologies
and in addition has a strong pipeline of new
renewables projects that provide a natural
hedge against this risk.
4. Wind capture market
Context
All credible pathways to net zero in the UK and
beyond assume the dramatic scaling up of wind
(especially offshore) generated electricity. As
wind generation capacity increases, it is expected
that the average electricity price wind power
(‘wind capture price’) achieves will be less than
the average price for electricity (‘baseload price’).
There is a risk that this lower average price for
wind output is more extreme than expected by
the market or SSE.
Key assumptions included wind capacity
projections from the IEA Net Zero Emissions by
2050 and STEPS scenarios, internal non-
subsidised wind output and internal wind capture
price factors.
Impact to SSE
The wind capture market risk has the potential
to be greater in a 1.5°C scenario than in the 2.5°C
scenario due to the expectation that the 1.5°C
scenario expects new renewable capacity to be
built at a greater pace to meet the net zero by
2050 goal.
The climate scenario assessed SSE’s current and
future renewables capacity against the future IEA
projections for both pathways. The 1.5°C
scenario indicated a greater risk in 2030, with
a range of £0.11bn and £0.15bn and a more
significant risk in 2050 with a range of £0.38bn
to £0.52bn, when compared to a warmer 2.5°C
scenario for the same time horizons.
Strategic alignment
SSE’s balanced portfolio of generation capacity,
power hedging strategies and the fact that SSE
factors wind capture price into its long term price
forecasts are some of the ways that SSE manages
and mitigates its business against this risk.
Link to strategy
Develop Operate Build Invest
46 SSE plc Annual Report 2023
A sustainable approach continued
Accelerating climate action continued
Classifying sustainable
investments
Progressing towards a UK
Green Taxonomy
SSE is an advocate of the development
of sustainable finance beyond green and
sustainable debt markets. SSE supports the
integration of standardised sustainability
criteria into investment decisions. Its
own internal investment criteria ensures
alignment of capital investment plans to its
core 2030 Goals which includes targeted
reductions in GHG emissions consistent
with a 1.5°C Paris Agreement pathway.
The announcement by the UK Government
in March 2023 that it would consult on a
UK Green Taxonomy in Autumn 2023 was
therefore a welcome step, and SSE looks
forward to engaging in the consultation
process. SSE continues to make the
case that a UK-appropriate taxonomy –
consistent with the broad principles
established by the EU Taxonomy but with
a focus on being simpler, more transparent
and auditable – would help support the
quality of standards, labels and disclosures
required to define green finance activity.
SSE’s Sustainability Report 2023
discusses the opportunities to enhance
the UK Green Taxonomy, available at
sse.com/sustainability .
Assessing SSE’s eligible activities
To provide stakeholders with an indication
of the scale of SSE’s green economic
activities, SSE has taken a best efforts
approach to consider its alignment
to the EU Taxonomy. Key strategic
activities (ie onshore wind, offshore wind,
transmission, distribution) from SSE’s
Reporting Segments were assessed against
the technical screening criteria. While an
internal assessment against the Do No
Significant Harm and minimum safeguards
criteria was undertaken, a second party
opinion has not yet been sought.
The financial metrics disclosed continue
to be classified based on SSE’s reportable
segments. Table 1 on page 47 provides
the output from this principle-based
assessment of SSE’s taxonomy aligned
activities.
Taxonomy eligible activities in 2022/23
are from SSE’s onshore and offshore wind
generation, hydro (run of river and pumped
storage) as well as its networks transmission
and distribution activities. In 2022/23,
the proportion of SSE’s taxonomy-eligible
activities across the different measures
were: adjusted operating profit, 55%;
adjusted investment and capital
expenditure, 81%; and, revenue, 26%.
The reason that SSE’s taxonomy-eligible
revenue appears low in relation to its
total revenue is primarily due to Energy
Portfolio Management (EPM) trading activity
and the sale of power to end customers,
both of which are high volumes, with
pass-through costs and lower margins than
in larger businesses such as renewables
generation and networks. SSE believes
that revenue is a poor measure in assessing
its economic activity and that the most
appropriate measures of its taxonomy-
eligible economic activity are in relation to
its capital investment and its operating profit.
The taxonomy non-eligible activities are
associated with SSE’s thermal generation
and gas storage businesses. As these
businesses continue their decarbonisation
pathways, it is expected that emerging
activities such as low-carbon flexible
generation or hydrogen storage will
qualify in the future.
Finally, activities that have not been
identified in the taxonomy as they either
do not significantly contribute to climate
change mitigation or could yet be
integrated into the Taxonomy at a later date
comprise SSE’s Business Energy, Airtricity,
Distributed Energy, EPM and Corporate
businesses. These activities either operate
as customer focussed businesses, a route
to market for generation, or do not contain
material activities at this time.
Providing the UK Green Taxonomy does
not deviate significantly from the EU model,
SSE expects its assessment of its taxonomy
eligible activities disclosed on page 47 to
be consistent with a future UK framework.
Taxonomy eligible activities
at a glance
Assumptions
SSE’s accounting policies for these
calculations are based on the current
EU Taxonomy Regulation 2020/852,
and delegated acts.
Linkage principle
In calculating each taxonomy-eligible
proportion, a ‘linkage principle’ has been
applied, stipulating that any revenue,
operating profit/loss or capital expenditure
that can be justifiably linked to an identified
taxonomy economic activity can be
classified as taxonomy-eligible. Using
this principle, revenue and operating
profits from SSE’s balancing activities,
hedging, and trading can be linked to
the EU taxonomy eligible activities when
the activity is undertaken to directly
support the eligible activities.
Proxies
Where financial results are not
appropriately split into Taxonomy
eligible activities (namely Energy Portfolio
Management trading and power sale
activities), revenue has been allocated
based on purchased power volumes
from renewable versus non-renewable
assets, and operating profit/loss has been
apportioned based on internal contractual
trading agreements.
Materiality
The analysis has been prepared by applying
a top-down review of SSE’s activities and the
alignment with existing segmental reporting
within taxonomy eligible activities. There
are some activities that fall below specified
thresholds which are not taxonomy eligible.
As SSE’s reporting processes and controls
will be refined ahead of implementation of
the UK Green Taxonomy, it is expected that
some reclassification of activities may occur
due to changes in materiality thresholds or
clarification on eligible activity criteria.
47SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Table 1: Assessment of SSE’s taxonomy aligned activities
SSE’s reported segments (a) Taxonomy eligible activity (a) Revenue (b)
Adjusted operating
profit (c)
Adjusted investment and
capital expenditure (d)
£m % £m % £m %
SSEN Transmission Transmission of electricity 656.1 5.3 372.7 14.7 495.5 22.9
SSEN Distribution Distribution of electricity 1,102.7 8.8 382.4 15.1 421.0 19.5
SSE Renewables Electricity generation 334.8 2.7 580.0 22.9 837.5 38.7
EPM
As route to market for
SSE Renewables
1,150.2 9.2 62.3 2.5 1.2 0.1
Total taxonomy eligible activities 3,243.8 26.0 1,397.4 55.2 1,755.2 81.2
SSE Thermal Thermal Generation 740.4 5.9 1,031.9 40.8 153.2 7.1
Gas Storage Supply of energy 12.2 0.1 212.5 8.4 6.3 0.3
EPM
As route to market for
SSE Thermal
3,198.6 25.6 (3.0) (0.1) 1.2 0.1
Taxonomy non-eligible activities 3,951.2 31.6 1,241.4 49.1 160.7 7.5
Business Energy 3,313.5 26.6 17.9 0.8 38.9 1.8
SSE Airtricity 1,776.9 14.2 5.6 0.2 10.5 0.5
EPM – – 21.1 0.8 2.3 0.1
Distributed Energy 139.1 1.1 (27.4) (1.1) 124.7 5.7
Corporate unallocated 66.2 0.5 (126.8) (5.0) 68.3 3.2
Total taxonomy partially/not-aligned activities 5,295.7 42.4 (109.6) (4.3) 244.7 11.3
Total continuing operations 12,490.7 100.0 2,529.2 100.0 2,160.6 100.0
Notes:
(a) Alignment is based on segmental reporting in SSE’s financial year end statements.
(b) Revenue: derived from the disaggregation of revenue from contracts by customers, in line with the requirements of IFRS 15 ‘Revenue from Contracts with
Customers’ (see note 5.1.1).
(c) Adjusted operating profit/loss: calculated as adjusted operating profit/loss related to the businesses aligned with the taxonomy categories (see note 5.1.2).
(d) Adjusted investment and capital expenditure: calculated as adjusted capital expenditure related to assets or processes associated with taxonomy-eligible
economic activities that is accounted for based on IAS 16, IAS 38 and IFRS 16 and thereby included within adjusted capital expenditure (see note 5.1.3).
Revenue Adjusted operating profit Adjusted investment and
capital expenditure
Eligible
Not eligible
Not aligned
48 SSE plc Annual Report 2023
A sustainable approach continued
Accelerating climate action continued
Identifying and assessing climate
opportunities and risks
SSE’s Group Risk Management Framework
(pages 156 and 157 ) is complemented by
a specialist TCFD climate assessment that
identifies and assesses climate opportunity
and risk in the short, medium and long term.
The climate risk assessment involves senior
business leader interviews supported by
ongoing business unit risk assessments to
capture and understand a long list of climate
opportunities and risks. A materiality test
is completed, and a final list of significant
climate opportunities and risks defined.
SSE identifies the climate impact on its
operations over the short (up to three
years), medium (four to 10 years) and long
term (up to 30 years) from the perspective
of market, policy or regulatory transition
opportunities and risks. Climate impacts
to SSE’s operations from the physical risks
of climate change are assessed over the
short (up to three years), medium (four to
10 years) and long term (up to 80 years).
SSE’s time horizons for assessing climate-
related opportunities and risks are aligned
with other business practice time horizons.
The three climate-related time horizons
mirror the investment, capital and
regulatory time horizons that govern SSE’s
financial, operational and capital plans.
Materiality is tested for each climate
opportunity or risk based on its ability
to have a substantive potential financial
impact on SSE’s strategy or significant
impact on SSE’s stakeholders.
Climate opportunity and risk management
In 2022/23, the assessment process
reconfirmed that the material climate-
related opportunities and risks (on pages
50 to 53 of SSE’s Annual Report 2022 )
remained relevant to SSE with some minor
amendments to a few such as, the ‘storm
damage network risk’ was updated to
more precisely account for the impact
of wind and heat (page 44 ).
Managing climate opportunities
and risks
SSE’s System of Internal Control defines the
policy, standards and governance for the
management of all risks, including those
relating to climate. The system involves
the critical controls that are in place to
manage risk including climate risk. Controls
include business continuity plans, crisis
management and incident response, large
capital project governance and internal and
external assurance.
The climate-related opportunities and
risks (pages 42 to 45 ), combined with
SSE’s Sustainability Report 2022 and CDP
Climate Change response provides further
information on these actions and controls.
Integrated climate-related
risk assessment
SSE’s Group Risk Management Framework
(pages 156 and 157 ) manages risks
that can threaten the achievement of
SSE’s strategic objectives, including
climate change.
TCFD Risk Management
recommendations:
Risk Management
a) Describe the organisation’s
processes for identifying
and assessing climate-
related risks.
b) Describe the organisation’s
processes for managing
climate-related risks.
c) Describe how processes
for identifying, assessing,
and managing climate-related
risks are integrated into the
organisation’s overall risk
management.
Climate change is a Group Principal Risk
to SSE and has the ability to affect the
achievement of agreed strategic objectives
and the long term success of SSE (see page
72 ). Scenarios related to physical risks
associated with climate change form part
of SSE’s viability assessment (page 71 ).
Climate-related influencing factors and key
developments are also considered against
all relevant Group Principal Risks (pages 68
to 77 ).
49SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
GHG emissions preparation
SSE’s GHG inventory is prepared in
accordance with the UK Government’s
environmental reporting guidelines
(BEIS, March 2019); the Greenhouse Gas
Protocol: A Corporate Accounting and
Reporting Standard (revised edition)
developed by the World Resources Institute
and the World Business Council for
Sustainable Development (2004); and
ISO 14064-1:2018 Specification with
Guidance at the Organization Level
for Quantification and Reporting of
Greenhouse Gas Emissions and Removals.
For more information on SSE’s GHG
emissions data and how it is produced,
see SSE’s GHG and Water reporting criteria
available at sse.com/sustainability .
TCFD Metrics and
Targets recommendations:
Metrics and Targets
a) Disclose the metrics used
by the organisation to assess
climate-related risks and
opportunities in line with
its strategy and risk
management process.
b) Disclose Scope 1, Scope 2,
and, if appropriate, Scope 3
greenhouse gas (GHG)
emissions, and the
related risks.
c) Describe the targets used by
the organisation to manage
climate-related risks and
opportunities and performance
against targets.
More on sse.com/sustainability
Table 2: SSE’s GHG inventory
Unit 2022/23 2021/22
Total GHG emissions
1
MtCO
2
e 11.33
(A)
9.93
(B)
Scope 1 GHG emissions
1
– total (UK/Ire) MtCO
2
e
6.08
(A)
(5.35/0.73)
5.75
(B)
(4.22/1.53)
Scope 2 GHG emissions – total (UK/Ire) MtCO
2
e
0.44
(A)
(0.44/<0.01)
0.49
(B)
(0.49/<0.01)
Scope 3 GHG emissions – total (UK/Ire)
1,4
MtCO
2
e
4.81
(A)
(4.12/0.69)
3.69
(B)
(2.86/0.83)
Scope 1 GHG emissions intensity of
electricity generated gCO
2
e/kWh 254
(A)
259
(B)
Total renewable generation output
2
– total (UK/Ire) GWh
9,665
(8,308/1,357)
8,799
(7,602/1,197)
Total non-renewable generation output
3
– total (UK/Ire) GWh
14,302
(12,770/1,532)
13,356
(10,394/2,962)
Total generation output – total (UK/Ire) GWh
23,967
(21,078/2,889)
22,155
(17,996/4,159)
1 Excludes immaterial GHG emissions from Keadby 2 gas-fired power station, which was in the final stages
of testing from September 2022 and was handed over to SSE on 15 March 2023.
2 Total includes pumped storage and biomass output and excludes constrained-off wind in Great Britain.
3 Includes 50% output from Seabank power station reflecting the end of SSE’s power purchase agreement
on 30 September 2021 and SSE’s 50% ownership share from October 2021 onwards. Also includes 50%
output from Saltend power station and Indian Queens power station from the date of SSE’s acquisition of
Triton Power on 1 September 2022. Excludes output from Keadby 2 gas-fired power station which was
handed over to SSE on 15 March 2023.
4 Includes GHG emissions associated with gas generation through Joint Venture holdings according to
equity share. They are: Seabank gas-fired power station and Triton Power (which includes Saltend
gas-fired power station, Indian Queens gas-fired power station and the decommissioned Deeside Power
station. This reflects the fact that under SSE’s operational control method of reporting GHG emissions,
Joint Venture equity share of GHG emissions is classed under the scope 3 ‘investment’ category in
accordance with the GHG Protocol.
GHG emissions inventory
Table 2, in combination with the energy
use data outlined in Table 6 on page 54 ,
represents SSE’s disclosures in line with the
UK Government Streamlined Energy and
Carbon Reporting requirements. SSE
takes an operational control consolidation
approach to account for its GHG emissions.
Under the operational control approach,
SSE includes all joint arrangements that it
has operational control in its scope 1 and 2
inventory. For activities SSE does not have
operational control, the GHG emissions
from the most material joint arrangements
(where SSE holds an equity share equal to
or greater than 50%) are included in SSE’s
scope 3 inventory.
SSE’s inventory details its direct and
indirect GHG emissions (scopes 1, 2 and 3)
performance (measured in million tonnes
of carbon dioxide equivalent – MtCO
2
e),
provided as total emissions as well as split
out by UK and Irish activity. It also provides
a carbon intensity measure based on direct
GHG emissions released for each unit of
electricity SSE produced.
Climate metrics and targets
(A) This data is subject to external
independent limited assurance by
PricewaterhouseCoopers LLP (‘PwC’).
For the results of that assurance, see
PwC’s assurance report and SSE’s GHG
and Water Reporting Criteria 2023 on
sse.com/sustainability .
(B) This data was also subject to external
independent limited assurance by
PricewaterhouseCoopers LLP (‘PwC’).
For the results of that assurance,
see PwC’s assurance report in SSE’s
Sustainability Report 2022 and SSE’s GHG
and Water Reporting Criteria 2022, both
available on sse.com/sustainability .
50 SSE plc Annual Report 2023
Generation output (GWh)
Scope 1 GHG emissions
(million tonnes CO
2
e)
18/19
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
3
6
9
12
19/20 20/21 21/22 22/23
A sustainable approach continued
Accelerating climate action continued
Scope 1 GHG intensity
in 2022/23
SSE’s scope 1 GHG emissions intensity fell
by 2% to 254gCO
2
e/kWh from 259gCO
2
e/
kWh the previous year, which is a fall
of 17% since the 2017/18 base year of
307gCO
2
e/kWh.
SSE’s intensity performance is calculated
based on two elements – total generation
output, comprising thermal and renewables
generation sources and total scope 1 GHG
emissions (99% of which is from thermal
generation).
Output from SSE’s renewable generation
portfolio (inc. pumped storage and biomass)
increased to 9.7TWh in 2022/23, from
8.8TWh the previous year, a rise of 10%
between the same periods. This was driven
by increased output having experienced
an exceptionally still and dry weather
conditions the previous year and output
from the operational turbines at Seagreen
offshore wind farm.
Output from SSE’s thermal generation
also increased, however this was by a
lesser extent than for renewables output.
This meant that the proportion of total
generation output contributed to by
renewable generation continued to
represent 40% of the total portfolio
in 2022/23.
Overall, SSE’s scope 1 GHG intensity was
slightly lower than the previous year due to
a reduction in output from the most carbon
intensive generating plant in SSE’s portfolio,
including from carbon intensive peaking
plant in Ireland.
Absolute GHG emissions
in 2022/23
To understand the GHG emission trends
between reporting periods the GHG
emission inventory is broken down by scope
and a description of material contributing
factors presented. In 2022/23, SSE’s total
GHG emissions consisted of 54% scope 1
emissions, 4% scope 2 emissions and 42%
scope 3 emissions. Overall, SSE’s total
GHG emissions increased by 14% between
2021/22 and 2022/23.
Between 2021/22 and 2022/23, GHG
emissions arising from electricity generation,
consisting 99% of SSE’s scope 1 emissions,
increased by 6%. This was predominantly a
result of a rise in output from SSE’s thermal
generation plant by 7% compared to the
previous year due to market conditions
and the reinstatement of operations
following planned and unplanned
outages the previous year. The impact
of weather, demand and availability
of plant creates variation in the pathway
of emissions reduction.
SSE’s scope 2 GHG emissions were
0.44MtCO
2
e in 2022/23, representing an
11% reduction from the previous year. This
reduction in scope 2 emissions is largely
a result of a fall in the greenhouse gas
emissions associated with losses on the
electricity network, which is a result as
a fall in the grid electricity factor by 9%
over the same period.
Renewables output Coal output Gas and oil output* Multifuel output
Scope 1 GHG emissions
* In 2022/23, oil-fired generation output contributed around 2% of gas and oil output.
Total scope 3 emissions increased by 30%
between 2021/22 and 2022/23. The two
material contributing factors include:
• The inclusion of 0.6MtCO
2
e GHG
emissions from Saltend gas-fired power
station from September 2022 onwards.
This reflects SSE’s 50% purchase of
Triton which completed in September
2022. The emissions from Triton are
defined as scope 3 emissions according
to SSE’s 50% ownership share.
• 12 months of GHG emissions data
from Seabank (50% equity share)
contributing 0.9MtCO
2
e following the
end of SSE’s power purchase agreement
in September 2021. It should be noted
that, prior to September 2021, 100%
of Seabank GHG emissions were
accounted in SSE’s scope 1 emissions
according to the GHG Protocol.
The increase in scope 3 emissions is partly
offset by a reduction of 5.5% in gas sold
GHG emissions between 2021/22 and
2022/23.
With scope 3 emissions increasingly
becoming a greater proportion of SSE’s
GHG emission inventory as a result of
the approach it is taking to delivery its
strategy, SSE is working with its Joint
Venture partners to ensure each put in
place their own Net Zero Transition Plans.
SSE’s scope 3 emissions represent 42% of
its total GHG emissions inventory and the
emissions associated with Joint Venture
thermal generation contributes to 32%
of the scope 3 GHG inventory.
51SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Performance against targets
To support improved performance, SSE
measures and reports progress against
interim science-based targets on a 1.5°C
pathway. This performance is outlined in
Table 3.
SSE remains on track to achieve its
SBTi-approved target to reduce scope 1
GHG emissions intensity by 80% between
2017/18 and 2030. It is expected that SSE’s
NZAP Plus will develop and connect the
renewables capacity which will contribute
to a reduction in the scope 1 GHG intensity
by 2030.
SSE’s total scope 1 and 2 GHG emissions
combined were 6.52MtCO
2
e in 2022/23,
this is a reduction of 41% from the 2017/18
base year of SSE’s SBTi-approved absolute
scope 1 and 2 GHG target. Overall, SSE’s
scope 1 and 2 GHG emissions have
reduced significantly compared to the base
year, reflecting lower output from thermal
power stations and the closure of SSE’s last
coal-fired power plant in March 2020. SSE
aims to reduce absolute scope 1 and 2
GHG emissions by 72.5% between 2017/18
and 2030.
GHG emissions from gas sold to
customers, which contribute around 45%
of SSE’s scope 3 emissions in 2022/23,
decreased by 5.5%. This was a result of
lower market demand reflecting increased
market prices. This means GHG emissions
from gas sold have reduced by 15% from
2017/18. SSE’s SBTi-approved target is to
reduce GHG emissions from gas sold by
50% between 2017/18 and 2034.
Table 3: SSE’s performance against its science-based carbon targets
Target Unit 2017/18 2021/22 2022/23 Target Progress against target
Reduce the GHG intensity of scope 1
GHG emissions by 80% by 2030,
from a 2017/18 base year
gCO
2
e/kWh 307 259 254 61 17% reduction in GHG intensity
since 2017/18
Reduce absolute scope 1 and 2 GHG
emissions by 72.5% by 2030 from a
2017/18 base year
MtCO
2
e 11.06 6.24 6.52 3.04 41% reduction in absolute
scope 1 and 2 GHG emissions
since 2017/18
Reduce absolute GHG emissions
from use of products sold by 50%
by 2034 from a 2017/18 base year
MtCO
2
e 2.53 2.29 2.16 1.27 15% reduction in GHG
emissions from gas sold
since 2017/18
Engage with 50% of suppliers by
spend to set an SBT by 2024
% 0 48 51 50 52% of SSE’s suppliers (by value)
that set or committed to set
their own science-based
targets through the SBTi
Working with supply chain
partners to drive climate action
To support the reduction of emissions
associated with the goods and services
SSE purchases, SSE seeks to engage with
50% of suppliers (according to financial
expenditure) to set their own science-
based targets by 2024. SSE continued to
engage with its supply chain on climate
matters through its partnership with the
Supply Chain Sustainability School with
nearly 27% of suppliers by spend using the
resources and training available. In addition,
a carbon working group was set up through
the Powering Net Zero Pact, that aims to
collaborate on a fair and just transition to
net zero carbon emissions, with the aim of
improving scope 3 emissions reporting.
At 31 March 2022, 34% of SSE’s suppliers
by value had set their own science-based
targets through the SBTi, with a further
17% committed to setting one. In 2022/23,
SSE and CDP Supply Chain collaborated
to deliver supplier webinars that aimed at
increasing the climate change questionnaire
response rate from its suppliers, the
engagement led to 237 key suppliers
responding to the questionnaire and
a supplier response rate of 56%.
Carbon pricing
As a generator of electricity, SSE is
subject to policies that impact the price
of carbon, which means the price of
carbon is an explicit consideration in
many investment decisions.
SSE’s generation activities in the GB are
subject to the UK Emissions Trading
Scheme (UK ETS), which is a cap-and-trade
emissions scheme. In addition, SSE’s
generation assets in GB are subject to the
Carbon Price Support mechanism which
sets a price per tonne of carbon emitted and
combined with the UK ETS allowance price,
makes up the Total Carbon Price paid by
electricity generators. In Ireland SSE’s
generation assets are subject to the EU
Emissions Trading Scheme (EU ETS). At the
time of reporting, SSE used carbon prices of
£78/tCO
2
in GB and €86/tCO
2
in the EU. Our
future plans include assumptions on low,
central and high carbon range forecasts.
SSE is required to report its GHG emissions
and energy consumption and this is
presented on page 54 . For further
details on SSE’s approach to carbon pricing
see SSE’s Sustainability Report 2023
alongside SSE’s CDP climate change
submission sse.com/sustainability .
52 SSE plc Annual Report 2023
A sustainable approach continued
Protecting
the natural
environment
Nature has a central role in supporting the achievement of net zero and adapting
to a climate changed world, and the nature and climate crises must be addressed
hand-in-hand. SSE’s Environment Strategy provides a framework for SSE to
manage and mitigate impacts to terrestrial, freshwater and marine ecosystems,
and build a business that uses resources efficiently and embraces the principles
of a circular economy.
Emerging nature frameworks
2022/23 saw a continued international
focus on nature and biodiversity and some
significant steps forward for biodiversity
were made, including the landmark deal
made at the UN Convention on Biological
Diversity (UNCBD) in Canada in December
2022, to protect a third of the planet for
nature by 2030.
While frameworks such as the Taskforce
on Nature-related Financial Disclosures
(TNFD) and the EU Corporate Sustainability
Reporting Directive (EU CSRD) are emerging,
there remains room for greater clarity on
best practice measurement and disclosure
of nature-related information. Increasing
meaningful disclosures around nature-
related impacts is a key focus for SSE, and
it will monitor how these frameworks and
standards develop and work to improve
its own disclosures, including against its
biodiversity net gain metrics.
Governing environmental
performance
SSE’s Chief Executive has overall lead
responsibility for environmental
performance, including at Board-level. The
Safety, Health and Environment Committee
(SHEC) advises the Board on matters relating
to safety, health and environment (SHE). The
work of the SHEC is designed around SSE’s
eight SHE Enduring Goals, one of which is
Environment: Protecting the environment
and operating in a sustainable way. The
SHEC is responsible for setting SHE
performance targets, which include
environmental performance.
The SHEC reports to the Sustainability,
Safety, Environment Advisory Committee
(SSHEAC) which is a Board level committee
that has specific oversight of environment
matters.
At business level, Managing Directors are
accountable for environmental performance
and for managing environmental impacts by
applying SSE’s SHE Management System.
SSE’s Group Environment Policy guides
decision making within the company
and outlines its commitments around
protecting the environment, preventing
pollution and operating in a sustainable
way. This policy is approved by the SSE
Board and is available publicly for SSE’s
stakeholders at sse.com/sustainability .
A strategic approach to
environmental protection
While SSE’s GHG emissions are its most
material environmental impact, it also
has wider impacts on the natural world
that must be carefully managed. Halting
the impact of nature loss and providing
opportunities to enhance ecosystems
and biodiversity will support SSE to meet
its net zero ambitions.
SSE’s Environment Strategy provides the
framework by which SSE considers these
wider environmental impacts. It is centred
around three UN Sustainable Development
Goals (SDGs) focused on the environment:
SDG14 Life Below Water; SDG15 Life Above
Land; and, SDG12 Responsible Consumption
and Production. The Strategy is supported
by policies and procedures to guide SSE’s
day-to-day operations and interactions with
the environment.
To ensure effective environmental
management, SSE operates an
environmental management system which
sets the controls, processes and procedures.
In 2022/23, a number of SSE’s business units
achieved ISO14001 certification – SSEN
Distribution, SSE Energy Customer Solutions
and SSE Enterprise. All of SSE’s businesses
are now certified to ISO14001.
Further detail around SSE’s approach
to managing environmental impacts,
including information on its ISO14001
certification, can be found in SSE’s
Sustainability Report 2023 .
53SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Understanding SSE’s nature
impacts and dependencies
SSE operates in some of the UK and
Ireland’s least populated places, home to
a wide variety of valuable ecosystems and
habitats. It works to manage the impacts of
its activities to ensure it protects and, where
possible, enhances these environments.
Measurable, science-based data as
presented in SSE’s Sustainability Report
2023 are key to ensuring nature impacts
and dependencies are understood and
considered in decision making with the aim
of making progress towards preserving and
protecting nature.
Targeting biodiversity net gain
For onshore Large Capital Projects, all of
SSE’s Business Units have committed to
delivering no ‘net loss’ in biodiversity on
those consented from 2023 onwards
and ‘net gain’ in biodiversity on those
consented from 2025 onwards.
SSE’s approach to Biodiversity Net Gain
began in 2020, with the development of
SSEN Transmission’s site optioneering
toolkit, which is now in implementation
and allows consideration of biodiversity
at the earliest stages of development and
has been recognised for its pioneering
approach. In 2022, SSE Renewables also
published optioneering toolkits and project
biodiversity net gain metric, which has
adapted the SSEN site optioneering toolkit
and the Defra Biodiversity Metric 3.1.
Biodiversity net gain will also be delivered
by SSEN Distribution as part of its ED2
business plan. While SSE has focused on
terrestrial habitats it is also exploring the
potential for enhanced biodiversity within
the marine environment.
Managing water use
Water plays a significant role in SSE’s
operations, being used in the energy
production process including as a coolant
in power stations and a source for power
generation in hydroelectric generators. SSE
also uses water as an amenity in its buildings.
SSE has policies and processes in place,
and works closely with environmental
regulators, to ensure that it uses water in a
sustainable way in its operations. SSE has
an ongoing investment programme within
its hydro operations to improve efficiency,
enhance water capture and minimise spill
from its plant.
None of SSE’s thermal and hydro generation
assets impact on water stressed areas, as
defined by the relevant environmental
regulators in the jurisdictions in which
they operate.
In 2022/23, total water abstracted by
SSE fell to 23,354 million m
3
from 23,896
million m
3
the previous year. This was
largely due to a reduction in water passing
through SSE’s hydro generation plant as a
result of lower levels of rainfall compared
to the previous year. The vast majority
(97%) of water abstracted in 2022/23
was used in SSE’s hydro generation
operations. This water is technically
recorded as abstracted, but it passes
through turbines to generate electricity
and is returned to the environment almost
immediately, and therefore has minimal
environmental impact.
SSE’s total water abstracted excluding
hydro operations also fell slightly over
this period. This was predominantly due to
an unplanned outage at a thermal power
station that uses a once through (direct)
cooling water system. Such assets have
higher abstraction rates than stations with
cooling tower systems.
2022/23 2021/22
2.2
Fresh water (rivers and groundwater)
Brackish and estuarine water
Total water abstracted by SSE (excluding hydro
generation) (million m
3
)
1.9
777
729
Total water consumed increased
significantly over this period, by over 70%.
This was due to increased output from
thermal generation overall, as well as a
proportional increase in the output from
thermal power plant with cooling towers
which have higher evaporative losses
of water than once through (direct)
cooling systems.
Table 4: SSE’s water data
Unit 2022/23 2021/22
Water use
Total water abstracted Million m
3
23,354
(A)
23,896
(B)
Total water abstracted
(exc. Hydro generation)
Million m
3
731
779
Freshwater abstracted
(rivers and groundwater)
(exc. hydro generation)
Million m
3
2.2
1.9
Total water returned Million m
3
23,353
(A)
23,895
(B)
Total water consumed Million m
3
1.4
(A)
0.8
(B)
(A) This data is subject to external independent limited assurance by PricewaterhouseCoopers LLP (‘PwC’).
For the results of that assurance, see PwC’s assurance report and SSE’s GHG and Water Reporting Criteria
2023 on sse.com/sustainability .
(B) This data was also subject to external independent limited assurance by PricewaterhouseCoopers LLP
(‘PwC’). For the results of that assurance, see PwC’s assurance report in SSE’s Sustainability Report 2022
and SSE’s GHG and Water Reporting Criteria 2022, both available on sse.com/sustainability .
OUR TARGET
SSE is committed
to delivering
Biodiversity Net
Gain by 2025 on
all onshore Large
Capital Projects in
the UK and Ireland
54 SSE plc Annual Report 2023
A sustainable approach continued
Protecting the natural environment continued
Managing air emissions
In 2022/23, emissions of nitrogen oxides
(NOx), sulphur dioxide (SO
2
) and particulate
matter (PM10) all reduced compared to
the previous year, with emissions of SO
2
reducing by more than a half. The falling
trend across three of these key air emission
sources, reflects a reduction in output from
oil-fuelled peaking plant in Ireland compared
to the previous year.
Mercury emissions to air increased almost
fivefold, due to an increased level of test
running on back-up fuel oil that was required
during the year, as dictated by Transmission
Operator on the island of Ireland. See Table 5
for full data on air emissions.
Sulphur hexafluoride (SF
6
) is a highly
effective insulating gas used for safety in
electrical transformers and in 2022/23,
SSE’s SF
6
emissions increased by almost
40% compared to the previous year. This
was due to a combination of factors,
including more robust reporting of minor
leakages and increasing numbers of assets
(to deliver net zero) that still requires SF
6
as an insulating gas. SSE has a number of
initiatives to reduce its dependency on SF
6
in its networks, including working with
suppliers to install SF
6
-free alternatives
across its electricity transmission network.
You can read more about what SSE is doing
to reduce the impact of SF
6
in its business
activities in its Sustainability Report 2023
and its Net Zero Transition Plan.
SSE’s energy consumption
Between 2021/22 and 2022/23, the energy
SSE purchased for use in its assets (offices,
depots, thermal power stations, gas storage
facilities, and data centres) increased by 5%,
from 196GWh to 206GWh.
A large contributor to this trend was a 60%
increase in energy consumed in SSE’s gas
storage facilities compared to 2021/22. This
was largely due to increased gas storage
activities at SSE’s Aldbrough facility to
ensure security of supply.
Energy consumed in SSE’s offices, depots
and data centres reduced by 5% compared
to 2021/22. This was due to the continued
investment by SSE in 2022/23 in a range
of energy efficiency measures including
a programme of LED lighting upgrades to
depot sites and it continued its ‘Better Off’
behaviour change campaign.
In 2022/23, SSE purchased 100% of its
electricity for use in its directly managed
offices from renewable sources, backed by
renewable guarantees. In 2022/23, around
52% of the electricity that SSE purchased
for its assets (offices, depots, thermal
power stations, gas storage facilities, and
data centres) was from renewable sources,
up from around 39% the previous year.
SSE is a member of the Climate Group’s
EP100 initiative to encourage businesses to
double energy productivity associated with
office and depot buildings by 2030 from a
2011 baseline.
Embedding circular
economy principles
Circularity is built on the principles of
reducing waste, increasing resource
efficiency, and promoting renewable
energy sources. By adopting circular
strategies, SSE is able to minimise its
environmental impact, enhance
operational efficiency, strengthen
resilience to resource shortages and
create new value for stakeholders. SSE is
introducing the concepts of circularity into
its business activities and is collaborating
with stakeholders to create solutions for
industry-wide challenges and support
circular supply chains.
Table 7 outlines SSE’s key waste data,
including by end destination. In 2022/23,
SSE managed 6,063 tonnes of waste, up
from 5,287 tonnes in 2021/22. This increase
was due to SSE widening the scope and
improving the accuracy of its waste data.
SSE’s target for 2022/23 was to divert 85%
of waste by tonnage from landfill and
recycle 40% of waste by tonnage. It
exceeded these targets, with 65% of SSE’s
total waste being recycled/composted
and only 5% being sent to landfill. The
proportion of waste sent to landfill more
halved compared to the previous year,
Table 5: SSE’s air emissions data
Unit 2022/23 2021/22
Air emissions
Sulphur dioxide (SO
2
) – thermal
generation
Tonnes
1,336
3,021
Nitrogen oxide (NOx) – thermal
generation
Tonnes
3,870
4,573
Sulphur hexafluoride (SF
6
) –
thermal generation and
electricity transmission and
distribution activities
Kg
424
305
Particulates emissions (PM10)
from thermal generation assets
Tonnes
116
277
Mercury emissions from
thermal generation assets
Kg
10.6
2.2
Table 6: SSE’s energy use data
Unit 2022/23 2021/22
Energy use*
Purchased heat from non-
renewable sources – UK/Ire
GWh
3.3/0.06
3.3/0.08
Purchased electricity from
renewable sources – UK/Ire
GWh
103.7/1.1
73.3/0.98
Purchased electricity from non-
renewable sources – UK/Ire
GWh
97.9/0
118.6/0
* This information, taken in conjunction with Table 2 on page 49 , represents SSE’s disclosures in line with
the UK Government Streamlined Energy and Carbon Reporting requirements.
Data and assurance
SSE takes an integrated approach towards assurance utilising internal audit
and external assurance providers to ensure accurate, complete disclosures.
Where data has been externally and independently assured, this has been
noted in the relevant tables. In all other areas, data is identified and disclosed
according to SSE’s internal processes, guided by environmental regulations
where appropriate.
55SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
with a higher proportion of waste being
processed as energy from waste and an
increase in recycled waste as well, as a
result of improved recycling processes
implemented at sites and as the inclusion
waste recycling data such as metals.
Over 2023/24, SSE expects to further
broaden the coverage of waste
performance data to include large capital
projects and minor works. SSE’s 2023/24
performance target is to divert 95% of
waste by tonnage from landfill and recycle
50% of waste by tonnage. It is expected
that the planned scope expansion of waste
data in 2023/24 will influence performance,
in particular recycled waste data. SSE will
continue to review its waste target to
ensure that it remains stretching.
Table 7: SSE’s waste data by end destination
2022/23 2021/22
Total waste produced Tonnes
6,063
5,287
Proportion of total waste:
Sent to landfill %
5%
12%
Processed as energy from waste %
29%
25%
Recycled %
62%
59%
Composted/sent to anaerobic digestion %
3%
1%
Treated %
2%
4%
Hazardous waste Tonnes
144.4
147.9
Data excludes waste data from contractors for large capital projects, minor works contracts and some
specialised waste streams.
SSE Renewables’ wind portfolio in the UK
and Ireland comprises some of the most
productive onshore wind generation assets
in Europe. The optimum maintenance
of those assets further maximises value
to SSE, whilst contributing to climate
mitigation solutions. The opportunity to
maintain the components of those assets
using circular economy principles (reduce,
reuse, repair, remanufacture, recycle,
and recover) is emerging as an important
driver of future commercial, social and
environmental value.
SSE Renewables is driving forward a
strategy to increase the use of refurbished
and remanufactured minor component
parts for the maintenance and repair of
existing components across its wind
portfolio, with particular focus on its
onshore portfolio in the immediate term.
Through a partnership with Scottish-based
SME, Renewable Parts Ltd, rather than
replacing broken turbine gears with newly
manufactured gears, Renewable Parts
refurbish and repair existing components
to a high standard, with high-performance
outcomes. This practical solution has been
instructive to establishing a wider circular
model throughout the wind industry
supply chain.
To support the acceleration of a circular
economy for the wind sector based
in the UK, this year SSE Renewables, the
University of Strathclyde and Renewable
Parts joined forces to launch CWIC, the
Coalition for Wind Industry Circularity.
CWIC aims to stimulate collaboration
between industry peers, suppliers,
and government agencies to unlock
and deliver economic, social, and
environmental opportunities. There are
immediate opportunities in the repair
and maintenance of existing wind assets,
and a longer-term prize through the
design of future wind technology both
onshore and offshore.
A coalition for circularity in the wind sector
Engagement in action
Suppliers, contractors and partners
56 SSE plc Annual Report 2023
Just transition:
measuring progress
From action to accountability
Leading on a just transition
SSE published its Just Transition Strategy
in November 2020, setting out the 20
principles it will follow to ensure that the
impacts from the decisions it takes are fair
and that it maximises the opportunities
for communities to benefit from net zero.
The 20 principles sit under five key themes:
good green jobs, consumer fairness,
building and operating new assets,
looking after people in high-carbon
jobs, supporting communities.
With SSE’s Just Transition Strategy, and a
subsequent report focused on the worker
transition in 2021, SSE continued extensive
multi-stakeholder engagement in the pursuit
of a net zero transition that is fair to working
people, consumers and communities.
This has taken several different forms
including:
• Just transition documentary: A short
documentary featuring voices of SSE
employees with the lived experience of
transitioning from high- to low-carbon
work, supplemented by the perspectives
of the Prospect trade union and
environmental NGO WWF aimed to
bring the notion of a just transition
to life. The film explains that a just
transition is about protecting workers
and communities in the face of
substantial industrial change and that
people must be at the centre of efforts
to tackle climate and nature crises. This
documentary has been shared widely
with stakeholders including trade
unions, investors, and NGOs, and was
also shown to over 1,660 employees.
• Multi-stakeholder event: An event
in London in April 2023 aimed to
normalise the just transition within
corporate climate discourse, enhancing
accountability and bringing the just
transition from concept to action.
Theobjectives included establishing a
sense of collaboration and openness
around a just transition; showing SSE’s
good stewardship of its own transition
to net zero and highlighting the business
benefits that come from establishing
the world’s first business strategy for a
just transition.
• Measuring progress report: A progress
update published in April 2023 in which
SSE set out to demonstrate the impact
its 20 principles for a just transition
have had across the business. These
specifically aim to promote a smooth,
fair and just transition to net zero by
disclosing progress (or otherwise)
against the Just Transition Strategy.
More details on the report and the short
documentary can be found at sse.com/
sustainability/just-transition/
A sustainable approach continued
Ensuring a
just transition
A sustainable transition to net zero is one that is fair
to working people, consumers and communities.
SSE seeks to ensure the benefits of net zero are
shared widely and unfairness is predicted and pre-
empted. Influencing a fair and just transition to net
zero is a strategic objective for SSE.
57SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Sharing the benefits from net zero
Contributing to jobs and GDP
Under its revised Net Zero Acceleration
Programme Plus, SSE plans to invest £18bn
in the five years to March 2027. This scale of
investment generates considerable value
for the communities in which SSE operates.
Every year SSE commissions an
independent assessment of the value it
adds to GDP and the jobs it supports across
the UK, Scottish and Irish economies. Over
2022/23, SSE contributed an estimated
£6.04bn to UK and €429m to Irish GDP. This
represented a slight increase compared to
2021/22 figures, which were £5.98bn and
€417m respectively (adjusted for current
prices). Jobs supported in these countries
fell from 47,130 in 2021/22 to 42,370 in
2022/23, due to a reduction in supply chain
spend. More detail on SSE’s contribution to
GDP and jobs supported in 2022/23 can be
found in SSE’s Sustainability Report 2023 .
SSE’s economic contribution reports can
be found at sse.com/sustainability .
Paying a fair share of tax
SSE considers the responsible payment
of tax a core element of how it shares
value with society. While SSE was the first
FTSE 100 company to be Fair Tax accredited
in 2014, in 2022/23, SSE also became the
first company to transition from the Fair Tax
Foundation’s UK HQ Multinational
accreditation to the Foundation’s new
Global Multinational accreditation.
The purpose is to demonstrate an ongoing
commitment to upholding the principles of
fair tax as SSE expands internationally.
Over 2022/23, SSE’s total tax contribution
was £1.3bn, consisting of £549m taxes
paid (including £217m corporation tax) and
£764m taxes collected. Further information
on SSE’s tax position can be found on
pages 93 and 237 to 239 of this report,
and in the Sustainability Report 2023 .
SSE is committed to the transparency of its
tax affairs and publishes an annual Talking
Tax report with enhanced country-by-
country tax disclosures alongside detail of
SSE’s tax strategy. SSE’s Talking Tax reports
can be found on sse.com/sustainability .
Sharing value directly
with local communities
An integral part of a just transition is being
a positive contributor to local communities
by sharing the economic value from its
assets and its business activities. During
2022/23, SSE invested around £16.5m in
communities across the UK and Ireland.
This included £10m awarded through
SSE Renewables community funds,
£1.4m awarded through SSEN’s Resilient
Communities Fund, and around £5m of
donations made directly to charitable
groups by SSE Airtricity to support with
the cost of living crisis (see page 64 ),
alongside smaller contributions from
employee-led initiatives.
SSE recognises the exceptional challenges
faced by communities because of the cost
of living crisis and in 2022/23 consulted
with a wide range of stakeholders to
understand where community funding
could make the biggest difference. With
stakeholder approval, SSE focused on
investing in projects which would directly
help improve energy efficiency and reduce
fuel poverty. In November 2022, SSE
Renewables’ Sustainable Development
Fund panel awarded its largest-ever single
award of £1m to support the Highland
Energy Efficiency Programme which
provides energy efficiency measures
including solar, battery, air source heating
and insulation to households in extreme
fuel poverty.
More detailed disclosure on SSE’s
community investment can be found
in SSE’s Sustainability Report 2023 ,
available at sse.com/sustainability .
Invested in communities across the UK and Ireland
by SSE in 2022/23.
£16.5m
SSE’s UK and Irish GDP contribution, jobs supported and taxes paid for 2022/23
UK contribution to GDP
£6.04bn
2021/22: £5.98bn
UK jobs supported
39,940
2021/22: 45,290
UK taxes paid
£502m
2021/22: £335m
Ireland contribution to GDP
€429m
2021/22: €417m
Ireland jobs supported
2,430
2021/22: 1,840
Ireland taxes paid
€53.8m
2021/22: €46.4m
2021/22 contribution to GDP figures have been adjusted to current prices.
58 SSE plc Annual Report 2023
A sustainable approach continued
Ensuring a just transition continued
Jobs for net zero
With the scale of growth in energy
investment over the next decade, it is
essential that action is taken to attract more
people into STEM (Science, Technology,
Engineering, Maths) careers, whilst training
existing talent to ensure the sector has a
future-fit workforce with the skills and
talent to deliver net zero.
Within SSE, at least 1,000 new jobs are
expected to be created every year to 2025.
Opportunities will be created in a range
of role types, which will mean adding to
existing skills and delivering new skills as
SSE moves into new technologies. To fill
these roles, SSE’s recruitment strategy
seeks to bring new talent into the
organisation immediately, at the same
time as developing a longer-term pipeline
to meet the skills needs of the future.
New jobs expected to be created every
year to 2025
1,000
For the jobs of today, SSE focuses on
recruiting new talent through its early
careers and pipeline programmes, as
well as attracting those from sectors like
oil and gas as part of the just transition,
and reaching those in wider industries with
similar skills such as mining, construction,
transport and logistics.
To support a long-term pipeline, SSE
works to inspire young people into STEM
careers through strategic partnerships with
secondary and primary schools (see SSE’s
Sustainability Report 2023 for details),
and over 2022/23 has performed a skills
gap analysis to understand key training
requirements for existing talent (see
’Developing the future skills required for
net zero’ on this page for more details).
At 31 March 2023, SSE’s headcount was
12,180, up from 10,754 at 31 March 2022.
This includes 100 employees in locations
outside the UK and Ireland. To meet the
demand of its growing Business Units, the
total number of people joining SSE rose
from 2,290 in 2021/22, to 3,226 for the
same time period in 2022/23. This means
that SSE filled a total of 4,401 positions
across internal and external recruitment over
2022/23, an increase of 38% from 2021/22.
For information about SSE’s approach to
inclusive and diverse hiring, see its Inclusion
and Diversity Report 2023 .
SSE’s employee retention level in 2021/22
was 90.5%, which remained slightly
elevated compared to pre-pandemic rates.
In 2022/23, retention decreased to 89.5%
reflecting a return towards pre-pandemic
labour market conditions. SSE’s 2022/23
voluntary turnover rate was 7.0%, compared
to 7.8% in 2021/22.
Developing the future skills
required for net zero
SSE’s investment in learning, training and
development increased to £10.4m in
2022/23 from £7.5m in 2021/22. Average
training hours per full-time employee was
19.8, a decrease from 20.7 in 2021/22,
with 85.5% of SSE’s employees receiving
some form of training over the year.
Core to SSE’s strategy to build its future
workforce is consistent investment in its
pipeline programmes. These pipeline
programmes include apprenticeships,
technical skills trainee programmes
and graduate programmes. The number
of people on one of SSE’s pipeline
programmes increased to 564, compared
to 465 individuals in 2021/22. Investment in
pipeline programmes increased to £12.8m
in 2022/23 from £9.8m in 2021/22. This
brings SSE’s total investment in pipeline
programmes over the last three years to
just over £30m.
Total investment in learning, training and
pipeline programmes in 2022/23
£23.2m
Over 2022/23, SSE identified the critical
skills of its workforce required to deliver its
Net Zero Acceleration Programme (NZAP).
Actions have been identified to develop the
skills of new and existing talent for the key
roles it recognises as facing potential skills
shortages. This approach to development
and training is especially important for skills
gaps that recruitment alone will not solve.
Targeted investment and focus was given
to a series of specific skills gaps and
shortages across the SSE Group, from
upskilling existing electrical jointers, to
developing new roles in system planning
to support smart grids. Simultaneously, SSE
is working to understand the skills required
for new technologies of the future, for jobs
that may not exist today, but which may
be required to be implemented at pace
to deliver net zero by 2030.
SSE has also continued to develop its
graduate offering to ensure that it attracts
future talent into this key early career
pipeline. SSE has significantly expanded the
number of graduate placements, from 60
participants in 2020/21 to 220 graduates
enrolled for the September 2023 scheme
which covers 13 different programmes.
More information on SSE’s approach to
learning and development and its training
programmes can be found in its
Sustainability Report 2023 .
Paying a fair wage
Fair remuneration is a cornerstone of SSE’s
approach to being a responsible employer
and providing good jobs. SSE is actively
involved in the living wage movement.
Having been a real Living Wage accredited
employer in the UK since 2013, it has also
paid the Living Wage in Ireland since 2016
and continues to chair the Living Wage
Scotland’s Leadership Group.
In September 2022 in response to the
cost-of-living crisis, the Living Wage
Foundation announced the new real Living
Wage for the UK two months earlier than
usual. This saw a 10.1% increase from the
2021 UK rate. SSE welcomed the action
taken by the Living Wage Foundation and
implemented the increase in November
2022, backdated to the 1 October 2022.
Since its accreditation as a Living Hours
employer in March 2021, SSE has been
working to roll out this enhanced standard
across its supply chain.
The right to freedom of
association and collective
bargaining
Everyone in SSE has the fundamental right
to freedom of association and to join a trade
union. SSE has four recognised trade union
partners (Prospect, Unite, Unison and the
GMB) which it works with through the Joint
Negotiating and Consultative Committee
and through regular ongoing dialogue.
In 2022/23, 50.3% of SSE’s total direct
workforce were covered by collective
bargaining agreements. Broader
incorporation of employee voice is
recognised by SSE as an important part
of decision-making and strategy. See the
stakeholder engagement section on
employees on page 28 of this report.
A guarantee of fair and decent work
59SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
A growing package
of employee benefits
SSE offers a wide range of employee
benefits, including flexible working
arrangements, 21 weeks of fully-paid
maternity leave, all-employee share plans,
a holiday purchase scheme, cycle-to-work
schemes, salary sacrifice low emissions car
scheme, and technology loans, amongst
other initiatives.
In November 2022, SSE announced
significant improvements to its family
leave offering, well beyond the statutory
minimum specified in UK and Irish
employment law. The enhancements aimed
to ensure that all new and prospective
parents at SSE feel supported, regardless
of personal or family circumstances and
where they are on the journey to becoming
a parent. This includes an additional seven
weeks paid leave for partners, two weeks’
full pay pregnancy loss leave, and two
weeks’ full paid leave for fertility treatment.
See SSE’s Inclusion and Diversity Report
2023 for more information.
Over the course of 2022/23, SSE also
enhanced its offering around health and
wellbeing support. More detail can be
found (see page 63 ).
Embedding a healthy
business culture
SSE has well established processes and
procedures to embed a healthy business
culture at all levels of its business, to support
people to do the right thing. SSE’s ‘Doing the
right thing’ guide to good business ethics
applies to direct employees and those that
work on SSE’s behalf, and covers a wide
range of topics, including bribery and
corruption, fair competition, engagement
with politicians and regulators, and cyber
security. It is supported by a number
of internal and external documents
to help colleagues to do the right thing,
which are outlined throughout the
guide. The guide is available publicly
at sse.com/sustainability and is promoted
to all employees through SSE’s internal
communication channels and mandatory
e-learning modules, as well as being
highlighted to suppliers in SSE’s
Sustainable Procurement Code.
SSE also has a suite of mandatory ethics and
compliance training modules, including
modules on fraud awareness, bribery and
anti-corruption, and anti-money laundering
and financial sanctions, which all employees
must complete bi-annually. Additional
modules on competition law and REMIT
are required for selected employees.
A review of cultural metrics is undertaken
twice annually by the Board supported
by a cultural dashboard (see pages 137
and 138 ).
Table 8: Reported incidents of suspected wrongdoing by category
Category of incident reported 2022/23 2021/22
Health and safety
(General Safety/Covid-19/Environmental/Product Contamination) 8
9
Dishonest behaviour
(Fraud/Theft/Bribery/Integrity/Money laundering/Corruption) 16
12
Conduct
(Bullying/Harassment/Victimisation) 10
15
Inclusion and diversity
(Racism/Discrimination/Unfair Treatment) 2
2
Drugs/alcohol 5
0
Regulatory Compliance 1
0
General
(Data Protection/Policy/Reputation/Corporate Governance/
Failure to Investigate) 8
11
Total 50 49
Table 9: Outcomes of investigations into reported incidents of suspected
wrongdoing
Outcome of investigation 2022/23 2021/22
Dismissal/Resignation
10
1
Warning issued
1
5
No action taken
0
4
Investigated as grievance
1
3
Investigated and partly substantiated but with no action taken
16
15
Investigated but case not proven
12
13
Initial investigation established insufficient evidence to proceed further
4
4
Unable to investigate due to insufficient information to establish
the nature, cause, location or otherwise of the allegation 1 4
Cases Still Under Investigation
5
0
Total 50 49
Reporting and investigating
wrongdoing
A healthy business culture is one where
everyone feels able to speak up, in the event
of wrongdoing. People that work for SSE, or
on its behalf, are encouraged to speak up
and are protected from retribution. SSE has
an independent whistleblowing channel,
hosted by SafeCall, with the option to
report anonymously, which supplements
internal reporting channels.
The number of reports of suspected
wrongdoing has remained stable year-on-
year, with 50 reports made through SSE’s
speak up channels in 2022/23, compared
to 49 the previous year. Every report is
triaged and considered for investigation.
SSE monitors the trends of Speak Up cases
closely. The outcomes of reported incidents
and investigations for 2021/22 and 2022/23
are outlined in Table 8 and Table 9.
Supporting whistleblowers
SSE’s Speak Up Aftercare Programme
has been designed to promote good
communication with people who speak up
and provide reassurance that there will be
no detriment for anyone speaking up in
good faith. The programme takes the form
of a survey that is issued at the point of
initial complaint, at 90 days and then at
180 days. Each survey is slightly different,
having been designed to ensure that there
is opportunity to highlight detriment in any
form, provide an outlet for discussion and
resolutions, and also seek feedback for SSE
on the user experience, ease of reporting,
what went well and to constantly improve
the service SSE is offering.
SSE’s Group Whistleblowing Policy is
available on sse.com/sustainability , with
the effectiveness of SSE’s whistleblowing
arrangements reviewed twice yearly by the
Group Executive Committee and the Board.
60 SSE plc Annual Report 2023
A sustainable approach continued
Ensuring a just transition continued
Promoting inclusion and diversity
SSE’s approach to
inclusion and diversity
SSE’s Inclusion and Diversity Strategy,
launched in 2021, builds on the inclusion
and diversity initiatives that SSE has been
undertaking since 2014. It is framed on
four pillars: Ambition; Education and
Development; Inclusive Processes; and
Employee Voice.
Delivery of the strategy relies on
engagement and effort from many
in SSE, and has been informed through
collaborating with external partners
to identify opportunities for further
improvement. It focuses on inclusion for all
by listening to underrepresented groups
and their unique experiences, and invests
leadership development to help shape and
influence the actions needed to embed
positive change across all levels of the
business. Learnings from these initiatives
will continue to develop the strategy further.
Developing leadership to
drive inclusion from the top
SSE’s has a number of leadership
programmes in place, which are designed
to build leadership confidence and raise
awareness for all to create an inclusive
workplace. This includes SSE’s Igniting
Inclusion Programme, which supports
managing directors and Business Unit
executive committees to learn about key
inclusion and diversity themes, and how
these can be practically applied in the
workplace. Over 2022/23, SSE also
embedded inclusivity throughout its
existing Leadership Blueprint, ensuring that
leaders build proud and inclusive teams.
Inclusion and Diversity
Report 2023
SSE publishes an annual
Inclusion and Diversity Report,
which provides comprehensive
information around SSE’s
Inclusion and Diversity Strategy
and progress against it.
Further information around
SSE’s approach to inclusion
and diversity over 2022/23,
the actions it is taking to drive
improvements and plans for
the coming years, see SSE’s
Inclusion and Diversity Report
2023 , available at sse.com/
sustainability .
Creating an inclusive
employee culture
Listening to employees enables SSE
to focus business priorities and improve
initiatives, whilst also ensuring employees
feel valued and have increased
opportunities for development. SSE gains
insight on employee voice through its
’Belonging in SSE’ communities, each of
which is sponsored by a Managing Director,
and which aim to bring people together
across the organisation for open and
constructive employee-led discussion.
Over 2022/23, SSE increased its members
in the ‘Belonging in SSE’ communities to
just over 2,000 and continued to listen to,
and engage with, employees on subjects
such as intersectionality, culture, ethnicity,
and neurodiversity. Each Belonging in
SSE community has developed an action
plan and every two months they meet
with SSE’s Group Executive sponsors to
discuss progress and opportunities to
move forward with their action plans.
Measuring progress
A key part of SSE’s Inclusion and Diversity
Strategy is the ability to measure the
progress being made as a result of the
various initiatives in place. SSE has been
tracking progress against a wide range of
diversity metrics within the business since
2015, including the proportion of women,
ethnic minority, disabled, and LGBTQIA+
employees. Setting measurable ambitions
that align with best practice enables SSE
to work towards stretching ambitions and
monitor its progress against these.
Setting measurable goals
Setting ambitions and KPIs, and using
external benchmarking.
Embedding best practice
Ensuring policies and processes are
inclusive and support everyone.
Actively listening
Understanding what matters to employees
to inform and shape the improvements
needed.
Focusing on behaviours
Building leadership confidence and
raising awareness for all to create an
inclusive workplace.
Ambition
Education and development
Inclusive processes Employee voice
61SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
SSE’s 2023 UK gender pay gap performance
Median
15.3%
(2022: 18.0%)
Mean
12.1%
(2022: 13.2%)
Median
14.7%
(2022: 17.6%)
Mean
44.3%
(2022: 45.9%)
UK gender pay gap UK bonus gender pay gap
• Increasing representation of women in
high-paid roles: Over 2022/23, female
representation in high-paid roles,
classed as those earning over £100,000
per year, has more than doubled from
25 to 53 female employees, compared
to a 50% increase for male employees,
from 145 to 217. Due to SSE’s female
population representing 30% of its
workforce, changes such as these have
an impact on the median pay gap.
More detail on SSE’s UK gender pay gap,
including further data, analysis, and
disclosure of the wide range of actions
taken to reduce the pay gap, is provided
in SSE’s Inclusion and Diversity Report
2023 .
SSE has voluntarily disclosed its Ireland
Gender Pay Gap since 2021, calculating
it in line with the UK Gender Pay Gap
methodology, based on a snapshot date
of 5 April. In December 2022, SSE disclosed
its first set of Ireland gender pay gap data
in line with the Irish Government’s new
mandatory gender pay gap requirements
which launched in May 2022. This data is
calculated using a 30 June snapshot and
SSE will publish its 2023 Ireland gender pay
gap disclosure later in 2023. More detail on
SSE’s 2022 Ireland gender pay gap can be
found at sse.com/sustainability .
SSE’s 2023 gender pay gap
Between 2021/22 and 2022/23, SSE saw
a positive trend in its headline UK gender
pay gap statistics. SSE’s gender pay gap
reduced from 18.0% at 5 April 2022 to
15.3% at 5 April 2023.
The reduction in SSE’s UK median
gender pay gap between 2021/22 and
2022/23 has been driven by three main
contributing factors:
• Interim cost-of-living pay increase:
In recognition of the cost-of-living
pressures affecting its employees, on
1 October 2022 SSE brought forward
part of its trade union negotiated cost
of living increase for 2023, by awarding
up to a 5% increase to all employees
earning less than £100,000 annually.
The structure of this pay award was
to prioritise helping those on lower
salaries who are most affected by the
rise in living costs, therefore employees
received either a 5%, 3%, or 0% increase
depending on their salary, with those
in the lower pay brackets receiving the
highest percentage increase. At SSE
representation of women is highest
in the lower and lower-middle pay
quartiles, resulting in a higher
percentage of female employees
receiving a 5% pay award. However,
the full impact of the 2022/23 pay award
on SSE’s gender pay gap will not be fully
understood until the second part of the
award is made for full-year in the first
quarter of 2023/24 (backdated to
1 April 2023).
• Salary uplift for employees on Joint
Agreement contracts: SSE introduced a
new skill-based Pay Progression model
in 2021, which saw employees’ salaries
being mapped according to their
skill-level. This resulted in many
employees receiving salary uplifts,
mainly those in the lower pay quartile.
As SSE has higher female representation
in this quartile, this meant a high
number of women received a pay
increase. Over 2022/23, the positive
impact of this new pay model on the
gender pay gap has continued with a
slightly higher proportion of female
employees progressing through the
pay progression framework.
SSE’s 2022/23
recognition
Ranked #30 in the top 100
Globally for Gender Equality
by Equileap.
Included in the Bloomberg
Gender Equality Index for
the 6th consecutive year.
Performed in the top decile
of WDI responders for 2022
submission.
62 SSE plc Annual Report 2023
A sustainable approach continued
Ensuring a just transition continued
Wider diversity targets
SSE tracks progress against a range of
diversity metrics, including the proportion
of ethnic minority, disabled, and LGBTQIA+
employees. Senior leaders focus on
progress as part of broad internal inclusion
and diversity ambitions quarterly, and these
metrics are reviewed twice yearly by the
GEC and the Board. SSE understands that
transparency supports inclusion and
diversity progress, and therefore is working
to increase the proportion of employees
disclosing their diversity data to SSE, so that
it can improve external disclosure as it
becomes feasible to do so.
Over 2022/23, SSE has developed its
ethnicity pay gap analysis, in line with the
UK Government guidelines published in
April 2023. SSE is using this data for internal
analysis and aims to publish its ethnicity pay
gap when employee disclosure rates are
high enough to ensure anonymity and
provide meaningful insight. At 31 March
2023, SSE had an employee disclosure rate
of 39% of the total employee population for
diversity metrics including ethnicity, sexual
orientation, and disabilities, an increase
from 32% the previous year. SSE’s diversity
data based on the population of employees
disclosing this information is provided in
Table 11. Increasing employees’ voluntary
disclosure of their diversity data, even if they
select ‘prefer not to say’, is essential in order
for SSE to set ambitions, develop strategies,
and gain learnings that will increase diversity
within the business. See SSE’s Inclusion and
Diversity Report 2023 for details about
how SSE is working to increase diversity
data disclosure rates.
An ethical business culture alongside
inclusion and diversity are directly
linked to the Group Principal Risk of
People and Culture – full details are
available on page 75 .
Table 11: SSE’s wider diversity data at 31 March in each year*
Diversity category Year
Ambition
(% of employees)
2022/23
(% of employees)
2021/22
(% of employees)
Disability 2030 8 8.9 6.8
Ethnic Minority 2030 15 8.1 6.3
LGBTQIA+ 2030 8 3.8 3.6
* Data is collected on SSE’s HR data reporting system ‘Harmony’. Gender has a 100% completion rate,
and is based on biological sex. Disability, Ethnic Minority, and LGBTQIA+ data is voluntarily disclosed
by employees, with a 39% disclosure rate at 31 March 2023 and a 32% disclosure rate at 31 March 2023.
Data excludes those without facility to share information on Harmony.
.
Table 10: SSE’s gender data for senior levels and all employees at 31 March in
each year
Year Ambition
2022/23
% Female (Male/
Female headcount)
2021/22
% Female (Male/
Female headcount)
Board
1
Ongoing 50%, with no less
than 40% female
representation
46% (7/6)
50% (6/6)
Group Executive
Committee (GEC)
2
– –
27% (8/3)
25% (6/2)
GEC
2
and direct
reports (excl.
administrative roles)
2025 40% female
34% (54/28)
22.4% (45/13)
Leadership Group
3
2030 40% female
25% (812/274)
23.7% (681/212)
All employees 2030 33% female
30%
(8,525/3,655)
28.8%
(7,658/3,096)
1 As at 23 May 2023, the Board has 42% female representation (seven men and five women), see page 149
for more detail.
2 In the context of gender reporting, the GEC includes all members of the GEC and the Company Secretary.
This is the definition of senior managers in SSE for the purposes of s414C(8)(c)(ii).
3 Employees in SSE’s senior level pay grades.
Making progress with
women’s representation
In 2021/22, SSE simplified its gender
reporting and set stretching gender
ambitions in line with the FTSE Women
Leaders Review. These are outlined in
Table 10 and are approved by the Group
Executive Committee (GEC) and Board-
level Nomination Committee.
Over 2022/23, progress has been made
across the business, moving SSE closer
to achieving its medium- and long-term
targets. Female representation on the
Board is currently 42%, following changes
to the Board which took effect post
31 March 2023, which remains above
the 40% Board Policy target. Full details
of changes across membership and
Nomination Committee focus are set
out on pages 115 and 142 to 149 . The
representation of women in the GEC and
direct reports has increased from 22.4% at
31 March 2022 to 34% at 31 March 2023,
representing maintenance of the progress
disclosed in the 2022 Annual Report and
offering a strong platform for continued
work towards the 2025 ambition of 40%.
63SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Protecting health, safety and wellbeing
Monitoring health
and safety performance
Safety remains SSE’s first priority with the
objective that ‘everyone gets home safe’
and that focus is all the keener following
the tragic death of Liam Macdonald, a
young contractor working on Shetland,
in June 2022.
The Total Recordable Injury Rate (TRIR)
for direct employees and contractors
combined was 0.19 per 100,000 hours
worked, up from 0.17 in 2021/22. This
increase reflects a significant surge in
investment and construction, and an
associated rise in contractor hours worked.
Further detail on SSE’s TRIR is outlined
in Table 12, with additional information
on contractor safety outlined on pages 66
and 164 .
SSE seeks to embed a strong safety culture
and to ensure that all those working on its
behalf feel confident to speak up around
safety. In SSE’s 2022 all-employee survey,
which had a 79% response rate, 92% of
employees said that their manager sets
the right example when it comes to Safety,
Health and Environment and 94% said that
SSE makes it easy for people to do the right
thing on Safety, Health and Environment.
Detailed information on SSE’s health
and safety performance over 2022/23 is
provided in the Safety, Sustainability, Health
and Environment Advisory Committee
report on pages 162 to 165 of this report
and in the Sustainability Report 2023 .
Taking a holistic
approach to wellbeing
In 2021/22, SSE undertook a strategic
review of occupational benefits which
also included recruitment of a dedicated
Head of Health and Wellbeing. The review
recognised that while a very good range of
support was already in place, there were
opportunities for some services to be used
more and/or expanded upon.
Building upon the outcomes of the
strategic review and recognising the impact
which Covid and the cost of living crisis
have had on employees’ wellbeing, over
2022/23 SSE developed a holistic range of
benefits which support physical, mental
and financial wellbeing.
In addition to providing a wider range of
support services, a key focus in 2022 was to
make it easier for employees to access the
right form of support when they need it. As
a result, SSE launched the Health Hub, an
online portal with clear signposting to all of
Unit 2022/23 2021/22
Total Recordable Injury Rate
– employees and contractors
Per 100,000
hours worked
0.19
0.17
Total Recordable Injury
Rate – employees
Per 100,000
hours worked
0.10
0.09
Total Recordable Injury
Rate – contractors
Per 100,000
hours worked
0.34
0.32
the wellbeing support and guidance
available to employees.
Increased investment
in employee health
Over 2022/23, SSE made a significant
investment to enhance the health support
it provides to its employees. One of the
key investments it made was the launch
of a new service, WeCare, which enables
employees in the UK and Northern Ireland
to access free online GP appointments
within 48 hours and access to a private
prescription service, to help colleagues
receive the medical care they need.
WeCare can be used by all UK and
Northern Ireland employees, as well as
their immediate family who live in the same
home, and it also offers 24/7 support on
physical and mental health issues, general
wellbeing and financial and legal matters.
Employees in Ireland can receive similar
support through SSE’s partnerships with
VHI Healthcare.
Table 12: Total Recordable Injury Rates for SSE’s employees and contractors
In 2022, SSE also launched a pilot
scheme in partnership with the British
Heart Foundation providing employees
with free health assessments. The service
was accessed by over 150 colleagues in
2022/23 and SSE plans to make it more
widely available in 2023/24.
These initiatives build upon a strong
foundation of existing support services
including Nuffield mental health and
musculoskeletal support, comprehensive
Employee Assistance Programmes,
a suite of toolkits covering mental health,
menopause and other health issues, a
series of health and wellbeing webinars
and Nudge, a financial education resource.
Safety and the Environment remains
as a Principal Risk to the Group, further
details on how this is mitigated can be
found on page 77 .
WeCare
Free online GP appointments
within 48 hours.
Access to a private
prescription service.
24/7 support on physical
and mental health issues,
general wellbeing and financial
and legal matters.
Can be used by all UK and
Northern Ireland employees, as
well as their immediate family.
64 SSE plc Annual Report 2023
A sustainable approach continued
Ensuring a just transition continued
Providing affordable and clean energy
Avoiding the next energy crisis
SSE recognises the hugely challenging
circumstances faced by energy consumers
in 2022/23. SSE Airtricity responded through
a combination of keeping tariffs as low as
possible for all consumers through not
passing through the full impact of wholesale
costs, a price freeze for financially vulnerable
consumers and customer support funds.
The business also honoured its commitment
not to make a profit in the year. Residual
profits of €8.6m were distributed to ROI
domestic customers in full, after the year-
end in April 2023, amounting to a credit of
€35 per customer.
Short-term measures, however, are not a
long-term solution to high energy costs
and a reliance on unpredictable sources of
energy. Therefore, the need to accelerate
the delivery of renewable energy generation
and accelerated energy efficiency rollout for
homes and businesses is more important
now than ever. It is this multi-track approach,
supporting customers in the short-term, with
industry and government working together
in the medium-term for a secure, clean and
affordable future energy system.
Powering greener homes
and businesses
SSE Business Energy helps business
customers of all sizes across the UK to
reduce their carbon emissions through its
green electricity offering. All SSE Business
Energy green electricity is backed by
Renewable Energy Guarantees of Origin
(REGOs) and is independently verified.
In addition to this, SSE Airtricity has a 50%
ownership share in Activ8 Solar Energies,
which carried out over 1,500 domestic
solar installations in 2022/23, with further
SSE Airtricity provided a holistic range
of practical measures up to the value
of €25m, including targeting families
who are struggling financially. This has
included:
• Price promise: SSE Airtricity held
energy costs at June 2022 levels
until the end of March 2023, for
up to 60,000 financially vulnerable
customers.
• Discretionary fund: a €1m
discretionary fund was created to
provide direct support to customers
in difficulty.
• Energy efficiency measures: to
help tackle one of the root causes of
fuel poverty, SSE Airtricity supported
vulnerable households with energy
efficiency. This has included delivering
home energy upgrades for up to 600
vulnerable households, at no cost,
and a €2.5m donation to not-for-profit
organisation EnergyCloud, which will
help divert surplus renewable energy
to up to 10,000 fuel poor homes
across Ireland.
• Working with partners to support
households: over 2022/23, SSE
Airtricity made donations to trusted
charity partners to support households
in need of financial assistance across
the island of Ireland, regardless of who
their supplier is. This included a €1m
donation to St Vincent de Paul (SVP)
and donations totalling £2m to Bryson
Charitable Group.
• Energy Bill Relief Scheme: Airtricity
also applied discounts to the value
of £116m in the year to customers
under the UK Government’s Energy
Bill Relief Scheme.
Engagement in action
Energy customers
Supporting customers
through exceptional times
The number of customers
benefiting from Airtricity holding
prices at June 2022 levels was
60,000
plans to deliver up to 40,000 installations
over the next 10 years. This activity is also
helping to support local jobs, with the
creation of 200 highly skilled green jobs
over the next two years announced by
Activ8 in 2022, supporting a just transition
towards net zero.
Energy Affordability remains a Principal
Risk to the Group, for further details
please see page 73 .
65SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
A FAIR ENERGY
FUTURE
March 2023
Unlocking a just transition
for consumers
Providing an inclusive service
to network customers
SSEN Distribution’s Priority Service Register
(PSR) is the mechanism to target support
for people in vulnerable situations. The
PSR provides support for customers who
require adapted services, or who may need
additional support, particularly in the event
of power cuts. It is therefore critical that the
Register is comprehensive, accurate and
captures all those in need.
To achieve that aim, in March 2023 a
new website thepsr.co.uk was created
through a collaborative initiative led
by SSEN Distribution and including 10
Distribution Network Operators (DNOs)
and Gas Distribution Network Operators
(GDNs). This website brings together
individual registers from DNOs and GDNs,
making it easier to raise awareness of the
additional support available nationwide.
Furthermore, the website supports external
partners such as local and national charities
and NHS Trusts to promote the PSR to their
customer base through a clear process.
Unlocking a just transition
for network customers
SSEN Distribution is at the forefront of
enabling net zero at a local level, operating
the electricity distribution network that will
facilitate new forms of heating, battery
storage and many more electric vehicles.
In March 2023, it published a report which
explores how net zero can be delivered
fairly for consumers, ensuring people
can participate in and benefit from the
energy transition.
The report, titled A Fair Energy Future ,
details the partnerships and innovation
projects SSEN Distribution has undertaken
to explore and understand the new energy
challenges that consumers will face in the
Creating new standards
in equal EV access
In October 2020 SSEN Distribution
established ‘Equal EV’, a collaboration
with Disabled Motoring UK (DMUK)
to identify the unique enablers
and barriers faced by drivers with
vulnerabilities adopting electric
vehicles (EVs) and the role of
technologies and Distribution
Network Operators in removing
barriers. The insights gained from
the work have been instructive and
have supported the inclusion of a
commitment to improve accessibility
at public charge points for disabled
users in the UK Government’s Electric
Vehicle Infrastructure Strategy.
In 2022, the Equal EV project fed into
the creation of the British Standard
Institution (BSI) PAS 1899, a new
specification on accessible public
charge points for EVs covering the
design of charge points, including
the location spacing and surrounding
environment, as well as the
appropriate information, signals
and indicators to be provided.
In addition, Disabled Motoring
UK (DMUK) launched a parking
standard called the Disabled Parking
Accreditation (DPA) which signposts
off-street car parks that are
accessible to disabled people and
will soon include a dedicated section
on EV charge point provision.
next two decades with technology rapidly
advancing and high-carbon heating and
transport being phased out.
In addressing these critical issues,
SSEN Distribution has created an action
plan for delivering a just transition for
energy consumers. With 10 commitments,
it will progress alongside further
recommendations for the energy industry
and policy makers to help unlock the
benefits of net zero for all consumers.
SSEN Distribution’s commitments cover
a range of areas, including: supporting
knowledge-sharing and collaboration;
addressing emerging vulnerabilities resulting
from the transition to net zero; ensuring
equal access to electricity infrastructure; and,
supporting remote and rural communities,
which may be off-grid, to benefit from the
electricity system of the future.
The full report can be found at
ssen.co.uk .
66 SSE plc Annual Report 2023
An increasing focus on
contractor safety
In 2022/23 there was a significant rise
in contractor hours worked on SSE’s
large capital projects, which represent a
higher-risk environment than for SSE’s
operational activity. SSE’s contractor TRIR
increased slightly compared to 2021/22
performance and there was a contractor
fatality on Shetland in June 2022. See
the Safety, Sustainability, Health and
Environment Advisory Committee report
on pages 162 to 165 of this report for
more information around SSE’s response
to this incident.
Given the rise in contractor hours worked in
SSE’s current growth phase, there is a need
for a strategy that builds stronger, more
collaborative relationships with supply chain
partners to keep everyone safe.
A dedicated, Group-level contractor safety
team was established in early 2023 to
ensure partners are fully supported and
performance is monitored across all of
SSE’s large capital projects.
Mitigating modern slavery
in the supply chain
Over 2022/23, SSE continued to deliver
its Modern Slavery Action Plan. Key
developments over the year included
the rolling out its updated modern slavery
clause and Living Hours clause into supplier
contracts, and completion of onsite
modern slavery audits.
SSE finalised the programme of onsite
modern slavery audits for three of its key
sites, which have been undertaken by third
party organisation Stronger Together since
2021/22. Findings showed that health,
safety, and labour standards were very high
on all three sites assessed and that risk of
modern slavery was very low. The gap
analysis highlighted key improvement
areas, including around risk identification,
supplier due diligence and training, which
have been embedded in SSE’s Action Plan.
Deep dive assessments for high risk areas
of SSE’s business activities continued. Work
was undertaken with Slave Free Alliance
to identify risk associated with Solar and
Battery projects, and mitigation actions are
ongoing. SSE Renewables increased focus
on high-risk areas such as vessels which
service offshore wind farms to identify
key risk areas and ensure additional due
diligence is put in place where required.
In addition, SSE continued to actively
participate in a number of industry
working groups and initiatives that seek to
develop best practice and industry-wide
approaches to addressing modern slavery.
More information on SSE’s actions to
mitigate the risk of human rights abuses
and modern slavery, and the industry
collaboration being undertaken, can
be found in SSE’s Sustainability Report
2023 .
Healthy supply chains influence SSE’s
exposure to the Principal Risks of Large
Capital Projects Management and Speed
of Change – further details on how these
are managed can be found on pages 75
and 77 .
Supporting a sustainable supply chain
A sustainable approach continued
Ensuring a just transition continued
SSE participated in climate debates on the
fringe of COP27 in Egypt in November
2022. SSE’s objective in its attendance
was to further the case for net zero
through the practical demonstration
and example of its investments in
low-carbon infrastructure in the UK,
Ireland and beyond.
One further objective was to learn from
international experiences in relation
to the mining and extraction of metals
and minerals critical to the technology
required by SSE’s investments.
SSE actively participated in discussions
and panels on the just transition,
considering issues through the lens of
indigenous communities, many of whom
host the commercial mining of minerals
such as cobalt, lithium and silicon.
The result of the engagement was an
understanding of the importance of
‘FPIC’ principles (free, prior and informed
consent) and an imperative to work more
closely with the most strategic suppliers
on efforts to ensure components
contained within the manufactured
capital assets SSE procures are sourced
from responsible sources.
The engagement at COP27 was
particularly instructive to SSE and has
led to the development of a workstream
that can deliver a transition to net zero in
a responsible and ethical way. This work,
directly with suppliers, is in addition to
ongoing human rights work with the
Sustainability Supply Chain School and
industry collaborations including Utilities
Against Modern Slavery and Scotland
Against Modern Slavery.
Engagement in action
Suppliers, contractors and partners
Supply chain learnings from COP27
67SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Non-financial information statement
SSE has reported extensively on its non-financial impacts within its Annual Report for a number of years and welcomes continued
increasing focus from regulators, shareholders and other stakeholders. This table outlines how SSE meets the Non-Financial Reporting
requirements contained within the Companies Act 2006. Further disclosure can also be found in SSE’s Sustainability Report 2023 .
Reporting requirement and
SSE’s material areas of impact
Relevant Group Principal
Risks, pages 72 to 77
Relevant Group Policies
on sse.com
Policy embedding, due diligence,
outcomes and key performance indicators
Environmental matters
• Delivering net zero
• Managing climate-related
issues
• Carbon performance,
metrics and targets
• Responsible resource use
– water and energy use,
air emissions
• Managing impacts on the
natural environment and
biodiversity
Climate Change
Safety and the Environment
Group Climate Change Policy
Group Environment Policy
2030 Goals progress,
pages 22 to 23
A year of strategic progress,
pages 18 to 21
Accelerating climate action,
pages 36 to 51
Protecting the natural
environment, pages 52 to 55
Safety, Sustainability, Health
and Environment Advisory
Committee Report,
pages 162 to 165
Employees
• Protecting health, safety
and wellbeing
• Investing in training
and learning
• Culture and ethics
• Reward and benefits
• Employee voice
• Promoting inclusion
and diversity
People and Culture
Safety and the Environment
Group Employment Policy
Group Safety and
Health Policy
2030 Goals progress,
pages 22 to 23
Ensuring a just transition,
pages 56 to 66
Focusing on culture,
pages 59 and 137 to 138
Empowering the employee
voice, pages 134 to 136
Safety, Sustainability, Health
and Environment Advisory
Committee Report,
pages 162 to 165
Social matters
• Ensuring a just transition
• Contributing to jobs
and GDP
• Sustainable procurement
and supporting local supply
chains
• Paying a fair share of tax
• Supporting customers
through the cost of
living crisis
• Sharing value with local
communities
People and Culture
Speed of Change
Energy Affordability
Group Sustainability Policy
Group Taxation Policy
Group Procurement Policy
2030 Goals progress,
pages 22 to 23
Ensuring a just transition,
pages 56 to 66
Human rights,
anti-corruption
and anti-bribery
• Reinforcing an ethical
business culture
• Speaking up against
wrongdoing
• Prevention of bribery
and corruption
• Approach to human rights
and modern slavery
People and Culture
Large Capital Projects
Management
Group Human Rights Policy
Group Corruption and
Financial Crime Prevention
Policy
Group Whistleblowing Policy
SSE’s social contribution,
pages 58 to 59
Focusing on culture,
pages 59 and 137 and 138
68 SSE plc Annual Report 2023
Principal Risk assessment processes
Outputs:
Actions
and risk
disclosures
Executive
Committee
assessment
Board
assessment
Individual risk
reviews
Committee
self-assessments
Risk
monitoring
Risk
response
Risk
identification
Risk
assessment
Throughout 2022/23 SSE has met and
managed unprecedented challenge
in the markets in which it operates. As
highlighted in the Chair’s Statement on
pages 4 and 5 , issues such as safety
programmes, affordability, sectoral risks
(such as extremely volatile commodity
prices and inflationary pressures), extreme
weather and climate change have featured
heavily in strategic risk discussions.
While managing these external challenges,
SSE has continued to make substantial
progress on the execution and delivery
of it’s Net Zero Acceleration Programme
(NZAP), with in excess of £2.8bn of capital
investment including acquisitions delivered
during the course of the year. Supporting
a just transition through continuing to
create options for investment and growth
by boosting energy security, supporting
communities and creating green jobs,
coupled with its balanced mix of
businesses, uniquely positions SSE for
the transition to net zero and resilience
against volatility. These factors along
with the ongoing geopolitical crisis in
Ukraine having a significant impact on
energy affordability and security of supply
concerns, formed the basis of the full
review of SSE’s Principal Risks that took
place during the financial year.
SSE’s risk management process is
comprised of four main stages summarised
in the diagram below. Continued maturity
and refinement of our risk management
framework ensures that it remains aligned
with SSE’s strategy and this year included
the review and redrafting of the Group Risk
Management Policy which is available to
view on sse.com .
SSE’s sector review on pages 12 to 15
provides more detail on the range of external
factors that influenced the risk exposures to
the Group over the course of the year.
Board considerations
Effective identification, understanding
and mitigation of Principal Risks underpins
the Board’s approach to setting strategic
objectives for SSE and informing strategic
decision making (please see page 124 for
SSE’s decision making context). The Board
aims to consider all material influencing
factors and key external trends in the energy
market, including those relating to climate
change, technological developments and
government policy and aims to do so in a
The execution of SSE’s strategy and the creation of value from
the opportunities arising from net zero are dependent on the
effective identification, understanding and mitigation of the
Group’s Principal Risks.
way that reflects the expectations of SSE’s
key stakeholder groups.
These material influencing factors also
have an impact on the nature and extent
of risks the Board is willing to take to meet
these objectives, and related mitigation
strategies adopted by the Group. Material
changes in the nature, proximity and
potential impacts of SSE’s Group Principal
Risks are regularly assessed by the
oversight committees and the Business
Unit executive committees with appropriate
mitigations implemented where necessary.
Overseeing risk
The Group Executive Committee and its
subcommittees (as detailed on page 122 )
have responsibility for overseeing SSE’s
Principal Risks. During the third quarter of
SSE’s financial year, an assessment of each
Principal Risk is completed by the assigned
oversight committee. This assessment
requires committee members to provide
commentary on contextual changes to the
risks, consider whether over the course of
the year the risks have become more or less
material based on impact and likelihood
and to confirm effective mitigations are in
place for controlling risks. Consideration is
also given to emerging risks and whether
any of those identified have the potential
to become a Principal Risk to the business
in the medium to long-term.
These responses are then consolidated
into reports, one for each Principal Risk,
which are presented back to the committees
along with the results of provisional viability
testing and analysis of relevant, current
management information and key
information relating to Business Unit
Principal Risks and controls. These reports
form the basis for the committees to discuss
and confirm the risk trend (more, less or
equally material), overall effectiveness of the
risk control and monitoring environment,
and whether any additional control
improvement actions are required. This is
an inclusive and iterative process that results
in considered and objective outputs and a
robust assessment of the Principal Risks. The
outputs from these committee assessments
are then presented to the Group Executive
Committee for full review.
Risk-informed decision making
Managing SSE’s risks
69SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Change to individual risk rating
Residual Likelihood HighLow
1
6
4
5
2
3
9
8
11
7
Residual Impact
MoreLess
1. Climate Change
2. Cyber Security
and Resilience
3. Energy Affordability
4. Energy Infrastructure
Failure
5. Financial Liabilities
6. Large Capital Projects
Management
7. People and Culture
8. Political and
Regulatory Change
9. Portfolio Exposure
10. Safety and the
Environment
11. Speed of Change
10
This year, due to the pace of change in
the markets in which SSE operates, an
additional assessment of the Principal Risks
was undertaken by the relevant subject
matter experts and the Group Executive
Committee during the last quarter of the
financial year. The output of this was then
considered, with any emerging risks or
additional material changes resulting from
this being proposed to the Board.
2022/23 Review Outcome
Following the 2022/23 annual review
process, the number of Principal Risks to
the Group remains at 11 with two revisions
of note. The previously named Group
Principal Risk of ‘Commodity Prices’ has
been redefined and renamed ‘Portfolio
Exposure’. The second revision relates to
the previously named Group Principal Risk
of ‘Politics, Regulation and Compliance’
which has been redefined and renamed
‘Political and Regulatory Change’, both
of these revisions have been made in order
to better reflect and articulate the risk
exposures to the Group.
An essential tenet of SSE’s Risk Management
process is the consideration of potential
emerging risks and whether any of those
identified have the potential to become a
Group Principal Risk in the medium to long
term. While no new emerging Principal
Risks have been identified this year
important revisions have been made to
the descriptions of each of the Principal
Risks to take account of key changes
and corresponding mitigations that were
introduced during the year.
Full details of the Group Principal Risks
are available on pages 72 to 77 . Key
developments that have influenced the
risk exposures to the Group have also
been highlighted in detail throughout the
Strategic Report.
Change to individual risk rating
Group Principal Risks
As reflected throughout the Strategic Report, this year exposures to a number of external factors,
particularly those driven by macro-economic and geopolitical events, have increased materially.
This, in turn, has increased the residual exposures of a number of the Group Principal Risks set
out on the following pages, primarily Energy Affordability, Cyber Security and Resilience, Portfolio
Exposure and Political and Regulatory Change.
The graphic below illustrates SSE’s 11 Group Principal Risks positioned to highlight the residual risk
impact scores against residual likelihood scores following completion of the Principal Risk Self
Assessment process.
Risk trend key
Increased in materiality
Not changed significantly
Reduced in materiality
* Safety remains SSE’s most important value, and management of this risk remains SSE’s highest priority.
** It should be noted that Energy Affordability is particularly closely linked to – and therefore impacted by – Political and Regulatory Change and
Portfolio Exposure.
70 SSE plc Annual Report 2023
Risk-informed decision making continued
Managing SSE’s risks continued
Risk Appetite Statement
The Group risk appetite remains aligned
to the achievement of SSE’s strategic
objectives. SSE will however only accept
risk where it is consistent with its core
purpose, strategy and values; is well
understood; can be effectively managed;
is in line with stakeholder expectations
and offers commensurate reward.
The sectors in which SSE operate are part of
a rapidly changing industry subject to a high
degree of political, regulatory and legislative
change as well as risk arising from other
developments including technology, the
impact of competition, stakeholders’
evolving expectations and climate change.
Furthermore, each of SSE’s Business Units
have differing levels of exposure to additional
risks. For example, the Transmission and
Distribution businesses are economically
regulated and are characterised by relatively
stable, inflation linked cash flows while the
SSE Renewables business benefits from cash
flows linked to government-mandated
renewables subsidies. Those Business Units
that generate and trade energy are also
exposed to significant medium- to long-
term energy market and commodity risks in
operational and investment decision making.
The key elements of SSE’s Strategic
Framework – including SSE’s Purpose,
Strategy, Goals and Values, as well as
the focus of its business model, are fully
reflective of its risk appetite (see pages 8
and 9 for further details).
Fundamentally:
• SSE has a clear strategy to create value
for shareholders and society in a
sustainable way by developing, building,
operating, and investing in the electricity
infrastructure and businesses needed in
the transition to net zero.
• SSE has a good understanding of the
risks and opportunities in the Great
Britain and Ireland energy markets
and a strong associated knowledge
of adjacent EU markets, augmented by
its acquisitions. UK and Irish markets,
alongside EU markets therefore provide
the Group’s geographic focus, with
expansion into other new international
markets being subject to rigorous
scrutiny and ensuring the appropriate
governance arrangements which are
consistent with the Group’s values and
strategic goals are in place.
• Safety is SSE’s first value and it has no
appetite for risks brought on by unsafe
actions, nor does it have any appetite
for risks brought on by insecure actions
including those relating to cyber security.
In areas where SSE is exposed to risks
for which it has little or no appetite,
even though it has implemented high
standards of control and mitigation, the
nature of these risks mean that they
cannot be eliminated completely.
In determining its appetite for specific risks,
the Board is guided by three key principles:
1. Risks should be consistent with SSE’s
core purpose, financial objectives,
strategy and values;
2. Risks should only be accepted where
relevant approvals have been attained
through the Governance Framework
to confirm appropriate reward is
achievable on the basis of objective
evidence and in a manner that is
consistent with SSE’s purpose, strategy
and values; and
3. Risks should be actively controlled and
monitored through the appropriate
allocation of management and
other resources, underpinned
by the maintenance of a healthy
business culture.
The Board has overall responsibility for
determining the nature and extent of the
risk it is willing to take to achieve strategic
objectives and for ensuring that risks are
managed effectively across the Group.
71SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Viability Statement
SSE provides the energy needed today
while building a better world of energy
for tomorrow through creating value for
shareholders and society in a stainable
way by developing, building, operating and
investing in the electricity infrastructure
and businesses needed in the transition
to net zero. The delivery of SSE’s purpose
and execution of its strategy depends on
the skills and talent of a diverse workforce,
the quality of its assets and the effective
identification, understanding and mitigation
of risk.
As required within provision 31 of the UK
Corporate Governance Code, the Board
has formally assessed the prospects of
the Company over the next four financial
years to the period ending March 2027.
The Directors have determined that as this
time horizon aligns with the Group’s Net
Zero Acceleration Programme Plus, which
includes a fully funded capital investment
programme to 2027, a greater degree
of confidence over the forecasting
assumptions modelled can be established.
In making this statement the Directors
have considered the resilience of the Group
taking into account its current position,
the Principal Risks facing the Group and
the control measures in place to mitigate
each of them. The Directors recognise the
significance of the strong balance sheet
with total undrawn committed lending
facilities as shown above:
The Group is an owner and operator of
critical national infrastructure and has
a proven ability to maintain access to
capital markets during stressed economic
conditions. The Group has demonstrated
this through securing £3.0bn of funding
since April 2021 including the issuance of
a 1bn Euro Hybrid bond in April 2022 and
€650m bond in July 2022. Further detail
relating to planned funding is available in
A6.3 Accompanying Information to the
Financial Statements in the Annual Report
and Accounts.
The Group has a number of highly
attractive and relatively liquid assets –
including a regulated asset base which
benefits from a strong regulated revenue
stream as well as the operational wind
portfolio – which provide flexibility of
options. This has been demonstrated
through the success of the programme
of disposals set out by the Group in June
2020 and with the recent sale of a 25%
stake in the Transmission business.
To help support this Statement, over the
course of the year a suite of severe but
plausible scenarios has been developed
for each of SSE’s Principal Risks. These
scenarios are based on relevant real life
events that have been observed either
in the markets within which the Group
operates or related markets globally.
Examples include critical asset failure to
generation assets (for Energy Infrastructure
Failure); changes to key government
energy policies (for Political and Regulatory
Change); and the physical impacts of
climate change on distribution assets
through more frequent and increasingly
severe storm events (for Climate Change).
Scenarios are stress tested against forecast
available financial headroom and in
addition to considering these in isolation,
the Directors also consider the cumulative
impact of different combinations of
scenarios, including those that individually
have the highest impact.
Upon the basis of the analysis undertaken,
and on the assumption that the fundamental
regulatory and statutory framework of the
markets in which the Group operates does
not substantively change, and the Group
continues to be able to refund its debt at
maturity, the Directors have a reasonable
expectation that the Group will be able to
continue to meet its liabilities as they fall
due in the period to March 2027.
£bn Matures Comment
SSE plc 1.30 March 2026
SSE plc 0.20 October 2026
SSE plc 1.00 February 2024 Collateral facility with 1 year
extension option (in favour
of the banks)
SSEN Transmission* 0.75 November 2025 2, 1 year extension options
(in favour of the Group)
SSEN Distribution 0.25 November 2025 2, 1 year extension options
(in favour of the Group)
3.50
* The Transmission facility is available to that Business Unit only.
72 SSE plc Annual Report 2023
Group Principal Risks
Climate Change
Risk trend
What is the risk?
The risk that SSE’s strategy,
investments or operations
are deemed to have an
unacceptable future impact
on the natural environment
and on national and
international targets to
tackle climate change.
Material influencing factors
• The impact of physical risks associated
with climate change, such as severe
adverse weather that causes damage or
interrupts energy supply or generation.
• The speed of technological
developments.
• Transitional risks relating to developments
in political and regulatory requirements
related to the products and services that
SSE provides.
• Ensuring the continuation of Large
Capital Projects which are fundamental
to Group net zero targets.
• Global and domestic policies including
those published by the UK’s Committee
on Climate Change relating to the 6th
carbon budget for the period 2032 and
2037.
• Political and regulatory engagement.
• Plans to transition to a decarbonised
energy system.
• Geopolitical events relating to the
security of supplies and macro-
economic stress.
Key mitigations
• Policy link: SSE Climate Change Policy and SSE
Sustainability Policy.
• SSE is investing on average £10m a day on
decarbonising infrastructure over a five-year
period to FY27 as part of its Net Zero Acceleration
Programme Plus.
• SSE provides transparent disclosures of its
governance around climate-related risks and
opportunities to allow its stakeholders to properly
assess its performance in managing climate related
issues.
• The Group Executive Committee is responsible
for implementing the Group strategy set by the
Board and driving climate-related performance
programmes across the organisation. The Chief
Sustainability Officer is responsible for advising the
Board, Group Executive Committee and businesses
on climate related matters and provides support
in the implementation of relevant initiatives across
the Group.
• The TCFD Steering Group, which consists of
representatives from Finance, Group Risk and
Sustainability conducts an annual review of the
outputs of the climate-related risk and opportunity
assessment process and assesses the potential
financial impact of key risks and opportunities in
a fair, balanced and understandable way. This is then
reviewed and approved by the Group Risk Committee.
• SSE’s approach to executive remuneration reflects
the role of sustainability and climate-related
considerations within SSE’s purpose and strategy,
with sustainability-linked metrics and targets an
element of performance related pay. As part of
the 2022 Directors’ Remuneration Policy review,
the Remuneration Committee further strengthened
the link between sustainability and executive pay
by introducing sustainability measures in the
long-term incentive (PSP) for the first time.
Performance is assessed against SSE’s 2030 Goals
and also against strategic performance in relation
to the implementation of the NZAP strategy.
These measures are worth a combined 30%
of the overall award.
Oversight
Group Risk Committee
Link to strategy
73SSE plc Annual Report 2023
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Link to strategy
Develop Operate Build Invest
Risk trend key
Increased in
materiality
Not changed
significantly
Reduced in
materiality
Cyber Security and Resilience
Risk trend
What is the risk?
The risk that key infrastructure,
networks or core systems are
compromised or are otherwise
rendered unavailable.
Material influencing factors
• Software or hardware issues, including
telecoms networks, connectivity and
power supply interruption.
• Heightened threat of cyber-attacks
due to geopolitical events.
• Increased sophistication and likelihood
of ransomware attacks.
• International expansion.
• Ineffective operational performance,
for example, breach of information
security rules or poor management
of resilience expertise.
• Employee and contractor understanding
and awareness of information security
requirements.
• Malicious cyber attack.
Key mitigations
• Policy link: SSE Cyber Security Policy and SSE
Data and Information Management Policy.
• Key technology and infrastructure risks are
incorporated into the design of systems and
are regularly appraised with risk mitigation
plans recommended.
• SSE conducts regular internal and third-party testing
of the security of its information and operational
technology networks and systems.
• Continued strengthening and embedding of the
cyber risks and controls framework to continue to
identify threats and reduce exposures through, for
example, improved use of data analytics and further
migration from unsupported systems.
• Significant longer term Security Programme
investment and planning which seeks to strengthen
the resilience of the systems on which SSE relies.
• IT Service Assurance works with individual Business
Units to form and agree appropriate service level
agreements for business-critical IT services.
• Business continuity plans are reviewed in response
to changes in the threat to the Group and regularly
tested.
• Over the course of the year an updated Cyber
Security Culture Strategy was launched. This has
been designed to continue to improve the cyber
security maturity across the Group and build
positively on the existing, strong cyber culture.
The implementation of this strategy will be assessed
and monitored to measure its impact on the levels
of cyber security awareness and culture across
the Group.
Oversight
Group Risk Committee
Link to strategy
Energy Affordability
Risk trend
What is the risk?
The risk that energy customers’
ability to meet the costs of
providing energy, or their ability
to access energy services is
limited, giving rise to negative
political or regulatory
intervention that has an impact
on SSE’s regulated networks
and energy businesses.
Material influencing factors
• Technology changes and innovations
to develop sustainable infrastructure
and energy solutions.
• Supply chain cost management.
• Public policies, including those aimed
at reducing carbon emissions and
energy consumption.
• Accessibility to energy and related
services for all.
• Increased focus on energy security in
response to current geopolitical events.
• Required investment in the upgrading of
the UK’s energy infrastructure to achieve
net zero.
• Political interventions.
• Fluctuations in the cost of fuels.
• Supplier and customer failures and
related bad debt.
Key mitigations
• Policy link: SSE Sustainability Policy.
• SSE Airtricity established the largest customer
support fund in Ireland, with provision for up to
€25m in affordability funding, and SSE Business
Energy has implemented the Energy Bill Relief
Scheme.
• Robust stakeholder engagement across
government, regulators and relevant counterparties.
• SSE is focused on fixing the long-term causes, not
the short-term symptoms of the current energy
crisis, as such it continues to advocate for
progressive policies that will help bring forward
necessary investment in low-carbon infrastructure
at lowest cost to reduce customers’ exposure to gas
price volatility and deliver net zero affordability.
Oversight
Group Executive Committee
Link to strategy
74 SSE plc Annual Report 2023
Energy Infrastructure Failure
Risk trend
What is the risk?
The risk of national energy
infrastructure failure, whether
in respect of assets owned by
SSE or those owned by others
which SSE relies on, that
prevents the Group from
meeting its obligations.
Material influencing factors
• Longer term changes in climate patterns
cause sustained higher temperatures
that may result in lower rainfall and
reduced wind impacting renewable
generation output.
• Government policy regarding the
operation of the energy network
which relates to security of supply.
• Failures in any aspect of the Great Britain
national critical infrastructure.
• Appropriate asset management and
necessary upgrading works of both
generation and network assets.
• Malicious attack on the Great Britain
energy infrastructure.
• Energy network balancing mechanisms.
• Continued availability of competent
personnel.
• Continued availability of key systems.
Key mitigations
• Policy link: Business Unit Asset Management
Policies.
• SSE assesses the climate impact on its operations
over the short, medium and long term from the
perspective of market, policy or regulatory transition
risks and opportunities and the physical risks of a
changed climate.
• SSE’s dedicated Engineering Centres of Excellence
review and develop plans to ensure the ongoing
integrity of its generation assets is maintained.
• Targeted investment plans to ensure the ongoing
health and integrity of network assets.
• Crisis management and business continuity plans
are in place across the Group. These are tested
regularly and are designed for the management of,
and recovery from, significant energy infrastructure
failure events. Where there are material changes in
infrastructure (or the management of it) additional
plans are developed.
• SSE continues to be an active participant in national
security forums such as the Centre for the
Protection of National Infrastructure (CPNI).
• Flexible and reliable power will continue to be
required to back up wind and solar generation,
ensuring security of supply across the UK. In line
with its commitment to a net-zero future, SSE is
actively progressing plans to deliver new low-
carbon capacity to play this critical role, with CCS
and pumped storage hydro projects in development.
Oversight
Group Executive Committee
Link to strategy
Financial Liabilities
Risk trend
What is the risk?
The risk that funding is not
available to meet SSE’s financial
liabilities, including those
relating to its defined benefit
pension schemes, as these fall
due under both normal and
stressed conditions without
incurring unacceptable costs or
risking damage to its reputation.
Material influencing factors
• Ongoing commitment to an investment
grade credit rating.
• Global macroeconomic changes and
subsequent volatility in foreign exchange
markets.
• Fluctuations in interest rates and inflation
which influence borrowing costs.
• Defined benefit pension scheme
performance including the impact of
fluctuations in gilt yields on the value
of scheme liabilities.
• Counterparty credit limit exposures.
• Operational and trading collateral
requirements.
Key mitigations
• Policy link: SSE Financial Management Policy.
• Committed borrowings and facilities are always
available equal to at least 105% of forecast
borrowings over a rolling 6-month period.
• Detailed and continuous financial modelling and
forecasting on a Group and Business Unit basis.
• SSE seeks to maintain a diverse and innovative
portfolio of debt to avoid over-reliance on any one
market. This allows it to build relationships with, and
create competition between, debt providers.
• Each of SSE’s defined benefit pension schemes
has a Board of Trustees which acts independently
of the Group.
• The approval of all material counterparty credit
limits is a matter reserved for the Board.
• The newly formed Collateral Committee meet
weekly to monitor ongoing collateral requirements.
• SSE has a proven ability to maintain access to capital
markets during stressed economic conditions. The
Group has demonstrated this through securing
£3.0bn of funding since April 2021 including the
issuance of a 1bn Euro Hybrid bond in April 2022
and €650m bond in July 2022.
Oversight
Group Risk Committee
Link to strategy
Group Principal Risks continued
75SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Large Capital Projects Management
Risk trend
What is the risk?
The risk that SSE develops and
builds major assets that do not
realise intended benefits or
meet the quality standards
required to support economic
lives of typically 25 to 60 years
within forecast timescales
and budgets.
Material influencing factors
• Appropriate contractual arrangements
which meet the requirements of any
jurisdiction in which SSE operates.
• New or unproven technology.
• Appropriate and effective budget
management.
• All aspects of supply chain management,
including those relating to human rights,
modern slavery and labour standards as
well as supply chain impacts associated
with new entities, new assets and a new
network structure created by joint
ventures and Brexit.
• Availability and capacity of competent
contractors in any jurisdiction in which
SSE operates.
Key mitigations
• Policy link: SSE’s Large Capital Projects Governance
Framework manual ensures that all major capital
investment projects for the Group are governed,
developed, approved and executed in a consistent
and effective manner, with full consideration of
best practice project delivery. The manual, which
was reviewed and updated in detail during 2022,
provides common standards across the Group and
incorporates continuous improvement practices.
• The Large Capital Project Services function employs
dedicated quality and assurance teams who perform
in-depth quality reviews, the outputs of which are
presented to the Board where appropriate.
• Ongoing interaction with key suppliers through
SSE’s Supplier Relationship Management
Programme.
• In major projects, SSE generally manages insurance
placement by organising owner-controlled insurance.
This strategy allows it to have greater control and
flexibility over the provisions in place. SSE also sees
the insurance market as an important source of
information on the reliability of technology and uses
this to inform the design process of major projects.
• Appropriate governance arrangements, including
those relating to Joint Venture and Partner
Management.
Oversight
Group Large Capital Projects
Committee
Link to strategy
People and Culture
Risk trend
What is the risk?
The risk that SSE is unable to
attract, develop and retain an
appropriately skilled, diverse
and responsible workforce and
leadership team, and maintain
a healthy business culture
which encourages and
supports ethical behaviours
and decision making.
Material influencing factors
• Rewarding employee contributions
through fair pay and benefits.
• Acquisition of competent skills and
resources to support growth plans in
international markets.
• SSE embraces cultural diversity in the
workplace and recognition of the value
and benefit of having an inclusive and
diverse workforce.
• A responsible employer ethos. For full
details please see the Sustainability
Report .
• Clearly defined roles, responsibilities and
accountabilities for all employees.
• Availability of career development
opportunities and appropriate succession
planning that recognises potential future
skills shortages.
• Clear personal objectives and
communication of the SSE set of values.
• A focus on ethical business conduct and
creating a culture in which employees
feel confident to speak up when they
suspect wrongdoing.
• The health and wellbeing of all employees
(see the Sustainability Report for
further detail).
• Clear and well-structured employee
engagement and communications.
Key mitigations
• Policy link: SSE Employment Policy and SSE
Whistleblowing Policy.
• SSE has a detailed Inclusion and Diversity
plan, progress against which is reviewed and
monitored by SSE’s Group Executive Committee
on a regular basis. Further details are available
on pages 60 to 62 and on page 136 of the
Directors’ report.
• SSE Governance arrangements, including those
relating to JV and Partner Management.
• There are a wide range of tools and services
available to all employees to support mental health
and wellbeing, including those provided as part
of the Employee Assistance Programme. Further
details on careers sse.com/employee-benefits .
• “Doing the Right Thing, a guide to ethical business
conduct”, explicitly outlines the steps employees
should take to ensure their day-to-day actions and
decisions are consistent both with SSE’s values and
ethical business principles. All SSE employees can
report incidents of wrongdoing through both
internal and external mechanisms. SSE uses an
independent ‘Speak Up’ phone line and email
service, hosted externally by SafeCall, through
which incidents can be reported.
• SSE’s business leaders are required to undertake
regular succession planning reviews. At a Group
level, SSE continues to develop its approach to the
management of talent.
Oversight
Group Executive Committee
Link to strategy
Link to strategy
Develop Operate Build Invest
Risk trend key
Increased in
materiality
Not changed
significantly
Reduced in
materiality
76 SSE plc Annual Report 2023
Political and Regulatory Change
Risk trend
What is the risk?
The risk associated with
operating in a fast-paced,
highly regulated environment
which is subject to constantly
changing political, regulatory
and legislative expectations
and interventions.
Material influencing factors
• SSE’s most significant contribution is
to align with the Paris Agreement goal
and aim to achieve net zero greenhouse
gas emissions by at least 2050.
• Material changes to regulatory
frameworks in any jurisdiction in which
SSE operates.
• Government intervention into the
structure of the energy sector in any
jurisdiction in which SSE operates.
• Constitutional uncertainty in any
jurisdiction in which SSE operates.
• Changes in financial, employment,
safety and consumer legislation and/or
regulation and the impact of these
changes on business-as-usual activities
in any jurisdiction in which SSE operates.
Key mitigations
• Policy link: SSE Political and Regulatory
Engagement Policy.
• The Group has dedicated Corporate Affairs,
Regulation, Legal and Compliance departments
that provide advice, guidance and assurance to
each business area regarding the interpretation of
political, regulatory and legislative change. These
teams take the lead in engagement with regulators,
politicians, officials, and other such stakeholders.
Full details of SSE’s Stakeholder Engagement can be
found on page 26 to 33 .
• SSE has a clear Political Engagement Policy that
sets out principles for any employees who make
representations to institutions of governments
or to legislatures on the Company’s behalf.
• SSE Governance arrangements, including those
relating to JV and Partner Management.
• The Group puts in place dedicated project teams
to manage all aspects of significant regulatory and
legislative change.
• There is regular engagement with the Board and
Group Executive Committee on political and
regulatory developments which may impact SSE’s
operations or strategy.
Oversight
Group Executive Committee
Link to strategy
Portfolio Exposure
Risk trend
What is the risk?
The risk to the Group’s
portfolio value associated
with fluctuations in both the
price and physical volume of
key energy market indices or
drivers– primarily gas, carbon
and electricity – as well as
foreign exchange values, CO
2
permits and oil.
Material influencing factors
• Global geopolitical events.
• Fluctuations in demand, supply and
generation capabilities both in Great
Britain and globally. Further detail is
available on page 12 of the Strategic
Report.
• Generation technology advancements.
• Government intervention into the
structure of the energy sector in any
jurisdiction in which SSE operates.
• International and national agreements
on climate change.
• International flows of fuel.
Key mitigations
• Policy link: An asset-by-asset approach to hedging
strategy that ensures trading positions cannot have
a material impact on SSE Group earnings. The latest
update on SSE’s hedging approach can be found on
sse.com .
• The Group Energy Markets Exposure Risk
Committee has operational oversight of commodity
positions; reporting to the Board Energy Markets
Risk Committee that has responsibility for
monitoring the ongoing effectiveness of Group
hedging arrangements. For further details please
see pages 160 to 161 .
• SSE uses VaR and PaR measures to monitor and
control exposures. Trading limits are reviewed
regularly by the Energy Markets Risk Committee,
with consideration given to changes in the material
influencing factors noted above, before being
approved by the Board.
• SSE’s Energy Economics team provides commodity
price forecasts which are used to inform decisions
on trading strategy and asset investment.
• SSE utilises hedging instruments to minimise
exposure to fluctuations in foreign exchange
markets, details of which are available in the
Financial Statements section of the Annual
Report and Accounts.
• SSE monitors the impact from recent reforms in
Europe (e.g., the European Market Infrastructure
Regulation (EMIR), Markets in Financial Instruments
Directive (MiFID) and Regulation on Energy Market
Integrity and Transparency (REMIT)) and those
resulting from the Electricity Market Reform
(EMR) process.
Oversight
Group Risk Committee
Link to strategy
Group Principal Risks continued
77SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Safety and the Environment
Risk trend
What is the risk?
The risk of harm to people,
property or the environment
from SSE’s operations.
Material influencing factors
• Safety culture and SSE’s commitment to
getting everyone home safe.
• Clear and appropriately communicated
safety processes.
• Regular and documented training.
• The size, scale, complexity and number
of projects under way.
• Adverse weather.
• Challenging geographic locations.
• Appropriate task and asset risk
assessment.
• Clear, effective and regular
communications of all relevant safety
updates.
• Competent employees and contractors.
Key mitigations
• Policy link: SSE Safety and Health Policy and
SSE Environment Policy.
• Safety is the Group’s No. 1 value with Board
oversight being provided by the Safety,
Sustainability, Health and Environment Advisory
Committee (SSHEAC).
• SSE has formed a new central Contractor Safety
Team supported by dedicated Contractor SHE
Managers and Assurance Auditors to improve
contractor safety performance. For full details
please see the Sustainability Report .
• Crisis management and business continuity plans
are in place across the Group. These are tested
regularly and are designed for the management
of, and recovery from, significant safety and
environmental events.
• Each business carries out regular SHE assurance
reviews of the risks faced, the controls in place and
the monitoring that is undertaken.
• SSE’s dedicated Engineering Centres of excellence
review and develop plans to ensure that the integrity
of its generation assets is maintained.
Oversight
Group Safety, Health and
Environment Committee
Link to strategy
Speed of Change
Risk trend
What is the risk?
The risk that SSE is unable to
keep pace with the speed of
change affecting the sector
and markets in which it
operates and so fails to meet
the evolving expectations of
its stakeholders or achieve its
strategic objectives.
Material influencing factors
• Geopolitical events.
• Fast developing customer needs and
expectations in relation to efficient,
innovative and flexible products and
services.
• Technological developments and
innovation.
• Net-zero strategic goals.
• Increased competition from market
entrants including international oil
companies.
• Longer term capital investment plans and
budgets.
• The size, scale and number of change
programmes under way, including those
relating to regulatory or legislative
requirements in any jurisdiction in which
SSE operates.
• Governance and decision-making
frameworks, including those relating to
JV and Partner Management.
Key mitigations
• Policy link: SSE Operating Model Policy.
• The Board sets the risk appetite of the Group
and approves and regularly reviews the Group’s
commercial strategy, business development initiatives
and long-term options ensuring alignment of risk
appetite and strategic objectives.
• SSE’s Group operating model has been designed
to ensure dynamic and efficient decision-making,
empowered and accountable delivery of Business
Unit strategies and to fulfil SSE’s purpose to provide
energy needed today while building a better world
of energy for tomorrow. Details of SSE’s decision-
making context are available on page 124 of the
Directors Report.
• The Group Executive Committee is responsible for
ensuring that Business Unit strategies are consistent
and compatible with the overarching Group strategy
and its vision to be a leading energy provider in a net
zero world.
Oversight
Group Executive Committee
Link to strategy
Link to strategy
Develop Operate Build Invest
Risk trend key
Increased in
materiality
Not changed
significantly
Reduced in
materiality
78 SSE plc Annual Report 2023
Financial Review
SSE’s performance in 2022/23 showed yet
again the real value of a balanced portfolio
of businesses, with 65% of Group adjusted
operating profit contributed by our
market-facing generation businesses and
30% from our index-linked regulated
electricity networks.
Delays on the Seagreen project and the
impact of the UK Electricity Generator
Levy meant SSE Renewables was broadly
flat year-on-year, but this was more than
offset by our thermal, flexible hydro and
gas storage assets which were rewarded
for providing timely backup to the market
when it was needed.
Platform
for
growth.
Balance and strategic focus in a year of strong financial
performance provide the foundations of long-term growth
and shareholder value creation.
In networks, SSEN Transmission had a
year of solid financial performance with
operating profit broadly flat as higher
allowed revenues were offset by lower-
than-expected volumes, higher operating
costs, and the 25% minority interest which
is excluded from adjusted metrics for part
of the year. SSEN Distribution earnings
were up year-on-year on higher tariffs and
reduced operating and fault costs when
compared to the previous year when Storm
Arwen had an impact.
While market conditions played a part in
this year’s results, we anticipate a degree of
continuing volatility which, combined with
the rise in variable wind capacity
coming onto the system, presents an
opportunity for ongoing value creation
for our large-scale flexible assets.
Solid strategic progress in the year,
including execution of spending plans
under the Net Zero Acceleration
Programme (NZAP), saw £2.8bn invested
in critical national infrastructure – an
all-time record level of capex and
investment for SSE which represented
a 37% increase on 2021/22.
Our balance sheet continues to be
underpinned by high-quality assets
and credit ratings compare favourably
with our peers. In the context of the
Group’s strong FY23 earnings, net debt
to EBITDA fell to 2.7x – well below our
4.5x ceiling.
We expect to report adjusted EPS
of more than 150p for 2023/24,
dependent upon market conditions,
plant availability and weather conditions.
And – as announced in May 2022 – our
recent performance, financial strength
and growth opportunities give us
confidence in the ‘NZAP Plus’ plans
outlined on pages 16 and 17 and
in the following Financial Review.
Our revised plans mean more value for
shareholders and society, more financial
strength, more investment, more jobs,
and more growth to come over the next
decade. The NZAP Plus is the platform
for around £18bn of investment in the
decarbonising infrastructure needed
for a cleaner, more secure and more
affordable future energy system.
In closing, this being my last contribution
to an SSE Annual Report, I would like
to express my thanks to the many
colleagues – past and present – who
have so ably supported me throughout
my 21 years as Finance Director. It has
been an absolute privilege and honour
working for 32 years in a company that
has such a strong purpose and heritage,
driving forward its net zero ambitions.
I leave in the knowledge that the
Company’s finances are in the safe
hands of Barry O’Regan who brings a
wealth of energy experience to the role
and is ideally placed to help seize the
wealth of opportunities coming SSE’s
way as net zero draws closer.
Gregor Alexander
Finance Director, SSE plc
23 May 2023
79SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Financial Review
Year ended 31 March 2023
This Group Financial Review sets out the financial performance of the SSE Group for the year ended 31 March 2023. See also the
separate sections on Group Financial Outlook, 2023/24 and beyond and Supplemental Financial Information.
The definitions SSE uses for adjusted measures are consistently applied and are explained in the Alternative Performance Measures
section of this document before the Financial Statements.
Key financial metrics
(continuing operations)
Adjusted Reported
March
2023
£m
March
2022
£m
March
2023
£m
March
2022
£m
Operating profit/(loss) 2,529.2 1,530.9 (146.3) 3,749.5
Net Finance (costs)/income (345.6) (372.8) (59.3) (273.2)
Profit/(loss) before tax 2,183.6 1,158.1 (205.6) 3,476.3
Current tax (charge)/credit (358.8) (107.1) 110.0 (881.3)
Effective current tax rate (%) 16.4 9.2 12.7 26.2
Profit/(loss) after tax 1,824.8 1,051.0 (95.6) 2,595.0
Less: hybrid equity coupon payments (38.8) (50.7) (38.8) (50.7)
Less: profits attributable to minority interests – – (23.6) –
Profit/(loss) after tax attributable to ordinary shareholders 1,786.0 1,000.3 (158.0) 2,544.3
Earnings/(loss) per share (pence) 166.0 94.8 (14.7) 241.2
Number of shares for basic/reported and adjusted EPS (million) 1,075.6 1,055.0 1,075.6 1,055.0
Shares in issue at 31 March (million)* 1,090.3 1,067.6 1,090.3 1,067.6
* Excludes treasury shares.
2021/22 numbers above restated to recognise Keadby 2 pre-commissioning revenues and costs in Income Statement following adoption of amendments to IAS 16
Property, Plant and Equipment – Proceeds Before Intended Use.
Dividend Per Share (pence)
March
2023
March
2022
Interim dividend 29.0 25.5
Final dividend 67.7 60.2
Full Year dividend 96.7 85.7
Impact from market volatility
The Group’s balanced mix of economically
regulated and market-based businesses
provides a natural hedge against short-term
commodity price volatility. Nevertheless,
the volatile commodity price environment
throughout the year combined with the
continued higher power price, gas price
and inflation rate environment, will have
a continued impact on SSE’s businesses
which can be summarised as follows:
SSEN Transmission and SSEN Distribution
operate under a regulatory price control
framework which is set by Ofgem. Returns
under this framework have no direct
relationship to power and gas market
prices. However, both allowed revenues
and Regulated Asset Values are index linked
(Transmission to CPI(H) for the RIIO-T2
price control period which lasts from 1 April
2021 to 31 March 2026, and Distribution to
RPI (for RIIO-ED1 which ended on 31 March
2023) and CPI(H) (for RIIO-ED2 which lasts
from 1 April 2023 to 31 March 2028).
Within SSE Renewables, the established
hedging approach generally reduces
its broad exposure to commodity price
variation at least 12 months in advance
of delivery. This approach secures
value for the business, by reducing
exposure to short-term commodity price
movements which would drive variable
financial performance.
Hedges may be achieved either through
the forward sale of power or gas and
carbon equivalents. This approach aims to
reduce the exposure of these wind assets to
volatile spot power market outcomes whilst
still providing an underlying commodity
price hedge. When gas-and-carbon
hedges are converted into electricity
hedges a ‘spark spread’ is realised which
can lead to changes in the average hedge
price expected. This can increase the
previously published average hedge price,
as has been seen in 2022/23, or decrease it.
Whilst this hedging approach provides
relatively stable realised power prices,
market volatility in periods where wind
volumes are significantly lower than
expected can necessitate ‘buy-backs’ of
excess forward sales contracts at higher
prices, which would reduce the trading
result, as has also been seen in 2022/23.
For SSE Thermal (as well as the Hydro plant
within SSE Renewables), value has come
from the ability of the plant to respond
to market conditions and provide vital
balancing services to support security
of supply through flexibility provision in
less predictable market conditions.
The last twelve months has seen the
Thermal business navigate extreme
volatility in the forward power markets.
Whilst some of this volatility is directly
attributable to the war in Ukraine and
ensuing gas crisis, there are other more
fundamental drivers relating to price
uncertainty which are longstanding.
80 SSE plc Annual Report 2023
Financial Review continued
These longer-term price drivers include
liquidity, carbon price basis risk, regulatory
or political interventions, and the availability
of risk capital and collateral within the
markets. This business therefore aims to
reduce earnings volatility by establishing a
hedge for the expected economic output
in the six months prior to delivery, although
this approach is closely monitored for any
unexpected changes in exposures as a
result of current market conditions, such as
the plant availability exposure, counterparty
credit risk, and changes to cost of capital
for collateral.
Higher power and gas prices are generally
more economically favourable for these
businesses, driving premiums over forward
peak spark prices which includes market-
based income from other sources outside of
the simple spark spread such as Balancing
Mechanism and ancillary Grid contracts.
Income from Capacity Mechanism is known
ahead of each delivery year and is unrelated
to current market conditions.
However, if plant is unavailable at times
of system stress then excess forward sales
contracts would again need to be ‘bought
back’ in the market which would negatively
impact the trading result.
The Gas Storage assets are operated on a
merchant basis, to optimise value arising
from changes in the spread between
summer and winter prices, market volatility
and plant availability. As such, volatile
gas prices are generally positive for this
business, to the extent that the assets
can respond to volatility and capture the
positive gas price spreads arising. To the
extent that gas remains in storage at the
period end, a remeasurement gain or loss
may also be recognised with reference to
the forward month market price.
Energy Portfolio Management, as the
market-facing commodity trader for each
business unit, holds the Group’s direct
exposure to unsettled commodity contracts
and therefore may experience significant
unrealised mark-to-market remeasurement
gains or losses in periods of volatility.
However, these revaluations are unrelated
to operating performance with traded
volumes backed by SSE’s future generation
output or expected customer demand.
Whilst EPM is permitted to take small
positions in the market to manage the
Group’s trading requirements and execute
optimisation opportunities, this is contained
within strict Value at Risk (‘VAR’) limits that
limits trading exposure in volatile markets.
During the year, market volatility and
increased margining requirements resulted
in a significant increase in the collateral
required for trade with counterparties and
on exchanges, this was monitored closely
by the Group and effectively managed
with more than sufficient levels of liquidity
maintained. The level of collateral required
has decreased over the second six months
of the financial year as older trades have
been settled and newer trades have
experienced lower levels of volatility.
SSE Business Energy and SSE Airtricity
(aside from Northern Ireland, where SSE
Airtricity’s gas supply business is subject
to a regulatory pricing mechanism) are
not subject to a regulated price cap and
therefore variable tariffs are adjusted
dynamically and fixed tariff rates are reset
for new customers as wholesale costs
increase or decrease. Although the
businesses are insulated against gas price
rises insofar as they are hedged, there
are external circumstances that would
result in hedge adjustments such as
weather, supplier failures and broader
economic conditions. Due to the difficult
affordability circumstances created by
escalating wholesale prices across the year,
a decision was made to protect domestic
customers in Ireland from the full impact
of these increases; tariff changes therefore
did not fully reflect increases in wholesale
prices. A dynamic forecasting approach has
been implemented to help the business
respond quickly to volume changes.
Both businesses have administered
government-backed support schemes
during the year, intended to protect
domestic and non-domestic customers
from the full impact of the heightened power
and gas price environment. These schemes
provide discounts to customers based on
estimated usage and recover amounts from
government based on actual customer
usage – the most material of these being
the Energy Bills Relief Scheme (‘EBRS’).
In relation to Airtricity, vertical integration
of generation and customer businesses
in the Irish market limits commodity
exposures with some benefit received
through Renewable Energy Feed-in Tariffs
(‘REFIT’) receipts on legacy wind assets.
Finally, SSE Group is well funded with a
strong investment grade credit rating; a
high proportion of the £8.9bn adjusted
net debt (c.92%) is fixed rate and the
average maturity of SSE’s debt is 6.4 years.
The Group has been successful despite
challenging debt markets, issuing €1bn of
Hybrid Bonds, a £350m Private Placement
and a €650m Eurobond earlier in the
financial year at well-below current market
prices. SSE’s balance sheet strength allows
the Group to meet additional collateral
requirements on higher and more volatile
commodity contracts, while the high
proportion of fixed-rate debt provides
robust financing in an inflationary
environment.
Operating profit
Adjusted and reported operating profits/
losses in SSE’s business segments for the
year to 31 March 2023 are set out below;
comparisons are with the same period to
31 March 2022 unless otherwise stated.
SSEN Transmission: Adjusted operating
profit decreased by 2% to £372.7m,
which includes a £(32.8)m minority interest
adjustment following completion of the
25% divestment on 30 November 2022.
SSEN Transmission’s significantly higher
allowed revenues in the year were partially
offset by a combination of a negative
timing impact on lower-than-expected
Transmission Network Use of System
‘TNUoS’ volumes, and increases in
operating costs and depreciation charges,
as the business continues to grow the asset
base and develop its operational capacity.
Reported operating profit increased
by 7% to £405.5m, reflecting all of the
adjustments above except for the £(32.8)m
minority interest adjustment, as minority
interests are fully consolidated for all profit
metrics except for Earnings Per Share
under IFRS.
SSEN Distribution: Adjusted and reported
operating profit increased by 9% to
£382.4m in the period. Higher allowed
revenues including previously under-
recovered allowances following the
impact of coronavirus on Distribution
Use of System ‘DUoS’ volumes in 2020/21,
were broadly offset by a negative timing
impact on lower-than-expected volumes
in 2022/23. In addition, 2022/23 operating
costs were lower than prior year mainly
driven by a reduction in fault costs, given
the impact of severe weather on the
network during 2021/22.
SSE Renewables: Adjusted operating profit
increased by 2% to £580.0m in the year.
Having experienced exceptionally still and
dry weather in he prior year, volumes
increased 0.7TWh or 7% in the current
year but were still around 1.5TWh or
13% behind planned levels due to less
favourable weather than the long-term
average and delays to construction of the
Seagreen project.
In line with SSE’s hedging approach, SSE
Renewables entered the financial year with
around 40% of its wind volume hedged
in gas and carbon equivalents, rather than
electricity. The conversion of those gas
and carbon trades into electricity ahead
81SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Operating profit performance for the year to 31 March 2023
Business-by-business segmental
Adjusted Reported
March
2023
£m
March
2022
£m
March
2023
£m
March
2022
£m
Operating profit/(loss)
SSEN Transmission 372.7 380.5 405.5 380.5
SSEN Distribution 382.4 351.8 382.4 351.8
Electricity networks total 755.1 732.3 787.9 732.3
SSE Renewables 580.0 568.1 446.3 427.8
SSE Thermal 1,031.9 300.4 1,089.5 624.2
Gas Storage 212.5 30.7 249.2 125.4
Thermal total 1,244.4 331.1 1,338.7 749.6
SSE Business Energy (GB) 17.9 (21.5) 17.9 (21.5)
SSE Airtricity (NI and Ire) 5.6 60.4 5.2 60.4
Energy Customer Solutions total 23.5 38.9 23.1 38.9
Energy Portfolio Management 80.4 (16.8) (2,626.0) 2,083.6
Distributed Energy (27.4) (10.9) (33.5) (29.2)
Neos Networks (39.8) (16.1) (56.0) (140.0)
Corporate unallocated (87.0) (95.7) (26.8) (113.5)
Total operating profit/(loss) from continuing operations 2,529.2 1,530.9 (146.3) 3,749.5
Net finance (costs)/income (345.6) (372.8) (59.3) (273.2)
Profit/(loss) before tax from continuing operations 2,183.6 1,158.1 (205.6) 3,476.3
Notes: Table above excludes any result from discontinued operations, being the Group’s investment in Scotia Gas Networks Limited which was disposed on 22 March
2022 (2022/23: £nil; 2021/22: adjusted operating profit of £21.0m) and the Group’s Gas Production operations which were disposed on 14 October 2021 (2022/23:
adjusted operating profit of £nil; FY2021/22: adjusted operating profit of £101.4m).
2021/22 restated to recognise Keadby 2 pre-commissioning revenues and costs in Income Statement following adoption of amendments to IAS 16 Property, Plant and
Equipment – Proceeds Before Intended Use.
In order to present the financial results and performance of the Group in a consistent and meaningful way, SSE applies a number of adjusted
accounting measures throughout this financial report. These adjusted measures are used for internal management reporting purposes and
are believed to present the underlying performance of the Group in the most useful manner for shareholders and other stakeholders.
Following the acquisition in the year of Triton Power Limited (JV with Equinor, SSE’s share 50%), the definitions SSE uses for adjusted
measures have been refined to consider the treatment of fair value gains arising from acquisition of a business or a joint venture interest.
Aside from this refinement, the definitions are consistently applied and a reconciliation of adjusted operating profit by segment to
reported operating profit by segment can be found in note 5.1(ii) to the Financial Statements.
Segmental EBITDA results are included in note 5.1(v) to the Financial Statements.
of delivery in the year – combined with an
unusually high and volatile electricity price
attributable to factors such as the war in
Ukraine and French nuclear outages –
drove a significant uplift in the achieved
price on hedged volumes in the year, with
approximately £216m additional benefit
captured. This uplift more than offset a
£(143)m net loss from Seagreen which
mainly reflected the buy-back costs of
undelivered hedged volumes in a higher
price environment.
Elsewhere, the higher and more volatile
price environment was beneficial for
flexible hydro and pumped storage,
as those assets efficiently responded to
capture peak prices in the market. Finally,
the adjusted result also includes a net
£43m charge relating to the Electricity
Generator Levy, which came into effect
from 1 January 2023 and is charged
on receipts generated from eligible
generation sources which are in excess
of a £75/MWh benchmark.
Reported operating profits have increased
by 4% to £446.3m in the year. In addition
to the factors noted above, the reported
result also reflects a £18.6m reduction in
exceptional charges mainly as a £28.6m
exceptional tax charge recognised in
the prior year – driven by the impact on
Joint Venture deferred tax balances from
the substantive enactment of the UK
Corporation Tax rate change, which
– was non-recurring.
82 SSE plc Annual Report 2023
Financial Review continued
However, this reduction in exceptional
charges was partially offset by a £10.1m
increase in Joint Venture share of interest
and tax charges driven by higher profitability
in these entities.
SSE Thermal Generation: Adjusted
operating profit increased 244% to
£1,031.9m, compared to £300.4m in the
prior year. SSE has continued to invest in
optimising its thermal generation fleet
despite many years of low returns and
significant write-downs because it believed
the inherent value the fleet offers the energy
system through its flexibility would eventually
be recognised. As noted previously, the last
twelve months has seen the Thermal
business navigate extreme volatility in the
forward power markets through the flexibility
it offers. The increase in adjusted operating
profit reflects additional capacity in the year
from Triton Power (acquired on 1 September
2022, £220m adjusted operating profit) and
Keadby 2 (entered commercial operation on
15 March 2023, £37m adjusted operating
profit), and additional generation volumes
from SSE Thermal’s existing feet together
with higher power prices and a strong
performance in the balancing market. In
addition, capacity market revenues – which
are unaffected by market prices – were
£33m higher compared to the prior year.
This was partially offset by £97m of
hedge buy-back losses due to unplanned
outages – mainly arising from Great Island
CCGT but also the reduction in capacity
from Tarbert oil-fired station – as well as
higher operating costs and increases in
depreciation charges due to historic
impairment reversals recognised in
September 2021 and March 2022.
Reported operating profit increased
by 75% to £1,089.5m in the year. The
acquisition in September 2022 of Triton
Power has resulted in a number of
exceptional items being recognised: a
£140.7m fair value uplift on acquisition
and a £172.0m fair value remeasurement
on operating derivatives (net of tax) were
mostly offset by a £(291.6)m impairment
charge reflecting the profitability delivered
to date by that business. These movements,
combined with a £89.1m gain on disposal
of Fiddlers Ferry land, a £17.8m reversal
of historic Great Island CCGT impairment
and an increase in the Joint Venture share
of interest and tax charges of £50.9m
account for the majority of the difference.
The prior year result included £333.3m of
exceptional items, mainly comprising the
reversal of historic impairment charges
relating to the Groups’ CCGT plants.
Gas Storage: Adjusted operating profit
increased by 592% to £212.5m, compared
to £30.7m in the prior year. The higher and
more volatile gas market price environment
during the year benefitted these assets
which operated on a merchant basis to
capture positive gas price spreads. In
normal market conditions, the seasonal
price spread occurs between summer and
winter which results in minimal profitability
for this segment in the first half of the year.
However, due to low Russian gas supplies
and increased European demand as gas
stores were built up for winter, the usual
spread was inverted, with summer gas
prices higher than winter at points during
the period. That inversion led to around
£46m of incremental profitability in the
first six months of the year. Aside from that
one-off benefit, the assets continued to
capture the usual summer-winter spread
while supporting vital energy security in
times of high gas demand across the winter.
Again, the strong performance of the Gas
Storage business affirms SSE’s decision
during previous years when earnings were
weaker to continue investing in these
critical assets.
Reported operating profit increased by
99% to £249.2m in the year. In addition
to the movements above, the prior year
included an impairment reversal of £97.3m
compared to a £45.7m further reversal
during 2022/23 as historic impairment
charges against these assets were partially
reversed. In addition, the reported results
include a £(9.0)m revaluation loss on gas
held in storage, compared to a £(2.6)m loss
in the prior year.
SSE Business Energy: Adjusted and
reported profitability increased to £17.9m
of profit in 2022/23 compared to a £(21.5)m
loss in the prior year. Market volatility since
the start of 2022 continues to create a
challenging environment for consumers
and consumer-facing businesses such
as Business Energy and Airtricity. With
the prior year loss including around
£34m of one-off charges relating to
non-recoverable Balancing System use
of Service ‘BSUoS’ costs and additional
mutualisation costs, 2022/23 has
demonstrated a recovery in underlying
profitability as the economy continued to
emerge from the impact of coronavirus.
However, even with the UK Government’s
EBRS support scheme, bad debt expenses
have increased by £(89.5)m from prior year
reflecting the deterioration of aged debt as
consumers’ finances are stretched.
SSE Airtricity: Adjusted profitability
decreased to £5.6m from £60.4m in the
prior year. Airtricity responded to the hugely
challenging circumstances faced by its
domestic energy customers during the
2022/23 financial year and – through a
combination of keeping tariffs as low as
possible for all consumers through not
passing through the full impact of wholesale
costs, a price freeze for financially
vulnerable consumers, customer support
funds and finally, in April 2023, a €35
rebate to each customer – honoured its
commitment not to make a profit in the year
in recognition of the cost-of-living crisis.
The cost of the €35 rebate will be reflected
in Airtricity’s financial results for 2023/24.
Reported profitability has decreased to
£5.2m from £60.4m in the prior year
reflecting the movements above as well
as a £(0.4)m share of interest and tax in
the current year from Joint Ventures.
Energy Portfolio Management: Adjusted
operating profit has increased to £80.4m
from a £(16.8)m loss in the prior year. EPM
continues to generate a relatively low level
of baseline operating earnings through
service provision to those SSE businesses
requiring access to the energy markets.
However, in addition to this, the business
is permitted to take small optimisation
opportunities whilst managing liquidity and
shape on external trades. As outlined above,
these optimisation opportunities are subject
to strict internal VAR limits and controls.
The increase in profitability is mainly due to
the heightened volatility and price of power
and gas trades in the market, which has
driven higher profits from the trading and
optimisation activities for this business.
A reported operating loss of £(2,626.0)m
was recognised in the year, compared
to a £2,083.6m profit in the prior year.
In addition to the movements above,
the reported operating result includes
the net remeasurement loss on forward
commodity derivatives in the period which
are fair valued in accordance with IFRS 9.
In line with previous years, this excludes
any remeasurement on ‘own use’
contracts and is unrelated to underlying
operating performance.
Distributed Energy: An adjusted operating
loss of £(27.4)m was recognised, compared
to a loss of £(10.9)m in the prior year. The
business continues to incur losses as it
invests to support business growth,
particularly in the solar and battery storage
business which will be reported under SSE
Renewables from April 2023.
83SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
The reported operating loss of £(33.5)m has
increased from a prior year loss of £29.2m
which reflects the above factors partially
offset by a smaller £(6.1)m charge mainly
related to the sale of the Contracting and
Rail business in June 2021 compared to the
£18.3m charge recognised in the prior year.
Neos Networks: SSE’s remaining 50% share
in the Telecoms business Neos Networks
Limited recorded an adjusted operating loss
of £(39.8)m compared to £(16.1)m in the
prior year, and a reported operating loss of
£(56.0)m compared to a loss of £(140.0)m
in the prior year. This result reflects the
losses incurred to support future business
growth, and includes a £37.7m impairment
of the Group’s investment in that business
of which £31.8m has been treated as
non-exceptional.
Corporate unallocated: Adjusted operating
loss of £(87.0)m compares against a loss
of £(95.7)m in the prior year. Whilst there
continues to be an unwind of historic
transitional service agreements with
SSE Energy Services (disposed to Ovo
in January 2020), Neos Networks (part-
disposed in January 2019) and SSE
Contracting (disposed to Aurelius in July
2021), the segment has also benefited
from a review of the corporate cost base
at the start of the year.
Reported operating loss of £(26.8)m
compares against a loss of £(113.5)m in the
prior year which included a £(13.1)m adverse
revaluation adjustment relating to the legacy
Gas Production decommissioning provision.
In the current year, a £50.5m positive
revaluation adjustment was recognised
on the same provision.
Adjusted Earnings Per Share
To monitor its financial performance
over the medium term, SSE reports on
its adjusted Earnings Per Share measure.
This measure is calculated by excluding the
charge for deferred tax, interest costs on
net pension liabilities, exceptional items,
depreciation on fair value adjustments,
revaluation adjustments to the retained
60% Gas Production decommissioning
obligation and the impact of certain
remeasurements.
SSE’s adjusted EPS measure provides an
important and meaningful measure of
underlying financial performance. In
adjusting for depreciation on fair value
adjustments, revaluation adjustments
to the retained 60% Gas Production
decommissioning obligation, exceptional
items and certain remeasurements,
adjusted EPS reflects SSE’s internal
performance management, avoids the
volatility associated with mark-to-market
IFRS 9 remeasurements and means that
items deemed to be exceptional due to
their nature and scale do not distort the
presentation of SSE’s underlying results.
For more detail on these and other
adjusted items please refer to the
Adjusted Performance Measures
section of this statement.
In the year ended 31 March 2023, SSE’s
adjusted Earnings Per Share on continuing
operations was 166.0p. This compares to
94.8p for the previous year and reflects
the movements in adjusted operating
profit outlined in the section above.
Group financial outlook –
2023/24 and beyond
Financial outlook for 2023/24
The 2022/23 financial year saw SSE’s
balanced portfolio of market-based and
economically-regulated businesses
successfully navigate the risks and
opportunities arising from the higher
and more volatile price environment. In
particular, the strong performance from
flexible thermal and hydro plant more than
offset the impact of the challenges faced by
onshore and offshore wind, namely lower
than expected windspeeds and construction
delays and the associated buy-back costs on
Seagreen offshore wind farm.
SSE remains focused on delivering long-
term sustainable financial performance.
And whilst energy prices and energy
price volatility have been reducing
from the highs of the last financial year,
SSE expects a relatively higher price
environment to endure.
Against this backdrop, SSE remains
confident that its businesses will continue
to deliver strong adjusted operating profit
in the 2023/24 financial year, specifically:
• For SSEN Transmission, increases to
the allowed revenue under RIIO-T2
combined with timing effects from
under-recoveries in the prior year are
expected to more than offset both
increases to the cost base as well as
the impact from an additional eight
months of earnings attributable to
minority interests.
• For SSEN Distribution, increases to the
operational cost base are not expected
to be recovered until future periods
under the tariff setting process, with
allowed revenue therefore expected to
be broadly flat.
• For SSE Renewables, assuming normal
weather and plant availability, SSE
expects to report around 12.5TWh
of generation output during 2023/24,
excluding any output from the Dogger
Bank A wind farm which is expected to
achieve first power during the year and
remains unhedged.
• For SSE Thermal and Gas Storage,
assuming normal plant availability,
SSE expects adjusted operating profit
to be more than £750m as the full-year
effect from the additional Keadby 2 and
Triton Power capacity is combined with
a sustained higher price environment in
the medium-term.
Taking the above factors into account,
SSE currently expects to report full-year
2023/24 adjusted Earnings Per Share of
more than 150p.
SSE is fulfilling its commitment to growing
the 2022/23 dividend by RPI and is
recommending a 96.7p full-year dividend in
line with that plan. Also in line with that plan,
in 2023/24, the dividend will be rebased to
60p in order to align future dividends with
SSE’s ambitious growth profile.
Capital expenditure and investment in
2023/24 is expected to exceed the £2.8bn
record investment in 2022/23, with the net
debt to EBITDA ratio expected to be within
the 3.5x – 4.0x target range.
Net Zero Acceleration
Programme Plus
SSE is a purpose-led company, seeking
to provide the energy needed today
while building a better world of energy
for tomorrow. It is a long-term business
with a clear strategy aligned with the
transition to net zero.
In November 2021, SSE set out a five-year
capex plan that aligned capital allocation
with the Group’s 2030 Goals and its
changing energy mix. This plan, referred to
as the Net Zero Acceleration Programme, or
NZAP, provided the optimal pathway at that
time to maximise total shareholder returns
from both earnings and asset value growth,
whilst remunerating shareholders through a
rebased dividend with attractive growth.
This plan and the targets contained within it
– which were partially updated in May 2022
to reflect the evidence of increasing value
creation potential – represented a floor, not
a ceiling, and were intended to position SSE
to take other opportunities as they emerge.
In the time since the NZAP was launched,
the global green transition has accelerated
as countries look towards providing energy
security by increasing their renewables and
low-carbon generation ambitions.
84 SSE plc Annual Report 2023
Financial Review continued
It is against this backdrop, and in light of
recent business performance, that SSE now
expects to meet or exceed the original
NZAP financial targets. SSE has therefore
announced an ‘NZAP Plus’ which rolls the
plan forward by 12 months and upgrades
the targets, ambitions and investment mix
to match the enhanced opportunity.
Upgraded capital investment plan to 2027
The NZAP Plus is a five-year £18.0bn capital
investment plan to 2026/27 – mainly driven
by new growth (c.£2.2bn or c.20%) but also
updating for supply chain cost increases
(c.£2.0bn or c.15%), removal of the
Distribution minority interest assumption
(c.£0.6bn or c.5%) and project phasing
(c.£0.7bn or c.5%). This increase – which
collectively represents an increase of over
40% on the NZAP – is focused on:
• Regulated electricity networks (c.50%)
SSEN Transmission (c.30%) will
comprise the majority of expected
investment in electricity networks, as the
RIIO-T2 baseline investment programme
has increased through uncertainty
mechanism projects such as the Skye
and Orkney subsea links. Whilst the
majority of Ofgem’s Accelerated
Strategic Transmission Investment (ASTI)
framework will be delivered towards the
end of the decade, the five-year plan also
includes early construction costs as these
projects are progressed. As such, SSEN
Transmission investment is expected to
increase to over £5bn from over £3bn
in the previous plan, net of the 25%
Minority Interest share, driving the gross
Regulatory Asset Value (‘RAV’) to between
£8–9bn by the end of 2026/27, and
deliver expected adjusted operating
profits of at least £400m on average
across the five year plan.
Whilst SSEN Distribution (c.20%) has
a lower share of networks investment,
the absolute amount of investment is
increasing with around £3.5bn of expected
investment compared to around £2bn
in the previous plan. This increase
reflects 100% ownership of the business
over the period, and is driven by the
£3.6bn of totex in the RIIO-ED2 Final
Determination, which runs from April
2023 to March 2028, with the potential
for additional investment in other net
zero-aligned projects to meet the
increasing electrification demands of
consumers. This investment is expected
to drive the gross RAV to between
£6–7bn by the end of 2026/27, and
deliver expected adjusted operating
profits of at least £450m on average
across the five year plan.
Overall, as SSEN Transmission and SSEN
Distribution continue to form a key
part of the low-carbon electricity core in
SSE, the total electricity networks RAV is
expected to increase from £8.2bn at the
start of the plan to between £14–16bn by
the end, of which SSE’s share after Minority
Interest is expected to be between
£12–14bn. On a gross basis, this equates
to a c.14% compound average growth
rate (‘CAGR’) over the five-year plan.
• Renewable energy generation (c.40%)
Since November 2021, SSE Renewables
has continued to grow its secured
pipeline of projects – which currently
stands at c.15GW – and also the quality
and diversity of these prospects. With a
continued focus on financial discipline
through targeting attractive returns on
new projects, it is expected that around
5GW of additional net capacity will be
added across the five-year plan, with net
installed capacity of more than 9GW by
March 2027. This growth will be fulfilled
through a diverse mix of technologies,
with an increasing number of attractive
battery and solar projects adding to SSE
Renewables’ core hydro, onshore and
offshore wind projects. The incremental
capacity, combined with changing mix
and inflationary impacts, means around
£7bn of net investment is expected
across the five-year period – a £2bn
increase on the expected investment
in the previous plan – and is expected to
drive a c.20% adjusted operating profit
CAGR across the five year plan subject
to normal weather and a c.£85/MWh
baseload power price in 2026/27.
• Low-carbon flexible thermal generation
and other businesses (c.10%)
The extreme volatility seen in energy
markets over the last year has made
it clear that investment in flexible,
low-carbon thermal generation – such
as sustainable biofuels, carbon capture
and storage and ultimately hydrogen –
will be critical to society in the transition
to net zero as a counterbalance for
increasing intermittent renewables
generation. The NZAP Plus expects to
invest up to £2.5bn in SSE Thermal’s
increasing pipeline of low-carbon
flexible generation prospects, which
currently stands at around 5GW across
a range of technologies, and deliver
expected adjusted operating profits
of around £500m on average across
the remaining four years to 2026/27.
The remaining capital investment will
be spent across SSE’s corporate centre,
distributed energy and customers
businesses, which remain part of a
very deliberate business model with
each playing its own role in delivering
SSE’s net zero-focused strategy.
With around 90% of the NZAP Plus
expected to be invested in renewables
and networks, the substantial majority of
the investment plan is focused on climate
solutions to achieve SSE’s interim 2030
Goals which are linked to material UN
Sustainable Development Goals (SDGs),
and it is aligned to the Technical Screening
Criteria of the EU Taxonomy.
Maintaining disciplined investment
at attractive returns
The changing investment mix within the
NZAP Plus reflects SSE’s focus on allocating
capital based on clear internal investment
criteria intended to maximise total
shareholder returns whilst ensuring strategic
alignment with SSE’s net zero electricity
focus. This investment criteria includes:
• Strategic fit – aligned with SSE’s
commitment to its 1.5-degree science-
based carbon targets, business mix
and capabilities;
• Optimum mix – balancing risk and
returns through a mix of economically
regulated and unregulated, market-
based assets; and
• Targeted returns – focusing investment
on high-quality assets where SSE’s
capabilities can deliver favourable risk-
adjusted project returns, namely targeting:
NZAP Plus highlights
Key targets and ambitions
Five-year targets:
NZAP (previous)
to 2025/26
NZAP Plus (new)
to 2026/27
– Capital investment (net) £12.5bn £18.0bn
– Adjusted Earnings Per Share CAGR 7 – 10%
From 2020/21 87.5p
13–16%
From 2021/22 94.8p
– Dividend growth beyond 2023/24
60p rebase
At least 5% to 2025/26 Between 5–10% to
2026/27
– Net debt/EBITDA expectations Below 4.5x Between 3.5–4x
– Net installed Renewable capacity Around 8GW More than 9GW
– Net Networks RAV >£9bn £12–14bn
Ten-year ambition: to 2030/31 to 2031/32
– Net installed Renewable capacity >13GW >16GW
– Net installed low-carbon flexible capacity >3GW* >2GW
– Net Networks RAV >£14bn >£20bn
* Included Distributed Energy capacity from Solar & Battery, now included within Renewable capacity ambition.
85SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
– Onshore wind and solar: returns
between 50–300bps over WACC for
unlevered projects, depending on the
balance of merchant, technology and
construction risk for each project;
– Offshore wind: more than 11% equity
returns (excluding developer profits)
for project financed developments;
– Networks: between 7–9% return
on equity, assuming a level of
outperformance, CPIH inflation
of 2% p.a. and an average gearing
ratio of 60%;
– Emerging technologies: between
300–500bps over WACC for
unlevered projects, reflecting
the expected increased risk on
newer, first-of-a-kind technologies
including carbon capture and
storage, hydrogen-fuelled
generation and battery storage.
These investment criteria – and targeted
returns – are applied in both domestic and
overseas markets.
Updating the growth-supporting
dividend plan
The original NZAP set out a five-year
dividend plan to support accelerated growth
by confirming previous commitments to
target dividend increases in line with RPI for
2021/22 and 2022/23, before rebasing to 60
pence in 2023/24 and targeting at least 5%
dividend increases in 2024/25 and 2025/26.
The Board has delivered on this dividend
commitment for 2021/22 and 2022/23
and continues to consider that the rebased
dividend to 60 pence in 2023/24 supports
SSE’s ongoing ambitions to accelerate
investment in the assets required to reach
net zero.
The capital allocation outlined in the NZAP
Plus is expected to drive a 13-16% Group
adjusted Earnings Per Share CAGR over the
five-year plan – against the 2021/22 baseline
of 94.8 pence – with around 50% of adjusted
EBITDA expected to be underpinned by
index-linked revenue streams.
The NZAP Plus extends the original NZAP
dividend plan to 2027 and, reflecting the
SSE Board’s confidence in future earnings
growth, now sets out a commitment to
target dividend increases of between 5
to 10% per year in 2024/25, 2025/26 and
2026/27. This updated dividend plan aims
to balance income to shareholders with
funding and a strong investment grade
credit rating alongside an upgraded
investment plan that will ultimately
create greater value and total returns for
shareholders over the long term. This plan
also retains the scrip dividend option for
shareholders with the cap on take-up still
set at 25% and implemented if necessary
by means of a share buyback.
A fully-funded plan, supported by
a strong balance sheet
Through effective capital allocation, raising
debt at highly attractive terms, capital
recycling and unlocking value through
partnerships, SSE continues to demonstrate
that it can take advantage of the accretive
opportunities it creates. It has a proven
ability to realise value from disposals, create
sustainable earnings growth and maintain
strong investment grade credit ratings – all
whilst aligning with a 1.5-degree pathway.
The Group’s business mix, future capital
investment and funding plans are designed
to ensure that it retains an investment
grade credit rating which provides capacity
to reach a 4.5x net debt/EBITDA ratio.
The financial strength of the Group means
that it expects to be within an average of
3.5–4.0x net debt/EBITDA across the
five-year plan.
More ambitious targets to 2032
The upgraded targets and ambitions within
the NZAP Plus provide the platform for
SSE’s businesses to grow substantially
through the remainder of the decade, and
are necessary to deliver the Group’s 2030
Goals and associated 1.5 degree aligned
carbon targets.
Looking further ahead, SSE is therefore also
rolling forward and upgrading key targets
for the 10 years to 2032 as set out below:
• A fourfold increase in SSE’s owned
renewables capacity to over 16GW
(net) from c.4GW today;
• Delivering more than 2GW of net
installed low-carbon flexible thermal
capacity;
• An increase to more than £20bn (net)
in SSE’s electricity networks RAV, from
£8.2bn (gross) in March 2022, equivalent
to a 14% gross RAV CAGR.
Disposal of minority stake
in networks
The selected use of partnerships remains a
key part of SSE’s strategy: to spread risk and
financial exposure; to unlock value whilst
avoiding non-earning debt; and to enable
future investment and growth.
During 2022/23, the Group completed a
25% minority interest disposal of the SSEN
Transmission business to Ontario Teachers’
Pension Plan Board for consideration of
£1,465m at a premium to RAV of around
1.9x at 30 September 2022.
Supplemental financial information
Adjusted investment and capex summary
March
2023
Share %
March
2023
£m
March
2022
£m
SSEN Transmission (excluding 25% MI from 1 Dec 2022) 23% 495.5 614.4
SSEN Distribution 19% 421.0 364.8
Regulated networks total 42% 916.5 979.2
SSE Renewables 39% 837.5 811.0
SSE Thermal 7% 153.2 123.4
Gas Storage – 6.3 2.1
Thermal Total 7% 159.5 125.5
Energy Customer Solutions 2% 49.4 39.8
Energy Portfolio Management – 4.7 2.4
Distributed Energy 6% 124.7 26.6
Corporate unallocated 4% 68.3 78.7
Adjusted investment and capital expenditure,
before refunds 100% 2,160.6 2,063.2
Project finance development expenditure refunds – (136.7)
Adjusted investment and capital expenditure 2,160.6 1,926.5
Acquisitions 642.7 141.3
Adjusted investment, capital and acquisitions
expenditure 2,803.3 2,067.8
Notes: 2021/22 restated to recognise Keadby 2 pre-commissioning revenues and costs in Income Statement
following adoption of amendments to IAS 16 Property, Plant and Equipment – Proceeds Before Intended Use.
86 SSE plc Annual Report 2023
Financial Review continued
This successful transaction reflected both
the current value and significant growth
potential of SSEN Transmission as one of
Europe’s fastest growing transmission
networks, with the proceeds released by
the sale supporting the significant growth
and investment across the Group.
While the November 2021 NZAP assumed
that a similar 25% minority stake in the SSEN
Distribution business would be disposed by
the 2025/26 financial year, SSE consistently
reviews strategic options and direction and
the NZAP Plus plan now reflects retaining
100% of the business. Strategies evolve
and a significant strengthening of SSE’s
balance sheet and an upgraded NZAP
Plus investment plan which remains well
balanced are the main factors contributing
to the Board assessment that continuing to
hold 100% of SSEN Distribution is the right
strategy at this time.
SSEN Distribution is a high-quality, core
business for the Group and will make
a significant contribution to delivering
sustainable long-term value as it plays a key
role in enabling net zero for consumers.
SSE’s capital expenditure
programme
During the year to 31 March 2023,
SSE’s adjusted investment, capital
and acquisitions expenditure totalled
£2,803.3m, representing an increase of
36% versus the prior year. Included within
the amount recorded are acquisitions
totalling £642.7m of which £519.5m is in
respect of the Southern European onshore
wind development platform acquisition and
£123.2m in respect of SSE’s share of the
purchase of Triton Power, both transactions
completed on 1 September 2022.
The remaining investment was delivered
mainly by SSE’s Renewables, Networks
and Thermal business units including the
highlights discussed below.
In SSEN Transmission, the second year
of RIIO-T2 saw deployment of a further
£495.5m of capex (SSE share, excluding 25%
from 1 December 2022 onwards), including
£152m on the Shetland connection with
160km of the total 260km subsea cable
which will connect the Shetland islands to
the GB Transmission system now installed.
In addition, £144m of spend was invested
progressing the East Coast development
project which will increase the overhead
lines from 132kV to 275kV and ultimately
to 400kV, as well as a further £55m on the
Argyll project.
The expected volumes include SSE’s equity
share of forecast pre-CFD volumes from
Seagreen offshore wind farm. No volumes
have yet been included for Viking onshore
wind farm nor Dogger Bank offshore wind
farm as hedging for these assets has not
commenced.
The table excludes additional volumes and
income for BM activity, ROCs, ancillary
services, capacity mechanism and shape
variations and optimisations. It also excludes
volumes and income relating to Irish wind
output, pumped storage and CfDs.
In the final year of RIIO-ED1, SSEN
Distribution invested £178m in the North
networks across a broad range of projects,
with additional reinforcement spend
needed following storm damage in FY22.
SSEN Distribution’s SHEPD network
delivered investment of £10m to upgrade
infrastructure at Aultbea-Ullapool and £5m
on Islay to maintain and enhance network
reliability to these island communities.
Both projects are under way and will be
complete by 2023/24. Further south, major
capital investment continued in the SEPD
network with a total spend of £243m in the
period, including upgrades to the network
in Bordon and Alton to enhance resilience
and future proof it for predicted uptake in
consumer led low-carbon-technology.
Significant expenditure was delivered on
SSE Renewables’ flagship construction
projects, including £339m of equity
drawdown for Seagreen Offshore
Windfarm, as the development progresses
towards commercial operations over the
summer of 2023. Construction of Viking
wind farm on the Shetland islands has
continued according to plan, with an
additional £202m deployed, the first
turbine erected in April 2023 and the
project on track to achieve commercial
operations in Summer 2024, while all
spend on the Dogger Bank wind farm
in the year was funded by debt raised
at the project level, and therefore not
included in SSE’s adjusted investment,
capital and acquisitions expenditure.
SSE Renewables – GB wind and hydro
The following table provides an update for SSE’s GB Wind and Hydro generation hedge
positions against the forecast merchant volume exposure as at 31 March 2023.
2021/22 2022/23 2023/24 2024/25 2025/26
Wind Expected volume – TWh 4.2 5.3 6.5 6.8 6.8
Volume hedged – % 85% 91% 85% 77% 17%
Proportion of hedge in
electricity – % 100% 62% 68% 30% 20%
Hedge price - £MWh £48 £54 £75 £115 £116
Hydro Expected volume – TWh 3.6 3.5 3.5 3.6 3.6
Volume hedged – % 83% 85% 85% 68% 23%
Proportion of hedge in
electricity – % 100% 100% 84% 31% 10%
Hedge price – £/MWh £50 £63 £86 £113 £113
Note: where gas and carbon trades have been used as a proxy for electricity, a constant 1MWh : 69.444 th and
1MWh : 0.3815 te/MWh conversion ratio between commodities has been applied.
In SSE Thermal, around £88m was invested
on the development of the 50MW Slough
Multifuel station, a joint venture with CIP,
which is progressing towards handover
during 2024/25. As well as around £20m of
residual spend on Europe’s most efficient
gas fired station at Keadby 2, which entered
commercial operation on 15 March 2023,
limited early development expenditure on
Keadby 3 was included within Thermal’s
reported number.
SSE’s hedging position at
31March 2023
SSE has an established approach to hedging
through which it generally seeks to reduce
its broad exposure to commodity price
variation at least 12 months in advance of
delivery. SSE continues to monitor market
developments and conditions and alters its
hedging approach in response to changes in
its exposure profile, such as the acceleration
of hedging by SSE Renewables previously
disclosed in May 2022. SSE will continue to
provide a summary of its hedging approach,
including details of any changes in the
period, within its Interim and Full-year
Results Statements.
A summary of the hedging position for
each of SSE’s market-based businesses is
set out below.
87SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Energy output hedges for both wind and
hydro are progressively established over
the 36 months prior to delivery (although
the extent of hedging activity for future
periods depends on the level of available
market depth and liquidity). Normal target
hedge levels continue to be achieved
through the forward sale of either
electricity, or gas and carbon equivalents.
Where the market depth and liquidity
significantly differs between gas and
carbon, the hedging approach allows –
for any time period – for the separate
forward sale of either commodity where it
is believed that it would reduce risk against
or secure value for generation assets. This
has not been applied to date.
This approach aims to reduce the exposure
of these wind assets to volatile spot power
market outcomes whilst still providing an
underlying commodity price hedge. When
gas-and-carbon hedges are converted
into electricity hedges a ‘spark spread’ is
realised which can lead to changes in the
average hedge price expected. This can
increase the previously published average
hedge price, as has been seen in 2022/23,
or decrease it.
For wind energy output, SSE’s established
approach to hedging seeks to account for
the effect of the ‘wind capture price’ by
targeting a hedge of less than 100% of its
anticipated wind energy output for the
coming 12 months. The targeted hedge
percentage is reviewed and adjusted as
necessary to reflect any changes in future
market and wind capture insights. The
last such revision occurred in March 2022,
with around 90% of the anticipated energy
output from wind for the coming twelve
months being hedged from that date.
The approach to hedging hydro energy
output remains unchanged at approximately
85% of its anticipated energy output for the
coming twelve months.
GB Thermal: In the six months prior to
delivery, SSE aims to hedge all of the
expected economic output of its CCGT
assets, having progressively established this
hedge over the 18 months prior to delivery.
This hedging approach is adjusted to take
into account any changes in exposures as a
result of current market conditions, such as
the plant availability exposure, counterparty
credit risk, and changes to cost of capital
for collateral.
Hedging activity also depends on the
availability of sufficient market depth and
liquidity, which can be limited, particularly
for periods further into the future.
Gas Storage: The assets are being
commercially operated to optimise value
arising from changes in the spread between
summer and winter prices, market volatility
and plant availability. At 31 March 2023,
125.6mTh of gas inventory was physically
held which represents c.65% of SSE’s share
of capacity (at 31 March 2022, 0.9mTh of
gas inventory representing c.1% of SSE’s
share of capacity).
UK Business Energy: The business supplies
electricity and gas to business and public
sector customers. Sales to contract
customers are hedged: at point of sale for
fixed contract customers; upon instruction
for flexi contract customers; and on a
rolling hedge basis for tariff customers.
Given the pricing and macro-economic
context, Business Energy is dynamically
monitoring nearer term consumption
actuals for any early signs of demand
variability and adjusting future volumes
hedged accordingly.
Energy Portfolio Management (EPM): EPM
provides the route to market and manages
the execution for all of SSE’s commodity
trading outlined above (spark spread,
power, gas, oil and carbon). This includes
monitoring market conditions and liquidity
and reporting net Group exposures. The
business operates under strict position
limits and VAR controls. There is some
scope for small position-taking to
permit EPM to manage around shape and
liquidity whilst taking small optimisation
opportunities. This is contained within a
total VAR limit of £5m.
Ireland: Vertical integration of the
generation and customer businesses in
Ireland limits the Group’s commodity
exposure in that market.
Summarising movements on exceptional items and
certain remeasurements
Exceptional items
In the year ended 31 March 2023, SSE recognised a net exceptional charge within
continuing operations of £(0.4)m before tax. The following table provides a summary
of the key components making up the net charge:
Exceptional credits/(charges) within continuing operations
Total
£m
Thermal Electricity Generation historic impairment reversal 17.8
Gas Storage historic impairment reversal 45.7
Fiddlers Ferry land sale 89.1
Triton Power Joint Venture bargain purchase gain and impairment (150.9)
Neos Networks impairment (5.9)
Reversal of previously recognised exceptional charges or judgements 3.8
Total exceptional charge (0.4)
Note: The definition of exceptional items can be found in note 3.2 of the Financial Statements.
In addition to the above exceptional items from continuing operations, a net exceptional
gain within discontinued operations of £35.0m after tax was recognised. This related to
the release of a provision following further clearance granted in respect of the Group’s
disposal of its Gas Production business which completed on 14 October 2021.
For a full description of exceptional items, see note 7 of the Financial Statements.
Certain remeasurements
In the year ended 31 March 2023, SSE recognised an adverse net remeasurement within
continuing operations of £(2,351.5)m before tax. The following table provides a summary
of the key components making up the adverse movement:
Certain remeasurements within continuing operations
Total
£m
Operating derivatives (including Joint Ventures, net of tax) (2,544.4)
Commodity stocks held at fair value (9.0)
Financing derivatives 201.9
Total net adverse remeasurement (2,351.5)
88 SSE plc Annual Report 2023
Financial Review continued
As in prior years, the reported result does
not include remeasurement of ‘own use’
hedging agreements which do not meet the
definition of a derivative financial instrument
under IFRS 9 ‘Financial Instruments’.
Commodity stocks held at fair value
Gas inventory purchased by the Gas
Storage business for secondary trading
opportunities is held at fair value with
reference to the forward month market
price. The £(9)m adverse movement in the
year reflects the increase in the underlying
volumes of gas held at year end have been
negatively impacted by lower forward
market prices.
However, whilst this movement reflects
the net change in fair value of physical gas
inventory held at the year end, it does not
take into account any positive or negative
mark-to-market movement on forward
contracted sales. Therefore, similar to
derivative contracts held at fair value,
we do not expect that all of this valuation
movement will be realised by the business.
Financing derivatives
In addition to the movements above, a
positive movement of £201.9m was
recognised on financing derivatives in the
year ended 31 March 2023, including
mark-to-market movements on cross-
currency swaps and floating rate swaps that
are classed as hedges under IAS 39. These
hedges ensure that any movement in the
value of net debt is predominately offset by
a movement in the derivative position. The
adjustment was primarily driven by higher
interest rates driving significant reductions
in the ‘out of the money’ position on SSE’s
fixed rate swaps, in addition to settlement
of previously ‘out-of-the-money’ contracts
in line with the contracted delivery periods.
These remeasurements are presented
separately as they do not represent
underlying business performance in the
period. The result on financing derivatives
will be recognised in adjusted profit before
tax when the derivatives are settled.
Reported profit before tax and
Earnings Per Share
Taking all of the above into account,
reported results for the year to 31 March
2023 are significantly lower than the
previous year. In addition to the £(2,351.5)m
net pre-tax loss on forward commodity,
gas inventory and financing derivative fair
value remeasurements and the £(0.4)m net
pre-tax exceptional charge noted above
– reported results also include £16.2m of
interest income on the net pension asset.
Reported results in the prior year reflected
pre-tax certain re-measurement gains of
£2,118.8m mainly driven by the significant
volatility in commodity markets in the prior
year, as well as pre-tax exceptional items
of £305.0m mainly driven by the reversal
of historic SSE Thermal and Gas Storage
impairment charges, and £7.6m of interest
income on the net pension asset.
Operating derivatives
SSE enters into forward purchase contracts
(for power, gas and other commodities)
to meet the future demands of its energy
supply businesses and to optimise the
value of its generation assets. Some of
these contracts are determined to be
derivative financial instruments under IFRS
9 and as such are required to be recorded
at their fair value as at the date of the
financial statements.
SSE shows the change in the fair value
of these forward contracts separately as
this mark-to-market movement does not
reflect the realised operating performance
of the businesses. The underlying value
of these contracts is recognised as the
relevant commodity is delivered, which
for the large majority of the position at
31 March 2023 is expected to be within
the next 6 – 12 months.
The change in the operating derivative
mark-to-market valuation was a £(2,544.4)m
adverse movement from the start of the
year, reflecting a £(2,708.2)m adverse
movement on fully consolidated operating
derivatives offset by a £163.8m share of
positive movement on derivatives in jointly
controlled entities (net of tax) which mainly
results from commodity hedging within the
Triton Power Joint Venture.
The adverse movement of £(2,708.2)m on
fully consolidated operating derivatives
includes:
• Settlement during the year of £272.0m
of previously net ‘out-of-the-money’
contracts in line with the contracted
delivery periods; and
• An adverse net mark-to-market
remeasurement of £(2,980.2)m on
unsettled contracts, largely entered
into during the course of 2021/22 and
2022/23 and in line with the Group’s
stated approach to hedging. This
mark-to-market remeasurement –
which compares to a £3,527.2m positive
movement in the prior year – reflects
the extreme volatility seen in commodity
markets during the period.
89SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Financial management and balance sheet
Debt metrics
March
2023
September
2022
March
2022
Net Debt/EBITDA* 2.7x N/A 4.0x
Adjusted net debt and hybrid capital (£m) (8,894.1) (9,988.6) (8,598.2)
Average debt maturity (years) 6.4 6.5 6.8
Adjusted interest cover 7.6x 4.2x 4.0x
Average interest rate for the period (excluding JV/assoc. interest and all hybrid coupon payments) 3.35% 3.25% 3.29%
Average cost of debt at period end (including all hybrid coupon payments) 3.92% 3.83% 3.81%
* Note: Net debt represents the group adjusted net debt and hybrid capital. EBITDA represents the full year group adjusted EBITDA, less £147m (at March 2023) for the
proportion of adjusted EBITDA from equity-accounted Joint Ventures relating to project financed debt.
Net finance costs reconciliation
March
2023
£m
March
2022
£m
Adjusted net finance costs 345.6 372.8
Add/(less):
Lease interest charges (29.4) (30.4)
Notional interest arising on discounted provisions (22.1) (5.7)
Hybrid equity coupon payment 38.8 50.7
Adjusted finance costs for interest cover calculation 332.9 387.4
SSE principal sources of debt funding
March
2023
September
2022
September
2021
Bonds 54% 52% 55%
Hybrid debt and equity securities 18% 18% 21%
European investment bank loans 5% 7% 7%
US private placement 10% 10% 9%
Short-term funding 9% 10% 5%
Index-linked debt 4% 3% 3%
% Of which has been secured at a fixed rate 92% 92% 96%
Rating Agency Rating Criteria Date of Issue
Moody’s Baa1 ‘stable outlook’ ‘Low teens’ Retained Cash Flow/Net Debt March 2023
Standard and Poor’s BBB+ ‘positive stable’ About 18% Funds From Operations/Net Debt December 2022
Maintaining a strong
balance sheet
A key objective of SSE’s long-term approach
to balancing capital investment, debt
issuance and securing value and proceeds
from disposals is by maintaining a strong
net debt/EBITDA ratio. SSE calculates this
ratio based on a methodology that it
believes best reflects its activities and
commercial structure, in particular its
strategy to secure value from partnering
by using Joint Ventures and non-recourse
project financing.
SSE considers it has the capacity to reach
a ratio of up to around 4.5x, comparable
with private sector utilities across Europe,
whilst remaining above the equivalent
ratios required for an investment grade
credit rating.
While there may be short-term fluctuations
in leverage as demonstrated by the 2.7 net
debt/EBITDA achieved at 31 March 2023
(2022: 4.0x), it is expected that this ratio will
generally fall between 3.5 – 4.0x across the
five years to 31 March 2027.
SSE’s S&P credit rating were updated in
December 2022 to at BBB+ ‘positive outlook’
and its Moody’s rating remains at Baa1 with
‘stable outlook’.
Adjusted net debt and hybrid capital
SSE’s adjusted net debt and hybrid capital
was £8.9bn at 31 March 2023, up from
£8.6bn at 31 March 2022. In addition to
dividends, capex spend and revaluation
of currency debt as well as various working
capital movements, this movement
includes the completion of two acquisitions
and one divestment during the year:
• In September 2022, SSE Renewables
completed the acquisition from Siemens
Gamesa Renewable Energy of an
onshore development platform across
Spain, France, Italy and Greece for a
consideration of €580m (£519.5m); and
• In September 2022, SSE Thermal,
alongside Equinor as 50/50 partners,
completed the acquisition of the Triton
Power portfolio with SSE’s share of the
purchase being £123.2m.
• In December 2022, a 25% Minority
Interest stake in SSEN Transmission was
disposed of, with £1.46bn of proceeds
received from Ontario Teachers Pension
Plan.
Debt summary as at 31 March 2023
The SSE Group issued £1.7bn of hybrid
capital and new medium- long-term debt
in the year ended 31 March 2023 whilst also
significantly increasing short-term debt
capacity in the form of Commercial Paper:
• In March 2022, the SSE Group through
its SSEN Transmission entity priced and
committed to a £350m dual tranche
private placement, being a £175m
10-year tranche at 3.13% and £175m
15-year tranche at 3.24% giving an all-in
average rate of 3.19%. The proceeds
were received on 30 June 2022.
90 SSE plc Annual Report 2023
SSE’s July 2020 and April 2022 hybrid bonds
are perpetual instruments and are therefore
accounted for as part of equity within the
Financial Statements but, consistent with
previous years, have been included within
SSE’s ‘Adjusted net debt and hybrid capital’
to aid comparability. The March 2017
hybrid bonds which were called and
settled in 2022/23 had a fixed redemption
date and were therefore debt accounted
and included within Loans and Other
Borrowings; as such they were already part
of SSE’s adjusted net debt and hybrid capital.
The coupon payments relating to the
equity accounted hybrid bonds are
presented as distributions to other equity
holders and are reflected within adjusted
Earnings Per Share when paid. The coupon
payments on debt accounted hybrid bonds
are treated as finance costs under IFRS 9
‘Financial Instruments’.
• In April 2022, SSE plc issued a €1bn
NC6 equity accounted hybrid bond at
4% to refinance the dual tranche debt
accounted hybrid bonds issued in March
2017. SSE has taken advantage of the
3-month par call option on these 2017
hybrid bonds, meaning they were repaid
on 16 June 2022 in advance of the first
call date. The €1bn equity accounted
hybrid bond has been kept in Euros and
the proceeds were used to cover the
portion of the maturing hybrid that was
originally swapped to Euros (€575m) and
to finance a portion of SSE Renewables’
European onshore development
platform acquisition as noted above.
• In August 2022, SSE plc issued a 7 year
€650m Eurobond at a coupon of 2.875%
which was left in Euros as part of our
net investment hedge in overseas assets
held in that currency. The bond was 8
times oversubscribed which allowed SSE
to secure a highly competitive rate for
the issuance.
Managing net finance income/(costs)
SSE’s adjusted net finance costs – which
includes interest on debt accounted hybrid
bonds but not equity accounted hybrid
bonds – were £345.6m in the year ended
31 March 2023, compared to £372.8m in
the previous year. The lower level of finance
costs from year to year mainly reflects lower
levels of net debt during the financial year
given proceeds from the disposal of Scotia
Gas Networks on 22 March 2022 (£1,225m)
and a 25% minority interest stake in SSEN
Transmission on 30 November 2022
(£1,465m).
Reported net finance income was £59.3m
compared to a reported net finance cost of
£273.2m in the previous year, reflecting the
movements above as well as the £201.9m
positive movement on financial derivatives
previously referenced.
• Over the course of the year, SSE plc
rolled maturing short-term debt in the
form of Commercial Paper in addition to
raising a further £0.4bn, which takes the
total outstanding Commercial Paper at
31 March 2023 to €1,376m (£1,048m).
Commercial Paper has been issued in
Euros and swapped back to Sterling
at an average cost of debt of 4.53%
and matures between April 2023 and
June 2023.
In addition to the March 2017 hybrid bonds
which were called in June 2022 as noted
above, a further £613m of medium-to-
long-term debt has matured in the year
comprising £163m (US Private Placement)
which matured in April 2022, £300m
(Eurobond) which matured in September
2022 and £150m European Investment
Bank fixed rate loan which matured in
October 2022. In the next twelve months,
there is a further £719m of medium-to-
long-term debt maturing being £50m
(European Investment Bank) maturing in
Summarising cash and cash equivalents
At 31 March 2023, SSE’s adjusted net debt
included cash and cash equivalents of
£0.9bn, down from £1.0bn at March 2022.
The cash collateral position has increased
from £74.7m of cash provided as collateral
at 31 March 2022 to £316.3m of cash
provided at 31 March 2023. Cash collateral
is only required for forward commodity
contracts traded through commodity
exchanges, and generally comprises an
‘initial margin’ element based on the size
and period of the trade and a ‘variation
margin’ element which will change from
day to day depending on the fair value
of that trade each day. The level of cash
collateral either provided or received
therefore depends on the volume of
trading through the exchanges, the periods
being traded and the associated price
August 2023, £35m maturing in April 2023
and £120m maturing in September 2023
(both US Private Placements) and a €700m
bond maturing in September 2023. Despite
this, the Group expects to have minimal
long-term debt refinancing requirements
to 2024/25, given expected asset disposal
proceeds. As noted above, a further
€1,048m (£929m) of short-term debt in
the form of Commercial Paper is also due
to mature in the second half of 2023/24,
however the current intention is to roll
this maturing short-term debt forward
throughout the 2023/24 financial year.
Hybrid bonds summary as at
31 March 2023
Hybrid bonds are a valuable part of SSE’s
capital structure, helping to diversify SSE’s
investor base and most importantly to
support credit rating ratios, with their 50%
equity treatment by the rating agencies
being positive for SSE’s credit metrics.
A summary of SSE’s hybrid bonds as at
31 March 2023 can be found below:
Issued Hybrid Bond Value
1
All in rate
2
First Call Date Accounting Treatment
July 2020 £600m 3.74% Apr 2026 Equity accounted
July 2020 €500m (£453m) 3.68% July 2027 Equity accounted
April 2022 €1bn (£831m) 4.00% Apr 2028 Equity accounted
1 Sterling equivalents shown reflect the fixed exchange rate on date of receipt of proceeds and is not subsequently revalued.
2 All in rate reflects coupon on bonds plus any cost of swap into sterling which currently only applies to July 2020 Hybrid.
Further details on each hybrid bond can be found in notes 21 and 22 to the Financial Statements and a table noting the amounts, timing
and accounting treatment of coupon payments is shown below:
Hybrid coupon payments
2023/24 2022/23
HYe FYe HYa FYa
Total equity (cash) accounted £74m £74m £39m £39m
Total debt (accrual) accounted – – £21m £21m
Total hybrid coupon £74m £74m £60m £60m
Financial Review continued
91SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
volatility. As collateral is only required
on a portion of trades, the movement in
collateral provided or received will not
correlate to the IFRS 9 fair value movement
recognised, which also only covers a
portion of the total Group trading activity.
The cash collateral position had increased
at 31 March 2023 due to the continued
higher forward power and gas price
environment, alongside heightened
price volatility in those markets. The
collateral position is lower than earlier
in the financial year as volatility and risk
factors have reduced, although prices do
remain heightened when compared to
previous years.
Revolving credit facility/
short-term funding
SSE has £3.5bn of committed bank facilities
in place to ensure the Group has sufficient
liquidity to allow day-to -day operations
and investment programmes to continue in
the event of disruption to Capital Markets
preventing SSE from issuing new debt for a
period of time. These facilities are set out in
the table below.
Date Issuer Debt type Term Value
Mar 19 SSE plc Syndicated Revolving Credit Facility with 10 Relationship Banks 2026 £1.3bn
Oct 19 SSE plc Revolving Credit Facility with Bank of China 2026 £200m
Nov 22 SHET plc Syndicated Revolving Credit Facility with 11 Relationship Banks 2025 £750m
Nov 22 SHEPD plc and SEPD plc Syndicated Revolving Credit Facility with 11 Relationship Banks 2025 £250m
Feb 23 SSE plc Syndicated Revolving Credit Facility with 10 Relationship Banks 2024 £1.0bn
Ahead of the 25% minority interest stake
disposal, SSEN Transmission entered a
three-year £750m facility and SSE
Distribution entered a similar 3 year £250m
facility, both having two one-year optional
extensions. These facilities were entered
into to help cover the future long-term
funding requirements and the working
capital of those businesses as they look
to become financially independent of the
Group. The facilities will therefore support
the ongoing capital expenditure investment
programmes that are required to deliver
their ambitious future growth plans and
will be drawn on a regular basis.
The new £1bn facility signed in February
2023 was executed to cover potential cash
collateral requirements required to cover
commodity position on exchanges or via
credit support annex’s on bilateral contracts.
The facilities can also be utilised to cover
short-term funding requirements; however,
the majority remain undrawn for most of
the time and at 31 March 2023, £100m was
drawn on the new £750m Scottish Hydro
Electric Transmission plc facility.
The two SSE plc facilities totalling £1.5bn
that mature in 2026 are classified as
sustainable facilities with interest rate and
fees paid dependant on SSE’s performance
in environmental, social and governance
matters, as assessed independently by
Moody’s ESG Solutions. The new £750m
Transmission facility is also classified as a
sustainable facility with interest rate and
fees paid dependant on four ESG KPI’s
being achieved.
In addition to the above, a $300m private
placement shelf facility exists with NY Life
which can be drawn in approximately two
equal tranches 12 months apart over the
next three years. At 31 March 2023 no
drawings have been made on this facility.
In addition to these committed bank
facilities, the Group has access to £50m
of uncommitted bank lines and a £15m
overdraft facility.
Maintaining a prudent treasury policy
SSE’s treasury policy is designed to be
prudent and flexible. In line with that, cash
from operations is first used to finance
regulatory and maintenance capital
expenditure and then dividend payments,
with investment and capital expenditure for
growth generally financed by a combination
of cash from operations, bank borrowings
and bond issuance.
As a matter of policy, a minimum of 50%
of SSE’s debt is subject to fixed rates of
interest. Within this policy framework, SSE
borrows as required on different interest
bases, with financial instruments being
used to achieve the desired out-turn
interest rate profile. At 31 March 2023, 92%
of SSE’s borrowings were at fixed rates.
Borrowings are mainly in Sterling and
Euros to reflect the underlying currency
denomination of assets and cash flows
within SSE. All other foreign currency
borrowings are swapped back into either
Sterling or Euros.
Transactional foreign exchange risk arises
in respect of procurement contracts, fuel
and carbon purchasing, commodity
hedging and energy portfolio management
operations, and long-term service
agreements for plant.
SSE’s policy is to hedge any material
transactional foreign exchange risks
through the use of forward currency
purchases and/or financial instruments.
Translational foreign exchange risk arises in
respect of overseas investments; hedging
in respect of such exposures is determined
as appropriate to the circumstances on a
case-by-case basis.
Ensuring a strong debt structure
through medium- and long-term
borrowings
The ability to raise funds at competitive
rates is fundamental to investment. SSE’s
fundraising over the past five years,
including senior bonds, hybrid capital and
term loans, now totals £9.5bn and SSE’s
objective is to maintain a reasonable range
of debt maturities. Its average debt maturity,
excluding hybrid securities, at 31 March
2023 was 6.4 years, down from 6.8 years at
31 March 2022. This movement reflects the
£1.7bn of new hybrid capital and long-term
debt issued in the last twelve months but
has been offset by a higher short-term
funding position via Commercial Paper.
SSE’s average cost of debt is now 3.92%,
compared to 3.81% at 31 March 2022.
Going Concern
The Directors regularly review the Group’s
funding structure and have assessed that
the Full Year Financial Statements should
be prepared on a going concern basis.
In making their assessment the Directors
have considered sensitivities on the forecast
future cashflows of the Group for the period
to 31 December 2024 resulting from the
current volatile market conditions; the
Group’s credit rating; the success of the
Group’s disposal programme through
2020/21 to 2022/23; the successful issuance
of £1.7bn of hybrid equity, Eurobond and
private placement debt issued during the
period; and the likelihood of disposal of
assets which have been announced as in
progress and related debt funding. The
Directors have also considered the Group’s
obligations under its debt covenants,
with projections to 31 December 2024
supporting the expectation that there will
be no breaches.
92 SSE plc Annual Report 2023
Financial Review continued
The Directors have assessed that the Group
remains able to access Capital Markets, as
demonstrated by the £3.6bn of debt issued
over the last 24 months. There is also an
expectation of continued availability of
the Commercial Paper market along with
future available liquidity in the private
placement market in addition to the
Group’s existing liquidity with £3.5bn
of undrawn committed borrowing
facilities which has been increased by
£2.0bn during the 2022/23 financial year.
Operating a scrip dividend scheme
SSE’s Scrip Dividend Scheme was last
renewed for a three-year period at the
2021 AGM and continues to be offered
to all shareholders. For the period out to
2026/27, take-up from the Scrip Dividend
Scheme will be capped at 25%. SSE plans
to implement this cap by means of a share
repurchase programme, or ‘buyback’, in
October each year following payment of
the final dividend. The scale of any share
repurchase program would be determined
by shareholder subscription to Scrip
Dividend Scheme across the full year,
taking into account the interim and final
dividend elections.
Following approval of the dividend at the
Annual General Meeting on 20 July 2023,
the scrip reference price will be determined
across the period from 27 July to 2 August
2023, with notification of the final scrip
reference price issued on 3 August 2023.
Following receipt of the final dividend scrip
elections on 24 August 2023, the overall
scrip dividend take-up for the financial
year will be calculated and any intention
to initiate a buy-back will be announced.
It is intended that any scrip buy-backs in
respect of 2022/23 will be completed
before 31 March 2024.
SSE believes limiting the dilutive effect
of the Scrip in this way strikes the right
balance in terms of giving shareholders
choice, potentially securing cash dividend
payment savings and managing the
number of additional shares issued.
SSE’s principal joint ventures and associates
SSE’s financial results include contributions from equity interests in joint ventures (‘JVs’) and associates, all of which are equity accounted.
The details of the most significant of these are included in the table below. This table also highlights SSE’s share of off-balance sheet
debt associated with its equity interests in JVs which totals around £3bn as at 31 March 2023.
SSE principal JVs and associates
1
Asset type
SSE
holding
SSE share of external debt
as at 31 Mar 2023
SSE Shareholder loans
as at 31 Mar 2023
Marchwood Power Ltd 920MW CCGT 50% No external debt £26m
Seabank Power Ltd 1,234MW CCGT 50% No external debt No loans outstanding
SSE Slough Multifuel Ltd 50MW energy-from-waste facility 50% No external debt £128m
Triton Power Holdings Ltd 1,200MW CCGT & 140MW OCGT 50% No external debt No loans outstanding
Beatrice Offshore Windfarm Ltd 588MW offshore wind farm 40% £681m Project financed
Dogger Bank A Wind Farm Up to 1,200MW offshore wind farm. 40% £745m Project financed
Dogger Bank B Wind Farm Up to 1,200MW offshore wind farm. 40% £616m Project financed
Dogger Bank C Wind Farm Up to 1,200MW offshore wind farm. 40% £344m Project financed
North Falls Offshore Wind Farm Ltd Offshore wind farm extension 50% No external debt No loans outstanding
Ossian Offshore Windfarm Ltd ScotWind seabed 40% No external debt No loans outstanding
Seagreen Offshore Windfarm Ltd 1,075MW offshore wind farm 49% £628m £816m
2
Seagreen 1a Ltd Offshore wind farm extension 49% No external debt £16m
Cloosh Valley Wind Farm 105MW onshore windfarm (part of
Galway Wind Park)
25% No external debt £26m
Clyde Windfarm (Scotland) Ltd 522MW onshore wind farm 50.1% No external debt £127m
Dunmaglass Windfarm Ltd 94MW onshore windfarm 50.1% No external debt £46m
Lenalea Wind Energy DAC 30MW of onshore windfarm 50% No external debt £8m
Stronelairg Windfarm Ltd 228MW onshore wind farm 50.1% No external debt £88m
Neos Networks Ltd Private telecoms network 50% No external debt £56m
Notes:
1 Greater Gabbard, a 504MW offshore windfarm (SSE share 50%) is proportionally consolidated and is reported as a Joint Operation with no loans outstanding.
2 For accounting purposes, £223m of the £816m of SSE Shareholder loans advanced to Seagreen Windfarm Limited as at 31 March 2023 have been classified
as equity.
93SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Taxation
SSE is one of the UK’s biggest taxpayers,
and in the 2022 PwC Total Tax Contribution
survey published in November 2022 was
ranked 16th out of the 100 Group of
Companies in 2022 in terms of taxes
borne (those which represent a cost to
the company, and which are reflected
in its financial results).
SSE considers being a responsible taxpayer
to be a core element of its social contract
with the societies in which it operates
and seeks to pay the right amount of tax
on its profits, in the right place, at the
right time. While SSE has an obligation
to its shareholders, customers and other
stakeholders to efficiently manage its total
tax liability, it does not seek to use the tax
system in a way it does not consider it was
meant to operate or use tax havens to
reduce its tax liabilities.
Under its social contract SSE has an
obligation to the society in which it
operates, and from which it benefits – for
example, tax receipts are vital for the public
services SSE relies upon. Therefore, SSE’s tax
policy is to operate within both the letter
and spirit of the law at all times.
SSE was the first FTSE 100 company
to be Fair Tax Mark accredited and has
now been accredited for nine years. The
group’s overseas expansion presented the
opportunity to move to Fair Tax Foundation’s
Global Multinational Business Standard
Accreditation, which was launched in
late 2021, SSE being the first company
to transition from the UK headquartered
accreditation to the global accreditation.
In November 2022, SSE published ‘Talking
Tax 2022: Fair tax in a time of change’ report.
It did this because it believes building trust
with stakeholders on issues relating to tax is
important to the long-term sustainability of
the business.
As part of the Spring Finance Bill, released
on 23 March 2023, the UK Government
published the final draft legislation behind
the Electricity Generator Levy (‘EGL’).
This measure introduces a temporary 45%
charge on exceptional receipts generated
by specific generation sources which are
in excess of a £75/MWh benchmark price
(adjusted in line with Consumer Price Index).
The levy will be in effect from 1 January
2023 to 31 March 2028, and therefore a
net charge of £43m has been recognised
in respect of the EGL within the 2022/23
financial year which has been excluded
from the Income Tax disclosure in line with
current accounting practice.
In the year to 31 March 2023, SSE paid
£501.7m of profit taxes, property taxes,
environmental taxes, and employment taxes
in the UK, compared with £335.3m in the
previous year. The increase in total taxes
paid in 2022/23 compared with the previous
year was primarily due to higher levels of
corporation tax being paid on UK profits and
higher levels of Climate Change Levy being
paid as a result of fewer outages at SSE’s
gas-fired power stations compared with the
previous year.
In 2022/23 SSE also paid €53.8m of taxes in
Ireland, compared to €46.4m the previous
year, due to increased profits in SSE’s Irish
businesses. Ireland is the only country
outside the UK in which it currently has
significant trading operations. SSE’s
operations elsewhere are still at an early
stage and are not yet paying material
amounts of tax.
As with other key financial indicators, SSE’s
As with other key financial indicators, SSE’s
focus is on adjusted profit before tax and, in
line with that, SSE believes that the adjusted
current tax charge on that profit is the tax
measure that best reflects underlying
performance. SSE’s adjusted current tax
rate, based on adjusted profit before tax,
was 16.4%, compared with 9.2% in 2021/22
on the same basis. The increase in rate is
primarily as a result of higher profit before
tax, partly mitigated by increased capital
allowances. In addition, a decision finding in
SSE’s favour was released by the Supreme
Court on 17 May 2023 on the group’s
long-running capital allowances case in
relation to Glendoe Hydro Electric Station.
The successful outcome has resulted in
the release of a £27.9m corporation tax
provision, which in turn reduced SSE’s
adjusted underlying current tax rate for
the year by 1.3%.
The UK Budget in March 2021 introduced
a ‘super-deduction’ for qualifying capital
expenditure incurred during the two-year
period from 1 April 2021 to 31 March 2023.
Capital allowances rates of 130% and 50%
replace the existing rates of 18% and 6%
respectively for qualifying capital expenditure
in that period, significantly increasing the
amount of capital allowances available on
the Group’s capital investment programme.
94 SSE plc Annual Report 2023
Pensions
Contributing to employees’ pension schemes – IAS 19
March
2023
March
2022
Pension scheme asset recognised in the balance sheet before deferred tax £m 541.1 584.9
Pension scheme liability recognised in the balance sheet before deferred tax £m – –
Net pension scheme asset recognised in the balance sheet before deferred tax £m 541.1 584.9
Employer cash contributions Scottish Hydro Electric scheme £m 1.0 1.0
Employer cash contributions SSE Southern scheme £m 52.1 58.0
Deficit repair contribution included above £m 38.0 40.9
In the year to 31 March 2023, the surplus
across SSE’s two pension schemes
decreased by £43.8m, from £584.9m
to £541.1m, primarily due to actuarial
losses of £79.2m and contributions
made to the schemes.
The valuation of the SSE Southern Pension
Scheme increased by £107.1m in 2022/23
primarily due to actuarial gains of £72.8m,
in particular the impact of higher discount
rates, as well as deficit repair contributions
exceeding service costs.
The Scottish Hydro Electric Pension
Scheme has insured against volatility in its
deferred and pensioner members through
the purchase of ‘buy-in’ contracts meaning
that the Group only retains exposure to
volatility in active employees. During the
year the Scottish Hydro Electric Pension
Scheme surplus decreased by £150.9m
mainly as a result of actuarial losses from
plan assets.
Additional information on employee
pension schemes can be found in note 23
to the Financial Statements.
Financial Review continued
95SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
95SSE plc Annual Report 2023
Operating review
SSE’s strategy of sustainably developing, building,
operating and investing in the electricity infrastructure
and businesses needed in the transition to net zero is
delivered through a focused mix of market-based and
economically-regulated energy businesses.
SSE’s businesses are key to enabling a net zero economy, have significant
growth potential and, importantly, are highly complementary. With common
skills and capabilities in the development, construction, financing and
operation of highly technical electricity assets, there are strong synergies
between them and valuable links across them. SSE’s business mix is very
deliberate, highly effective, fully focused and well set to prosper on the
journey to net zero, whilst contributing to energy security and affordability.
The review of the Business Units that follows provides visibility of
performance and future priorities.
usiness Unit
Operating Review
96 SSE plc Annual Report 2023
Who SSEN Transmission
serves
Electricity generators, large electricity
demand customers and ultimately
all electricity customers across the
North of Scotland and beyond.
How it supports SSE’s strategy
SSEN Transmission invests in the
critical infrastructure needed for a
network for net zero that connects
sources of renewable electricity to the
national grid and transports it to areas
of demand.
How it is remunerated
Through economically regulated
returns recovered from generators
and customers that are potentially
enhanced through efficient delivery.
In addition to Certain View
expenditure, Uncertainty Mechanisms
permit recovery of additional revenue
in a given price control period to
reflect additional investment
requirements. These Uncertainty
Mechanisms fund network upgrades
during the price control period.
“Through our ambitious
investment programme as one
of Europe’s fastest growing
transmission networks, we
are committed to improving
network reliability for the
communities we serve,
alongside supporting climate
and energy security targets,
as we deliver a network for net
zero at an affordable cost to
consumers, while providing
a fair return to shareholders.”
Rob McDonald
Managing Director,
SSEN Transmission
Operating Review continued
SSEN Transmission
SSEN Transmission owns, operates and develops the high voltage electricity transmission system
in the North of Scotland and its islands. Following a minority stake sale completed in November
2022, the business is owned 75% by SSE plc and 25% by Ontario Teachers’ Pension Plan Board.
All capex and RAV references in this update relate to 100% of the business unless otherwise
stated. The business is well placed to capture significant long-term growth opportunities from
investment in enhancing energy security and enabling the development of renewables across
the North of Scotland.
Operational delivery
In 2022/23, SSEN Transmission delivered
another year of exceptional operational
performance, achieving the maximum
reward available through the Energy Not
Supplied Incentive of £0.8m for the third
consecutive year, which will be reflected in
revenue in 2024/25. This strong operational
performance is underpinned by a robust
programme of inspection, maintenance,
refurbishment and replacement of its
transmission assets, keeping the lights on for
communities around the North of Scotland
and ensuring reliable network access for its
electricity generation customers to support
security of supply.
SSEN Transmission’s capital investment
programme remains on track with good
progress being made on all major projects.
This includes the second phase of the
Inveraray-Crossaig overhead line replacement
project, with the installation of all steel towers
now complete and the project on track for
energisation this summer. As well as
maintaining and enhancing network reliability
to the communities it serves, the Inveraray-
Crossaig project will also enable the growth in
renewable electricity generation across the
region as part of the wider Argyll and Kintyre
275kV Strategy.
The Shetland High Voltage Direct Current
(HVDC) transmission link also continues to
make excellent progress with the second
phase of the subsea cable installation works,
which commenced in March 2023, now
complete. 160km of the total 260km of
subsea cable is now installed. Noss Head
Switching Station in Caithness, which the
Shetland HVDC link will connect to, was
successfully energised in April 2023. Upon
competition, the Shetland HVDC link will
connect to the existing Caithness-Moray
HVDC link, becoming the world’s first
multi-terminal HVDC system outside of
China. It is a key innovation to support the
future development of integrated HVDC grids,
with HVDC links to date largely point-to-point
connections. The project remains on track
for completion and energisation in 2024.
Good progress continues to be made to
increase the capacity of the North East
transmission network to 400kV, with this
phase of network upgrades remaining on
track for energisation by the end of 2023.
Work to incrementally increase the east
coast transmission network also remains
on track, to 275kV by the end of 2023 and
then to 400kV by 2026.
These strategic investments in new and
upgraded infrastructure are key to help
enable the continued growth in renewable
electricity generation across the North of
Scotland. These renewable connections
includes the completion of the third circuit of
the Seagreen offshore wind farm connection
to Tealing substation in Angus which
completed in November 2022.
As at 31 March 2023, the total installed
capacity of the North of Scotland
transmission network was around 10.5GW,
of which just over 9GW is from renewable
sources. This includes the successful
energisation of the Creag Rhiabhach
wind farm (92MW) near Lairg in December
2022 and the successful completion of all
three phases of the Seagreen (1,075MW)
grid connection. Factoring in the forecast
growth in renewables in the remaining
years of the RIIO-T2 period, SSEN
Transmission remains well on track to
meeting, and likely exceeding, its goal to
transport the renewable electricity that
powers 10m homes.
For financial performance commentary
please refer to the Financial Review.
97SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
SSEN Transmission key performance indicators
March
2023
March
2022
SSEN Transmission
Transmission adjusted operating profit
1
– £m 372.7 380.5
Transmission reported operating profit – £m 405.5 380.5
Gross Regulated Asset Value (RAV) – £m 4,836 4,155
SSE Share Regulated Asset Value (RAV)
1
– £m 3,627 4,155
Renewable Capacity connected to SSEN Transmission Network
2
– MW 9,208 7,790
Transmission adjusted investment and capital expenditure
1
– £m 495.5 614.5
1 Excludes 25% minority interest from 1 December 2022.
2 Includes full Seagreen Transmission Entry Capacity.
Growth opportunities in RIIO-T2
SSEN Transmission continues to make
tangible progress in unlocking several
investments over and above its baseline
investment case secured at the start of
RIIO-T2. These additional projects, which
are being taken forward through Ofgem’s
Uncertainty Mechanisms, will be key to
delivering a pathway to net zero and
helping support energy security.
In October 2022, SSEN submitted to Scottish
Ministers its Section 37 planning application
for the replacement and upgrade of the Fort
Augustus to Skye transmission line, with
Highland Council’s Planning Committee
unanimously supporting the application
in March 2023. The replacement line is
required to maintain security of supply
and enable the connection of renewable
electricity generation along its route. In May
2023, Ofgem published for consultation
its response to SSEN Transmission’s FNC,
setting out its ‘minded-to approve’
provisional decision. Subject to timely
planning and regulatory approvals, the
project is on track for completion in 2026.
Following Ofgem’s approval of SSEN
Transmission’s Initial Needs Case for the
Argyll 275kV Strategy in December 2022, in
May 2023, SSEN Transmission submitted its
FNC. This followed a direction from Ofgem
to allow submission in advance of securing
all main planning consents due to the risk of
delay and likely increase in cost that would
otherwise have been the case, alongside
providing certainty to support the project’s
procurement process. The Argyll and Kintyre
275kV Strategy is required to upgrade the
local transmission network from 132kV to
275kV operation, supporting the forecast
growth in renewables in the region.
The decision in October 2022 by Argyll
and Bute Council’s Planning Committee to
raise an objection to SSEN Transmission’s
proposed overhead line between Creag
Dhubh and Dalmally has resulted in a Public
Local Inquiry (PLI), which is now under
way. SSEN Transmission remains extremely
disappointed by the decision, which went
against the recommendations of the
Council’s own Planning Officer, with no
other statutory stakeholder objections
received, and continues to review what
this means for its delivery programme and
will work with all stakeholders to minimise
the impact of this on new renewable
generation connections.
In March 2023, Ofgem provisionally
approved long established plans to provide
a 220kV subsea transmission link to Orkney,
the timing of which remains subject to
Ofgem’s final decision and ongoing
discussions with the supply chain.
Further expenditure to connect new
renewable generation, enable rail
electrification and support system security
is also expected throughout the RIIO-T2
period and beyond when the need for this
investment becomes certain.
Subject to regulatory and planning
approvals, SSEN Transmission’s expenditure
across the price control period could take
its RAV to between £8bn to £9bn by 2027.
Further growth opportunities
In July 2022, the National Grid Electricity
System Operator (ESO) published the
Pathway to 2030 Holistic Network
Design (HND). It set out the onshore and
offshore electricity transmission network
infrastructure required to deliver the UK
Government’s 50GW by 2030 offshore
wind target.
In December 2022, Ofgem published
its Accelerated Strategic Transmission
Investment (ASTI) framework decision,
which provided the regulatory framework
under which those investments will be taken
forward. Ofgem’s ASTI decision is a major
step forward in strategic network planning
for electricity transmission infrastructure and
included ‘approval of need’ of all investments
in SSEN Transmission’s network region set
out in the HND report as ‘required’ to enable
2030 targets. The ASTI framework also
unlocks early pre-construction expenditure
to help secure the supply chain, alongside
allowances to support early construction
activities.
In light of these developments, SSEN
Transmission has upgraded its long term
RAV target, which is now expected to exceed
£15bn by 2032. Subject to timely and positive
planning decisions and the outcome of
competitive tenders for delivery of these
projects, SSEN Transmission is committed
to 2030 delivery of these projects.
Beyond these investments, in October 2022,
Ofgem published its decision on the onshore
and offshore classification of the offshore
HND assets. It confirmed that a proposed
subsea connection from Fetteresso to a new
substation in Lincolnshire will be classed as
an onshore electricity transmission asset,
which is likely to support further growth.
With the HND enabling around 11GW of
ScotWind’s 28GW ambition, a follow-up
exercise is now under way which will set
out how ScotWind’s full offshore wind
ambition will be realised, the outcome of
which is expected before the end of 2023.
The Scottish Government is also consulting
on its Draft Energy Strategy and Just
Transition Plan, which includes proposals
for an additional 8-12GW of onshore wind
by 2030.
Recognition by Ofgem and the ESO of these
further potential growth and investment
opportunities, alongside ever-increasing
UK and Scottish Government energy targets
and ambitions, underlines the importance
of the Transmission network, particularly in
the North of Scotland, in transitioning the
GB energy system to net zero.
Given the scale of investment required to
deliver net zero, it is crucial that the policy
landscape and regulatory framework,
particularly financial parameters, continue
to attract the investment required to
support delivery of the most ambitious
investment plan in low-carbon
infrastructure for a generation.
98 SSE plc Annual Report 2023
Operating Review continued
SSEN Distribution
SSEN Distribution, operating under licence as Scottish Hydro Electric Power Distribution plc
(SHEPD) and Southern Electric Power Distribution plc (SEPD), is responsible for safely and
reliably maintaining the electricity distribution networks supplying over 3.9m homes and
businesses across central southern England and the North of Scotland. SSEN Distribution’s
networks cover the greatest land mass of any of the UK’s Distribution Network Operators with
over 75,000km² of extremely diverse terrain. The business has significant growth opportunities
as a key enabler of the local and national transition to a net zero future.
“RIIO-ED2 is a critical milestone
in the journey to net zero. We
have a pivotal role to play in
strengthening our network
and increasing our resilience,
whilst future-proofing our
system to enable the greater
uptake of low-carbon
technologies to allow our
customers to meet their
net zero goals.”
Chris Burchell
Managing Director,
SSEN Distribution
Who SSEN Distribution
serves
Over 3.9m homes and businesses
and generators and service providers
that are, or want to be, connected
to its distribution networks and
customers in its operating areas.
How it supports SSE’s strategy
It provides timely connection
of local renewables and the co-
ordinated delivery of investment
and flexible solutions to alleviate
network constraints and enable
further electrification.
How it is remunerated
Through economically regulated
returns recovered from customers
and connecting parties. Additional
earnings come through efficient
delivery of investment and
performance-related incentives.
Operational delivery
In December 2022, Ofgem published its
Final Determinations for the RIIO-ED2 price
control outlining its response to SSEN’s
Business Plan ‘Powering Communities
to Net Zero’. SSEN Distribution accepted
Ofgem’s Final Determination in March
and will continue to work closely with the
regulator to ensure the price control has
the agility and flexibility required to keep
pace with net zero requirements. The price
control began in April 2023 and will run
until March 2028.
Major capital investment
The new price control period will see the
acceleration of SSEN Distribution’s major
capital investment programme across
both its networks, delivering significant
improvements for customers and
supporting future earnings through RAV
growth. This builds on continued capital
delivery in the final year of RIIO-ED1, where
SSEN Distribution invested £421m, bringing
the total investment since the beginning of
the price control to £2.7bn.
Customer interruptions and
incentive score
Under the RIIO regulatory regime and
the Interruptions Incentive Scheme (IIS),
SSEN Distribution is incentivised on its
performance against the loss of electricity
supply through the recording of Customer
Interruptions (CI) and Customer Minutes
Lost (CML), which includes both planned
and unplanned supply interruptions. These
incentives will typically be collected two
years after they are earned.
The SHEPD CI rate increased from 56
in 2021/22 to 60 in 2022/23, with CML
increasing from 57 to 59. Whilst performance
in response to unplanned network faults
improved in comparison to 2021/22,
reflecting investment in automation and
operational response, a rise in planned
interruptions to facilitate new connections
has impacted IIS performance. In SEPD,
the CI rate increased to 44 up from 42 the
previous year and CMLs also increased to
46 from 42 the previous year. Adverse
weather which did not qualify as exceptional
under IIS provisions and a major transmission
fault affecting 55,000 customers were also
contributory factors in performance for
the period.
In 2022/23 the SSEN Distribution network
was affected by two extreme weather
events, an ice storm in Shetland in
December 2022 and Storm Otto in February
2023. Power restoration efforts during both
weather events were swift and effective
as reflected in a motion in the Scottish
Parliament praising SSEN Distribution’s
‘exceptional response’ to Storm Otto,
citing improvements in restoration,
communications and customer service.
In response to the security of supply
concerns across GB and possibility of
emergency disconnections, Distribution
was the first Distribution Network Operator
(DNO) to develop an emergency planning
portal for customers and conducted
engagement with over 2,500 stakeholders
to help ensure preparedness and
community resilience.
99SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Improving customer satisfaction
SSEN Distribution’s Broad Measure
performance has again improved in 22/23
achieving a total incentive return of £4.4m
and continuing the upward trend which
has been supported by a comprehensive
improvement plan for each Broad Measure
category. In 2022/23 SSEN Distribution was
the most improved DNO for Customer
Satisfaction, with the speed of improvement
being five times that of the industry average.
In 2022/23 SSEN Distribution received its
highest ever league table position in the
Stakeholder Engagement and Customer
Vulnerability (SECV) standings, resulting
in an estimated revenue of £1.5m. Support
for customers in vulnerable situations also
increased with registrations to SSEN’s
Priority Services Register rising by 11%
compared to the previous financial year
through targeted communications and
partnerships. In addition, over 14,500
households were supported by fuel poverty
and energy efficiency measures, an
increase of almost 70% on 2021/22.
In March 2023, SSEN published its Fair
Energy Future report, and in doing so
became the first DNO to publish a
consumer-led just transition action plan
aimed at securing a fair and inclusive net
zero transition for all.
For financial performance commentary
please refer to the Financial Review.
Growth opportunities
Delivering in the new RIIO-ED2 price
control period
SSEN Distribution’s RIIO-ED2 Business Plan,
which was co-created with stakeholders,
is a core component of SSE Group’s NZAP
Plus. The Final Determination from Ofgem
provides SSEN Distribution with a proposed
total base expenditure of £3.6bn, an uplift
of over 22% on the equivalent period in
RIIO-ED1, including potential additional
investment opportunities of up to £0.7bn
over the period through uncertainty
mechanisms and reopeners.
Accelerating connections
With the transition to net zero gathering
pace, SSEN Distribution is seeing a
significant rise in the uptake of low-carbon
technologies, particularly EV charge points,
heat pumps, and battery storage. The
business has seen a 75% uplift in the
number of electric vehicle charge points
connected compared to last year.
The SEPD network is experiencing rapid
growth in both generation and demand
requests, with significant large load
requests coming from data centres and
contracted batteries doubling over the
past year. In SHEPD, generation demand
has tripled from 3.7GW to 9.5GW over the
past 18 months.
Empowering local investment
and growing flexibility
Project LEO, SSEN Distribution’s industry-
leading project established to replicate the
future energy system and test flexibility
services at the ‘grid edge’, has concluded.
Insights are now being used to facilitate
extensive engagement with local
authorities and stakeholders to support
local net zero planning. This includes
collaborative work with the Isle of Wight
Council and local generators to produce
a first-of-its-kind local net zero island
study, which has identified core network
development needed to unlock renewables
and meet future demands. This provides a
robust case to unlock further investment
through uncertainty mechanisms early in
the price control.
SSEN Distribution is also increasing
tendering its flexibility services in areas
where localised high demand can be offset
to extend overall network capacity. SSEN’s
RIIO-ED2 Distribution System Operator
Strategy targets delivery of 5GW in flexible
services and 3.7GW of flexible connections
by 2028. Overall, SSEN will invest around
£70m in DSO capabilities in the five-year
period, enabling greater consumer
take-up of low-carbon technologies
while delivering an estimated £460m of
benefits through deferred reinforcement
and avoided capital expenditure.
Building a workforce for the future
During the RIIO-ED2 price control period,
SSEN Distribution will increase its
workforce materially as it delivers the
infrastructure required for net zero, safely,
efficiently and in line with customers’
expectations. In the last year alone, its
graduate intake increased by 180% and
trainee engineers by 90%, with specific
pipelines for digital skills, alignment to
and a focus on recruiting for difference,
including neurodiversity.
SSEN Distribution key performance indicators
March
2023
March
2022
SSEN Distribution
Distribution adjusted and reported operating profit – £m 382.4 351.8
Regulated Asset Value (RAV) – £m 4,720 4,054
Distribution adjusted investment and capital expenditure – £m 421.0 364.8
Electricity Distributed – TWh 36.1 37.6
Customer Minutes Lost (SHEPD) average per customer 59 57
Customer Minutes Lost (SEPD) average per customer 46 42
Customer Interruptions (SHEPD) per 100 customers 60 56
Customer Interruptions (SEPD) per 100 customers 44 42
100 SSE plc Annual Report 2023
Operating Review continued
SSE Renewables
SSE Renewables develops and generates zero carbon electricity at scale from wind farms
and provides clean flexible power from its hydro schemes. The business comprises existing
operational assets and those under development in onshore wind, offshore wind, flexible hydro
electricity, run-of-river hydro electricity, pumped storage, as well as solar and battery technology
co-located on existing UK and new international markets. In April 2023, the standalone Solar and
Battery business, that had previously reported alongside SSE Distributed Energy, was integrated
into SSE Renewables to optimise technological, planning and development synergies.
Operational delivery
SSE Renewables’ operational offshore
wind installed capacity is 487MW with its
onshore wind and hydroelectric installed
capacity at 1,969MW and 1,459MW
respectively. SSE Renewables is currently
leading the construction of more offshore
wind than any other company in the world.
Whilst availability across all technologies
has remained high, the lower-than-
expected wind and rainfall observed
over the last three years continued in
the last financial year, resulting in lower
than normal production.
SSE Renewables’ hydro assets play an
increasingly critical role in delivering
cost-effective, low-carbon flexibility to
the system, providing additional diversified
revenue streams. Following a very dry
summer, autumn rain was above average
followed by drier than average conditions
over the winter months resulting in output
for the year being behind plan. Plant
availability, however, was very strong
and following an intensive period of
summer maintenance outages, which
were delivered to plan, winter plant
availability was exceptional with the fully
flexible plant and the pumped storage
asset at Foyers performing particularly well.
SSE Renewables is actively progressing plans
to enhance assets across its operational
hydro fleet, including the addition of
pumping capacity, generation capacity
increases and grid services capabilities.
“We are working to keeping
global warming to a 1.5°C
pathway through the
development, construction
and operation of renewables.
We are currently building
more offshore wind energy
than any other company
in the world and we have
ambitions to do more,
delivering our diverse pipeline
of over 11GW across wind,
hydro, solar and batteries.”
Stephen Wheeler
Managing Director,
SSE Renewables
Who SSE Renewables serves
Electricity customers across markets
in GB, Ireland and abroad who are
increasingly seeking lower-carbon
sources of energy.
How it supports SSE’s strategy
SSE Renewables is driving the net zero
transition through the development,
financing, construction and operation
of world-class renewables.
How it is remunerated
Through the wholesale electricity
market, ancillary services market,
Capacity Market, Balancing
Mechanism revenue from hydro
output, power purchase agreements,
and government support schemes
for renewable energy.
SSE Renewables is the leading owner,
operator and developer of onshore
wind farms across the UK and Ireland.
Operational onshore wind fleet availability
was high throughout the year. Volumes
finished at 93% of plan at year end with
lower than forecast wind resource in Q4
impacting volumes.
While the end of the financial year saw
lower wind resource than anticipated,
autumn and winter saw an improved
performance with Beatrice and Greater
Gabbard offshore wind farms achieving
91% of plan overall, reducing to 73% when
including Seagreen and the impact of its
construction delay. There are now 50
turbines generating at Seagreen producing
significant volumes and a new-build
Vestas operational service vessel has
been mobilised to site.
For financial performance commentary
please refer to the Financial Review.
Construction programme
All three phases of the world’s largest
offshore wind farm at Dogger Bank (each
1,200MW, SSE share 40%) continue to
progress. Onshore works are continuing on
all three phases, with the three convertor
stations at various stages of construction
and the onshore HVDC cables already
installed on Dogger Bank A and B. The
operation and maintenance base at Port
of Tyne is complete and was officially
opened in March.
Offshore work is well under way for Dogger
Bank A with successful installation of the
first monopiles and transition pieces and
the 175km offshore export cable. In April,
Dogger Bank A reached another milestone
with the installation of the world’s first
unmanned HVDC offshore substation,
making it the first project in the UK to use
this technology to transmit the electricity
produced back to shore, ensuring that the
electricity is transmitted efficiently over
long distances while minimising losses.
Dogger Bank A is still expecting to achieve
first power during Summer 2023, assuming
normal weather. However, due to delays to
101SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
the manufacturing of nacelles for the
GE Haliade X turbine, the commercial
operations date for Dogger Bank A has been
pushed back by a few months to Q3 2024.
The project is working with GE to assess
whether impacts on Dogger Bank B and C
are likely, as well as options to mitigate.
On Seagreen 1 (1,075MW, SSE share 49%),
which will be Scotland’s largest and the
world’s deepest fixed-bottom offshore wind
farm once operational, installation of all 114
foundations (‘jackets’) was completed in April
2023 including the world’s deepest jacket at
a depth of 58.6m. With 84 turbines installed
and 53 turbines exporting power to the grid
as of 18 April 2023, the project continues
to make significant progress towards its
commercial operations date during the
summer of 2023.
Onshore, construction is progressing well
on Viking (443MW) in Shetland with turbine
installation under way and all turbines
expected to be up by the end of 2023.
Viking is expected to be fully operational
by Autumn 2024.
In Ireland, Lenalea wind farm (30MW,
SSE share 50%) construction is progressing
and it is due to be completed by the end of
2023. Following a final investment decision
in August, Yellow River (101MW) started
construction at the beginning of November
2022 and will proceed on a merchant basis.
In hydro, phase one of the Tummel
Bridge power station refurbishment was
completed on schedule. The two existing
‘camelback’ turbines and accompanying
machinery were removed in preparation
for the installation of two new, bespoke
turbines in Q2 2023.
Growth opportunities –
Domestic
SSE Renewables’ core markets of the UK
and Ireland continue to offer considerable
growth opportunities.
In March, the UK Government opened the
application window for Allocation Round 5
(AR5). SSE Renewables projects Seagreen
1A Strathy South, Bhlaraidh Extension,
Aberarder and Viking are all eligible to
bid for the auction, with results expected
by September 2023. However, the low
administrative strike price (caps) in the
auction, particularly for offshore wind,
do not reflect the cost increases faced
by projects. As a result, SSE Renewables
will not be entering Seagreen 1A into
the auction. It will continue to seek an
alternative route to market to progress
this project.
Located in the North Sea, in the outer
Firth of Forth, Berwick Bank wind farm has
the potential to deliver 4.1GW of installed
capacity, making it one of the largest
offshore opportunities in the world.
SSE Renewables key performance indicators
March
2023
March
2022
SSE Renewables
Renewables adjusted operating profit –£m 580.0 568.1
Renewables reported operating (loss) –£m 446.3 427.8
Renewables adjusted investment and capital expenditure
before acquisitions – £m 837.5 811.0
Generation capacity – MW
Onshore wind capacity (GB) – MW 1,285 1,285
Onshore wind capacity (NI) – MW 117 122
Onshore wind capacity (ROI) – MW 567 567
Total onshore wind capacity – MW 1,969 1,974
Offshore wind capacity (GB) – MW 487 487
Conventional hydro capacity (GB) – MW 1,159 1,159
Pumped storage capacity (GB) – MW 300 300
Total renewable generation capacity (inc. pumped storage) – MW 3,915 3,920
Contracted capacity 2,787 2,792
Generation output – GWh
Onshore wind output (GB) – GWh 2,770 2,502
Onshore wind output (NI) – GWh 286 264
Onshore wind output (ROI) – GWh 1,357 1,196
Total onshore wind output – GWh 4,413 3,962
Offshore wind output (GB) – GWh 1,846 1,430
Conventional hydro output (GB) – GWh 3,037 3,107
Pumped storage output (GB) – GWh 301 227
Total renewable generation (inc. pumped storage) – GWh 9,597 8,726
Total renewable generation (also inc. constrained off) – GWh 10,159 9,423
Note 1: Capacity and output based on 100% of wholly owned sites and share of joint ventures.
Note 2: Contracted capacity includes sites with a CfD, eligible for ROCs, or contracted under REFIT.
Note 3: Onshore wind output excludes 456GWh of constrained off generation in FY2022/23 and 469GWh
in FY2021/22; Offshore wind output excludes 106GWh constrained off generation in FY2022/23
and 228GWh in FY2021/22.
Note 4: Biomass capacity of 15MW and output of 68GWh in FY2022/23 and 73GWh FY2021/22 is excluded,
with the associated operating profit or loss reported within Distributed Energy.
Note 5: Onshore NI and contracted capacity reduced by 5MW in the period following the sale of Bessy Bell I
in July 2022.
A consent application was submitted
to the Scottish Government in December
2022. The first connection date is in 2027
and the full project could be complete
around the end of the decade.
Ossian offshore wind farm, owned by
the SSE Renewables (3.6GW, share 40%),
Marubeni Corporation and Copenhagen
Infrastructure Partners (CIP) consortium,
is one of the largest floating offshore wind
projects in development worldwide and
could play a key role in meeting the UK
Government’s floating wind targets.
The project continues to progress through
the early stages of development with the
Environmental Impact Assessment Scoping
Report for the Ossian Array submitted to
the Scottish Government in March 2023.
North Falls offshore wind farm (up to
504MW, SSE Renewables share 50%), an
extension to Greater Gabbard off the east
coast of England, continues to progress
through development ahead of planning
submission next year. North Falls could
be operational by 2031, depending on the
grid connection solution.
In February, SSE Renewables announced
early scoping work to explore options for
developing a fourth phase of Dogger Bank
wind farm. There are two options being
explored for the energy generated: a
grid connection and/or green hydrogen
production. The project’s progression
remains subject to agreement with the
Crown Estate.
In March 2023, SSE Renewables’
Gordonbush Hydrogen project was
shortlisted for funding from the UK
Government’s Net Zero Hydrogen Fund.
SSE Renewables recently announced
additional plans to adapt its existing
conventional 152.5MW Sloy hydro power
plant with pumping capabilities. Subject
to final design, the converted Sloy scheme
could be capable of delivering up to
25GWh of long-duration electricity storage
capacity, providing vital reserve capacity for
an increasingly renewables-led energy
system as well as critical energy security
back-up.
In March, SSE Renewables confirmed a
£100m commitment to further develop
plans for the Coire Glas pumped hydro
storage project (c. 1,300MW). The project,
which received planning consent from the
Scottish Government in 2020, would more
than double Britain’s total current electricity
storage capacity. Subject to a favourable
revenue stabilisation mechanism for long
duration electricity storage, Coire Glas
could reach a final investment decision by
the end of 2024 with the objective of being
fully constructed and commissioned by
2031 and therefore play a significant role
in the UK Government’s 2035 target for a
decarbonised power system.
102 SSE plc Annual Report 2023
Operating Review continued
SSE Renewables continued
SSE Renewables remains committed to
delivering Arklow Bank Wind Park 2 (up to
800MW), despite being unsuccessful in
Ireland’s first Offshore Renewable Energy
Support Scheme (ORESS) auction in May
2023. It will proceed to submit a planning
application later this year to Ireland’s
planning board, An Bord Pleanála, whilst it
explores future ORESS contracts and other
routes to market.
The Irish Government has confirmed a new
target of 20GW of offshore wind by 2040
with at least four ORESS auctions starting
next year with ‘plan-led’ designated zones
identified by the Government based on
grid capacity.
Building on its existing Irish offshore
development portfolio (Setanta (1,000MW)
and Celtic Sea Array (1,200MW), SSE
Renewables has submitted an application
for an investigative foreshore licence for
surveys of the seabed for a possible new
1GW offshore wind farm in the Atlantic
Ocean off the coast of Tarbert, Co. Kerry.
In January, SSE Renewables announced
plans for its first solar and battery
installation, co-located at its existing
operational wind farm in Co. Wexford,
Ireland. The planning application for the
project, a 21MW solar photovoltaic (PV)
array and a 10MW/2hr battery energy
storage system, will be submitted in the
coming months.
Growth opportunities –
International
Europe
SSE Renewables is progressing its Southern
Europe development portfolio with at least
three projects (totalling c.100MW) aiming
for a final investment decision this year. The
first two projects (in France and Spain) are
targeting construction commencing in
Summer 2023, with at least one further
project targeting a final investment decision
later in the financial year.
SSE Renewables remains focused
on offshore wind in Northern Europe,
despite missing out on the Dutch
and Polish tender processes. In the
Netherlands, SSE Renewables is now
focused on the upcoming Ijmuiden Ver
zone tenders (2 x 2GW), with bids now
expected in Q1 2024 following finalisation
of the sites and tender process by the Dutch
authorities later this year. SSE Renewables
has partnered with APG, acting on behalf of
Dutch pension fund ABP (the Netherlands’
largest), for the tenders. And in Poland, the
business continues to look at offshore
partnering opportunities.
Asia-Pacific
SSE Renewables continues to pursue
offshore wind development activities in
Japan through its joint venture SSE Pacifico
(80% stake). It is assessing participation in
the upcoming Round 2 auction whilst also
targeting future auctions. The Japanese
Government has announced its intention
to open up its Exclusive Economic Zone
to potential future floating wind projects.
SSE Renewables has formed a 50/50 joint
venture with Equis to bid for a feasibility
licence for an offshore wind farm project
in Australia’s first Federal Government
SSE Renewables project pipeline
Project Location Technology
Capacity
(MW)
SSE Share
(MW)
In construction
Dogger Bank A GB Offshore wind 1,200 480
Dogger Bank B GB Offshore wind 1,200 480
Dogger Bank C GB Offshore wind 1,200 480
Seagreen 1 GB Offshore wind 1,075 527
Viking GB Onshore wind 443 443
Yellow River Ireland Onshore wind 101 101
Lenalea Ireland Onshore wind 30 15
Littleton GB Solar 30 30
Salisbury GB Battery 50 50
Ferrybridge GB Battery 150 150
Total in construction – GW 2.8GW
Late-stage development
Seagreen 1A GB Offshore wind 500 245
Bhlaraidh Extension GB Onshore wind 99 99
Strathy South GB Onshore wind 208 208
Other GB & Ireland GB & Ire Onshore wind – 137
Spanish projects Spain Onshore wind
1
281 291
France, Italy and Greece projects Various Onshore wind
1
125 125
Coire Glas GB Pumped storage 1,300 1,300
ByPass GB Solar 50 50
Monk Fryston GB Battery 320 320
Tawnaghmore GB Battery 100 100
Total late-stage development – GW 2.9GW
Early-stage development
Berwick Bank GB Offshore wind 4,100 4,100
Ossian (ScotWind lease) GB Offshore wind 3,600 1,440
Arklow Bank 2 Ireland Offshore wind 800 800
North Falls GB Offshore wind 504 252
Cloiche GB Onshore wind 125 125
Other GB & Ireland GB & Ire Onshore wind – 311
Spanish projects Spain Onshore wind
1
808 808
France, Italy and Greece projects Various Onshore wind
1
1,190 1,190
Fiddler’s Ferry GB Battery 150 150
Staythorpe GB Battery 350 350
Total early-stage development – GW 9.5GW
Total secured pipeline – GW 15.1GW
Other future prospects
Dogger Bank D GB Offshore wind 1,320 660
Setanta (Braymore Point) Ireland Offshore wind 1,000 1,000
Celtic Sea Array ROI Offshore wind 1,200 1,200
Tarbert Ireland Offshore wind 1,000 1,000
Japanese projects Japan Offshore wind ~6,000 ~4,800
Other GB GB Onshore wind – ~550
Other Ireland Ire Onshore wind – ~200
Spanish projects Spain Onshore wind
1
~1,750 ~1,750
France, Italy and Greece projects Various Onshore wind
1
~700 ~700
Other GB Hydro GB Hydro 75 75
Other Solar GB Solar ~400 ~400
Other Battery GB Battery ~900 ~900
Total future prospects >13,000
Notes: All capacities are subject to change as projects refined. Table reflects ownership and development
status as at May 2023. Late-stage is consented in GB and grid or land security elsewhere, early-stage has land
rights in GB and some security over planning or land elsewhere. Future prospects are named sites where
non-exclusive development activity is under way. Additional solar and battery storage projects reflects Solar
and Battery team now forming part of SSE Renewables.
Note 1: Includes solar hybridisation.
declared offshore wind zone of Gippsland,
in waters off the coast of Victoria. The
outcome of the bid is expected by the
end of 2023.
North America
SSE Renewables views the United States
as an attractive growth market, particularly
following the introduction of the Inflation
Reduction Act. It continues to actively
explore US market entry opportunities
across onshore and offshore wind and
adjacent technologies.
103SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Who SSE Thermal serves
Electricity suppliers, traders and
other generators through the
energy market; the national grid,
and ultimately electricity customers.
How it supports SSE’s strategy
SSE Thermal is providing critical
flexibility to offset renewables
variability as the energy system
transitions to net zero. The strategic
importance of its Gas Storage assets
has been highlighted by recent world
events and the increasing focus on
national energy self-sufficiency.
How it is remunerated
The wholesale energy market,
Capacity Market and ancillary services
market provide the core revenue
streams. The fleet also responds to
forward market volatility and within
day demand, providing flexible
generation and storage.
“The performance of our
flexible generation and gas
storage assets this past year
underlines the value that SSE
Thermal can create for the
Group, the GB energy system
and society more broadly.
We will continue to optimise
these assets while progressing
with new, lower-carbon
opportunities that will
help smooth the transition
to net zero.”
Catherine Raw
Managing Director,
SSE Thermal
SSE Thermal
SSE Thermal owns and operates conventional flexible thermal
generation in GB and Ireland, and around 40% of GB’s
conventional underground gas storage capacity. These assets
provide much-needed system flexibility. SSE Thermal is actively
developing options to progressively decarbonise its portfolio,
most notably in carbon capture and storage and hydrogen
technologies, with biofuel as a bridge into hydrogen.
Operational delivery
In a year of record performance, SSE
Thermal’s fleet delivered strong availability
In the GB market, which increased in the
second half. The impact of unplanned
outages, most notably at Great Island,
more than offset by strong operational
availability across the portfolio. This
enabled the fleet to use its inherent
flexibility to sell output to the market
and contract forward ahead of delivery,
capturing value through forward spark
spreads. The fleet has also been able to
optimise in response to market conditions,
particularly during periods of low wind.
Robust asset management allowed the
fleet to meet availability expectations
and capture market value through a
volatile period, despite outages at Medway,
Marchwood and Great Island. Managing
availability responsibly is and continues
to be a key focus for SSE Thermal, both
within year and when taking a view of
future system needs.
In March 2023, Keadby 2, Europe’s most
efficient CCGT, entered commercial
operation following a full commissioning
phase which started in October 2021.
Keadby 2 includes a first-of-a-kind turbine
that displaces older, more carbon intensive
plant on the system. Before entering
commercial operation, Keadby 2 had been
generating intermittently across the year,
capturing early value. Keadby 2’s 15-year
Capacity Market agreement is due to
commence in October 2023 and all
milestones to secure this agreement
have been completed.
Following an agreement in June, SSE
Thermal, alongside Equinor as 50/50
partner, completed the acquisition of the
Triton Power portfolio on 1 September in
a £341m transaction, providing additional
flexibility and decarbonisation options.
The portfolio includes the 1.2GW Saltend
power station in the Humber along with
two smaller plants, Indian Queens power
station, a 140MW OCGT in Cornwall, and
Deeside power station in North Wales, a
decommissioned CCGT which provides
carbon-free inertia to the system. While
the Triton portfolio delivered value on
an unhedged basis immediately after
acquisition, a hedging strategy has since
been implemented to reduce ongoing
merchant exposure.
In July, SSE Thermal completed the sale of
the closed and decommissioned Fiddlers
Ferry power station.
In March, in line with requirements under
the Industrial Emissions Directive, SSE
Thermal announced the closure of Tarbert
oil-fired power station in Ireland by the end
of December 2023. Great Island CCGT and
Rhode and Tawnaghmore peaking plant
continue to play an important role in a tight
system, where increased dispatchable
capacity is required to meet system needs.
For financial performance commentary
please refer to the Financial Review.
Growth opportunities
Developing decarbonised alternatives
to the existing CCGT fleet will be vital to
deliver SSE’s goal to cut carbon intensity by
80% by 2030 and achieve its science-based
carbon reduction targets, aligned with a
1.5°C global warming scenario.
In GB, SSE Thermal is developing projects
that include carbon capture and storage
(CCS) and hydrogen; technologies that
will be critical to the transition to net zero,
enabling enhanced renewables deployment
by balancing the system. CCS and
hydrogen remain at the heart of the UK
Government’s plans. In the past year,
the UK Government has committed to
104 SSE plc Annual Report 2023
Operating Review continued
SSE Thermal continued
deliver hydrogen transport and storage
business models by 2025 to support its
10GW hydrogen production ambition,
it has indicated that it will consult on the
potential for hydrogen-to-power market
interventions later in 2023 and issued
a call for evidence on future support
for power-CCS projects.
Aldbrough Hydrogen Pathfinder, SSE
Thermal’s hydrogen value chain proof-
of-concept project, was shortlisted to
progress to a due diligence phase after
submitting a bid for funding and Hydrogen
Production Business Model support
through the Net Zero Hydrogen Fund.
Aldbrough Hydrogen Pathfinder seeks
to unite hydrogen production, hydrogen
storage and a 100% hydrogen-fired
open-cycle gas turbine (OCGT) on one
site by the middle of the 2020s. This project
will enable and inform the scaling up of
SSE’s, the wider Humber, and the UK’s
hydrogen ambitions and help de-risk
further hydrogen investment. With the
role of small-scale peaking plant expected
to increase, this integrated concept also
delivers expertise and experience in
low-carbon OCGTs.
SSE is continuing to develop options
for hydrogen blending into Keadby 2,
with pre-FEED activity under way. Option
assessment and scoping activity for a
further 100% hydrogen-fired CCGT at
Keadby 3 also continues. Pre-FEED activity
is also under way for Aldbrough Hydrogen
Storage. The Triton Power portfolio adds
to this hydrogen pipeline, with plans to
blend up to 30% low-carbon hydrogen
by 2027.
In December Keadby 3 Carbon Capture
Power Station became the first power-CCS
project to secure planning consent in the
UK. Alongside the contract awarded in
June for the completion of FEED (Front End
Engineering Design), this demonstrates the
project’s advanced development. In March
the UK Government announced the first
carbon capture projects to be supported
by government-backed contracts – this
included projects located in Teesside and
the northwest of England. As a Humber-
based project, Keadby 3 has not progressed
to the final stage of negotiations for a
Dispatchable Power Agreement. The UK
Government has instead identified the
Humber as a region to be supported
through subsequent phases of its cluster
sequencing process by 2030 at the latest.
There are opportunities for Keadby 3 to
access CO
2
storage in either the Endurance
store (a Track-1 CO
2
transport and storage
system) or Viking (identified as a minded-to
Track-2 CO
2
transport and storage system
SSE Thermal key performance indicators
March
2023
March
2022
SSE Thermal
Thermal adjusted operating profit –£m 1,031.9 300.4
Thermal reported operating profit –£m 1,089.5 624.2
Thermal adjusted investment and capital expenditure, before
acquisitions – £m 153.2 123.4
Generation capacity – MW
Gas- and oil-fired generation capacity (GB) – MW 5,538 3,975
Gas- and oil-fired generation capacity (ROI) – MW 1,292 1,292
Total thermal generation capacity – MW 6,830 5,267
Generation output – GWh
Gas- and oil-fired output (GB) – GWh 16,781 11,303
Gas- and oil-fired output (ROI) – GWh 1,532 2,962
Total thermal generation – GWh 18,313 14,265
Note 1: Capacity is wholly owned and share of joint ventures, and reflects Transmission Entry Capacity; March
2023 capacity reflects share of Triton Power portfolio with acquisition completed 1 September 2022.
Note 2: Output is based on SSE 100% share of wholly owned sites and 100% share of Marchwood PPAs due
to the contractual arrangement. In September 2021 SSE’s offtake agreement for 100% of output from
its Seabank CCGT JV expired, with output following that date only recognised to the extent of its 50%
equity share.
Note 3: Output in GB in year to March 2023 excludes 1,184GWh of pre-commissioning output from Keadby 2
CCGT which commissioned 15 March 2023.
SSE Thermal capacity contract awards
The following agreements have been awarded through competitive auctions:
Station Asset type
Station
capacity
SSE share
of contract Capacity obligation
Medway (GB) CCGT 735MW 100% To September 2027
Keadby (GB) CCGT 755MW 100% To September 2027
Keadby 2 (GB) CCGT 893MW 100%
16 years commencing
October 2022
Peterhead (GB) CCGT 1,180MW 100% To September 2027
Seabank (GB) CCGT 1,234MW 50% To September 2027
Marchwood (GB) CCGT 920MW 100% To September 2027
Saltend (GB) CCGT 1,200MW 50% To September 2027
Indian Queens (GB) OCGT 140MW 50% To September 2027
Slough Multifuel (GB)
Energy from
Waste 50MW 50%
15 years commencing
October 2024
Burghfield (GB) OCGT 45MW 100% To September 2027
Chickerell (GB) OCGT 45MW 100% To September 2027
Great Island (Ire) CCGT 464MW 100% To September 2027
Rhode (Ire)
Gas/oil
peaker 104MW 100% To September 2027
Tawnaghmore (Ire)
Gas/oil
peaker 104MW 100% To September 2027
Tarbert (Ire) Oil 620MW 100% To September 2023
Tarbert (Ire) Biofuel 300MW 100%
10 years commencing
October 2026
Platin (Ire) Biofuel 150MW 100%
10 years commencing
October 2026
Capacity contracts are based on de-rating factors issued by the delivery body for each contract year,
therefore will not directly match SSE’s published station capacity.
Capacities stated reflect Transmission Entry Capacity.
Marchwood (SSE equity share 50%) tolling arrangement means SSE receives 100% of economic benefit
from capacity contract.
Keadby 1 has capacity obligation in 2023/24, 2025/26 and 2026/27 but none in 2024/25.
Medway has capacity obligation in 2023/24 and 2026/27 but none in 2024/25 and 2025/26.
Keadby 2 16 year obligation comprised of a T-1 and a 15 year contract.
105SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Gas Storage
Operational delivery
SSE Gas Storage performed strongly,
navigating highly volatile gas markets and
optimising assets to help ensure security
of gas supply for the UK whilst providing
important liquidity to the market. These
assets are a significant risk management
tool to the portfolio by offering short-
notice flexibility to mitigate exposures from
wind speeds and demand variability.
SSE’s gas storage assets have made a
substantial contribution this year, with high
withdrawals and the technical ability to
cycle quickly in response to market signals.
Over the past three years the equivalent of
two caverns of storage have been added
through studies into maximum and
minimum operating pressures. Aldbrough
Caverns 6 and 9 were successfully returned
to service ahead of winter 2022/23, adding
further capacity. As a result of an increase
in future market revenues forecast from
these types of assets, the historical
impairments have been almost fully
reversed on Aldbrough at the year-end.
For financial performance commentary
please refer to the Financial Review.
Growth opportunities
Underlining the clear societal value these
assets provide, the UK Government’s
Powering Up Britain Energy Security Plan,
published in March, highlighted that gas
storage had operated successfully over the
winter helping to meet demand caused by
cold weather spells. The UK Government
will consider the future role that storage
can play in the longer term, considering
the need to align with future plans for
hydrogen and CO
2
storage. SSE Thermal
remains committed to working with UK
Government departments and Ofgem
to ensure the critical role of UK storage is
properly valued, and low-carbon options
can be delivered in tandem.
SSE Gas Storage key performance indicators
March
2023
March
2022
Gas Storage
Gas Storage adjusted operating profit – £m 212.5 30.7
Gas Storage reported operating profit – £m 249.2 125.4
Gas storage adjusted investment and capital expenditure – £m 6.3 2.1
Gas storage level at period end – mTh 123 1
Gas storage level at period end – % 65 1
by UK Government). Next steps on cluster
sequencing are expected later in 2023,
with work progressing to complete FEED
for Keadby 3.
The UK Government also set out further
detail for Track-2 clusters. Acorn was
identified as a ‘minded-to’ Track-2 CO
2
transport and storage system, alongside
Viking, for deployment by 2030. Acorn
would provide CO
2
storage for Peterhead
Carbon Capture Power Station. Further
expressions of interest for Track-2 clusters
are being accepted by the UK Government
ahead of next steps being communicated
later in 2023. Peterhead Carbon Capture
Power Station is continuing to develop with
a planning application submitted in March
2022 and announcement of the award of
a FEED contract in July. It remains well-
placed to participate in future Dispatchable
Power Agreement allocation processes.
SSE Thermal is seeking opportunities to
expand its GB low-carbon pipeline. It
continues to explore the decarbonisation
of the Medway site through hydrogen
or CCS. It has identified a potential new
location for low-carbon power generation
in northwest England, where CCS and
hydrogen operations are being developed,
well-located relative to the HyNet cluster.
It is also investigating options to use
alternative fuels, such as hydrogen
derivatives. Construction activity for
Slough Multifuel remains on track to
complete in summer 2024.
In Ireland, SSE Thermal is advancing
projects using sustainable biofuel as a
lower carbon alternative to fossil-fuels
and as a bridge to hydrogen. In March it
provisionally secured 10-year Capacity
Market agreements for two new low-
carbon power stations to commence
in 2026/27 delivery year:
• 260MW of de-rated electricity
generation at Tarbert (€129,000/MW)
• 140MW de-rated electricity generation
at Platin (€177,000/MW)
The proposed low-carbon units at Tarbert
in Co. Kerry and Platin in Co. Meath would
help to protect security of supply and
provide flexible backup to Ireland’s growing
renewables sector. The proposed units will
initially run on Hydrotreated Vegetable Oil
(HVO), which is produced by processing
waste oils to create a fossil-free alternative
to diesel in accordance with EU sustainability
standards. This would provide a bridge to a
hydrogen future with both units having
the potential to convert to the fuel. As with
Aldbrough Hydrogen Pathfinder, these
projects reflect the expected role peaking
generation will play in the system.
Low-carbon projects in Ireland are
progressing alongside activity to deliver
a Temporary Emergency Generation
unit, at the request of the Irish authorities.
Following legislation and a site selection
process undertaken by EirGrid, approved
by the Commission for the Regulation
of Utilities, the Tarbert site was selected
to host 150MW of generation capacity,
to run on distillate oil. It will operate as an
emergency plant with a maximum running
time of 500 hours per annum. Under the
Irish Government’s emergency generation
legislation, this capacity is to cease
operations as soon as the temporary
electricity emergency has been addressed,
and no later than March 2028. The unit
would only be utilised when it is clear that
market-sourced generation will not be
sufficient to meet system needs.
Plans to develop an innovative hydrogen
storage project at Aldbrough with Equinor,
announced in July 2021, are progressing.
Following the commitment in the British
Energy Security Strategy to deliver
hydrogen transport and storage business
models by 2025, the UK Government
published a consultation on this at the
end of August 2022. This consultation
notes the importance of storage as
a ‘system balancer’ and envisages
underground hydrogen storage becoming
important to the functioning of the
hydrogen economy by the end of the
decade. As described in the previous
section, Aldbrough Hydrogen Pathfinder
has progressed to due diligence following
a bid into the Net Zero Hydrogen Fund.
106 SSE plc Annual Report 2023
Energy Customer Solutions
SSE Business Energy in GB (non-domestic) and SSE Airtricity on the island of Ireland (domestic
and non-domestic) provide a shopfront and route to market for SSE’s generation, renewable
green products and low-carbon energy solutions. Across Great Britain and Ireland, focus
remains on supporting customers to reduce energy consumption, modernise systems and
expand the green energy product offering to ensure the business grows its position as a trusted
partner to customers on their net zero journey.
SSE Business Energy
Operational delivery
The primary focus of the last year has been
on delivering support to customers during
a period of extreme market instability. This
included implementing government bill
supports for customers at an administrative
cost of £2m that the business absorbed.
Targeted support for customers included
reducing contract lengths to help manage
customers’ exposure to high prices and
providing flexible repayment options for
customers struggling to pay. Under the UK
Government’s Energy Bill Relief Scheme,
Business Energy applied customer
discounts to the value of £721m in the year
and was compensated for the reduction
in wholesale gas and electricity unit prices
that was passed on. In other support
measures, in October 2022, the business
voluntarily implemented a disconnection
ban for businesses (with a cumulative debt
of £5m) where end-users were either
vulnerable or living in a residential setting
aligned to a non-domestic contract.
SSE Business Energy key performance indicators
March
2023
March
2022
SSE Business Energy
Business Energy adjusted and reported operating profit/(loss) –£m 17.9 (21.5)
Electricity sold – GWh 12,108 12,645
Gas sold – mtherms 200 218
Aged debt (60 days past due) –£m 167 79.3
Bad debt expense –£m 108 18.5
Energy customers’ accounts – m 0.43 0.47
Additional supports included the decision
not to pass on £12m of non-commodity
costs to some customers with flexible
contract terms.
Business Energy has continued to make
progress on our Smart programme in
2022/23 installing more smart meters in
proportion to our market share. Focus
remains on driving Smart adoption
throughout 2023/24, building on our
engaging smart propositions and incentives
to encourage adoption and helping
customers to manage and reduce demand.
The business launched a suite of new and
enhanced digital offerings in the period to
improve the customer journey, including
a small business sustainability content hub,
providing help to customers with net zero
guidance, and a free and easy-to-use
carbon footprint calculator.
For financial performance commentary
please refer to the Financial Review.
Growth opportunities
Business Energy will continue to focus on
giving customers increased choice and
flexibility to improve their green credentials
and help with their paths to net zero. This
includes extending its product range and
giving customers greater transparency
over the provenance of their renewable
energy supply.
“In response to the cost
inflation associated with
events of the past year, SSE’s
customer businesses have
focused on managing risk
to ensure the best possible
outcomes for our customers,
supporting those that are
vulnerable and working
with governments on
assistance packages.”
Nikki Flanders
Managing Director,
Energy Customer Solutions
Who Energy Customer
Solutions serves
700,000 domestic and business
customers in the all-island Ireland
energy supply market, and around
469,000 non-domestic customers
in GB.
How it supports SSE’s strategy
By responding to the climate
emergency through the provision of
green energy solutions to customers
who are increasingly focused on the
transition to net zero.
How it is remunerated
By competing for customers and
direct billing to them and third party
intermediaries (in GB) and through
state-supported schemes (in ROI).
Operating Review continued
107SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
SSE Airtricity
Operational delivery
The primary focus of 2022/23 has been on
supporting customers, resulting in the
establishment of the most comprehensive
customer support fund of any supplier in
Ireland, up to the value of €25m. Measures
included a €2.5m donation made to
non-profit organisation EnergyCloud,
which promotes system efficiency, utilising
surplus renewable energy to supply
fuel-poor households. Airtricity also
applied discounts to the value of £116m
in the year to customers under the UK
Government’s Energy Bill Relief Scheme.
Furthermore, as referenced in the Group
Financial Review, SSE Airtricity honoured
its commitment not to make a profit in the
year in recognition of the cost-of-living
crisis. Residual profits of €8.6m were
distributed to domestic customers in full,
with accounts credited after the year-end
in April 2023. The cost of the rebate will be
reflected in financial results for 2023/24.
The business continued to enhance service
offerings as customer engagement levels
tripled year-on-year at their peak. The
introduction of enhanced digital service
capabilities such as Live Chat resulted in a
greater than 90% reduction in customer
wait times below peak levels.
During the period SSE Airtricity continued
to evolve product offerings to support
demand reduction including the launch of
a market-leading premium
microgeneration solar offering via our joint
venture with Activ8 Solar Energies. Through
its pioneering Generation Green Home
Upgrade home retrofit proposition the
business completed 1,500 solar installs,
supplied over 300 batteries and retrofitted
650 homes this financial year, representing
an estimated carbon saving of 8.9GWh.
Partnerships with RTÉ’s DIYSOS, increasing
our support for the women’s game through
partnership with the Football Association of
Ireland, and funding LGBT Ireland’s advice
helpline are examples of Airtricity’s values
and active community support.
For additional financial performance
commentary please refer to the
Financial Review.
Growth opportunities
SSE Airtricity has laid solid foundations and
led the way in proposition innovation to
more easily enable customers to reduce
carbon emissions and energy usage. It has
ambitions plans for energy services across
the island of Ireland, aiming to deliver
45,000 home retrofits by 2030 and
expanding the offering into the (ROI)
B2B and NI markets.
SSE Airtricity key performance indicators
March
2023
March
2022
SSE Airtricity
Airtricity adjusted operating profit – £m 5.6 60.4
Airtricity reported operating profit – £m 5.2 60.4
Aged debt (60 days past due) – £m 11.0 7.3
Bad debt expense – £m 7.8 4.6
Airtricity electricity sold – GWh 5,795 5,219
Airtricity gas sold – mtherms 193 177
All Ireland energy market customers (Ire) – m 0.74 0.70
108 SSE plc Annual Report 2023
SSE Distributed Energy
Distributed Energy brings low-carbon energy solutions to business-to-business markets –
including major regional and partnership opportunities. With private wires, heat networks,
behind-the-meter solar and battery, EV charging and competitive networks all part of the
UK’s net zero plans it is well positioned for future growth. As mentioned on previous pages,
grid-scale Solar and Battery will report under the SSE Renewables segment from 1 April 2023,
but progress in 2022/23 is outlined below.
Operational delivery
SSE’s Distributed Energy team has opened
its first EV charging hub in Glasgow with
plans to roll out a further 300 such hubs
across the UK and Ireland. It has also
launched its ‘Enhance’ technology platform
which schedules, dispatches, and controls
flexible assets to facilitate trading or Grid
balancing actions.
SSE announced significant milestones in
its solar and battery storage business in the
reporting period which now has a 1.2GW
solar and battery pipeline secured and a
further 1.3GW of other prospective sites
under development. These milestones
include breaking ground in September
at its first 50MW battery storage project
at Salisbury with construction starting this
summer at a 30MW solar farm at Littleton
in Worcestershire. Construction of a
new 150MW battery storage project at
Ferrybridge in Yorkshire is also getting
under way with the assets expected to
be fully operational in late 2024.
For financial performance commentary
please refer to the Financial Review.
SSE Distributed Energy key performance indicators
March
2023
March
2022
SSE Distributed Energy
SSE Distributed Energy adjusted operating (loss) –£m (27.4) (10.9)
SSE Distributed Energy reported operating (loss) –£m 33.5 (29.2)
SSE Heat Network customer accounts 11,431 11,291
Biomass, heat network and other capacity – MW
1
26 33
Biomass, heat network and other output –GWh 96 104
1 Capacity in March 2023 reflects sale of 8MW Chippenham gas-fired power station and changes to
capacity installed on heat networks.
Growth opportunities
Distributed Energy has significant growth
opportunities including supporting
gigafactories and landmark redevelopment
projects like Teesside. It is also developing
heat network technologies including a
new £25m low-carbon district heating and
electricity scheme in Aire Valley, Leeds.
Following its acquisition of the Imperial
Park private wire network in Wales;
Distributed Energy will continue to explore
opportunities to help businesses cut
carbon and costs as well as supporting
the transition to net zero at a local level.
Transferring the Solar and Battery business
to SSE Renewables allows it to scale up and
develop opportunities both domestically
and internationally, as well as take on
co-location projects. Solar is a cost-
effective low-carbon technology and
the UK Government has reaffirmed its
commitment to its 70GW target by 2035;
whilst battery storage is a key part of the
net zero jigsaw with its ability to rapidly
store and discharge energy when needed
most by the grid.
“Enterprise continues to identify
and grow new ventures that
complement SSE’s core
portfolio both to public sector
and commercial markets. The
success of Solar and Battery
is proof of our key role for SSE
Group in incubating new areas
of growth that will help drive
net zero.”
Neil Kirkby
Managing Director,
SSE Enterprise
Who SSE Distributed Energy
serves
For the public sector and commercial
markets in GB and Ireland. It provides
smart digital solutions for assets
deployed and for businesses,
buildings, and cities.
How it supports SSE’s strategy
Distributed energy, solar and battery
storage assets have an increasingly
important role to play in the GB
energy system as electrification
accelerates and generation is
increasingly led by intermittent
wind output. They also provide
valuable diversity and optionality
to the SSE portfolio.
How it is remunerated
By competing for customers and
direct billing to them and third party
intermediaries (in GB) and through
state-supported schemes (in ROI).
Operating Review continued
109SSE plc Annual Report 2023
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Energy Portfolio Management (EPM)
Energy Portfolio Management (EPM) trades commodities for SSE’s market-based Business Units,
securing value on behalf of SSE’s asset portfolios in wholesale energy markets and managing
volatility through risk managed trading of energy-related commodities for SSE’s market-based
Business Units. SSE trades the principal commodities to which its asset portfolios are exposed,
as well as the spreads between two or more commodity prices (e.g. spark spreads): power
(baseload and other products); gas; and carbon (emissions allowances). Each commodity
has different risk and liquidity characteristics, which impacts the quantum of hedging possible
(see also SSE’s hedging Position in the Financial Review).
Operational delivery
EPM navigated continued energy market
volatility, with winter 2022/23 seeing a
reduction in volatility. EPM ensures the SSE
portfolio was hedged in accordance with
the Group’s approach to hedging and then
optimised through prompt periods. The
value EPM secured for SSE’s asset portfolio
continues to be reported against individual
Business Units.
For financial performance commentary
please refer to the Financial Review.
EPM key performance indicators
March
2023
March
2022
EPM
EPM adjusted operating profit/(loss) –£m 80.4 (16.8)
EPM reported operating (loss)/profit –£m (2,626.0) 2,083.6
Growth opportunities
Transformation of the EPM Business Unit
continues with further recruitment and
changes in systems and processes.
Focus has been on core delivery in the
exceptional market environment, alongside
developments in market modelling,
assurance, data governance and analytics,
and wind balancing.
European trading continues in small
volumes with the intention to increase this
through 23/24.
Energy Economics, SSE’s long-term price
forecasting and market analysis team,
moved into EPM at the end of the financial
year providing significant synergies and
enhanced opportunities to share
knowledge across the teams.
“The core strengths of the
EPM team in prompt and
curve trading have served us
well in navigating the market
turbulence of the past year.
We have an eye to the future,
reinforcing our existing
expertise while rapidly growing
our capabilities in advanced
data analytics and international
markets to support the Group’s
growth ambitions.”
Gordon Bell
Managing Director,
Energy Portfolio Management
Who EPM serves
SSE’s individual Business Units and
the SSE Group.
How it supports SSE’s strategy
The work EPM does is key to
managing risk associated with the
operations behind SSE’s Net Zero
Acceleration Programme. It trades
the principal commodities to which
SSE’s asset portfolios are exposed,
as well as the spreads between two
or more commodity prices (e.g. spark
spreads); power (baseload and other
products); gas; and carbon (emissions
allowances). Each commodity
has different risk and liquidity
characteristics, which impacts
the quantum of hedging possible.
How it is remunerated
It receives fees for providing energy
trading services to the constituent
parts of the SSE group.
110 SSE plc Annual Report 2023
Directors’
Report
In this section
Chair’s introduction 112
Governance at a glance 114
Board at a glance 115
Board of Directors 116
Group Executive Committee 121
Our corporate governance 122
Considered decision-making 124
Setting strategy 125
Guiding strategic progress 126
Governing SSE for long-term success 130
Understanding shareholder views 132
Empowering the employee voice 134
Focusing on culture 137
Defining Board responsibilities 139
Assessing Board performance 140
Nomination Committee Report 142
Audit Committee Report 150
Energy Markets Risk Committee Report 160
Safety, Sustainability, Health and
Environment Advisory Committee Report 162
Remuneration Committee Report 166
– Remuneration Committee Chair’s statement 166
– Remuneration at a glance 168
– Annual report on remuneration 170
– Directors’ Remuneration Policy – a summary 185
Other statutory information 188
Statement of Directors’ responsibilities in respect
of the Annual Report and the Financial Statements 191
Good governance and a strong corporate culture are
the foundations of SSE’s purpose, vision and strategy.
The Board gives close consideration to the views of all
stakeholders in its decision making and understands the
importance of clear disclosure of this, and other material
issues, in reporting how its work supports the long-term
success of the Company.
111SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
112 SSE plc Annual Report 2023
Chair’s introduction
Supported by the clarity of our purpose and
a strong Net Zero Acceleration Programme
(NZAP) the objectives of work in the year
was clear; to provide sharp focus to the
strategic agenda, engage constructively
on a fair policy framework for its delivery,
and ensure SSE is positioned to deliver
for its stakeholders in the long term. This
encompasses our responsibility, as a Board,
to understand and represent stakeholder
views and material issues arising from the
current economic backdrop.
Leading the correct response
Through the strategic agenda, we have
overseen and positively challenged the
pace and progress of large capital projects,
continuing to assess whether the NZAP
pursues the right actions in the changing
external context. Our strategy days in
Summer 2022 supported in-depth analysis
of how the environment has evolved since
November 2021, and throughout the year
the clear targets we set have been tracked
through dialogue with senior leadership,
strategic deep dives, and the introduction
of an NZAP dashboard. This covers
pipelines, project construction and options
for further growth. The confidence we have
in our growth strategy and the value it will
create is reflected in the NZAP Plus plans
announced in May 2023. More details are
available on page 125 .
Significant progress has been made in
the year. We sold a minority stake in SSEN
Transmission, and have a clear path for SSEN
Distribution to make increased investment
under the RIIO-ED2 price control. SSE
Renewables progressed flagship projects
and continues to pursue opportunities at
home and internationally. SSE Thermal
enhanced the CCS and hydrogen potential
of its portfolio, supported by the partnership
acquisition of Triton Power for which we
updated our Net Zero Transition Plan. Energy
Customer Solutions remains dynamic in its
response to cost of living and customer
support, and we are providing flexibility for
the future through distributed energy, solar
and battery technologies. More on Board
strategy work is on pages 125 to 129 .
Managing sector impacts
The risks presented through inflationary
pressure, volatile commodity prices,
increased competition and the totemic
issue of climate change are subject to
defined governance through standing
Board and Committee work.
On capital investment, we have reviewed
decision-making criteria at regular intervals
to ensure opportunities are appraised in
line with our view of acceptable returns,
an input which is complemented by Audit
Committee feedback on our funding and
treasury policy.
Leading
for the
long
term.
The ultimate measure of effective and
responsible corporate governance is how
it stands up in periods of challenge. SSE
was tested in 2022/23 by unprecedented
volatility, and the Board supported decisions
and actions that considered the issues of
affordability, security, sustainability and fairness.
113SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Our approach to hedging has provided a
baseline to manage portfolio exposures,
and we have reviewed the governance and
risk metrics overseen by the Energy Markets
Risk Committee (EMRC) to ensure controls
remain appropriate in the current climate.
Specific updates have allowed Board
and Remuneration Committee input on
employee cost of living support and SSE’s
overall employee value proposition, to
ensure actions are considered holistically
and support those most deeply impacted.
Climate change and a just transition to
net zero sit at the core of SSE’s strategy,
and focus continues to be provided to
our science-based targets, supporting
sustainability strategies and transparent
reporting of our social, environmental and
economic impacts. Accordingly, separate
Sustainability and Net Zero Transition
Reports accompany this Annual Report.
Validating our actions
Our analysis of the operating context is
not conducted in isolation, and we value
additional perspectives to foster unbiased
discussion and challenge our view of the
long term. Methods to gather insights have
included stakeholder soundings of our
strategy, guest speaker sessions, and
internally facilitated deep dives. Given the
speed of change on both a national and
international level, a vast array of topics has
been covered through external sessions,
including the political and economic
outlook, policy developments, and the
geo-political context.
On behalf of the Board, I confirm the
continued value we place on conversations
with shareholders, which take place through
investor meetings and events, and questions
across the year and around the AGM. We
hosted two additional initiatives in 2022/23,
an ESG seminar focused on our Net Zero
Transition Report, and a two-day session in
Inverness which provided the opportunity
to meet management teams and visit key
sites. Our engagement approach in 2023/24
will continue to support understanding of
shareholder opinion and we will respond to
the feedback we receive. For the 2023 AGM
we again offer inclusive participation through
a hybrid meeting and we encourage virtual
participation if you cannot attend in person.
Our people and safety
Our people and their safety are paramount,
and I reiterate how saddened we were by
the death of Liam Macdonald, a contractor
working on Shetland in June 2022. The
Board and Safety, Sustainability, Health
and Environment Advisory Committee
(SSHEAC) apply sharp focus to our safety
performance and continue to monitor the
level of rigour and support provided. With
a rise in contractor hours worked across
large capital projects a central Contractor
Safety Team is now also in place.
This was the first year, since Covid-19,
where the Board conducted a full schedule
of site visits. Virtual large-scale engagement
complements this approach, and I am
extremely pleased it was a record year
for employee participation across SSE
with in-person and virtual events attended
more than 40,000 times. Collectively
we have been able to reach 32 locations
across the UK and Ireland, with over 3,500
employees participating in the post-AGM
engagement sessions alone.
Dame Sue Bruce established the direct link
between the Board and employee voice
through the Non-Executive Director for
Employee Engagement role, and I would
like to extend my thanks to Sue for the
thoughtful agenda she passes on to Lady
Elish Angiolini to lead. We know colleagues
value discussing topics of importance
with senior leaders and we will support
continued and open conversations.
Engagement is supported by the Cultural
Dashboard we review twice a year. This
has again matured and through purposeful
design it prompts thinking of the individual
strands which contribute to, or have the
potential to influence, our culture. More
on employee listening and culture is on
pages 134 to 138 .
Assessing performance
In 2021/22 the external Board evaluation
was conducted by Lintstock, following
two consecutive internal processes in the
preceding years. To provide a measured
assessment of progress, we re-engaged
Lintstock to complete follow-up reviews in
2022/23 and 2023/24, for which the format
will reflect that of our internal evaluation
approach. I am pleased the 2022/23 report
confirmed our effective operation, and that
additional actions have been identified for
our plan of Board work. More on the
evaluation is on pages 140 to 141 .
Balanced leadership
In April 2023, we announced the retirement
of Gregor Alexander and his stepping down
from the Board on 1 December 2023, after
what will be 21 years as Finance Director.
Gregor has been with SSE since its inception,
joining Scottish Hydro-Electric in 1990, and
has been instrumental to the transformation
of the Group. His financial leadership and
counsel are evident in the strong position in
which he leaves SSE. Following an external
recruitment process, Barry O’Regan, current
Finance Director, SSE Renewables, will
succeed him as Chief Financial Officer.
We look forward to working with Barry,
who brings depth of financial and energy
expertise having been actively involved in
SSE’s strategic growth.
As reported previously, and in line with
succession plans, Dame Sue Bruce stepped
down from the Board on 31 March 2023 and
Peter Lynas will not seek re-election at the
2023 AGM. We extend our thanks for the
commitment and experience they will have
provided to the Board over the last nine
years, and Melanie Smith, John Bason and
Lady Elish Angiolini bring their own depth of
expertise to the Board roles they assume
following these non-Executive changes.
Standing Nomination Committee work,
in conjunction with 2021/22 evaluation
findings, sees one new addition to the
Board, with the appointment of Maarten
Wetselaar as a non-Executive Director from
1 September 2023. Maarten is a leader in
the energy transition and I look forward to
welcoming him when he joins.
Inclusion and diversity are priority areas for
the Board and Nomination Committee, and
we commit to reporting transparently on
progress. After the above Board changes,
membership will comprise 42% women; this
is above our 40% ambition and we continue
to work within the enduring policy aim of
gender parity. In line with the FCA Listing
Rule, we explain that the roles of Chair,
Senior Independent Director, Chief Executive
and Finance Director are all held by men.
Within senior leadership, we are pleased
with the improvement in gender diversity
compared to 31 March 2022 but there
is more work to do. The reset of our
internal ambitions in 2022 sets a minimum
standard, not an endpoint, and we continue
work to understand the levers for change.
We further welcome the Parker Review’s
recommendation for voluntary ethnicity
targets at the same level and will ascertain
a challenging yet credible position to work
towards for 2027. More on Nomination
Committee work is on pages 142 to 149 .
I hope you find the Directors’ Report which
follows a transparent and engaging
account of work across 2022/23.
Sir John Manzoni
Chair, SSE plc
23 May 2023
114 SSE plc Annual Report 2023
Governance at a glance
UK Corporate
Governance Code
The Board continues to assess
its approach to corporate
governance through application
of the FRC’s UK Corporate
Governance Code (the Code)
and reports against the 2018
Code for the year ended 31 March
2023. A copy can be found at
www.frc.org.uk .
For 2022/23, the Board confirms
compliance against the Code
Provisions. The assessment of
independence which supported the
time limited extension to the tenure
of Dame Sue Bruce and Peter Lynas
is set out on page 146 .
The spirit of the Code continues to
be upheld through the work of the
Board and its Committees, which
includes application of the Code’s
Principles. The below confirms
where disclosures to evidence
this approach are located, and
cross-references are used where
supporting information is located
outside of the Directors’ Report.
Board Leadership and
Company Purpose
See pages 122 to 138
Division of Responsibilities
See page 139
Composition, Succession and
Evaluation
See pages 140 to 149
Audit, Risk and Internal Control
See pages 150 to 165
Remuneration
See pages 166 to 187
Key activities in 2022/23
Appraised strategic
delivery
Overseeing NZAP progress and
approving the NZAP Plus
pages 125 to 129
Fully-funded capital investment plan
£18bn
Enhanced shareholder
dialogue
Continuing the Chair’s shareholder
roadshow as a standing event
pages 132 to 133
Number of Chair roadshow meetings
20
Progressed Board
succession
Approving the appointment of a new
non-Executive Director and Finance
Director succession plans
pages 144 to 145
Number of Board members
12
Assessed external
context
Conducting deep dives and external
speaker sessions
page 125
Knowledge sessions held
19
Amplified employee
listening
Participating in diverse events across
all areas of the Group
pages 134 to 136
Board-employee engagements
58
Considered Board
diversity
Confirming the difference across
Board membership including gender,
ethnicity and broader characteristics
pages 148 to 149
Female Board membership
42%
115SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Board at a glance
Planned Director changes
• Dame Sue Bruce stepped down from the Board on 31 March 2023.
• Peter Lynas steps down from the Board on 20 July 2023.
• Maarten Wetselaar joins the Board on 1 September 2023.
• Gregor Alexander to be succeeded by Barry O’Regan on 1 December 2023.
Board composition
Skills to support long-term success
The below skills matrix sets out the expertise the non-Executive Directors have assimilated outside of their SSE Board role. The collective
position is enhanced by the innate differences in approach and thinking styles, which results from the diverse background and experience
of each individual as set out in the biographies on pages 116 to 120 .
Sir
John
Manzoni
Lady
Elish
Angiolini
John
Bason
Tony
Cocker
Debbie
Crosbie
Peter
Lynas
Helen
Mahy
Melanie
Smith
Dame
Angela
Strank
Tenure (years) 2 1 <1 5 1 8 7 4 3
Experience of operating context and disruptive trends
Energy sector, energy regulation and energy
markets
Government and public policy
Clean energy, renewables and climate science
Global business, scale and complexity
Digital and data
Stakeholders and social impact
Skills to challenge and set a sustainable strategy
Large capital project management
Financing, economics and capital markets
Partnering, M&A and transactions
Risk management
Consumer insight
Responsible leadership of a large organisation
Corporate governance and leadership
Culture, safe working and people development
Board gender balance (as at 23 May 2023)
42%
female membership
Women
Men
58%
42%
7
5
Board independence (as at 23 May 2023)
73%
independent
Independent non-
Executive Directors
Executive Directors
Non-Executive
Chair
8
1
3
Rolling three-year female representation
43%
female
Average non-Executive Director tenure
(as at 23 May 2023)
3.98
years
Board ethnicity (as at 23 May 2023)
1
ethnic minority background
White British
Māori
1
11
31 March
2021
30%
31 March
2022
37%
31 March
2023
43%
Sir John
Manzoni
Lady Elish
Angiolini
John Bason
Debbie Crosbie
Tony Cocker
Peter Lynas
Helen Mahy
Melanie Smith
Dame Angela
Strank
9 years
0 1 2 3 4 5 6 7 8 9
116 SSE plc Annual Report 2023
Board of Directors
Sir John Manzoni
Chair
Alistair Phillips-Davies
Chief Executive
Gregor Alexander
Finance Director
Martin Pibworth
Chief Commercial Officer
Tony Cocker
Senior Independent Director
NC
ER
SHE
RC
ER ER
SHE
NC
AC
ER
SHE
Date of appointment
Non-Executive Director since September 2020
and Chair from April 2021
Date of appointment
Executive Director since January 2002 and
Chief Executive from July 2013
Date of appointment
Executive Director and Finance Director
since October 2002
Date of appointment
Executive Director since September 2017
and Chief Commercial Officer from
November 2020
Date of appointment
Non-Executive Director since May 2018 and Senior
Independent Director from October 2020
Board tenure
2 years
Board tenure
21 years
Board tenure
20 years
Board tenure
5 years
Board tenure
5 years
Career and experience
Sir John has wide-ranging experience across the
energy industry and both the private and public
sectors. Through an executive career at BP which
spanned 24 years, he held a number of senior roles
including Chief Executive, Refining and Marketing
in which he was a Main Board member. This was
followed by President and Chief Executive Officer
at Talisman Energy Inc before a move to UK
Government where he spent six years as Chief
Executive of the Civil Service and Permanent
Secretary of the Cabinet Office. He has previously
been a non-Executive Director of SABMiller plc
and Chair of Leyshon Energy Limited.
Career and experience
Alistair joined SSE in 1997 and possesses extensive
knowledge of the Group, having held senior roles
across multiple business areas. Prior to joining the
Board in 2002 as Energy Supply Director, Alistair
was Director of Corporate Finance and Business
Development. In 2010, he became Generation
and Supply Director, before his appointment
as Deputy Chief Executive in 2012 then Chief
Executive in 2013. Alistair is a fellow of the
Energy Institute and a Chartered Accountant.
Career and experience
Gregor joined SSE in 1990 and has been Finance
Director on the Board since 2002. Prior to being
appointed as Finance Director, Gregor worked
in senior finance roles and led specialist teams
including as Group Treasurer and Tax Manager.
Gregor has also served on the Boards of SSE’s
networks businesses over a number of years.
He is a Chartered Accountant and member
of the Accounting for Sustainability (A4S) CFO
Leadership Network.
Career and experience
Martin joined SSE in 1998 as an energy trader,
which was followed by a series of commercial
roles before becoming Managing Director, Energy
Portfolio Management, and a member of SSE’s
then Management Board in 2012. In 2014, he was
appointed Managing Director, Wholesale, and a
member of SSE’s Group Executive Committee.
In 2017 he joined the Board as Group Energy
Director, a role which was expanded to Group
Energy and Commercial Director in November
2020. This role was re-titled Chief Commercial
Officer in March 2022.
Career and experience
Tony possesses detailed knowledge of the energy
sector through a 20-year career with E.ON SE and
Powergen plc, encompassing responsibility for:
thermal generation; onshore and offshore wind
(including Scroby Sands and the London Array,
the world’s largest offshore wind farm when
built); commodity trading and risk management;
and retail. Latterly, he held the position of CEO
and Chair of E.ON UK plc, comprising the main
businesses in the UK. Previous roles include CEO
of E.ON Energy Trading SE and Managing Director
of E.ON UK Energy Wholesale. He has served on
the Board of Energy UK.
Skills and attributes which support strategy
and long-term success
• Dynamic and engaging leadership style
with diverse perspectives gained across
multiple sectors, organisational settings
and geographies, which complement the
responsibilities of SSE Chair.
• Experienced in the governance of large-scale
business operations, leading reform and the
management of complex projects to drive
commercial performance, skills key to the
fulfilment of SSE’s vision and purpose.
• Strong communicator with insight into
the management and development of
stakeholder relations aligned with SSE’s
approach to decision-making.
• Working knowledge of energy regulation,
government and policy considerations which
underpin the success of a net zero transition.
• Brings sharp focus to people leadership,
succession planning and inclusion and
diversity.
Skills and attributes which support strategy
and long-term success
• Sound executive leadership and a considered
approach to strategy; evidenced through
continued delivery under the Group operating
model, Net Zero Acceleration Programme,
and sustainability plans and targets.
• Broad knowledge of the energy markets in
Great Britain and Ireland and across Europe,
which informs views of long-term direction.
• Proactive approach to understanding
stakeholder priorities including the impact of
the energy crisis, SSE’s societal response to
net zero and the pace, focus and investment
needed to deliver a clean, secure and
cost-effective energy system.
• Detailed understanding of policy, politics,
and regulation, enabling constructive
engagement in these areas.
• Focused on people development to support
culture and capabilities for future growth.
Skills and attributes which support strategy
and long-term success
• Extensive knowledge of financial markets as
leader of SSE’s financial strategy, including
the approach to sustainable financing and
long-term performance, and the link between
financial, social and environmental factors.
• Experienced in directing significant corporate
projects and major transactions, including
SSE’s approach to investments, divestments
and partnering to create strategic value.
• Oversees governance in the management
of Group risks including those emerging
from the net zero transition and external
economic environment, with a focus on
capital investment, resilient supply chains,
project delivery and digital.
• Deep appreciation of shareholder views
and ESG matters including the continued
commitment to lead on fair tax, fair work
and sharing economic value through of SSE’s
2030 Goals.
Skills and attributes which support strategy
and long-term success
• Literacy in complex energy and commodity
markets which is supported by technical
and operational expertise.
• End-to-end experience in large capital
projects including joint venture engagement
and governance, which has been applied
in the development of SSE’s diverse and
flexible generation portfolio, including the
renewables pipeline.
• Commercially minded in seeking future
growth within SSE’s market-based businesses,
including internationally, having supported
key capital recycling opportunities and
transactions to refine SSE’s business mix and
secure optimum value from investments.
• Understanding of change management and
sources of commercial risk, having overseen
SSE’s monitoring and response to recent
market volatility.
Skills and attributes which support strategy
and long-term success
• Extensive CEO and MD experience across
renewables, generation, commodity portfolio
management and energy trading.
• Wide-ranging technical and operational
insight, surrounding energy infrastructure
and assets including the delivery of major
thermal and renewable energy projects.
• UK and European energy industry and
non-Executive experience enhances Board
understanding of trends relevant to SSE’s
operations and of utilities regulation.
• A balanced sounding board with additive
experience in strategic consultancy and
energy and utility stakeholder management.
Key external appointments and changes
• Non-Executive Director of Diageo.
• Chair of the Atomic Weapons Establishment.
• Non-Executive Director of KBR Inc.
Key external appointments and changes
• Chair of SSEN Distribution Board from
April 2023.
• Non-Executive Director of Anglian Water
Services Limited from November 2022.
• Member of the Scottish Energy Advisory
Board.
• Member of the UK Government’s Hydrogen
Advisory Council.
Key external appointments and changes
• Chair of SSEN Transmission Board from
October 2022.
• Director of Neos Networks Limited from
February 2023.
• Stepped down as non-Executive Director
of Stagecoach Group plc in June 2022.
Key external appointments and changes
• Member of Energy UK Board.
Key external appointments and changes
• Chair of Infinis Energy Management Limited.
• Visiting Professor at Aston University.
• Chair of Future Biogas Limited from March
2023.
CHAIR EXECUTIVE
DIRECTORS
117SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Sir John Manzoni
Chair
Alistair Phillips-Davies
Chief Executive
Gregor Alexander
Finance Director
Martin Pibworth
Chief Commercial Officer
Tony Cocker
Senior Independent Director
NC
ER
SHE
RC
ER ER
SHE
NC
AC
ER
SHE
Date of appointment
Non-Executive Director since September 2020
and Chair from April 2021
Date of appointment
Executive Director since January 2002 and
Chief Executive from July 2013
Date of appointment
Executive Director and Finance Director
since October 2002
Date of appointment
Executive Director since September 2017
and Chief Commercial Officer from
November 2020
Date of appointment
Non-Executive Director since May 2018 and Senior
Independent Director from October 2020
Board tenure
2 years
Board tenure
21 years
Board tenure
20 years
Board tenure
5 years
Board tenure
5 years
Career and experience
Sir John has wide-ranging experience across the
energy industry and both the private and public
sectors. Through an executive career at BP which
spanned 24 years, he held a number of senior roles
including Chief Executive, Refining and Marketing
in which he was a Main Board member. This was
followed by President and Chief Executive Officer
at Talisman Energy Inc before a move to UK
Government where he spent six years as Chief
Executive of the Civil Service and Permanent
Secretary of the Cabinet Office. He has previously
been a non-Executive Director of SABMiller plc
and Chair of Leyshon Energy Limited.
Career and experience
Alistair joined SSE in 1997 and possesses extensive
knowledge of the Group, having held senior roles
across multiple business areas. Prior to joining the
Board in 2002 as Energy Supply Director, Alistair
was Director of Corporate Finance and Business
Development. In 2010, he became Generation
and Supply Director, before his appointment
as Deputy Chief Executive in 2012 then Chief
Executive in 2013. Alistair is a fellow of the
Energy Institute and a Chartered Accountant.
Career and experience
Gregor joined SSE in 1990 and has been Finance
Director on the Board since 2002. Prior to being
appointed as Finance Director, Gregor worked
in senior finance roles and led specialist teams
including as Group Treasurer and Tax Manager.
Gregor has also served on the Boards of SSE’s
networks businesses over a number of years.
He is a Chartered Accountant and member
of the Accounting for Sustainability (A4S) CFO
Leadership Network.
Career and experience
Martin joined SSE in 1998 as an energy trader,
which was followed by a series of commercial
roles before becoming Managing Director, Energy
Portfolio Management, and a member of SSE’s
then Management Board in 2012. In 2014, he was
appointed Managing Director, Wholesale, and a
member of SSE’s Group Executive Committee.
In 2017 he joined the Board as Group Energy
Director, a role which was expanded to Group
Energy and Commercial Director in November
2020. This role was re-titled Chief Commercial
Officer in March 2022.
Career and experience
Tony possesses detailed knowledge of the energy
sector through a 20-year career with E.ON SE and
Powergen plc, encompassing responsibility for:
thermal generation; onshore and offshore wind
(including Scroby Sands and the London Array,
the world’s largest offshore wind farm when
built); commodity trading and risk management;
and retail. Latterly, he held the position of CEO
and Chair of E.ON UK plc, comprising the main
businesses in the UK. Previous roles include CEO
of E.ON Energy Trading SE and Managing Director
of E.ON UK Energy Wholesale. He has served on
the Board of Energy UK.
Skills and attributes which support strategy
and long-term success
• Dynamic and engaging leadership style
with diverse perspectives gained across
multiple sectors, organisational settings
and geographies, which complement the
responsibilities of SSE Chair.
• Experienced in the governance of large-scale
business operations, leading reform and the
management of complex projects to drive
commercial performance, skills key to the
fulfilment of SSE’s vision and purpose.
• Strong communicator with insight into
the management and development of
stakeholder relations aligned with SSE’s
approach to decision-making.
• Working knowledge of energy regulation,
government and policy considerations which
underpin the success of a net zero transition.
• Brings sharp focus to people leadership,
succession planning and inclusion and
diversity.
Skills and attributes which support strategy
and long-term success
• Sound executive leadership and a considered
approach to strategy; evidenced through
continued delivery under the Group operating
model, Net Zero Acceleration Programme,
and sustainability plans and targets.
• Broad knowledge of the energy markets in
Great Britain and Ireland and across Europe,
which informs views of long-term direction.
• Proactive approach to understanding
stakeholder priorities including the impact of
the energy crisis, SSE’s societal response to
net zero and the pace, focus and investment
needed to deliver a clean, secure and
cost-effective energy system.
• Detailed understanding of policy, politics,
and regulation, enabling constructive
engagement in these areas.
• Focused on people development to support
culture and capabilities for future growth.
Skills and attributes which support strategy
and long-term success
• Extensive knowledge of financial markets as
leader of SSE’s financial strategy, including
the approach to sustainable financing and
long-term performance, and the link between
financial, social and environmental factors.
• Experienced in directing significant corporate
projects and major transactions, including
SSE’s approach to investments, divestments
and partnering to create strategic value.
• Oversees governance in the management
of Group risks including those emerging
from the net zero transition and external
economic environment, with a focus on
capital investment, resilient supply chains,
project delivery and digital.
• Deep appreciation of shareholder views
and ESG matters including the continued
commitment to lead on fair tax, fair work
and sharing economic value through of SSE’s
2030 Goals.
Skills and attributes which support strategy
and long-term success
• Literacy in complex energy and commodity
markets which is supported by technical
and operational expertise.
• End-to-end experience in large capital
projects including joint venture engagement
and governance, which has been applied
in the development of SSE’s diverse and
flexible generation portfolio, including the
renewables pipeline.
• Commercially minded in seeking future
growth within SSE’s market-based businesses,
including internationally, having supported
key capital recycling opportunities and
transactions to refine SSE’s business mix and
secure optimum value from investments.
• Understanding of change management and
sources of commercial risk, having overseen
SSE’s monitoring and response to recent
market volatility.
Skills and attributes which support strategy
and long-term success
• Extensive CEO and MD experience across
renewables, generation, commodity portfolio
management and energy trading.
• Wide-ranging technical and operational
insight, surrounding energy infrastructure
and assets including the delivery of major
thermal and renewable energy projects.
• UK and European energy industry and
non-Executive experience enhances Board
understanding of trends relevant to SSE’s
operations and of utilities regulation.
• A balanced sounding board with additive
experience in strategic consultancy and
energy and utility stakeholder management.
Key external appointments and changes
• Non-Executive Director of Diageo.
• Chair of the Atomic Weapons Establishment.
• Non-Executive Director of KBR Inc.
Key external appointments and changes
• Chair of SSEN Distribution Board from
April 2023.
• Non-Executive Director of Anglian Water
Services Limited from November 2022.
• Member of the Scottish Energy Advisory
Board.
• Member of the UK Government’s Hydrogen
Advisory Council.
Key external appointments and changes
• Chair of SSEN Transmission Board from
October 2022.
• Director of Neos Networks Limited from
February 2023.
• Stepped down as non-Executive Director
of Stagecoach Group plc in June 2022.
Key external appointments and changes
• Member of Energy UK Board.
Key external appointments and changes
• Chair of Infinis Energy Management Limited.
• Visiting Professor at Aston University.
• Chair of Future Biogas Limited from March
2023.
Key
Committee membership
NC
Nomination Committee
AC
Audit Committee
ER
Energy Markets Risk Committee
SHE
Safety, Sustainability, Health and Environment
Advisory Committee
RC
Remuneration Committee
Committee Chair
External appointments
The Board considered and approved
the additional external commitments
taken on by Alistair Phillips-Davies,
Tony Cocker, Debbie Crosbie, Helen
Mahy and Melanie Smith during the
period, confirming there would be
no impact on the time commitment
required for their respective roles.
For the non-Executive Directors,
an additional assessment of
independence and objectivity
was conducted, with no concerns
identified. The resultant position
is believed to be consistent with
recognised proxy advisor guidelines.
INDEPENDENT
NON-EXECUTIVE
DIRECTORS
118 SSE plc Annual Report 2023
Board of Directors continued
INDEPENDENT
NON-EXECUTIVE
DIRECTORS
Lady Elish Angiolini QC
Non-Executive Director
John Bason
Non-Executive Director
Debbie Crosbie
Non-Executive Director
Peter Lynas
Non-Executive Director
Helen Mahy CBE
Non-Executive Director
Melanie Smith CBE
Non-Executive Director
NC
SHE
RC
NC
AC
RC
NC
AC
ER
NC
AC
RC
NC
AC
SHE
NC
ER
RC
Date of appointment
Non-Executive Director since September 2021
Date of appointment
Non-Executive Director since June 2022
Date of appointment
Non-Executive Director since September 2021
Date of appointment
Non-Executive Director since July 2014
Date of appointment
Non-Executive Director since March 2016
Date of appointment
Non-Executive Director since January 2019
Board tenure
1 year
Board tenure
Under 1 year
Board tenure
1 year
Board tenure
8 years
Board tenure
7 years
Board tenure
4 years
Career and experience
Lady Elish has an extensive public sector legal
career, serving as Lord Advocate of Scotland
from 2006 to 2011, across two government
administrations, having previously been Solicitor
General for Scotland. Since then, she has carried
out independent public inquiries and reviews
for the UK and Scottish Governments and held
positions in academia, serving as Principal of
St Hugh’s College Oxford since 2012. She is also
a Pro-Vice Chancellor of Oxford University and
previous Chancellor of the University of West of
Scotland. She is Chair of the Board of Trustees for
the legal action non-governmental group Reprieve
and a patron of several charities.
Career and experience
John brings significant listed company and recent
and relevant financial and international experience
through a career in global businesses. He joined
Associated British Foods plc (ABF) as Finance
Director in 1999 and held this position until
stepping down in April 2023. Whilst in post, ABF’s
diverse food, ingredients and retail businesses
employed 128,000 people and operated in 53
countries across Europe, Asia, the Americas,
Australia and Africa. Prior to this, John was
Finance Director of the international distribution
and services group Bunzl plc. Non-Executive
experience includes Senior Independent Director
and Audit Committee Chair of Compass Group
PLC. John is a Chartered Accountant.
Career and experience
Debbie brings over 25 years of experience in
financial services leadership and became the
first female Chief Executive of Nationwide
Building Society in 2022. Prior to this appointment,
Debbie served as CEO of TSB from May 2019 and
was previously an Executive Director and Chief
Operating Officer of Clydesdale Bank, where
she led preparations for its successful demerger
from National Australia Bank and subsequent IPO.
Debbie is a fellow of the Chartered Institute of
Bankers and a member of the Glasgow Economic
Leadership Board and the Strathclyde University
Business School Advisory Board.
Career and experience
Peter has over 30 years of business experience
spanning all areas of finance. He retired from the
role of Group Finance Director of BAE Systems plc
in March 2020, prior to which he was Director,
Financial Control, Reporting and Treasury. His early
career involved roles within GEC Marconi, where
he was appointed Finance Director of Marconi
Electronic Systems before the completion
of the British Aerospace/Marconi merger.
He is a Fellow of the Chartered Association
of Certified Accountants.
Career and experience
Helen is a former Company Secretary and General
Counsel of National Grid plc. She is an experienced
non-Executive Director with previous directorships
at Bonheur ASA, Aga Rangemaster plc, Stagecoach
Group plc, SVG Capital plc, Chair of MedicX Fund
Limited, Deputy Chair and Senior Independent
Director of Primary Health Properties PLC, and
Chair of The Renewables Infrastructure Group
Limited. She was a member of the Parker Review
steering committee into the Ethnic Diversity of
UK Boards. She is a patron of the Social Mobility
Business Partnership, Co-chair of the Employers
Social Mobility Alliance and Chair of the Global
Media Campaign to end FGM.
Career and experience
Melanie has over 20 years of strategy and
transformation experience. Most recently, she
built the Ocado Retail joint venture – the world’s
largest pureplay online grocer and the UK’s fastest
growing grocer, of which she was CEO until 2022.
Prior to this she was Strategy Director for Marks &
Spencer with responsibility for group strategy, M&S
Bank and M&S Services. Earlier roles include Global
Strategy and Marketing Director at Bupa, Chief
Operating Officer at TalkTalk and a Partner in
McKinsey’s Consumer practice.
Skills and attributes which support strategy and
long-term success
• Possesses significant understanding of
Scottish governance and has practical
experience of working with the UK and
Scottish governments through involvement
in independent public reviews, whilst
maintaining no political affiliation.
• Strong ambassadorial skills developed
through an international stakeholder network
in judicial, governmental, diplomatic, and
academic fields.
• Exercises a strong sense of social purpose
and adds depth of perspective to Board
considerations, including as an advocate
for employee views in the Boardroom;
reinforcing SSE’s approach to wider
value creation.
Skills and attributes which support strategy and
long-term success
• Extensive leadership experience and
international perspective, gained from global
companies and complex operations, which
will be invaluable to SSE’s growth and entry
into new markets.
• A proven track record in developing financial
and commercial strategy, including M&A,
corporate transactions and large capital
projects, which complements SSE’s Net
Zero Acceleration Programme Plus, and
supports appointment to the role of Audit
Committee Chair from 21 July 2023.
• Understanding of the listed company context
with practical experience of investor relations
and ESG strategy, placing upmost importance
on the role of sustainability.
Skills and attributes which support strategy and
long-term success
• Extensive experience of the implementation
of strategy, including execution of far-
reaching transformation projects within
large consumer-facing organisation,
and the critical role of digital and data.
• Understanding of capital allocation,
optimisation, and investment appraisal
frameworks central to SSE’s growth plans.
• Responsible for efficient and effective
operations in high profile organisations
in a heavily regulated sector, requiring a
compliance-driven approach and proficiency
in IT and cyber security, risk management and
internal controls.
• Business leader with expert understanding
of the wider organisational responsibilities
to employees and society.
Skills and attributes which support strategy and
long-term success
• Brings recent and relevant financial
experience to the Board and strong
direction to the Audit Committee, as Chair
of which, he drives focus on the risk and
control environment including Group
resilience, cyber security and the ethics
and compliance culture.
• International business perspective and
an applied understanding of long-term
project management and delivery, including
investment appraisal, contracting and supply
chain experience.
• Up-to-date investor relations experience
through his executive career at BAE and
pensions insight having been Chair of the
trustee Board of a major UK scheme.
Skills and attributes which support strategy and
long-term success
• Long-standing energy and regulatory
expertise, including understanding of the
legal, compliance, governance and risk
frameworks in which SSE’s businesses operate
and a decade of experience overseeing
renewables infrastructure investment.
• Insight into a broad range of investor and
stakeholder perspectives and trends from
cross-sectoral, international and external
Board interests that enable wider discussion
and debate.
• Advocate of a strong safety and employee
wellbeing culture, extensive knowledge of
sustainability, and applies a wide focus to
social equity including social mobility and
inclusion and diversity.
Skills and attributes which support strategy and
long-term success
• Highly qualified to appraise strategy
development and execution, having
advised and led growth, brand and business
transformation in the consumer and retail
sectors worldwide.
• Deep commercial and digital experience
across multiple goods and services categories,
including insurance, telco and energy that
furthers Board understanding of the customer.
• Has a people centric style and wide-ranging
experience in a global context including a
strong cultural appreciation.
• An entrepreneurial organisational leader,
actively engaging with stakeholder views
to create high performing organisations.
Key external appointments and changes
• Pro-Vice Chancellor of the University
of Oxford.
• Principal of St Hugh’s College Oxford.
• Chair of the Sarah Everard Inquiry.
• Chair of Board of Trustees of Reprieve.
• Stepped down as Chair of the Discipline
Board of ICAS in March 2023.
Key external appointments and changes
• Non-Executive Director of Bloomsbury
Publishing Plc.
• Chair of the charity FareShare.
• Primark Strategic Advisory Board Chair from
April 2023.
• Stepped down as Finance Director of
Associated British Foods plc in April 2023.
Key external appointments and changes
• Chief Executive of Nationwide Building
Society.
• Member of the Glasgow Economic
Leadership Board.
• Member of the Business School Advisory
Board of Strathclyde University.
• Member of the FCA Practitioner Panel
from June 2022.
• Director of UK Finance from May 2023.
Key external appointments and changes
• Senior Independent Director of First Group plc.
Key external appointments and changes
• Non-Executive Director of Gowling WLG
(UK) LLP.
• Non-Executive Director of NextEnergy Solar
Fund from April 2023.
• Stepped down as Chair of The Renewables
Infrastructure Group Limited in October 2022.
• Stepped down as Commissioner for The
Equality and Human Rights Commission in
March 2023.
Key external appointments and changes
• Advisory Board member of Manaia.
• Trustee of Sadler’s Wells.
• Founder of Mokaraka Trust.
• Trustee of Somerset House from
December 2022.
• Stepped down as CEO of Ocado Retail
Limited in August 2022.
119SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Lady Elish Angiolini QC
Non-Executive Director
John Bason
Non-Executive Director
Debbie Crosbie
Non-Executive Director
Peter Lynas
Non-Executive Director
Helen Mahy CBE
Non-Executive Director
Melanie Smith CBE
Non-Executive Director
NC
SHE
RC
NC
AC
RC
NC
AC
ER
NC
AC
RC
NC
AC
SHE
NC
ER
RC
Date of appointment
Non-Executive Director since September 2021
Date of appointment
Non-Executive Director since June 2022
Date of appointment
Non-Executive Director since September 2021
Date of appointment
Non-Executive Director since July 2014
Date of appointment
Non-Executive Director since March 2016
Date of appointment
Non-Executive Director since January 2019
Board tenure
1 year
Board tenure
Under 1 year
Board tenure
1 year
Board tenure
8 years
Board tenure
7 years
Board tenure
4 years
Career and experience
Lady Elish has an extensive public sector legal
career, serving as Lord Advocate of Scotland
from 2006 to 2011, across two government
administrations, having previously been Solicitor
General for Scotland. Since then, she has carried
out independent public inquiries and reviews
for the UK and Scottish Governments and held
positions in academia, serving as Principal of
St Hugh’s College Oxford since 2012. She is also
a Pro-Vice Chancellor of Oxford University and
previous Chancellor of the University of West of
Scotland. She is Chair of the Board of Trustees for
the legal action non-governmental group Reprieve
and a patron of several charities.
Career and experience
John brings significant listed company and recent
and relevant financial and international experience
through a career in global businesses. He joined
Associated British Foods plc (ABF) as Finance
Director in 1999 and held this position until
stepping down in April 2023. Whilst in post, ABF’s
diverse food, ingredients and retail businesses
employed 128,000 people and operated in 53
countries across Europe, Asia, the Americas,
Australia and Africa. Prior to this, John was
Finance Director of the international distribution
and services group Bunzl plc. Non-Executive
experience includes Senior Independent Director
and Audit Committee Chair of Compass Group
PLC. John is a Chartered Accountant.
Career and experience
Debbie brings over 25 years of experience in
financial services leadership and became the
first female Chief Executive of Nationwide
Building Society in 2022. Prior to this appointment,
Debbie served as CEO of TSB from May 2019 and
was previously an Executive Director and Chief
Operating Officer of Clydesdale Bank, where
she led preparations for its successful demerger
from National Australia Bank and subsequent IPO.
Debbie is a fellow of the Chartered Institute of
Bankers and a member of the Glasgow Economic
Leadership Board and the Strathclyde University
Business School Advisory Board.
Career and experience
Peter has over 30 years of business experience
spanning all areas of finance. He retired from the
role of Group Finance Director of BAE Systems plc
in March 2020, prior to which he was Director,
Financial Control, Reporting and Treasury. His early
career involved roles within GEC Marconi, where
he was appointed Finance Director of Marconi
Electronic Systems before the completion
of the British Aerospace/Marconi merger.
He is a Fellow of the Chartered Association
of Certified Accountants.
Career and experience
Helen is a former Company Secretary and General
Counsel of National Grid plc. She is an experienced
non-Executive Director with previous directorships
at Bonheur ASA, Aga Rangemaster plc, Stagecoach
Group plc, SVG Capital plc, Chair of MedicX Fund
Limited, Deputy Chair and Senior Independent
Director of Primary Health Properties PLC, and
Chair of The Renewables Infrastructure Group
Limited. She was a member of the Parker Review
steering committee into the Ethnic Diversity of
UK Boards. She is a patron of the Social Mobility
Business Partnership, Co-chair of the Employers
Social Mobility Alliance and Chair of the Global
Media Campaign to end FGM.
Career and experience
Melanie has over 20 years of strategy and
transformation experience. Most recently, she
built the Ocado Retail joint venture – the world’s
largest pureplay online grocer and the UK’s fastest
growing grocer, of which she was CEO until 2022.
Prior to this she was Strategy Director for Marks &
Spencer with responsibility for group strategy, M&S
Bank and M&S Services. Earlier roles include Global
Strategy and Marketing Director at Bupa, Chief
Operating Officer at TalkTalk and a Partner in
McKinsey’s Consumer practice.
Skills and attributes which support strategy and
long-term success
• Possesses significant understanding of
Scottish governance and has practical
experience of working with the UK and
Scottish governments through involvement
in independent public reviews, whilst
maintaining no political affiliation.
• Strong ambassadorial skills developed
through an international stakeholder network
in judicial, governmental, diplomatic, and
academic fields.
• Exercises a strong sense of social purpose
and adds depth of perspective to Board
considerations, including as an advocate
for employee views in the Boardroom;
reinforcing SSE’s approach to wider
value creation.
Skills and attributes which support strategy and
long-term success
• Extensive leadership experience and
international perspective, gained from global
companies and complex operations, which
will be invaluable to SSE’s growth and entry
into new markets.
• A proven track record in developing financial
and commercial strategy, including M&A,
corporate transactions and large capital
projects, which complements SSE’s Net
Zero Acceleration Programme Plus, and
supports appointment to the role of Audit
Committee Chair from 21 July 2023.
• Understanding of the listed company context
with practical experience of investor relations
and ESG strategy, placing upmost importance
on the role of sustainability.
Skills and attributes which support strategy and
long-term success
• Extensive experience of the implementation
of strategy, including execution of far-
reaching transformation projects within
large consumer-facing organisation,
and the critical role of digital and data.
• Understanding of capital allocation,
optimisation, and investment appraisal
frameworks central to SSE’s growth plans.
• Responsible for efficient and effective
operations in high profile organisations
in a heavily regulated sector, requiring a
compliance-driven approach and proficiency
in IT and cyber security, risk management and
internal controls.
• Business leader with expert understanding
of the wider organisational responsibilities
to employees and society.
Skills and attributes which support strategy and
long-term success
• Brings recent and relevant financial
experience to the Board and strong
direction to the Audit Committee, as Chair
of which, he drives focus on the risk and
control environment including Group
resilience, cyber security and the ethics
and compliance culture.
• International business perspective and
an applied understanding of long-term
project management and delivery, including
investment appraisal, contracting and supply
chain experience.
• Up-to-date investor relations experience
through his executive career at BAE and
pensions insight having been Chair of the
trustee Board of a major UK scheme.
Skills and attributes which support strategy and
long-term success
• Long-standing energy and regulatory
expertise, including understanding of the
legal, compliance, governance and risk
frameworks in which SSE’s businesses operate
and a decade of experience overseeing
renewables infrastructure investment.
• Insight into a broad range of investor and
stakeholder perspectives and trends from
cross-sectoral, international and external
Board interests that enable wider discussion
and debate.
• Advocate of a strong safety and employee
wellbeing culture, extensive knowledge of
sustainability, and applies a wide focus to
social equity including social mobility and
inclusion and diversity.
Skills and attributes which support strategy and
long-term success
• Highly qualified to appraise strategy
development and execution, having
advised and led growth, brand and business
transformation in the consumer and retail
sectors worldwide.
• Deep commercial and digital experience
across multiple goods and services categories,
including insurance, telco and energy that
furthers Board understanding of the customer.
• Has a people centric style and wide-ranging
experience in a global context including a
strong cultural appreciation.
• An entrepreneurial organisational leader,
actively engaging with stakeholder views
to create high performing organisations.
Key external appointments and changes
• Pro-Vice Chancellor of the University
of Oxford.
• Principal of St Hugh’s College Oxford.
• Chair of the Sarah Everard Inquiry.
• Chair of Board of Trustees of Reprieve.
• Stepped down as Chair of the Discipline
Board of ICAS in March 2023.
Key external appointments and changes
• Non-Executive Director of Bloomsbury
Publishing Plc.
• Chair of the charity FareShare.
• Primark Strategic Advisory Board Chair from
April 2023.
• Stepped down as Finance Director of
Associated British Foods plc in April 2023.
Key external appointments and changes
• Chief Executive of Nationwide Building
Society.
• Member of the Glasgow Economic
Leadership Board.
• Member of the Business School Advisory
Board of Strathclyde University.
• Member of the FCA Practitioner Panel
from June 2022.
• Director of UK Finance from May 2023.
Key external appointments and changes
• Senior Independent Director of First Group plc.
Key external appointments and changes
• Non-Executive Director of Gowling WLG
(UK) LLP.
• Non-Executive Director of NextEnergy Solar
Fund from April 2023.
• Stepped down as Chair of The Renewables
Infrastructure Group Limited in October 2022.
• Stepped down as Commissioner for The
Equality and Human Rights Commission in
March 2023.
Key external appointments and changes
• Advisory Board member of Manaia.
• Trustee of Sadler’s Wells.
• Founder of Mokaraka Trust.
• Trustee of Somerset House from
December 2022.
• Stepped down as CEO of Ocado Retail
Limited in August 2022.
120 SSE plc Annual Report 2023
Board of Directors continued
Dame Angela Strank DBE
Non-Executive Director
Sally Fairbairn
Company Secretary and Director of Investor
Relations
NC
SHE
RC
Date of appointment
Non-Executive Director since May 2020
Date of appointment
Company Secretary and Director of Investor
Relations since December 2014
Board tenure
3 years
Career and experience
Dame Angela brings depth of executive experience
from a long-standing international career in the
energy sector, which included 38 years’ service at
BP. Prior to retirement in December 2020, she was
a member of BP’s Executive Management team as
BP Group Chief Scientist and Head of Downstream
Technology. This followed international business
and technical leadership positions spanning R&D,
engineering, digital, product development and
innovation, business development, finance and
renewable energy. Angela is a Fellow of the Royal
Society, the Royal Academy of Engineers, and the
UK Energy Institute. She was awarded a DBE for
long-standing services to the energy industry and
pioneering STEM careers, especially for women.
Career and experience
Sally joined SSE in 1997 as a chartered accountant
working in the Corporate Finance team. Through
this role, which included responsibility for
long-term financial modelling of the SSE Group,
she developed knowledge of the SSE’s diverse
operations and the UK energy industry. In 2007,
Sally became Director of Investor Relations and
Analysis allowing her to develop extensive
experience of the shareholder and financial analyst
community, and through associated engagement,
has detailed understanding of investor views.
Sally was appointed to the joint role of Company
Secretary and Director of Investor Relations in
December 2014.
Skills and attributes which support strategy and
long-term success
• Expert understanding of the current and
future role of technology and science within
the broader energy and manufacturing
industries, including the impact of disruptive
trends and resultant transformation.
• Knowledge of leading and collaborating on
a large scale and with international outlook,
having worked extensively in culturally diverse
environments including the Middle East,
Europe, the Far East, Africa and America.
• Corporate social responsibility and
sustainability experience through active
involvement in climate science research,
the energy transition, reputation and safety
management, pioneering women in STEM
careers, and as a champion of inclusion
and diversity; having chaired the Corporate
Sustainability Committee, and Safety,
Ethics and Sustainability Committee in
two FTSE 100 companies.
Key external appointments and changes
• Non-Executive Director of Rolls Royce plc.
• Non-Executive Director of Mondi plc.
INDEPENDENT
NON-EXECUTIVE
DIRECTORS
COMPANY
SECRETARY
121SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Liz Tanner
General Counsel
Liz is a barrister and has been Group
General Counsel since March 2019,
having joined SSE in 2002 as part of
the acquisition of Neos Networks.
Since joining SSE, Liz has held a
variety of legal and commercial
roles within a number of different
SSE Group companies and currently
oversees the corporate functions of
Legal, Compliance, Data Protection
and Large Capital Project Services.
John Stewart
Director of HR
John has been Director of HR since
joining SSE in July 2009. Prior to this
he worked in a broad range of senior
management roles in the energy and
water sectors and has experience of
working in both the UK and in the US.
He oversees all areas in relation to
SSE’s people including talent and
capability, training and development,
employee engagement, and
inclusion and diversity.
Stephen Wheeler
MD, SSE Renewables
Stephen has been MD, SSE
Renewables since January 2022
having previously held the roles
of MD, SSE Thermal and MD, SSE
Ireland. Prior to SSE, he was part
of the management team that grew
the Airtricity renewable energy
platform before SSE acquired it in
2008. Before joining Airtricity, he
spent over 10 years working with
ABB and Siemens internationally.
Catherine Raw
MD, SSE Thermal
Catherine has been MD, SSE Thermal
since April 2022, and brings extensive
operational and commercial
experience from her previous roles in
the international mining firm Barrick
Gold where she was both Chief
Operating Officer for North America
and Chief Financial Officer. Prior
to this, Catherine was a Managing
Director and Fund Manager at
BlackRock, one of the world’s largest
fund management companies.
Sam Peacock
MD, Corporate Affairs, Regulation
and Strategy
Sam joined the Group Executive
Committee in April 2020 and leads
SSE’s teams overseeing corporate
strategy, government and regulatory
affairs, communications, brand, and
local project communications. Prior
to joining SSE in 2011, he directed
government affairs at Ofgem and
worked at leading communications
agency Edelman, as well as in
Parliament and in Government.
Chris Burchell
MD, SSEN Distribution
Chris has been MD, SSEN Distribution
since November 2020, following an
extensive career in transport where
he held several MD and Group level
operational and commercial
leadership positions, including with
Arriva, The Go-Ahead Group and
Railtrack. Chris also brings wider
sector experience having been a
non-Executive Director with OFWAT
and as Chair of the Rail Delivery
Group trade body.
Rob McDonald
MD, SSEN Transmission
Rob has been MD, SSEN Transmission
since January 2019, having joined
SSE in 1997 and holding a number
of senior roles within the Group
Regulation function. Prior to his
current position, he was MD,
Corporate and Business Services
covering Legal, Regulation,
Compliance, Safety and Large
Capital Projects Services across SSE.
Group Executive Committee
Sally Fairbairn
Company Secretary and Director
of Investor Relations, Committee
Secretary
Alistair Phillips-Davies
Chief Executive
Gregor Alexander
Finance Director
Martin Pibworth
Chief Commercial Officer
Biographical details of the Executive
Directors and Company Secretary
and Director of Investor Relations.
More on pages 116 to 120
122 SSE plc Annual Report 2023
Our corporate governance
Corporate governance in SSE can be
explained as the minimum expectations
set by the Board surrounding standards,
responsible conduct and controls.
SSE’s Board-led Governance Framework
supports this approach by mapping
where accountability resides in line with
delegated authorities, and as such, is a key
part of SSE’s System of Internal Control.
The Board
The primary role of the Board is to lead SSE
in a way that ensures its long-term success,
whilst generating value for shareholders
and wider stakeholders. This is a broad-
ranging duty and is directed by the
cornerstones of SSE’s purpose and vision.
These guiding statements are considered
on an ongoing basis by the Board, and their
positioning continues to underpin a strategy
focused on clean energy infrastructure and
energy security in the transition to net zero.
The Board agrees and monitors SSE’s
strategy through a continuing programme
of work. In 2021/22, this saw approval
and announcement of SSE’s Net Zero
Acceleration Programme (NZAP), which
was further updated in May 2023 as
explained on page 83 . Overseeing
execution of the NZAP has been a key
Board focus in 2022/23 and complemented
by strategic review work to confirm its
continued applicability as the optimum
pathway for all stakeholders. Details of
how SSE’s businesses and associated
business model provide the best possible
balance to deliver this long-term value is
set out on pages 2 to 11 .
The Group Executive Committee
and Business Units
Once set by the Board, the implementation
of strategy is the responsibility of the Group
Executive Committee and management
across SSE’s Business Units. Oversight
of performance is achieved through
structured operational and financial
reporting from the Executive Directors
at each Board meeting, in addition to
presentations from each Business Unit
across the year. These presentations
comprise strategic updates and approvals
in line with SSE’s Governance Framework.
Operational and financial performance for
2022/23 is covered across the Strategic
Report on pages 1 to 109 .
Supporting Committees
Areas of importance to the Board and
SSE’s operations influence the features
of the Governance Framework, this is
illustrated in part by the Committees which
support the Board and the Group Executive
Committee. The Board Committees are
delegated a specific area of focus by
the Board, while the Group Executive
Committee establishes and oversees the
Committees needed at Group and Business
Unit level to achieve strategic delivery.
Clarity surrounding the responsibilities
of each Committee is ensured through
approved Terms of Reference.
Monitoring of delegated matters is
supported by formal reporting channels.
For Board Committees, this is a personal
account from the non-Executive Director
who chairs the Committee following each
Committee meeting. On executive matters,
the Chief Executive, Finance Director and
Chief Commercial Officer are responsible
for providing full updates at each Board
meeting. These mechanisms are in addition
to sub-Committee minutes, written reports
and agreed KPIs to monitor financial and
non-financial performance.
Dedicated Boards oversee SSE’s economically regulated networks businesses in compliance with applicable regulatory licence conditions.
SSE Energy Customer Solutions comprises SSE Airtricity and SSE Business Energy.
SSE Enterprise comprises the business activities within SSE Distributed Energy.
SSEN Distribution Board
SSEN Transmission Board
SSE plc Board
75%
SSEN
Transmission
SSEN
Distribution
SSE
Renewables
SSE
Enterprise
Energy
Customer
Solutions
SSE
Thermal
Energy
Portfolio
Management
Group Risk
Group
Investment
Group Large
Capital
Projects
Group
Energy
Markets
Exposure Risk
Group Safety,
Health and
Environment
Group
Disclosure
Group Executive Committee
Board Committees
Business Unit Executive Committees Group Committees
Energy Markets
Risk Committee
(EMRC)
See pages 160 to 161
Safety,
Sustainability,
Health and
Environment
Advisory Committee
(SSHEAC)
See pages 162 to 165
Remuneration
Committee
See pages 166 to 187
Nomination
Committee
See pages 142 to 149
Audit Committee
See pages 150 to 159
Board oversight
Management accountability
SSE’s Governance Framework
Our corporate governance
123SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Board reserved matters
To safeguard the areas material to the
delivery of SSE’s purpose, vision and
strategy, the Board retains a schedule
of matters reserved for its decision. This
ensures the necessary framework and
resources are in place for the Group to
meet its stated objectives and covers the
below areas. Examples of how the Board
has considered these matters are set out
on pages 125 to 131 .
Strategy and performance
• Approval and review of commercial
strategy, business development and
long-term strategic options.
• Oversight of performance in line with
approved strategy and objectives.
• Review and approval of priorities
surrounding SSE’s principal sustainability
impacts, including climate change.
• Major transactions and any material
extension or closure of operations.
Financial management
• Approval of annual operating and
capital expenditure budgets.
• Approval of dividend policy and key
financial communications.
• Changes in SSE’s capital structure.
Risk and control
• Ensuring sound systems of internal
control and risk management.
• Oversight of emerging and principal
risks.
People and culture
• Approach to people, succession,
and inclusion and diversity.
• Agreement and monitoring of a healthy
corporate culture including SSE’s values
and framework of cultural controls.
Governance
• Changes to Board and Board
Committee structure, size and
composition.
• Approval of shareholder
communications.
• Confirmation of stakeholder approach.
• Approval of Board-level corporate
governance matters.
Regulation
• Approval of the electricity distribution
and transmission price control reviews
proposed by Ofgem.
Board Charter
The Schedule of Reserved Matters is one of
a collection of documents which make up
SSE’s Board Charter. The contents of the
Board Charter govern Board operations
and pertinent Group-wide matters and
is subject to annual Board review and
approval. The Board Charter contains:
• SSE plc’s Articles of Association.*
• Board’s Schedule of Reserved Matters.*
• SSE’s guide to good business ethics.*
• SSE’s Guide to Governance.
• Board Committee Terms of Reference.*
• Non-Audit Services Policy.*
• Procedure for Taking Independent
Advice.
• Non-Executive Directors’ Shareholding
Policy.
• Board Inclusion and Diversity Policy.*
• Responsibilities of key Board roles.*
* Documents available in full on sse.com .
Board operations
The Board, led by the Chair, seeks to
nurture a culture in which informed and
transparent decision-making takes place.
This is supported by clearly defined Board
roles and constructive dialogue within
and outside of meetings. The division
of responsibilities across the Board is
explained on page 139 .
As one of the key responsibilities of the
non-Executive Directors is to challenge and
provide counsel, it is deemed appropriate
that relationships can be built across SSE.
The Board therefore has unfettered access
to senior leadership, their teams and
specialist functions, with individuals from
different levels across the organisation
invited to present at Board meetings and
deep dive sessions. For details of employee
engagement and knowledge development in
2022/23 see pages 134 to 136 and 147 .
Meeting agendas are developed by the Chair,
Chief Executive and Company Secretary.
These are structured around a pre-agreed
annual plan of Board business and the status
of projects, strategic workstreams and the
overarching operating context. Adequate
time is allocated to support effective and
constructive discussion, and guidance is
available to authors and presenters of Board
materials. An electronic meeting portal
allows efficient navigation of papers,
information and requests.
Before or after every Board meeting, the
non-Executive Directors meet without the
Executive Directors present. This allows any
issues surrounding meeting business to be
raised separately from full Board discussion.
Board meetings in 2022/23
In the period to 31 March 2023, there
were six scheduled meetings of the
Board with update calls in alternate
months to maintain coverage of key
business developments, emerging issues
and opportunities. Arrangements remain in
place should a Board decision or approval
be required outside of these times. Where
an individual is unable to attend a meeting,
feedback is sought in advance by the
relevant Board or Committee Chair and
Secretary, and a debrief offered thereafter.
Board
Nomination
Committee
1
Audit
Committee EMRC SSHEAC
2
Remuneration
Committee
3
Number of meetings held 6 8 4 4 5 4
Sir John Manzoni 6/6 8/8 – 4/4 3/5 4/4
Alistair Phillips-Davies 6/6 – – – – –
Gregor Alexander 6/6 – – 4/4 – –
Martin Pibworth 6/6 – – 4/4 5/5 –
Tony Cocker 6/6 8/8 4/4 4/4 5/5 –
Lady Elish Angiolini 6/6 7/8 – – 5/5 4/4
John Bason
4
5/5 5/5 3/3 – – –
Dame Sue Bruce 6/6 7/8 – – – 4/4
Debbie Crosbie 6/6 8/8 4/4 4/4 – –
Peter Lynas 6/6 7/8 4/4 – – 4/4
Helen Mahy 6/6 8/8 4/4 – 5/5 –
Melanie Smith 6/6 8/8 – 4/4 – 3/4
Dame Angela Strank 6/6 7/8 – – 5/5 4/4
1 Nomination Committee. Dame Sue Bruce and Dame Angela Strank were unable to attend an additional short-notice meeting due to prior engagements. Lady Elish
Angiolini was unable to attend one meeting due to illness. Peter Lynas was unable to attend one meeting due to a prior commitment which was notified upon the
meeting date being set.
2 SSHEAC. Sir John Manzoni was unable to attend one meeting due to travel disruption, with the other an additional short-notice meeting which conflicted with a
prior commitment.
3 Remuneration Committee. Melanie Smith was unable to attend an additional short-notice meeting due to a prior commitment.
4 John Bason joined the Board, Nomination and Audit Committee on 1 June 2022.
124 SSE plc Annual Report 2023
Our purpose
To provide energy needed today,
while building a better world of
energy for tomorrow.
Our vision
To be a leading energy company
in a net zero world.
Our strategy
To create value for shareholders
and society in a sustainable way
by developing, building, operating
and investing in the electricity
infrastructure and businesses
needed in the transition to
net zero.
Considered decision-making
Our culture
See pages 137 to 138 .
Employees
Shareholders
and debt providers
Energy
customers
Government
and regulators
NGOs, communities
and civil society
Suppliers,
contractors and
partners
Stakeholder views
Decision-making context
Decision-making context
The Board has a duty to lead by example
and set the correct tone to ensure fair and
responsible decision-making across SSE.
SSE’s Governance Framework represents
the backdrop to this, through which the
Board confirms ambitions, parameters and
expectations to drive long-term success.
These expectations are further embodied
across SSE’s purpose, vision, strategy, and
culture, and the belief that stakeholder
views should be considered within
long-term plans and day-to-day operations.
Engaging with stakeholders
The approach to stakeholder engagement
is directed by a Board-agreed framework.
This confirms SSE’s key stakeholder groups;
the purpose of meaningful stakeholder
relations; and how stakeholder views should
be considered at Business Unit and Group
level. These principles are explained in the
Section 172 Statement on pages 26 to 27 .
Given the societal impact and scale of SSE’s
business operations, breadth and depth
of stakeholder engagement is required, to
ensure decisions demonstrate an appropriate
degree of stakeholder awareness. A mature
executive and business-led stakeholder
network supports this work, with Board
oversight and understanding of views
achieved through both direct Board
engagement and reporting of below-Board
activity. This allows the timely recognition of
emerging stakeholder considerations, with
the Board’s own engagement guiding the
expectation that senior leadership and SSE’s
Business Units take demonstrable account
of stakeholder opinion in their decisions and
longer-term objectives.
Addressing stakeholder
priorities
The response to stakeholder views across
business plans is depicted across the
Annual Report, with the pages that follow
providing insight surrounding the direct
interaction of stakeholder views with Board
discussions and decisions in 2022/23.
It is recognised SSE’s purpose, and the
issues of energy security and affordability,
the climate emergency, and the societal
impact of net zero are of wide stakeholder
interest. A number of engagement priorities
based on these topics have therefore
been identified for 2023/24 and are set
out opposite.
Stakeholder engagement
priorities
The following priorities have
been identified by the Board
for constructive focus and
assessment across engagement
work in 2023/24:
• Progressing and evolving
the Net Zero Acceleration
Programme Plus to support
stakeholder value creation.
• Continued leadership and
advocacy surrounding a
just transition to net zero.
• Playing a part in addressing
the energy related
consequences of the ongoing
war in Ukraine, with long term
energy affordability and
energy security being key
outputs of Group strategic
and Business Unit plans.
Read more on SSE’s stakeholders
and how the priorities above
been identified through
supporting engagement
on pages 26 to 33 .
125SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Setting strategy
The Net Zero Acceleration Programme
(NZAP), published in November 2021, set
out SSE’s fully-funded capex plan to 2026.
In the period since then, the NZAP has been
the platform for investment in low-carbon
assets and electricity infrastructure. A key
Board focus across the year was ensuring
the NZAP remained the correct pathway for
SSE and that its execution was progressing
at the correct pace. The growth ambitions
and science-based climate targets for
achievement by 2031 underpinning it
provided a clear framework for decision-
making and assessment of progress.
Reviewing external context
The Board’s appraisal and oversight of
SSE’s situation is supported by an agreed
strategic agenda embedded across
its annual plan of work. This includes
dedicated strategy days, Business Unit-led
strategic updates at agreed intervals across
the year, and Board-level approvals linked
to strategic projects. An NZAP dashboard
setting out a holistic view of Group-wide
progress was developed at the request
of the Board and is reviewed three times
a year.
Board strategy days
2022/23
Purpose To review changes in the external environment since approval of the NZAP and understand the potential impact on
long-term direction. Through this assessment, confirm both the risks and opportunities facing SSE and identify key
topics which should be considered to continue to maximise shareholder and stakeholder value.
Attendees
across
sessions
• The Board
• Group Strategy Team
• Group Executive Committee
• Business Unit Leadership Teams
• Corporate Finance Team
Reviewing
the external
context
Board debate was set against the backdrop of unprecedented market volatility driven by macro-economic and geo-
political factors, which have played a role in the energy and affordability crises across 2022/23. Within this context, the
Board considered the short-, medium- and long-term actions required to transition to net zero by 2050 and the following
influencing external factors material to NZAP execution:
• Policy and regulatory frameworks to deliver energy security and market reform for a fair and just transition to net zero.
• Economic and inflationary pressures on project delivery, supply chains and wider stakeholder experience.
• The competitive environment, market share and diversification across geographies.
• The growth landscape and risk-adjusted returns of the existing pipeline, new projects and technologies.
• The role of SSE’s key stakeholder relationships in NZAP delivery.
Confirming
strategic
options
The continued shareholder and societal value of the NZAP and its alignment with SSE’s purpose was tested through
assessment of the following areas:
• The optimum business mix to support net zero and deliver long-term value in an evolving energy sector.
• Progress against NZAP targets across each Business Unit and the pathways supporting growth and identification
of further opportunities.
• Financial strategy incorporating the balance of capital allocation and the ways to fund accelerated growth.
• Investor priorities and views surrounding strategy and NZAP ambitions.
• The role of SSE’s people, the embedded organisational culture, skills and capabilities.
Outcomes
and next
steps
The following represents the outcomes and next steps which were agreed to shape upcoming Board work:
• Confirmation that SSE’s business mix remains optimal for it to focus on NZAP execution.
• Approval of the strategic priorities for each Business Unit and agreement on the optimal growth areas within them.
• Setting an ongoing programme of strategic questions and topics for consideration throughout 2022/23.
Supplementing the above are strategic
deep dives which examine specific areas
of growth or material factors on which
future priorities depend. To bolster the
Board’s approach to challenge and
understanding of stakeholder views,
objective opinions are sought through
soundings on strategy and by inviting
external speakers to present views on the
external operating environment and future
trends. Details of deep dives and external
engagements which took place in 2022/23
are set out opposite.
Following consideration of SSE’s
opportunities and recent business
performance, as well as the external
environment and the acceleration of the
global green transition, in May 2023, the
Board approved SSE’s NZAP Plus. This rolls
forward the original NZAP by 12 months to
2027 and upgrades the targets, ambitions
and investment mix to reflect the enhanced
opportunities SSE has. The Board is clear
that the NZAP Plus is still a fully-funded
plan, now including expected capital and
investment of £18bn over the five year
period to 2027. For full details of NZAP
Plus see page 83 .
Strategic deep dives
9 sessions held covering:
• Pumped storage and digitalisation
• Transmission investment drivers
• Distribution networks and
net zero
• The role of carbon capture
and storage
• The future for hydrogen
• International energy markets
• Commodity risk metrics and
management
• Digital innovation
• Sustainability and climate
reporting
Engaging external opinion
10 external speakers engaged
providing diverse perspectives on:
• UK political and economic
outlook
• Domestic policy environment
• Global politics and economics
of the energy transition
• Time value of new technologies
126 SSE plc Annual Report 2023
Guiding strategic progress
The following key developments have been the subject and result of the Board’s
oversight of strategic progress, and form the basis of principal decisions taken
in the year. Discussion and debate have been underpinned by the NZAP, Board
strategy work, and SSE’s 2030 Goals, with end outcomes influenced by the
needs of SSE’s key stakeholder groups.
NZAP Plus
JUNE
2022 2023
JULY AUG SEPT OCT NOV DEC JAN MAR APR MAYFEB
13
5
1 2 3, 4
8
15
16
17
96
10
7
11 12
14
By 2027 By 2032
Growing renewables and system flexibility
1. Yellow River wind farm Final Investment Decision.
2. Southern Europe renewables platform
acquisition completes.
3. Coire Glas exploratory work confirmed.
4. Ferrybridge battery approval.
5. International opportunities and bid parameters.
Exploring low-carbon technologies
6. Triton Power portfolio acquisition with Equinor.
7. Net Zero Transition Plan updates approved.
8. Aldbrough hydrogen pathfinder progresses
to due diligence in net zero hydrogen fund.
9. Platin and Tarbet power stations in Ireland
provisionally secure capacity agreements to
support development.
Key strategic developments
Accelerating transmission network capacity
10. SSEN Transmission responds to Ofgem consultation
on transmission investments required for 2030
government targets.
11. SSEN Transmission minority stake sale completes.
12. Ofgem approves transmission investments required
for 2030 government targets.
Increasing investment in local networks
13. SSEN Distribution responds to Ofgem RIIO-ED2
draft determinations.
14. SSEN Distribution responds to Ofgem RIIO-ED2
final determinations.
15. SSEN Distribution accepts of Ofgem’s RIIO-ED2
final determinations.
Focusing on a fair net zero transition
16. ‘Just transition: measuring progress’ published.
Advocating for all stakeholders
17. ‘Ambition to Action: A Delivery Plan for Cleaner,
Homegrown Energy’ published.
Renewables 40%
Thermal/other 10%
Transmission 30%
Distribution 20%
Balanced capital investment
in fully-funded plan
Science-based
targets aligned
to 1.5°C
Renewables net
capacity
>9GW
Networks net gross
RAV CAGR
£12-14bn
Adjusted EPS CAGR
13-16%
Net debt/EBITDA
3.5-4.0x
127SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
SSE’s 2030 Goals
Cut carbon
intensity by 80%
Increase renewable
energy output fivefold
Enable low-carbon
generation and demand
Champion a fair and
just energy transition
Growing renewables
and system flexibility
Exploring low-carbon
technologies
What did the Board review: 1,2,3,4,5
The Board has appraised growth opportunities in
Great Britain, Ireland and internationally to support
SSE Renewables’ development pipeline. The strategic
drivers remain the deployment of end-to-end large
capital project expertise to address global net zero
ambitions and enhance portfolio diversity. At home, as
generation is increasingly led by intermittent wind output,
the Board confirmed its view of the important role of
pumped hydro storage and installed battery capacity to
provide system flexibility and integrate renewable energy.
Section 172 and stakeholder factors
• Delivering long-term energy affordability.
Developing and building indigenous renewable energy
and storage is part of the solution to long-term security
of supply and affordability.
• Futureproofing market design. Project decisions and
bid parameters have been based on an assessment of
risk-return profiles within current policy frameworks.
A key focus has been constructive engagement with
policy makers to ensure the energy system promotes
investment in net zero-linked projects, whilst delivering
societal benefit and a fair return for investors.
• Safeguarding supply chains. A Board review
considered procurement and commercial activity
and engagement, to support supply chain capacity
and capability for new and future projects. In addition
to the impact of inflation, commodity exposure,
material scarcity, and the potential sustainability
risks of new technologies.
Next steps and future opportunities
• Exporting expertise. Continuing to apply financial
discipline to international expansion, building diversity,
and leveraging SSE’s approach to partnering across
complementary geographies which align with SSE’s
culture and values.
• Promoting system flexibility. Advancing the case
for policy and market design frameworks that support
investment in long-duration pumped storage hydro
technologies which is vital in the transition to net zero.
What did the Board review: 6,7,8,9
The long-term decarbonisation of the UK power system
relies on a pipeline of viable low-carbon projects which can
support security of supply and grid stability. The Board has
confirmed the platform industrial low-carbon clusters can
provide for these projects, and underpinned by the principles
of a just transition to net zero, reviewed opportunities to
repurpose existing thermal generation sites and partner on
the new technologies needed to drive change.
Section 172 and stakeholder factors
• Security of supply for society. Low-carbon thermal
generation is the flexible back-up to a predominantly
renewables energy system. The Board commits to
deploying SSE’s capabilities and partnership expertise to
deliver these new technologies, which allow employees
to transfer existing skills to transition to net zero.
• Reducing environmental impact. SSE has a Board-
approved target to achieve net zero emissions across
scope 1 and 2 emissions by 2040 at the latest (subject
to security of supply requirements) and for remaining
scope 3 emissions by 2050 at the latest. This long-term
ambition is supported by a series of interim targets
approved by the Science Based Targets Initiative (SBTi)
and aligned to a 1.5°C pathway.
• Stakeholder expectations. The Triton acquisition
considered ESG investor views and the long-term
priority to decarbonise the sites on which the assets
were situated. Transparency surrounding the impact
of this decision was ensured through updates to SSE’s
Net Zero Transition Plan, to confirm the approach
to managing and reporting on the GHG emissions
associated with investments.
Next steps and future opportunities
• Advancing low-carbon thermal. New low-carbon
flexible generation – using CCS and hydrogen
technology – is key to reducing emissions and
transitioning away from unabated gas generation.
• Supporting local economies. Ongoing engagement
with local communities will support the creation of
low-carbon economies in areas impacted by the
decline of carbon intensive activity. The objective is
to deliver local benefit and strengthen stakeholder
relations through open dialogue.
Link to NZAP Plus
• Capital expenditure
and investment
• Net installed
renewable capacity
Link to 2030 Goals
Link to NZAP Plus
• Capital expenditure
and investment
• Net low-carbon
flexible capacity
Link to 2030 Goals
128 SSE plc Annual Report 2023
Guiding strategic progress continued
Accelerating transmission
network capacity
What did the Board review: 10,11,12
SSEN Transmission is delivering its Business Plan under
the RIIO-T2 price control period. The Board has reviewed
performance against the plan and provided financial
approvals for projects within its certain view. To support
growth, the sale of a 25% minority stake in the business
was approved in November 2022. This was followed
by confirmation from Ofgem, within its network-wide
Accelerated Strategic Transmission Investment (ASTI)
framework, of eight additional investments within SSEN
Transmission’s network area required to meet the
Government’s 2030 ambitions.
Section 172 and stakeholder factors
• Unlocking value. The stake sale was assessed against
SSE’s strategic partnership criteria and Ontario
Teachers’ were deemed to be a strong fit for a minority
shareholder in SSEN Transmission. The sale parameters
were confirmed to have no detrimental impact on
stakeholders, and the proceeds directly supported the
NZAP and now the NZAP Plus, through net zero-
enabling investment in SSEN Transmission and a
rebalancing of capex across SSE’s Business Units.
• Framework for growth. The priorities raised through
SSEN Transmission’s response to the proposed ASTI
framework, aligned with the Board’s view of certainty
over the need for transmission network capacity for
2030 and informed engagement with stakeholders to
enable success, including the supply chain.
• Powered by people. Updates were considered on
workforce planning, focusing on critical talent and
targeted programmes for diversity, pipelines, and
training and development which supporting the
pace of required expansion.
Next steps and future opportunities
• A network for net zero. Delivery of a price control
business plan that protects customers’ interests and
supports the building of national critical infrastructure
remains a priority.
• Supply chain management. Ongoing engagement
with supply chain partners to ensure resource
capacity and material availability meets SSEN
Transmission’s needs as it reinforces the network
in the North of Scotland.
Increasing investment
in local networks
What did the Board review: 13,14,15
SSEN Distribution’s Business Plan for the RIIO-ED2 price
control period sets out the investment and targeted
improvements for the 3.9m customers in communities
across its network. Following initial submission of
the Business Plan in November 2022, the Board has
remained updated on the structured dialogue between
SSEN Distribution and Ofgem across the determination
process, which led to final settlement in March 2023.
Section 172 and stakeholder factors
• Supported by stakeholders. SSEN’s RIIO-ED2
Business Plan, co-created through extensive
stakeholder engagement, remains committed to
significant improvements in reliability, resilience,
and services for customers, alongside acceleration
of investment in local network infrastructure and
flexible systems to power communities to net zero.
• Fair outcomes. Considering each stage of SSEN
Distribution’s finalisation of the Business Plan with
Ofgem, the Board reviewed the commitment to
increase investment and commensurate benefits
for end-users.
• Supporting communities. Following the storms
of winter 2021/22, the Board assessed findings
from comprehensive reviews which considered
the business’s response to the exceptional weather
events and impact on customers. This informed
the view of system reliability covered by RIIO-ED2
proposals and saw endorsement of next steps to
shape future approach.
Next steps and future opportunities
• Minority stake sale. While the November 2021
NZAP assumed a 25% minority stake in the SSEN
Distribution business, SSE consistently reviews strategic
options and direction and the NZAP Plus plan now
reflects retaining 100% of the business. A significant
strengthening of SSE’s balance sheet and an upgraded
NZAP Plus investment plan are the main factors
contributing to the Board assessment that continuing
to hold 100% of SSEN Distribution is the right strategy
at this time.
• A focus on service. Ongoing monitoring of delivery
of the RIIO-ED2 Business Plan, with focus on
effectiveness of the system reliability measures
within it.
Link to NZAP Plus
• Capital expenditure
and investment
• Net networks RAV
• Net debt/EBITDA
consistent with
investment grade
rating
Link to 2030 Goals
Link to NZAP Plus
• Capital expenditure
and investment
• Net networks RAV
• Net debt/EBITDA
consistent with
investment grade
rating
Link to 2030 Goals
129SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Advocating for
all stakeholders
What did the Board review: 17
Progress towards net zero requires constructive dialogue
with policy makers. In May 2023, the Board reviewed
‘From Ambition to Action: A Delivery Plan for Cleaner,
Homegrown Energy’; a resource to help frame political
engagement over the course of the year as political parties
develop their own manifestos ahead of an upcoming
General Election. In doing so, it considered the policies
which SSE advocates should be adopted, to deliver
investment in clean energy infrastructure and achieve
cross-party ambitions on decarbonisation, energy security
and the green economy. All of which are aligned to and
consistent with SSE’s NZAP Plus and 2030 Goals.
Section 172 and stakeholder factors
• Championing progress. With political attention
turning towards a likely General Election in 2024 political
stakeholders will be increasingly focused on setting out
the policy platform which they will present to the
electorate. These will ultimately come together in the
party manifestos which are published prior to the election.
• Supporting net zero policy. All political parties have
made significant commitments to decarbonise the
power sector; increase deployment of renewables; and
boost investment in homegrown energy infrastructure.
• Stakeholder-led advocacy. The SSE manifesto is
tailored to the priorities of our stakeholders and is designed
to set out tangible policies which could be adopted to help
the parties achieve their publicly stated-targets.
• Maintaining neutrality. As with all of SSE’s
engagement, the document will be politically neutral
and applicable across the parties; focusing on areas
where there is broad social consensus on the direction
of travel for the energy sector.
Next steps and future opportunities
• Framework for progressive engagement. SSE’s
Ambition to Action document will form the basis of policy
engagement from its launch in May 2023, through to the
General Election. Bi-lateral, party neutral engagement
with key stakeholders will be conducted throughout a
programme of events including at Party Conferences.
• Setting a long-term framework. SSE will periodically
refresh Ambition to Action to ensure that it has longevity
and relevance over this period; including adding public
polling data to demonstrate levels of support amongst
the electorate for the positions included.
Focusing on a fair
net zero transition
What did the Board review: 16
With SSE’s strategy focused on low-carbon investments,
the Board is concerned to ensure that the interdependencies
of climate action are understood and, where appropriate,
managed carefully. Ensuring a fair transition to net zero for
working people, consumers and communities is outlined in
SSE’s Just Transition Strategy, published in 2020. In March
2023, the Board reviewed progress against that strategy and
had oversight of the publication of a first-of-a-kind progress
report. The Board also considered the priorities for action in
the year ahead, including an enhanced focus on attracting
former high-carbon workers into SSE.
Section 172 and stakeholder factors
• Embedding stakeholder dialogue. SSE’s principles
for a just transition to net zero are underpinned by a
commitment to high quality multi-stakeholder dialogue.
SSE’s Board was represented at an event in London in
April 2023 to launch the report, ‘Just transition: measuring
progress’ which provided an opportunity to bring together
stakeholders including employees, trade union partners,
suppliers, investors, and NGOs, amongst many others.
• Understanding stakeholder views. Employees and
their trade union representatives are concerned that SSE
delivers opportunities for the existing workforce as it
continues to transition away from high carbon activity.
Investors are keen to be able to track SSE’s progress and
hold it to account. Environmental NGOs want to be certain
there is no watering down of climate commitments, and
human rights advocates are focused on protecting the
rights of working people in SSE’s supply chains.
Next steps and future opportunities
• Supporting people and communities. In the year
ahead, SSE will further develop interventions to attract and
support former high carbon workers, particularly those
from the oil and gas industry. The transition to smart
electricity grids at a local level, provides opportunities to
deliver benefits to consumers and actions will be taken to
ensure the benefits reach as wide a population as possible.
• Reporting on progress. Achieving, and balancing the
multitude of social expectations in the transition to net
zero will be supported by maximum transparency. In
addition to continuous stakeholder engagement, SSE
has committed to provide a biannual dedicated Just
Transition Report, alongside its usual annual disclosures.
Link to NZAP Plus
• Capital expenditure
and investment
• Net installed
renewable capacity
• Net networks RAV
• Net low-carbon
flexible capacity
Link to 2030 Goals
Link to NZAP Plus
• Capital expenditure
and investment
• Net installed
renewable capacity
• Net networks RAV
• Net low-carbon
flexible capacity
Link to 2030 Goals
SSE’s 2030 Goals
Cut carbon
intensity by 80%
Increase renewable
energy output fivefold
Enable low-carbon
generation and demand
Champion a fair and
just energy transition
130 SSE plc Annual Report 2023
Strategy and performance
Role of the Board
To set conditions for the delivery of
strategy and creation of stakeholder value,
and oversee SSE’s response to the external
environment.
Business Unit performance and operating
context
• Monitored large capital project progress
and operational performance through
standing updates from the Executive
Directors at every meeting and Business
Unit Leadership Team presentations
across the year.
• Assessed the impact of energy market
volatility on SSE’s portfolio through
monthly updates on price movements,
endorsing EMRC recommendations in
relation to hedging and internal
governance to manage commodity
and credit requirements and exposures.
• Followed developments in the policy
and political landscape, advocating
unwavering focus on net zero and the
transition pathway through constructive
stakeholder engagement, receiving
standing feedback from the Executive
Directors and Corporate Affairs teams
on business-led activities. Including,
amongst other matters, consideration
of the Energy Generator Levy as it was
being developed.
• Noted measures being taken to
address the affordability agenda for
domestic customers in Ireland centred
on progressive options to support the
most vulnerable and help with delivering
sustainable solutions, including the
return of profits to customers. For more
detail see page 107 .
• Monitored business compliance
performance in line with applicable
legislative and regulatory frameworks
and received updates on relevant
inquiries.
Setting and reviewing strategy
More on pages 125 to 129
Safety, health and environment (SHE)
• Maintained strong focus on performance
through review of SHE metrics and targets
– across a broad range of measures –
at the start of every Board meeting.
• Continues to oversee the response
to the fatality at Viking wind farm with
support from the SSHEAC.
• Received updates on SHE strategy
and plans aligned to Business Unit
specific risks including the hazards of
a significant rise in contractor hours
across large capital projects and actions
to drive SSE’s safety culture.
• Considered mental health and wellbeing
support for those impacted by the fatality
at Viking wind farm; for service advisors
delivering SSE’s customer cost of living
response; and for all employees against
the challenging economic backdrop.
Sustainability
• Endorsed work to address agreed
sustainability priorities and the progressive
evolution of SSE’s reporting on material
environmental, social and governance
(ESG) issues, including work to meet TCFD
recommendations on scenario analysis
and initiating a double materiality review.
• Approved actions for 2022/23 with a
focus on: engaging in the debate on
proportionate standardisation of
sustainability disclosure; pioneering just
transition work; and embedding tailored
sustainability assessments and action
plans within each large capital project.
• Considered risk mitigations to address the
zero-tolerance policy for human rights
abuse in operations and supply chains;
approving updates to SSE’s Human Rights
and Modern Slavery Statement.
• Re-affirmed the governance pathways
for ESG topics which form the basis of
external benchmarks and indices, and
SSE’s year-on-year ratings performance.
• Supported continued participation in
the global conversation on collective
climate action at COP27 in Egypt in
which senior leadership participated.
SSHEAC Report
More on pages 162 to 165
Governing SSE for long-term success
Supporting work on long-term strategic direction, Board agendas have focused on matters to
ensure effective performance and governance of SSE. These topics are diverse and draw on the
Board’s Schedule of Reserved Matters, SSE’s culture and values, and the operating context.
Financial management
Role of the Board
To assess financial performance and set the
parameters which define SSE’s financial and
investment strategy.
Financial performance
• Assessed financial performance and
the impact of unusually volatile market
conditions on a wider than normal range
of potential financial outcomes.
• Monitored variances against budget,
and reviewed the latest financial forecast
against analyst consensus and market
guidance, approving updated EPS
guidance as required.
• Approved and recommended half and
full-year dividends of 29.0p and 67.7p.
Capital investment
• Tracked capital expenditure through
monthly financial updates and the NZAP
dashboard, reviewing project spend,
emerging risks and opportunities.
• Monitored the economic backdrop –
characterised by financial market
volatility and inflation – reviewing and
updating accepted project returns at
regular intervals to ensure a prudent
approach to investment appraisal.
Financial planning and funding
• Approved the 2023/24 budget which
reflected strategic progress and job
creation under the NZAP, including
more certainty in SSE Networks
business plans and delivery of new
capacity in the form of Keadby 2 and
on- and off-shore wind projects.
• Reviewed the long-term financial model
following updates to assumptions and
outputs, in line with strategic progress
and changes in SSE’s external operating
context, including more certainty
about the need for electricity networks
investment, the impact of inflation,
and long-term energy price forecasts.
• Reviewed funding requirements as
overseen by the Audit Committee,
considering maturing debt, financial
headroom and market conditions to
ensure good liquidity, a strong balance
sheet and capacity for future growth.
• Considered the annual ratings review
process and an enduring investment
grade credit rating.
• Confirmed the governance of SSE’s
pension schemes with a specific update
covering the contingency planning in
place to reduce any potential impact
of gilt-driven volatility.
131SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Governance
Role of the Board
To promote responsible leadership based
on transparency and a dynamic approach
to corporate governance.
Shareholder communications
• Approved the contents of 2022/23
trading statements, Half-year Results,
the Annual Report and Accounts, and
supporting regulatory announcements;
considering feedback from the Audit
Committee on significant judgements,
the fair, balanced and understandable
assessment, and the going concern
basis of preparation.
• Approved the notice and business of the
Annual General Meeting 2023 including
the continued say on climate through
SSE’s Net Zero Transition Report,
and endorsed plans for shareholder
participation through pre-meeting
engagement and a continued hybrid
meeting format.
Board and Board Committees
• Monitored Nomination Committee
work on Board composition, succession
planning and wider capability; approving
the appointment of Maarten Wetselaar
from 1 September 2023, updates to
Board Committee membership, and
the succession plans for the Finance
Director and Company Secretary.
• Re-affirmed SSE’s Board Inclusion and
Diversity Policy and noted external
developments and views in relation
to actions and progress – from the
FTSE Women Leaders Review, the
Parker Review and investors – reviewing
SSE’s position in conjunction with the
Nomination Committee and Group HR.
• Reviewed the findings and actions from
the Board performance evaluation.
• Monitored and approved SSE’s conflicts
of interest register, confirming the
continued independence of each
non-Executive Director.
External developments
• Reviewed current and future governance
and reporting developments, considering
FRC thematic reviews; the Government’s
response to its consultation on corporate
governance and audit reform; live
workstreams relating to sustainability,
climate, and transition plan reporting;
and reporting against the FCA’s inclusion
and diversity Listing Rule.
Climate change
Role of the Board
To ensure decisions are sustainable
in the long-term and the approach to
climate change is addressed through
work on strategy, operations and risk.
Supporting Board work
SSE’s purpose, vision and strategy are
fully aligned with net zero. The physical
and transitional risks, and opportunities
associated with climate change, are
therefore not a singular agenda item.
They are embedded across all areas
of Board work with long-term
considerations couched in the
possible pathways to net zero.
This includes assessment of policy
frameworks; the operation of energy
markets; the impact of climate change
on weather; the role of innovation and
technology within SSE’s asset base;
changes to customer behaviour; and
investor views of SSE’s business model
and growth.
In turn, the framework set by the Board
based on its view of climate-related
issues, includes strategic targets,
business goals, the approved budget,
net zero consistent investment criteria,
risk management parameters including
SSE’s Risk Appetite, and SSE’s approach
to stakeholder engagement.
Risk and internal control
Role of the Board
To set the approach to risk management
and oversee an effective system of
internal controls.
Risks, viability and internal controls
• Reviewed and approved the
methodology and findings of the
Group Principal Risk review and
emerging risk assessment supporting
SSE’s Risk Appetite Statement and
other risk disclosures.
• Confirmed the output of the assessment
which forms the basis of SSE’s Viability
Statement.
• Confirmed the ongoing effectiveness
of SSE’s System of Internal Control.
• Endorsed SSE’s data privacy programme
as a contributor to the sustainability
agenda, reviewing GDPR metrics,
milestones and international
implementation.
• Complementing the work of the Audit
Committee, evaluated cyber risk and
information security, spanning: the threat
environment and notable external attacks
in line with geo-political tensions, the
maturity of SSE’s controls and capabilities
to detect and respond, the effectiveness
of training in ongoing assurance, and key
risks and plans to support NZAP growth.
Risk-informed decision making
More on pages 68 to 77
System of Internal Controlaaa a
More on page 159
People and culture
Role of the Board
To understand employee views and set the
cultural tone underpinning a fair workplace
and ethical business practice.
Supporting employees
• Challenged the approach to
addressing recognised cost of living
issues to ensure solutions were targeting
those most affected; overseeing an
interim salary increase and an amplified
communications programme
highlighting existing benefits to
assist with financial wellbeing.
• Discussed the strategy surrounding
post-pandemic working practices
including locational flexibility to match
employees’ needs and offering hybrid
working practices where possible;
stressing the importance of employee
consultation on lessons learned and
maintaining engagement with SSE’s
culture especially for new recruits.
Doing the right thing
• Conducted a biannual review of the
performance of SSE’s whistleblowing
arrangements considering employee
confidence in the process,
benchmarking of performance and
post-Covid 19 trends, the origin of
cases, and the ease at which reports
can be made alongside protections
for those that speak-up; effectiveness
was confirmed alongside a dynamic
continuous improvement programme.
Empowering the employee voice
and Focusing on culture
More on pages 134 to 138
132 SSE plc Annual Report 2023
Understanding shareholder views
Gathering views
The Board engages with a range of equity
and debt investors to help inform strategic
decision making, communicate SSE’s
sustainable business plans, and report
on environmental, social and governance
(ESG) and financial performance.
Engagement by the executive team is
led by the Chief Executive and Finance
Director, with participation from the Chief
Commercial Officer and other members
of the Group Executive Committee,
focusing on operations, and financial and
sustainability performance in executing
SSE’s strategy. Engagement by the Chair
leads on corporate governance, strategy
development, people and wide-ranging
ESG matters.
Open and regular dialogue remains
the foundation to the Board’s approach,
with managed communication channels
in place for all to use (see page 345 ).
Notwithstanding, the Board, executive
management and the Investor Relations
team proactively engage with investors
through an annual programme of activity;
and ongoing communication with analysts,
proxy advisors, ESG ratings agencies and
financial ratings agencies helps improve
disclosure and allows stakeholders to
better assess SSE’s performance.
Institutional investors
Collectively, in 2022/23, the Board
engaged directly with institutional investors
representing over 45% of issued share
capital. The programme of engagement –
which encompassed 182 one-to-one
sessions with investors – was mainly
focused across three periods of roadshows:
immediately following the preliminary
Full-year Results announcement; in
advance of the Annual General Meeting;
and immediately following the Half-year
Results announcement.
Members of the Executive Team met
physically with investors in the United
Kingdom, France, Germany, Switzerland,
and Australia during the year, and virtually
met with investors from other locations
such as North America and Asia. This
complemented a number of physical
and virtual investor events which covered
specific focus areas as set out below
and opposite. The Chair also continued
proactive and open dialogue with investors
on priorities and views of corporate
governance, meeting physically with many
of SSE’s largest shareholders in advance
of the Annual General Meeting.
Supplementing one-to-one engagement,
the Executive Directors attended 15 industry
conferences, mainly physical, and held 29,
mainly virtual, group meetings which were
attended by a number of shareholders and
prospective investors.
Retail shareholders
To allow management of an individual’s
shareholding, SSE’s recently refreshed
investor website houses all regulatory news
announcements and published financial
and non-financial reports. The Investor
Relations team and the Company
Secretariat, with support from SSE’s
Registrar, engage directly with retail
shareholders in response to private
shareholding queries.
Annual General Meeting (AGM)
The Board encourages shareholders to
participate in the AGM – through casting
votes and raising questions on the business
of the meeting. A hybrid meeting format
allows full remote participation for those
who cannot attend in person, and answers
to questions and the results of the meeting
are published on sse.com as soon as
practicable after the event. In 2022, all
resolutions were passed with in excess
of 81.90% votes cast in favour.
Debt investors
Engagement with solicited credit ratings
agencies, being Standard & Poors’ and
Moody’s, takes place throughout the
course of the year, with increased dialogue
ahead of the annual ratings review process
and in line with Company related news
flows. Regular dialogue is also maintained
between key relationship banks and debt
investors with SSE’s Treasury team and the
Finance Director.
Engagement in action
Shareholders and debt providers
Showcasing SSE’s Transmission
and Renewables businesses
In September 2022, an in-person event was
hosted by the Finance Director in Inverness,
for sell-side analysts and large institutional
shareholders to delve deeper into SSE’s
Transmission and Renewables businesses.
Each area was discussed on separate days
and sessions facilitated by presentations
from the senior managers leading on
strategic execution within the respective
Business Units.
These materials, and supporting
discussions which were made available
on sse.com shortly after the event,
demonstrated the value of each business’s
assets and the available investment
opportunities. To provide additional
context, site visits to Blackhillock HVDC
converter station, Glendoe hydroelectric
scheme and Stronelairg wind farm formed
part of the agenda.
The event was met with highly positive
feedback, with attendees confirming the
presentations were educational; the
exposure to wider senior management
demonstrated their expertise; and the
site visits brought the scale and quality
of assets to life.
133SSE plc Annual Report 2023
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14
46
21
6
20
6
34 34
8 8
14
APR 22 MAY 22 JUN 22 JUL 22 AUG 22 SEP 22 OCT 22 NOV 22 DEC 22 JAN 23 FEB 23 MAR 23
Sharing and interpreting
feedback
The Board receives monthly updates on
investor and financial market sentiment,
providing insight into recent share price
movements; a briefing on recent sell-side
analyst commentary; and key monthly
movements in the share register. This is
covered through a combination of written
reports and verbal feedback from meetings
which have taken place.
The feedback provided by shareholders
during and after Full-year and Half-year
Results Roadshows is communicated
directly to the full Board in a biannual
shareholder feedback paper including
updates from SSE’s brokers. The Board,
through the SSHEAC, receives a full annual
review of SSE’s performance in investor-led
ESG reviews and ratings in addition to,
through the Finance Director, updates on
credit ratings agency reviews. Key matters
raised by shareholders during the period,
which were considered across Board
deliberations are set out on page 29 .
Following the publication of SSE’s Net Zero
Transition Plan, and in support of the first
annual shareholder vote on its Net Zero
Transition Report (proposed at the 2022
AGM), the Chair hosted a climate-focused
investor event with SSE’s Chief Commercial
Officer and Chief Sustainability Officer in
June 2022. This online event set out SSE’s
progress in relation to its agreed climate
targets – covering climate-related
strategies, plans and performance –
as well as touching on SSE’s work on
the just transition.
This engagement was set against the
backdrop of how SSE strives to balance
social, environmental and economic
impacts whilst enhancing value for
stakeholders. To allow questions and
feedback on SSE’s approach a Q&A session
followed the presentations. Following the
session, stakeholders confirmed improved
understanding of SSE’s decarbonisation
plans and Just Transition Strategy; and
the resolution to receive SSE’s Net Zero
Transition Report received 98.9% of votes
cast in favour at the AGM.
Engagement in action
Shareholders and debt providers
Shareholder engagement activity 2022/23
Number of
shareholder
meetings
Continued dialogue on climate
Full-year
2021/22
results
Half-year
2022/23
results
AGM
governance
134 SSE plc Annual Report 2023
Empowering the employee voice
How the Board engages
The two-way dialogue between the
Board and employees is facilitated by a
combination of engagement methods.
These are set out in full below and include
face-to-face discussions at meetings, site
visits, and attendance at employee events.
With 2022/23 being the first year in which
in-person engagements could fully resume,
the Board-employee programme travelled
to 32 sites encompassing all of SSE’s
Business Units and a number of corporate
functions.
Virtual engagement platforms, which
evolved during the pandemic, have
remained a key part of the engagement
strategy providing simultaneous access to
a diverse audience of roles and locations.
The scale at which virtual sessions can
be offered amplifies understanding of
employee views and material issues.
The adoption of a diverse range of listening
channels continues to support the principle
that everyone in SSE should have a voice
and is consistent with employee feedback
surrounding the benefit of multiple platforms
through which to raise areas of interest or
concern. In turn, it supports the Board in
gathering a fair and representative view of
the issues which are important to employees
and builds an appreciation of how these may
differ by geography, business area, role, and
individual circumstances.
Sites visited
32
Board-led virtual engagement
sessions
13
Non-Executive Director for
Employee Engagement
sessions
13
Total employee attendance at
Board calls
23,835
Largest audience size
3,781
All-employee survey
engagement score 2022/23
84%
Engagement
highlights
Board listening approach
Engagement audience and purpose
All-employees
• Offers Board
perspectives which can
otherwise be missed
from business-led
communications.
• Provides the Board with
insight of employee
opinion on life at SSE
and key areas of interest
or concern.
People leaders
• Provides the opportunity
to replay key messages
which the Board has
heard through listening
channels.
• Supports and challenges
management actions
in response.
Senior leadership
• Creates a platform for
two-way interaction
between the Board
and senior leaders who
lead SSE’s teams.
• Allows the Board to
offer views and personal
external perspectives.
Engagement format and value created
Director-employee
sessions
Provides employees
with access to the Board
with direct two-way
interaction supporting
detailed discussion of
specific topics.
Leadership and business
roadshows and
conferences
Provides an opportunity to
exchange views on SSE’s
strategy and both Group-
wide and business-specific
priorities, supporting wider
engagement and awareness
including the contribution
and impact made by
employees.
Focus groups
Allows interaction across
diverse geographies
and cross-sections of
employees, and being
smaller in size, provides
the opportunity to seek out
added context surrounding
employee sentiment
through true conversation.
The impact can be fast and
influence decisions which
may affect employees.
All-employee surveys
Exists as a long-standing
tool with a mature strategy
that attracts a strong
response rate. The results
are viewed as representative
of the majority of employee
voices and shape the
cultural agenda, ensuring
that employee sentiment
is considered in all key
decision making.
Site visits
Allows non-Executive
Directors to travel
across SSE and feel and
understand employees’
experience of the
operational environment.
These visits can be followed
by informal roundtables
to allow deeper two-way
dialogue on matters of
importance.
Digital channels and
written communications
Reinforces matters of
importance and embeds
the tone through the
Board’s written reflections.
This can include
observations and takeaways
from other engagement
activities to allow a
wider reach.
135SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Engaging on net zero
Non-Executive Director for
Employee Engagement
The Nomination Committee oversees
the recommended appointment of the
Non-Executive Director for Employee
Engagement, which Lady Elish Angiolini
assumed from 1 April 2023 in a handover
from Dame Sue Bruce. In considering the
successor to the role, the Nomination
Committee noted Elish’s rich experience
in assimilating and interpreting views and
translating findings into a required course
of action. These skills support the core
purpose of the employee-Board link and
the desire to operate in an empathetic and
thoughtful way.
The creation of the role remains a natural
and progressive step in the evolution of
SSE’s employee voice strategy, providing
an enhanced and more interactive
understanding of employee sentiment.
Each year, the programme of work for
the Non-Executive Director for Employee
Engagement is structured and supported
in collaboration with SSE’s Head of
Employee Engagement. The success
of the role is measured in action, whereby
the employee voice is consistently
represented in meetings attended by the
Non-Executive Director for Employee
Engagement, allowing the views and
opinions of colleagues to feature and
contribute to discussions and decisions
being made.
Q&A with Lady Elish Angiolini
What are your reflections on the value
of direct Board-employee engagement
in SSE?
Engagement is very valuable to the Board
as it builds trust, collaboration and aligns
the Board and employee approach. I can
see how the Board seeks diverse feedback
from employees delivering on strategy,
and it’s essential that direct engagement
continues as a core activity.
Since joining the Board in 2021,
what insight have you gained into
the employee experience in SSE?
This is a period of record growth and we
must continue investing in face-to-face
and virtual engagements to understand
how employees and SSE’s culture are
responding. We should also build on
relationships with employee-led groups
like the ‘Belonging in SSE’ communities,
who are strong advocates of the
employee voice.
Where do you see opportunities
for 2023/24?
I’ve been able to speak with many
colleagues across SSE and have been
impressed with the dedicated team
spirit and commitment to SSE’s purpose.
A willingness to share views has given
me a good understanding of employee
experiences in SSE and I look forward
to exploring priorities in conversations
to come.
What skills and perspective would
you like to bring to conversations
in the year?
I have an inquisitive nature and like to
listen to all views to encourage honest and
frank discussion, which will help highlight
areas for me to bring to the Board. I’ve
also been involved with organisations
undergoing intense periods of change
and this will support my understanding
of employee sentiment.
The successful delivery of SSE’s strategy
is dependent on employees feeling
engaged with the Group’s purpose.
A key objective over 2022/23 was
therefore connecting people’s roles
with net zero and feeling engaged with
senior leaders. Full Board attendance
at the Annual General Meeting (AGM)
2022 was seen as an opportunity to
deliver this.
The event was used for both in-person
and virtual interaction, with members
of the Board taking part in a roundtable
discussion with colleagues from a
range of businesses, geographies and
demographics, alongside leads from
the ‘Belonging in SSE’ communities.
The employee group sought advice,
opinions and feedback on topics
including flexible working patterns,
the challenges faced by neuro-diverse
colleagues, mental health awareness
and career progression.
The AGM virtual Q&A session was open
to all employees and attended by more
than 3,500 people from across Great
Britain and Ireland. Directors addressed
queries on a wide range of issues and of
the attendees who provided feedback
on the event, 90% said they valued
hearing from the Board and 85% found
the session helped them to connect
their roles to the Group’s net zero-
aligned strategy.
Engagement in action
Employees
136 SSE plc Annual Report 2023
Empowering the employee voice continued
Board response to employee views
Discussions with employees have been broad ranging in 2022/23 and cognisant of the energy crisis, net zero, cost of living and employee
well-being. Through the full suite of listening and engagement channels, the below confirms how the Board has responded to material
issues raised by employees across the year. These are set out under key themes which are checked through SSE’s all-employee survey to
ensure they are reflective of employee priorities and to assess progress and improvement.
Key themes Active Board engagement
Inclusion and diversity
Why the Board engaged
The Board champions SSE’s
inclusion and diversity approach,
and seeks insight surrounding
the effectiveness of plans and
initiatives in order to continually
further progress.
• Melanie Smith hosted an all-employee Q&A during Race Equality Week and encouraged the
sharing of diversity information, to support actions that focus on making SSE more inclusive.
• The Chair and Non-Executive Director for Employee Engagement participated in a session
with the ‘Belonging in SSE’ community leads, and heard views on lived experiences,
challenges, aspirations and priorities for the Board. Key takeaways were shared more widely
using internal communications and would continue to inform Board policy development.
• The Board sponsored events including Perthshire Pride which was attended by employees,
the Chief Commercial Officer and the Non-Executive Director for Employee Engagement; and
the Finance Director participated in the ‘It Takes All Kinds of Minds’ international conference
which was aligned with Neurodiversity Focus Week across SSE internal channels.
Strategy, net zero and
climate change
Why the Board engaged
The Board acts in response to
all-employee survey and call
feedback, which cited a want
to engage further with senior
leaders on SSE’s strategy and
the drive to net zero.
• Tony Cocker and Melanie Smith were involved in Leadership Roadshows and SSE’s Leadership
Conference with the Executive Directors, to cover topics including strategy, execution and
growth, people and wellbeing.
• The Board oversaw activities to embed SSE’s Just Transition Strategy, with an externally-
available video featuring key stakeholders and just transition themes, launched internally
through an all-employee virtual session.
• The Chief Executive and Helen Mahy visited the Arklow Bank wind farm phase 2 development
site and project team, with key takeaways being environmental and stakeholder consultation,
and community engagement.
• Over 800 SSE leaders joined the Chief Executive, the Chair and Debbie Crosbie for a call
exploring the Leadership Blueprint and their pivotal role in delivering SSE’s strategy and Net
Zero Acceleration Programme.
Digital strategy
Why the Board engaged
The Board understands the
development in the digital space
is a key area and seeks views on
challenges, opportunities, progress
and making employees part
of digital initiatives and change.
• Melanie Smith spent time with the Digital Team on strategic progress, with views shared with
the Board thereafter, around skills to keep pace with developments in energy technology.
• An all-employee call hosted by the Chief Executive shared progress towards SSE’s digital
ambitions and provided a forum for employee questions and views.
• A virtual meeting between the Non-Executive Director for Employee Engagement and
the Information Security and Privacy Group discussed cyber security priorities for SSE and
employees, and led to Dame Sue Bruce sponsoring the Cyber Security Month which brought
additional focus to this area.
Great place to work and
ways of working
Why the Board engaged
The Board seeks views of employee
needs in order to drive culture and
meet expectations surrounding
working practices and wider
support; areas which continue to
evolve post-pandemic and in the
current cost of living context.
• The Chief Commercial Officer held an all-employee session to explore engagement survey
results and covered well-being, reward and recognition, strategy and communication of key
messages, reaching an audience of over 3,000 employees.
• Prompted by an employee request, a session in Glasgow with the Non-Executive Director
for Employee Engagement explored the post-pandemic return to the office, with employees
sharing experiences and views on hybrid working.
• The Non-Executive Director for Employee Engagement and Lady Elish Angiolini attended
a welcome event to meet SSE’s newest intake of graduates which considered career
development and navigation.
• A session was held with representatives from Business Energy and the Non-Executive Director
for Employee Engagement, to discuss all-employee survey results and actions to address
focus areas identified through the survey.
137SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Focusing on culture
Aligning with purpose,
vision and strategy
Company culture has internal and external
influence, guiding interactions within SSE
and directing decisions with stakeholder
impact. This context is reflected within
the above Board-approved definition of a
healthy corporate culture, which supports
purpose, vision, strategy and long-term
success, by setting a baseline against which
cultural guidance can be developed and
cultural indicators tested.
Setting the tone
A healthy corporate culture is a shared
deliverable, which starts with the Board
setting the correct tone. This is supported
through approval of SSE’s values, and their
translation into accepted attitudes and
behaviours within SSE’s Group Policies and
an employee guide ‘Doing the Right Thing;
SSE’s guide to good business ethics’, all of
which are supported by mandatory training
for everyone in SSE.
Leading by example is through the Board’s
own conduct and communication to
employees of key Board activity. Senior
leaders across SSE have the same
responsibility to lead, embed and oversee
cultural standards.
Culture is embedded at Board-level by:
• SSE’s Governance Framework and
practices (see pages 122 to 124 ).
• Board decision-making (see pages 125
to 131 ).
• People matters, appointments and
succession planning (see Nomination
Committee Report ).
• SSE’s risk, controls and compliance
approach (see Audit Committee and
EMRC Reports and page 68 ).
• Focus on safety, sustainability, health
and the environment (see SSHEAC
Report ).
• Attitudes towards reward and
remuneration (see Remuneration
Committee Report ).
Monitoring and measuring
The Board uses multiple sources to assess
the strength of culture and understand how
it manifests across employee sentiment,
observed behaviours and trends. These can
be described as a combination of the below
reported metrics, standing reports and
listening channels.
• Feedback from Board-employee
engagement and Non-Executive Director
for Employee Engagement insights.
• Employee survey results.
• Twice yearly Cultural Dashboard review.
• Monthly people updates from the Chief
Executive covering key developments
and employee sentiment.
• Monthly compliance reporting from
the Finance Director.
• Monthly safety and wellbeing data.
• Whistleblowing performance reports.
The Cultural Dashboard (see page 138 )
remains a health check, comprising data
from Group HR and Group Compliance.
A key section aligns employee survey data
with people metrics and KPIs under cultural
strands. This allows the Board to consider
where there are deviations between what
is being heard and underlying behaviours.
During 2022/23, the Board retaining
oversight of ongoing culture-related
workstreams through its wider agenda.
Engagement in action
Employees
Understanding operational culture
Over 2022/23 the Board have visited a
wide range of locations and business
areas, providing direct access to
operations and ensuring front-line
employees could share their experiences
with the Board. These visits further
enhanced understanding of the cultural
tone and sentiment across Business Units.
Renewables. Visits by the Chair,
John Bason, Dame Angela Strank and
Tony Cocker covered Coire Glas site
investigation works, Stronelairg wind
farm, and Foyers and Glendoe power
stations over a two-day period, gaining
insight into the challenges and progress
in current and future renewables
operations from employees. The Chair
visited Dogger Bank wind farm HVDC
station and engaged with partner and
contractor representatives on project
scope, approach and progress, and as
part of his induction John Bason visited
Montrose harbour, the site associated
with the Seagreen offshore wind farm, to
gain a deeper insight into the industry.
Thermal. Helen Mahy visited the
Thermal engineering hub in Leeds to
meet and discuss areas important to the
Team including inclusion and diversity,
development and mentoring, the results
of the all-employee survey and technical
developments including Carbon Capture
and Storage.
Networks. In advance of a Board
meeting, engagement took place with
employees working on flexible energy trials
at the innovation project, Local Energy
Oxfordshire (LEO). Insight was gathered
surrounding the technical, commercial,
social and regulatory challenges and the
potential for a community-based approach
to local flexibility.
Energy Customer Solutions. Lady Elish
Angiolini visited the team in Belfast to learn
more about improvements to the customer
experience and compliance, and heard
examples of the challenges experienced
by customers in vulnerable circumstances
and how colleagues support each other
when dealing with hardship and difficult
customer scenarios.
A healthy corporate culture is one in which SSE has a purpose, values and strategy that are
respected by its stakeholders, and an operating environment that is inclusive, diverse, supportive
and engaging; that encourages employees to make a positive difference for stakeholders; in
which values guide responsible decisions and actions; and in which attitudes and behaviours
are consistent with high standards of conduct and doing the right thing.
138 SSE plc Annual Report 2023
Our culture is shaped and determined by the way we…
Attract and
retain people
Work
together
Look after
each other
See
ourselves
Make
decisions
Manage
performance
Lead from
the top
Reflected in employee sentiment surrounding the core themes and actions SSE is taking in each area...
Employee
engagement
84% ▲
Inclusion
85% ▲
Safety
93% ▲
Our
strategy
83% ▼
Doing the
right thing
85% ▲
My
manager
76%
Senior
leaders
66% ▲
Life at SSE
73%
My Team
85%
Wellbeing
76% ▲
Supported by key people metrics and KPIs…
10.5% ▲
Employee
turnover.
4,401 ▲
vacancies
filled.
83%
of
employees able
to work flexibly.
8 ▲
‘Belonging
in SSE’
communities
with over 2,000
active members.
255 ▲
Safe Days.
6.9 ▲
Sick days
per head.
Just over 1 in 5
SSE colleagues
have made the
transition from
high to low-
carbon roles*.
95.5% ▲
Certification
across mandatory
eLearning
courses.
50 ▲
employee
contacts on
Speak Up
platforms.
1,992
Leaders engaged
with the
Leadership
Blueprint Plans*.
58 ▲
Board-led
employee
engagements,
including
13 Non-Executive
Director for
Employee
Engagement
sessions.
Continually supported by cultural action plans and Board support in 2022/23…
Provided
continued
oversight of
critical skills
investment,
performance
initiatives and
development
of employee
proposition
(see pages 146
to 147 ).
Oversight of top
leaver reasons;
SSE’s employer
brand; and
activity which
communicates
SSE’s proposition
to external
candidates.
In response to
employee views
and engagement,
oversaw
enhanced Family
Leave entitlement
for pregnancy
loss, fertility
treatment and
partner’s leave.
Amplified direct
engagement
with employees
on the topic
of inclusion
and diversity
(see page 136 ).
SSHEAC safety
and wellbeing site
visits continue
to be conducted
(see page 165 ).
Reviewed
safety, health
and wellbeing
performance at
the start of every
Board meeting.
Received
updates on the
formation of a
new Contractor
Safety Team.
Oversees
ongoing delivery
of the Net Zero
Acceleration
Programme
and 2030 Goals
(see pages 125
to 129 ).
Directly
supported
employee
communications
on strategy
(see page 136 ).
Continued focus
on front line
communications
(see page 137 ).
Reviewed SSE’s
whistleblowing
arrangements
and performance
(see page 131 ).
Board support
for SSE’s cyber
security month.
Direct Board
engagement
with leaders to
provide feedback
and direction
(see page 136 ).
Continues
to sponsor
a leadership
review which
confirmed
a strong,
collaborative
organisational
environment with
trust and support.
Board’s approach
to understanding
and assessing
strength of
culture (see
page 137 ).
Board presence
across SSE’s full
engagement
approach
(see pages 134 to
136 ).
* New measure.
Measuring culture through our dashboard
See also culture on the Board agenda on page 28 .
Embedding a healthy business culture on page 59 .
Focusing on culture continued
▲ ▼ Movement relative to 2021/22.
▲ ▼
Movement relative to internal 2021 trend benchmark.
139SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Defining Board responsibilities
Through the Board Charter, the Board approves the clear division of responsibilities between the Chair and Chief Executive and sets
out what is expected of the non-Executive Directors, recognising the defined roles of Senior Independent Director and Non-Executive
Director for Employee Engagement. The below confirms the split of executive and non-Executive accountabilities which support the
integrity of the Board’s operations.
Executive
Chief Executive
• Proposing and directing the delivery of Board-agreed strategy
through leadership of the Group Executive Committee.
• Ensuring SSE’s decisions and actions have long-term focus,
through management, implementation and progression of
sustainability interventions, which support strategy and address
material impacts including climate change.
• Communicating and providing feedback on the implementation
and impact of Board-agreed policies on behaviours and culture,
ensuring SSE operates in line with its values.
• Assuming responsibility for the overall performance of SSE’s
Business Units and leading the functions of: HR; Corporate
Affairs, Regulation and Strategy; and Sustainability.
• Engaging with SSE’s six key stakeholder groups and leading
on related activity at EU, International and UK level.
Finance Director
• Deputising for the Chief Executive.
• Proposing policy and actions to support sound financial
management and leading on M&A transactions.
• Leading the functions of: Finance; Procurement and Logistics;
Group Risk and Audit; IT and Cyber Security; Investor Relations
and Company Secretarial; and the General Counsel areas of
responsibility.
• Overseeing relationships with the investment community.
• Engaging with SSE’s six key stakeholder groups and leading
on related activity in Scotland.
Chief Commercial Officer
• Supporting the work of the Chief Executive and Finance
Director.
• Leading SSE Renewables, SSE Thermal, Energy Portfolio
Management, Energy Customer Solutions and SSE Enterprise
at Board level.
• Driving growth and commercial market risk activities for
all of SSE’s non-networks businesses at Group level.
• Leading executive relations with trade unions.
• Engaging with SSE’s six key stakeholder groups and leading
on related activity in Ireland and Northern Ireland.
Company Secretary
• Safeguarding compliance with Board procedures and providing
support to the Chair.
• Ensuring the Board has high quality information, adequate time
and appropriate resources.
• Advising the Board on corporate governance developments.
• Considering Board effectiveness in conjunction with the Chair.
• Facilitating the Directors’ induction programmes and assisting
with professional development.
• Providing advice, services and support to all Directors when
required.
Non-Executive
Chair
• Leading the effective operation and governance of the Board.
• Ensuring decision-making has long-term focus, and SSE’s
approach to sustainability, including climate change, is
addressed through strategic, operational and risk considerations.
• Setting agendas to support balanced decision-making.
• Demonstrating objective judgement and applying sufficient
challenge to proposals.
• Ensuring effective Board relations and a culture that supports
constructive debate.
• Engaging with major shareholders and key stakeholders to
ensure the Board understands and considers their views.
• Overseeing the annual Board evaluation and identifying
required actions.
• Setting the cultural tone and leading initiatives to assess culture.
Senior Independent Director
1
• Providing a sounding board for the Chair.
• Leading the Chair’s performance evaluation.
• Serving as an intermediary to other Directors when necessary.
• Being available to all stakeholders if they have concerns
requiring resolution.
Independent non-Executive Directors
• Challenging and assisting in the development of strategy.
• Reviewing and measuring the performance of management.
• Providing independent insight and support based on relevant
experience.
• Reviewing financial information and ensuring the System of
Internal Control and Risk Management Framework are effective.
• Reviewing succession plans for the Board and senior leadership.
• Monitoring actions to support inclusion and diversity.
• Engaging with key stakeholders and reporting to the Board
on perspectives.
• Setting executive remuneration policy.
• Serving on, or chairing, various Committees of the Board.
Non-Executive Director for Employee Engagement
1
• Providing an employee voice in the Boardroom.
• Developing, implementing and reporting on employee
engagement initiatives.
• Representing the Board and its decision-making in discussions
with employees.
• Engaging with officers of trade unions and internal trade unions
representatives on strategic issues affecting the workforce.
1 The responsibilities of Senior Independent Director and Non-Executive
Director for Employee Engagement apply in addition to those of non-
Executive Director.
140 SSE plc Annual Report 2023
Assessing Board performance
Annual Board evaluation
The Board monitors and improves
performance by reflecting on the
continuing effectiveness of its activities,
the quality of its decisions and by
considering the individual and collective
contribution made by each Board member.
This is assessed annually through the
Board evaluation process.
The 2022/23 Board and Board Committee
evaluations were facilitated by Lintstock
Ltd (Lintstock). This followed Lintstock
conducting the 2021/22 external Board
and Board Committee performance
reviews, with their services re-engaged
for a further two years to provide efficient
and consistent oversight of the actions
and themes identified.
The methodology of the 2022/23 follow-
up reviews were aligned with that of an
internal evaluation and structured to allow
identification of new focus areas. Besides
the provision of the Board and Board
Committee evaluation work, there was no
other contractual connection between SSE
or the individual Directors and Lintstock.
Progress against 2021/22 evaluation findings
Opportunities for refinement Update on actions
Optimising oversight
of strategic execution
The Board reviewed proposals for monitoring progress on strategic execution and agreed updates
to further optimise Board oversight. These centred on the preparation and presentation of certain
strategic reports, including the NZAP dashboard, which has been reviewed in the year.
Alignment on
people matters
A revised framework for constructive challenge and monitoring of people matters is in place, with
it agreed to enhance Board knowledge of SSE’s leadership teams through increased face-to-face
engagement. Details of work on talent, and inclusion and diversity, is on pages 134 to 136 .
Leveraging
external voices
The findings supported the view that the management team was highly expert and proficient in
the suite of technical matters which fall under its remit. There was an opportunity for the Board
to complement this, through the use of third-party or external expertise on particular topics.
Accordingly, Board deep dives have been conducted and several external speakers engaged to
provide a diverse perspective on certain subjects (see page 125 ).
Stage 1
Re-engaging
Lintstock
Following a selection
process, and in compliance
with the UK Corporate
Governance Code,
Lintstock were engaged
to perform an external
review of the Board and
its Committees in 2021/22.
After seeking the opinion
of the Board, the Chair
with assistance from the
Company Secretary and
Director of Investor
Relations, re-engaged
Lintstock to facilitate
the Board evaluations in
2022/23 and 2023/24, as it
was deemed efficient and
appropriate in the cycle of
continuous improvement.
Stage 2
Design of
the evaluation
Considering the findings
of the 2021/22 external
Board performance review,
it was agreed the review
of the Board and its
Committees in 2022/23
be conducted by Lintstock
in the same format as an
internal evaluation. This
centred on the use of a
detailed questionnaire,
to be completed by
the Board, Committee
members, and secretaries.
Stage 3
Review
methodology
The questionnaire was
issued, and to achieve a
comprehensive suite of
feedback, questions were
structured around agreed
topics, comprising:
• Board dynamics;
• Board composition;
• Board support;
• management and focus
of meetings;
• stakeholder oversight;
• strategic oversight;
• risk management and
internal control; and
• succession planning
and people oversight.
Stage 4
Findings
and actions
Based on the information
and views garnered from
the review responses,
Lintstock produced
the Board and Board
Committee evaluation
reports for review. The
finalised report of findings
was provided to the Board
and actions agreed.
2022/23 Board evaluation process
141SSE plc Annual Report 2023
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2022/23 Board evaluation findings
The findings of the Board evaluation
were positive, with progress thought to
have been achieved across a number
of evaluation areas. Areas which scored
well, relative to an external benchmark,
included: the clarity of strategic purpose;
the relationship between the non-
Executive Directors and Chief Executive;
oversight of strategic implementation;
the contribution to the development of
strategy; and Board support through the
Company Secretary and training.
The findings further affirmed strong Board
composition, with discussions cognisant of
the attributes which should be considered
in future appointments, alongside how
these should be balanced and prioritised
within succession plans.
Whilst the findings were positive and
confirmed the Board to be operating
effectively, there remained as with all
balanced process, opportunities for
improvement and refinement.
Opportunities for refinement Commentary and actions
Enhancing contact with
SSE’s culture, senior teams,
Business Units, and strategic
context
It was acknowledged ongoing activities were enhancing the Board’s appreciation of these areas,
notwithstanding, increased structure and planning would maximise the impact of this work.
Actions agreed by the Board:
• A Board planner for visits and existing pre-Board meeting sessions has been circulated to ensure
these be utilised to good effect.
• A biannual review of competitor strategies is to take place and continue on an ongoing basis.
• Deep dives will be arranged on specific topics such as ESG, technology and influences on
long-term energy prices.
Continued consideration
of people issues
The Board was supportive of progress in this area, noting that positive results would take time to
be visible within the organisation. As such, there were a number of practices the Board wished to
continue and develop further.
Actions agreed by the Board:
• To maintain a focus on diversity progress, targets and reporting will continue as a biannual item at
the Nomination Committee (see pages 148 to 149 ).
• To facilitate Board oversight and provide support on capacity to deliver strategy and growth, the
Nomination Committee should continue to consider activities to build capability (see page 146 ).
• There should be a continued focus on succession at an Executive Director and senior leadership
level. In fulfilment of this, the Board will attend talent dinners biannually; succession plan updates
will continue at the Nomination Committee; and in line with standing practice non-Executive
Directors can attend management conferences and talent invited to present at Board meetings.
Board composition The Board identified ongoing management of Board succession, and ensuring a smooth transition in
roles, as priority areas of focus, given a number of changes to Board membership. The findings also
supported the view it would be beneficial for greater geographic representation across its composition.
Actions agreed by the Board:
• In light of the above, in 2022/23, the succession plan for Finance Director was approved, and a
non-Executive Director search was undertaken which saw the appointment of Maarten Wetselaar
(see pages 144 to 145 ).
Board Committees
The evaluation of Board Committee
performance found that each Committee
remained effective in providing Board
support. Specific findings and the
agreement of actions was overseen by
each Committee Chair, with consideration
of the overall findings for the Board.
Progress will continue to be monitored
by each Committee, with details set out in
the Reports across pages 142 to 187 .
Individual Director performance
Individual Director performance and
contribution was assessed through
one-to-one meetings with the Chair.
These sessions allowed reflection on
personal development and discussion of
matters relevant to Boardroom culture and
process. The findings, in combination with
individual skills (see page 115 ), the
time commitment, and independence
assessments (see pages 143 and 146 )
confirmed that each Director continues
to contribute positively.
Chair performance
The performance of the Chair was
evaluated by the Senior Independent
Director, based on: feedback gathered
by an external facilitator; a thorough
discussion with non-Executive and
Executive Directors; and individual input
from non-Executive and Executive
Directors and selected senior managers.
The output of this performance review
confirmed that Sir John Manzoni continues
to be a effective and energetic Chair. He
leads ambitious and constructive challenge,
and appropriate support of the Executive
Directors. He has a high degree of visibility
and availability, is inclusive, and always
looking to hear views while putting his
own experience to appropriate use.
He leads and conducts the Board well,
both in the formal Board meetings and
through regular interactions outside the
Boardroom. He engages actively with
colleagues at all levels and has continued
to engage constructively with investors on
strategy, governance, and ESG.
The priority focus areas for the Chair in
the coming year, were agreed and aligned
with those identified through the evaluation
process for the Board as a whole. It was
confirmed that he devoted sufficient time
to the role, and in all respects met the
requirements of the Code.
142 SSE plc Annual Report 2023
Nomination Committee Report
Role of the Committee
The Nomination Committee provides
dedicated focus to the following
people-led matters.
• Board leadership. Identifies
the skills, knowledge and
experience required for the
effective leadership and long-term
success of SSE, managing the
balance of competencies through
succession planning, knowledge
development and recruitment.
• Board Committees. Monitors the
size, structure and composition
of the Board’s Committees to
ensure the appropriate Board
support now, and going forward.
• Talent pipeline. Monitors the
senior leadership pipeline and
initiatives to develop internal
capability, engaging in leadership
programmes and updates on
external recruitment.
• Inclusion and diversity. Under
the Board’s Policy, considers the
perspectives and attributes across
the Board and senior leadership,
confirming ambitions and work to
drive progress, reviewing overall
support for Group-wide inclusion
and diversity strategy.
The Committee’s Terms of Reference
are available on sse.com .
Non-Executive Director for Employee
Engagement. Both Melanie and Lady Elish
bring their own expertise to these positions.
In our annual review of Board Committee
membership, and in advance of the change
in Audit Committee Chair, we agreed
John Bason would join the Remuneration
Committee from May 2023, retaining the
practice that the Audit Committee Chair
provide a consistent view of Group
performance across relevant Board forums.
Inclusion and diversity remains a core
area of work, framed by the Board Inclusion
and Diversity Policy and the internal
ambitions which represent a commitment
to progress. The diversity of the Board is on
page 115 , with membership comprising
42% women and one Director from an
ethnic minority background. This will
remain the position after the changes
described above. Across membership,
difference is enhanced through diverse
perspectives and backgrounds and we
seek to ensure this extends to Board
Committees and Chair roles. Per the FCA’s
Listing Rule, we explain the positions of
Chair, Senior Independent Director, Chief
Executive and Finance Director are held by
men. This will continue to be considered
within our agenda, with regard for our
policy and stakeholder views.
Discussions with the Executive Directors and
Group HR considers inclusion and diversity
action below-Board level. Within senior
management women’s representation is
34.1% and we continue to work towards a
target of 40% for 2025. An area of focus will
be agreeing a supplementary ambition for
ethnicity across this senior population. More
on inclusion and diversity can be found on
pages 148 to 149 and in the Inclusion and
Diversity Report on sse.com .
Sir John Manzoni
Chair of the Nomination Committee
23 May 2023
with defined parameters, and from a
shortlist comprising both internal and
external candidates, Barry O’Regan, Finance
Director, SSE Renewables, was identified as
the strongest fit for the role. This objective
outcome confirms the strength of internal
talent development, and we will focus on
an effective transition for 1 December 2023.
Gregor has been instrumental in shaping
SSE’s investment case and delivering our
financial objectives over his 21 years in post,
and we look forward to working with Barry
in his role as Chief Financial Officer on the
opportunities that lie ahead. More on the
above processes and detail of how diversity
was considered in Board recruitment during
the year is on pages 144 to 145 .
In another change, Sally Fairbairn, our
Company Secretary and Director of
Investor Relations also signalled her
intention to retire, which was supported
by the recommendation in May 2023 that
Liz Tanner become General Counsel and
Company Secretary from 1 August 2023.
We thanked Dame Sue Bruce for her
dedication, as she stepped down after just
over nine years’ service on 31 March 2023.
And on 20 July 2023, we will see Peter Lynas
complete his final term as a non-Executive
Director. A number of changes in Board
roles, set out in the 2022 Annual Report
and on page 146 , take place as a result.
Melanie Smith is now Remuneration
Committee Chair and Lady Elish Angiolini
Dear Shareholder,
The execution of orderly succession
plans to support the strength of the Board
has been a significant Committee focus,
and underpinned by assessment of the
Board’s skills, knowledge, and tenure, in
the context of SSE’s long-term growth and
operating environment. The skills matrix
on page 115 confirms the attributes we
identify as key in the Board’s leadership role.
The external evaluation in 2021/22, cited an
opportunity to monitor Board membership
as SSE progressed its Net Zero Acceleration
Programme, and this was explored in the
candidate specification for a new non-
Executive Director. We are delighted the
resultant search sees Maarten Wetselaar
join the Board on 1 September 2023.
Maarten’s appointment enhances existing
international and renewables infrastructure
capabilities, and brings a global outlook
and career of energy leadership expertise
to the Board. He will become a member of
the Nomination, Audit, and Energy Markets
Risk Committees upon appointment.
The Board has continued to benefit from
the long-standing experience of the
Executive Directors, and regularly reviews
the internal pipeline and external talent
pool to confirm optionality for any change.
In 2022/23, we progressed the succession
plan for the Finance Director, Gregor
Alexander, with external support from
Korn Ferry. This was a robust process,
Key activities in 2022/23
• Reviewed Board composition.
• Recommended the succession
plan for both the Finance Director
and Company Secretary.
• Recommended the appointment
of a new non-Executive Director.
• Assessed inclusion and diversity
performance.
143SSE plc Annual Report 2023
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Committee evaluation
The annual review of Committee performance was facilitated by Lintstock (see pages 140 to 141 ) and the outputs considered by
the full Committee. This confirmed the Committee’s continued effective operation and agreement of actions for 2023/24.
Evaluation confirmed
• A robust process supports the review of Board composition and capabilities and has resulted
in effective succession planning across non-Executive roles.
• Work on senior leadership pipelines with Group HR has strengthened and enabled deeper
discussion surrounding talent and capability.
• A clear rhythm of work has been established to review the impact of inclusion and diversity
strategy at all levels, creating a platform to drive progress.
Actions for 2023/24 • Board composition. Focus should be maintained on the collective and individual skills of
the Board, in the context of tenure and SSE’s long-term growth, with support for transitions
in membership.
• Executive succession and talent pipeline. Positive challenge should continue surrounding
the depth and breadth of succession plans for senior leadership, alongside work on internal
and external talent pools.
• Inclusion and diversity. The amplification of the inclusion and diversity agenda should
be supported; assessing progress and identifying where targeted action is needed to
deliver change.
Membership and attendance
The membership of the Committee
comprises the non-Executive Directors
and the Chair of the Board, who is also
Chair of the Committee. The Company
Secretary is Secretary, and where
appropriate, the Executive Directors are
invited to attend meetings. Biographical
details of the Committee members can
be found on pages 116 to 120 . The
Committee met eight times in 2022/23
with attendance on page 123 .
Board leadership
Composition and succession
The composition of the Board is informed
by plans for orderly succession across Board
and Committee roles. This is supported by
regular assessment of the skills, experience
and diversity the Board needs, in line with
strategy and changes in SSE’s operating
context. The backdrop to these discussions
comprises the full breadth of Board work
set out across the Directors’ Report, and the
elements of Board composition and diversity
set out on page 115 .
Resulting from the above, and in line with
work to support SSE’s Net Zero Programme,
an independent non-Executive Director
recruitment process was initiated in the
year. Following a robust search, this saw the
recommendation that Maarten Wetselaar
join the Board from 1 September 2023.
This was followed in April 2023, with the
announcement that Gregor Alexander
would be stepping down from the Board
on 1 December 2023, at which time he
will have served as Finance Director for
21 years. In support of a comprehensive
process, internal succession plans and the
results of an external search, were subject
to interview and selection with support
from an independent recruitment firm.
The resultant recommendation, which
was approved by the Board, will see Barry
O’Regan, current Finance Director, SSE
Renewables, become Chief Financial
Officer on 1 December 2023.
Details of the work which supported each
of the above appointments is set out on
pages 144 to 145 .
As reported in 2021/22, John Bason joined
the Board as Audit Committee Chair
designate on 1 June 2022. At which time
he became a member of the Nomination
Committee and Audit Committee.
Following their respective nine year terms,
Peter Lynas steps down from the Board on
20 July 2023 and Dame Sue Bruce stepped
down on 31 March 2023. The succession
plan for their key Board roles is confirmed
on page 146 .
Sally Fairbairn, Company Secretary and
Director of Investor Relations will also step
down from the role following notification
of her retirement. The Committee
subsequently recommended the split of
her responsibilities, with Liz Tanner, SSE’s
current General Counsel also to become
Company Secretary in support of this
change. This transition will take effect from
1 August 2023. The position of Director of
Investor Relations will become a separate
role within the Investor Relations Team.
Time commitment
The expected time commitment of the Chair
and non-Executive Directors is agreed and
set out in writing in a Letter of Appointment.
This is issued following confirmation of an
individual’s capacity to take on the role and
involves an assessment of existing external
commitments and demands on time.
Any changes, such as additional external
appointments which could impair the ability
to meet the above, can only be accepted
following approval of the Board. The
acceptance of an external appointment by
an Executive Director also remains subject
to prior Board consent. Approved changes
across 2022/23 are set out on page 117 .
144 SSE plc Annual Report 2023
Nomination Committee Report continued
Embedding inclusivity
SSE’s Board Inclusion and Diversity Policy sets out actions to promote
diverse appointments and inclusive recruitment processes. This includes
using gender neutral language to ensure role specifications are accessible
to a wide range of candidates and engaging those who are signatories to
the enhanced voluntary code of conduct for executive search firms. As SSE
champions a culture which embraces difference, organisational fit remains
a key parameter in additional to technical capability. More on inclusion and
diversity, and the Board’s policy can be found on pages 148 to 149 .
External search firms
Russell Reynolds supported the search for a new non-Executive Director and
has no further connection with SSE or its Directors. Korn Ferry provided its
executive search services, within the Finance Director succession work,
independent of other leadership development and below-Board reward
consultancy support for which it is engaged by SSE.
Stage 1
Confirm
objective of
the process
and role
specification.
Stage 2
Engage
an external
recruitment
firm and set out
process.
Stage 3
Assess
how the
specification
can be met
through
a longlist.
Stage 4
Review
technical
and cultural
fit to agree
a shortlist.
Stage 5
Identify the
preferred
candidate to
recommend
to the Board.
Board recruitment
and succession process
Key search criteria
• Strong financial, listed
company and investor
credentials.
• Experience of
organisational scale
and complexity.
• Demonstrable capital
investment and M&A
expertise.
• Proficiency in managing
debt and funding
strategies.
Finance Director
succession
Key search criteria
• Large capital projects.
• Operations,
development,
or construction
of renewable energy.
• International business
and M&A.
• Engagement with
capital markets.
Independent
non-Executive
Director
appointment
Diversity of
key board roles
For details of SSE’s
disclosure against
Listing Rule 9.8.6(9)
please see page 149 .
145SSE plc Annual Report 2023
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Supporting overall Board diversity
The appointment of Barry O’Regan represents internal succession, as he moves from
the role of Finance Director, SSE Renewables in which he also has responsibilty for
corporate finance across the SSE Group. Following rigorous assessment, he was
confirmed to bring the individual and technical attributes required of Chief Financial
Officer and deemed a highly capable successor possessing substantive financial and
energy sector experience from a 20-year career. He brings his own strengths to the
financial leadership and growth of SSE, having been integral to the reshaping of the
Group and overseeing many of SSE’s large capital investments, in addition to leading
teams and working across financial control, corporate finance and M&A, treasury,
reporting and operational finance.
External search diversity
47%
of profiles
gender
diverse
7%
of profiles
ethnically
diverse
6
nationalities
represented
Supporting overall Board diversity
Maarten Wetselaar brings distinct and additive international energy leadership and
related perspectives to the Board. Both from his current role as Chief Executive of
CEPSA, the Spanish multinational oil, gas, and diversified energy company, and 26 years
at Shell, where he played a pivotal role in establishing its renewables business activity.
His breadth and depth of experience across conventional and new energy projects
enhance existing Board knowledge and will reinforce positive challenge. In addition,
expertise across business growth and portfolio transformation, and working knowledge
across capital and commodity markets, remain key to SSE’s growth and strategy.
Stage 1 To enhance
existing Board
capabilities across
growth in new
markets and emerging
international options,
an objective search for
a new non-Executive
Director was agreed
by the Committee.
Stage 2 Russell Reynolds
was engaged to support
the process and
identified search
categories, aligned
to the key criteria, to
allow consideration of
different backgrounds
and leadership models.
This comprised direct
and indirect expertise
across the energy value
chain to foster diversity
of candidate profiles.
Stage 3 Maintaining as
broad a brief as possible,
the Committee created
a longlist for discussion.
An agreed sub-
Committee worked
with the search firm to
support engagement
and considerations in
respect of interest,
bandwidth, and conflicts
for this pool.
Stage 4 A shortlist of
candidates was engaged
to meet with each
member of the sub-
Committee, and an
update provided to
the full Committee to
provide comments on
progress. The preferred
candidate was then
invited to meet with two
Executive Directors.
Stage 5
A recommendation
was made to appoint
Maarten Wetselaar
to the Board and
Nomination, Audit,
and Energy Markets
Risk Committees from
1 September 2023. This
followed confirmation
of independence and
capacity to take on
the role.
Stage 1 The Committee
initiated work to assess
and develop existing
succession plans for the
role of Finance Director.
This was led by a
non-Executive sub-
Committee, with
involvement from the
Chief Executive and
Director of HR.
Stage 2 Korn Ferry was
appointed to initiate
a prospective scan of
external pools against
an agreed role
specification. Different
search streams were
engaged to support
identification of a depth
and breadth of profiles
and allow prioritisation
of the key search criteria.
Stage 3 A longlist was
compiled, and potential
candidate fit measured
against the key criteria.
Existing internal
succession plans were
graded in the same
way and presented to
the sub-Committee
alongside this work.
At the request of the
sub-Committee, Korn
Ferry engaged with
interested candidates.
Stage 4 The Chief
Executive and Director
of HR, refined a shortlist
of internal and external
options for sub-
Committee discussion.
Each member of
the sub-Committee
met high-potential
candidates, with the
Chief Commercial
Officer engaged in the
final stages. All non-
Executive Directors were
invited to meet with the
sub-Committee’s
preferred candidate.
Stage 5 It was
recommended to the
Board to enact the
succession plan for
Finance Director in line
with confirmation of
Gregor Alexander’s
intention to retire. This
recommended that Barry
O’Regan be appointed
Chief Financial Officer
from 1 December 2023,
with a phased transfer of
responsibility for IT and
General Counsel teams
to the Chief Executive,
and for Procurement to
the Chief Commercial
Officer.
External search diversity
29%
of profiles
gender
diverse
12%
of profiles
ethnically
diverse
15
nationalities
represented
146 SSE plc Annual Report 2023
Nomination Committee Report continued
Director re-appointment
All non-Executive Directors undertake a
fixed term of three years subject to annual
re-election by shareholders. The fixed
term can be extended, and consistent with
best practice, does not exceed nine years
subject to defined circumstances as
identified by the Committee.
Extensions recommended in the period
were a second three-year term for Dame
Angela Strank, and a time-limited extension,
from 1 July 2023 to the conclusion of the
AGM on 20 July 2023, in the tenure of Peter
Lynas. The latter was to facilitate an orderly
handover in the role of Audit Committee
Chair. In line with standing practice, each
decision was supported by the continuing
independence, experience, and contribution
that each Director brings to both Board and
Committee work.
Conflicts of interest and independence
Each Director has a duty to disclose
any actual or potential conflict of
interest situations, as defined by law, for
consideration and approval if appropriate by
the Board. This requirement is supported by
an annual authorisation process, in which
the Committee reviews SSE’s Conflicts of
Interest Register, and seeks confirmation
from each Director of any changes or
updates to their position.
This process informs the simultaneous
assessment of a non-Executive Director’s
independence, as following the absence
of any conflict, the Committee reflects
upon the outcome of each individual
Director’s performance evaluation (see
page 141 ) and the circumstances set
out in the Code which could compromise
an individual’s position.
Following review in 2022/23, and to the
exclusion of the interested Director in each
case, the Committee recommended, and
Board confirmed: updates to the Conflicts
of Interest Register; the continuing
independence and objective judgement
of each non-Executive Director; and the
overall independence of the Board in line
with the recommendations of the Code.
Additional safeguards to support Director
independence continue through:
• Meetings between the Chair and the
non-Executive Directors, individually
and collectively, without the Executive
Directors present.
• Separate and clearly defined roles for
the Chair, as head of the Board, and the
Chief Executive, as head of executive
management (see page 139 ). This
division of responsibility is supported
by a degree of contact outside of
Board meetings to ensure an effective
ongoing dialogue and channel for
the timely escalation of external or
internal developments.
Director induction
All Directors receive a comprehensive
induction programme. This is tailored
through discussion with the Chair
and the Company Secretary and
considers existing expertise and
any prospective Board or Board
Committee roles.
The agreed plan for John Bason
comprised a balance of knowledge-
based sessions with internal
functions and external advisors,
in addition to site visits across
locations to provide exposure
to SSE’s businesses and working
environments. Delivery has been
in phases with information material
to the non-Executive Director role
provided in the early stages.
An induction programme for Maarten
Wetselaar and Barry O’Regan will be
agreed upon joining the Board.
John Bason induction programme
Areas covered Sessions by
SSE’s purpose, strategy, operating
context, and business model
Chief Executive
Group Strategy
MD of each Business Unit
Financial performance and
strategy, funding, assurance,
and investment community
Finance Director
Senior Finance leaders
External Auditor
Investor Relations
SSE’s Brokers
Energy sector and trends, SSE’s energy
portfolio and long-term energy markets
Chief Commercial Officer
Net zero transition, sustainability,
and stakeholder engagement
Chief Sustainability Officer
Group Corporate Affairs
Safety, health and the environment,
and SSE’s people and culture
Director of HR
Group Safety, Health and
Environment Manager
Corporate governance and
Board operations
Company Secretary and
Director of Investor Relations
Legal and regulatory views of the external
environment and SSE’s risk profile
General Counsel
SSE’s Legal Advisors
Director of Regulation
Group Chief Information Officer
147SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Knowledge and training
Any Director can request further information
to support their individual duties or
collective Board role. The arrangements are
overseen by the Company Secretary and
can be internally or externally facilitated,
with sessions typically originating from
technical Board discussions, an identified
training opportunity, or area of general
interest relating to SSE. Outside of monthly
agenda time, the Board schedule included
nine strategic deep dives in 2022/23 in
addition to several external speaker sessions
– which were often structured to precede
Board discussion at meetings. Further details
of the topics covered are on page 125 .
Through SSE’s mandatory training
programme, all Directors are requested
to refresh their understanding of current
obligations and recent developments in
areas pertinent to their role. These modules
address, among other matters: Directors’
Duties; competition law; anti-money
laundering and financial sanctions; data
protection; and inclusion and diversity.
In 2022/23, a cyber security session was
offered to all Board members covering
the threat landscape; cyber awareness
and defence; and actions to support SSE’s
security culture.
To remain abreast of, and connected to,
broader societal trends, expectations and
issues, the Directors are encouraged to
participate in seminars and events hosted
by external organisations. Discussion
with peers, other sectors, and individuals
in different professional and personal
situations, is viewed as an opportunity
to develop broader perspectives and
insights, which can translate into different
thinking styles and new debate within
Board discussions.
Board Committees and key roles
Board Committee composition and the
appointment of key Board roles is designed
around the following principles: to ensure
alignment between skills and specific
Committee responsibilities; to prevent
undue reliance on the capacity of any
Director; and to comply with recognised
guidance including the Code. Annually,
the Board considers the composition of
its Committees to assess the allocation
of skills and how the diversity of the
Board is carried through, by extension,
to its supporting forums. At 23 May
2023, each Committee has at least
40% female membership across non-
Executive positions.
Changes can be recommended to support
succession plans, in line with new Board
appointments, or in response to the annual
review described above. In 2022/23, the
Board approved the following membership
recommendations.
The previously agreed succession plan, for
the Board roles held by Dame Sue Bruce,
saw Melanie Smith assume the role of
Remuneration Committee Chair, and Lady
Elish Angiolini become SSE’s non-Executive
Director for Employee Engagement, both
with effect from 1 April 2023. The views
of the Committee which led to the above
recommendations are set out on page 149
of the Annual Report 2022 .
Supporting his appointment as Audit
Committee Chair designate, John Bason
takes on the role of Audit Committee Chair
on 21 July 2023. This follows Peter Lynas
stepping down from the Board on 20 July
2023. John also joins the Remuneration
Committee in advance of this date on
22 May 2023.
Talent capability and
development
Succession for senior leadership roles,
and strategy to support talent development
by building capability for the future, is
overseen by the Committee with support
from Group HR, with formal updates
considered at least twice a year.
On succession, at least annually, the
Committee reviews the existing internal
pipeline of candidates for immediate and
medium- to longer-term movement into
key leadership and functional roles. This
is subject to routine challenge to ensure
understanding of the breadth of internal
potential and experience represented by
external talent pools.
In 2022/23 the Committee received updates
on Board, Group Executive Committee
and Business Unit Executive Committee
succession options, which included a review
of timing of readiness, and consideration of
new talent and succession capability that
had been recruited into SSE. The Committee
also received updates on the targeted
development activity that is taking place
across the population, and engaged in
a number of discussions with external
providers to understand the impact of
these key initiatives.
On investing in broader talent and capability,
updates are provided on critical skills
investment and performance improvement,
which are centred on an agreed set of
leadership capabilities and competencies
required for SSE’s long-term growth.
In the context of SSE’s Net Zero
Acceleration Programme, emphasis has
been placed on commercial expertise,
project delivery, digital, data, and the
international context, with these endorsed
as key development areas for structured
training interventions. The Committee has
also had input from external partners on
how talent is benchmarking externally, and
on a specific focused initiative to encourage
more gender diversity into senior leadership
talent pipelines.
The Committee also continued to receive
updates on the progress of the Leadership
Development Review which has been
providing leadership teams with feedback
about how they align with SSE’s Leadership
Blueprint and Enterprise Leadership Model.
In providing Board-level support to the
Leadership Blueprint, Debbie Crosbie
participated in a virtual session with leaders,
to explore the refreshed framework and
behaviours which define leadership within
SSE’s culture.
To provide direct exposure to the talent
pool and allow reciprocal sharing of
experiences, members of the Committee
engage in core talent programmes,
with the diversity across training cohorts
monitored to encourage and progress
difference. Additional engagement
with future leaders is facilitated through
presentations at meetings, business-led
sessions, and attendance at conferences.
The open two-way dialogue between the
Directors and all levels of the organisation
is a key tool for observing and informally
coaching emerging talent.
148 SSE plc Annual Report 2023
Nomination Committee Report continued
Board inclusion
and diversity
Board Policy
How the policy links to strategy
People are at the heart of the
transformational change needed
to achieve net zero, and SSE believes
innovative solutions to climate
change require diverse perspectives,
different experiences, and new skills.
The principles of equality, fairness,
inclusion and diversity must be at
the heart of everything it does.
Policy principles
• Identify Board and Committee
needs and the balance of diversity
characteristics.
See page 143 .
• Adopt a formal and inclusive Board
recruitment process.
• Engage firms who are signatories
to the enhanced code of conduct
and discuss ambitions for diverse
candidate lists.
• Recruit on an objective and
shared understanding of merit.
See page 144 to 145 .
• Nurture an inclusive Board and
Committee culture.
• Oversee work to develop a diverse
talent pipeline.
• Be aware of stakeholder
expectations and challenge targets
in wider strategy.
See pages 137, 147 and 148 .
Policy targets
• An ultimate goal of enduring gender
parity, whereby the Board commits
to female representation of not less
than 40%, with the aim to maintain
as close to 50% male and female
representation as possible on a
rolling basis.
Target met. 42% women on the
Board at 23 May 2023. 42.8% rolling
three-year female representation at
31 March 2023.
• Consider female representation
across the roles of Chair, Senior
Independent Director, Chief
Executive and Finance Director.
See explanation opposite.
• The Board should have at least
one Director from an ethnic
minority background.
Target met. 1 ethnic minority
represented across Board
membership.
Inclusion and diversity
SSE’s Group-wide inclusion and
diversity strategy is explained across
pages 60 to 62 and in SSE’s Inclusion
and Diversity Report 2023 available on
sse.com .
Role of the Committee
The role of the Nomination Committee
in relation to inclusion and diversity starts
with an assessment of difference across
the composition of the Board and its
Committees. At senior leadership-level,
it sets expectations to nurture an inclusive
culture so that diversity is embraced;
confirming inclusion and diversity plans
and ambitions and seeking assurance
surrounding progress. This is enabled
through work with Group HR to review
the impact of initiatives which are in place.
The Committee monitors decisions across
the above areas with cognisance for the
Group-wide approach.
Board policy
The Board operates under a standalone
inclusion and diversity policy which can
be found on sse.com . Its objective is to
set a Board-led culture which is inclusive
to all views, perspectives and experiences,
and which fosters diversity as a norm.
Across Board membership, the policy
drives balance and alignment with SSE’s
purpose, strategy and values, through
agreed principles and targets which reflect
the measures the Board will take when
considering its membership and that of its
Committees. The Nomination Committee
reviews this policy, including targets and
progress, at least annually, with diversity
permeating all areas of Committee work.
In setting principles and targets, the
Nomination Committee, and Board,
acknowledge the external expectations
of stakeholders and the opportunities
to drive change through succession
planning. The FTSE Women Leaders
Review and Parker Review are reflected
within Board ambitions.
An overarching priority for the Nomination
Committee is that succession plans remain
refreshed, and provide options to support
an orderly transition should a Board vacancy
arise in the short-, medium- and long-term.
These succession plans were mobilised in
the year to support the handover in role of
Finance Director.
More on SSE’s Board Inclusion and Diversity
Policy is set out opposite.
Senior leadership ambitions
Below Board-level, the Committee
provides specific focus to the diversity
of SSE’s senior leadership and pipelines,
including the recommendations of external
initiatives and shareholder views. To identify
the levers for progress, close work has
continued with the Executive Directors
and Group HR to develop clear action
plans which are underpinned by stretching
ambitions. More detail on these ambitions
and progress can be found on page 60 .
Consistent with next steps agreed through
2021/22 external Board evaluation, and a
commitment to providing counsel on SSE’s
approach, the Nomination Committee has
conducted biannual reviews of diversity
strategy and scorecards, covering:
• accelerating progress across ambitions;
• empowering inclusive leadership
and fluency across inclusion and
diversity topics;
• assessing the effectiveness and
continuous improvement of existing
processes; and
• actively listening to the employee voice.
With strong support for the enhanced
and increased frequency of contact with
the executive teams, actions were reset
through the 2022/23 Board evaluation
for further work across the coming year.
Following the recommendation of the
Parker Review for FTSE 350 companies to
set targets for ethnic minority representation
across senior management teams. Focus
will be provided to improving diversity data
disclosure to allow a credible target to be
set. This will be reported on in the Annual
Report 2023.
Board engagement on inclusion
and diversity
In addition to desktop work, Committee
members have proactively engaged with
SSE’s employee-led ’Belonging in SSE’
communities and responded to requests for
Board-level views on inclusion and diversity
issues. More detail on these activities can be
found on pages 134 to 136 .
149SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Explanation against LR 9.8.6(9)
As at the Company’s chosen reference
date, 31 March 2023, and in line with FCA
Listing Rule 9.8.6(9), SSE confirms it has
met the targets for at least 40% female
membership on the Board and for one
Director to be from an ethnic minority
background. It has not met the target
for one of the positions of Chair, Senior
Independent Director, Chief Executive or
Finance Director to be held by a woman.
The reasons for this are set out below.
Executive Directors
The roles of Chief Executive and Finance
Director have been held by Alistair
Phillips-Davies and Gregor Alexander for 9
and 20 years respectively. These positions
support the long-term strategic delivery
of the SSE Group and remain subject to
considered succession planning to ensure
this strength of leadership continues.
The announcement in April 2023, that
Barry O’Regan would succeed Gregor
Alexander in the role of Chief Financial
Officer from December 2023, was the
result of a rigorous external process
and objective assessment of internal
succession plans. Assisted by purposeful
design, diversity was considered at each
stage and details of the recommendation
made by the Nomination Committee is set
out on page 145 . The overriding priority
across all Board appointments remains
identification of the strongest candidate
for the role, based on clear search criteria
and the need for an orderly transition.
Further detail of the challenge applied
by the Nomination Committee on the
continued development of a diverse
internal pipeline, and the work to oversee
external benchmarking to ensure SSE has
the diversity and capabilities needed for
future growth, is set out on page 147 .
Chair and Senior Independent Director
SSE’s Chair, Sir John Manzoni, has held
the position since April 2021 following
appointment to the Board in September
2020. This resulted from a robust and
inclusive appointment process and
details of how diversity was challenged
at each stage can be found in the
Annual Report 2021 .
SSE’s Senior Independent Director,
Tony Cocker, has held the position since
October 2020 following appointment
to the Board in May 2018. Tony was
appointed in line with the internal
succession plan for the role and
continues to effectively support the
Board and Chair in this position.
Full details of the skills and attributes
which support each of the above
appointments can be found in the
individual Director biographies set
out on pages 116 to 120 .
Work continues to ensure that gender
and ethnicity, alongside broader diversity
characteristics are present across the
Board and targeted action would be taken
should the overall diversity of membership
be deemed insufficient at any time.
In support of transparent disclosure, SSE
will continue to report on its progress in
the Annual Report in advance of the FTSE
Women Leaders target date of December
2025, and welcomes feedback and
engagement from shareholders and
wider stakeholders on this topic.
Data under LR 9.8.6(10)
In line with LR 9.8.6(10), as at the reference date of 31 March 2023, the composition of the Board and Executive Management was
as follows.
Gender (sex)
Number
of Board
members
Percentage
of the Board
Number of
senior positions on the Board
(CEO, CFO, SID and Chair)
Number
in Executive
Management
1
Percentage
of Executive
Management
1
Man 7 54% 4 8 73%
Woman 6 46% 0 3 27%
Ethnic background
Number
of Board
members
Percentage
of the Board
Number of
senior positions on the Board
(CEO, CFO, SID and Chair)
Number
in Executive
Management
1
Percentage
of Executive
Management
1
White British or other White
(including minority-white groups)
12 92% 4 11 100%
Mixed/Multiple Ethnic Groups – – – –
Asian/Asian British – – – –
Black/African/Caribbean/Black British – – – –
Other ethnic group,
including Arab
1 8% – –
Not specified/ prefer not to say – – – –
1 Per the definition within the Listing Rules, executive management within SSE is the Group Executive Committee including the Company Secretary.
Gender is captured as sex for all employees at the onboarding stage and held on the Company’s secure people data system,
Harmony. SSE has 100% completion of sex data and that is what is used when reporting the gender diversity of the Board and
executive management. Recognising that for some, gender identity can differ from that assigned at birth, all employees are offered
the opportunity to volunteer their gender identity directly within Harmony, or by completing a diversity data form that is electronically
uploaded onto the system. Ethnicity data is also provided voluntarily and can be offered in the same was as gender identity. SSE has
100% voluntary completion of ethnicity data at Board and executive management level. All diversity data reporting is done securely
and in a way that protects anonymity so that no one person can be identifiable. All information is strictly confidential in accordance
with SSE’s Privacy Notice in line with the UK and ROI General Data Protection Regulations (UK GDPR and GDPR 2018 and DPA 2018).
150 SSE plc Annual Report 2023
Audit Committee Report
Role of the Committee
Financial reporting
• Review the integrity of the interim
and annual Financial Statements.
• Review the appropriateness of
accounting policies and practices.
• Review the significant financial
judgements and estimates
considered in relation to the
Financial Statements, including
how each was addressed.
• Review the content of the Annual
Report and Accounts and advise
the Board on whether taken as
a whole, it is fair, balanced and
understandable.
External audit
• Review and monitor the objectivity
and independence of the External
Auditor, and oversee the policy
on the provision of Non-Audit
Services.
• Review and monitor the
effectiveness of the external
audit process and the ongoing
relationship with the External
Auditor.
• Review and make
recommendations to the
Board on the tendering of the
external audit contract, and the
appointment, remuneration
and terms of engagement
of the External Auditor.
Internal audit
• Review and approve the
Internal Audit Plan and monitor
its implementation.
• Review and monitor the
effectiveness of the Internal Audit
function, including the adequacy of
the overall Internal Audit resource.
Internal control and risk
management
• Review and monitor the
effectiveness of the management
of risk and overall System of
Internal Control.
• Review the framework and analysis
to support both the Going Concern
and the long-term Viability
Statement.
The Committee’s Terms of Reference
were reviewed during the year, and are
available on sse.com .
approach and key findings are covered
in more detail in the report that follows.
The Committee continued to receive
regular updates on the status of the BEIS
consultation on ‘Restoring Trust in Audit
and Corporate Governance’. Whilst
there remains areas of uncertainty in the
measures to be implemented, SSE has
made significant progress in developing
the internal control framework for financial
reporting. At each Committee meeting,
an update on progress is provided by the
project team covering legislative and
regulatory developments, progress on
implementation and validation of Finance
and IT controls, and the change programme
to support the organisation adopt the new
framework from 1 April 2024. These regular
briefings allow the Committee to ensure
that necessary preparations are being
considered and progressed in line with
or ahead of regulatory change.
On 16 December 2022, I received a
letter from the FRC following their review
of the SSE’s 2022 Annual Report and
Accounts. The FRC stated that there were
‘no questions or queries’ in relation to those
Annual Report and Accounts
1
. The FRC did
highlight certain matters which SSE were
invited to consider in relation to preparation
of the 2023 Annual Report and Accounts,
and these matters have been dealt within
our approach to disclosure this year.
After 9 years as Audit Committee Chair,
I will be standing down following the AGM
in 2023. Over the last year, I have worked
with my successor, John Bason, to ensure
a smooth and orderly transition. I hope
you find this report informative and take
assurance from the work undertaken by
the Committee during the year.
Peter Lynas
Chair of the Audit Committee
23 May 2023
foundations that were established last
year and I am pleased to report that SSE
is now fully compliant with the TCFD
recommendations and recommended
disclosures. SSE believes there is an
opportunity to further enhance its
reporting in this area and will actively
seek feedback from shareholders and
stakeholders on best practice.
During the year, the Committee
engaged PwC to carry out a detailed
External Quality Assessment (EQA) of the
Internal Audit function. The findings and
key recommendations were presented to
the Committee in February 2023. Overall,
the Internal Audit function was found to be
well established and highly valued across
the organisation. A summary of the scope,
Dear Shareholder,
On behalf of the Board, I am pleased
to present the Audit Committee Report
which is intended to provide shareholders
with an understanding of the work we
have done to provide assurance on the
integrity of the Annual Report and Financial
Statements for the year ended 31 March
2023, together with the effectiveness of
the Group’s risk management and internal
controls framework in a year of exceptional
market volatility.
The process which the Group adopted in
relation to identification and quantification
of its climate-related risks and opportunities,
together with the governance processes
established to oversee and approve the
associated reporting, were considered
by the Audit Committee. The approach
adopted this year builds on the strong
1 In line with FRC requirements, the letter provides no assurance that the Annual Report and Accounts are
correct in all material respects. The FRC’s role is not to verify the information provided but to consider
compliance with reporting requirements.
Key activities in 2022/23
The key areas of focus in the year
included:
• Ensuring the business performance
is fairly presented in financial
reporting.
• Assessing the output of an external
quality assessment of the Internal
Audit function carried out by PwC.
• Overseeing the project to enhance
the internal control framework for
financial reporting.
• Orderly transition of Audit
Committee Chair.
• Consideration of accounting for
new matters in the year including
the Energy Bill Relief Scheme and
the Electricity Generator Levy.
151SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Committee membership
The composition of the Committee is
compliant with the Code and currently
comprises five independent non-Executive
Directors as Committee members. Peter
Lynas has chaired the Committee since
2014 and is considered by the Board
to have recent and relevant financial
experience. He was Group Finance Director
of BAE Systems plc until 31 March 2020
and is a Fellow of the Chartered Association
of Certified Accountants. Peter Lynas will
stand down after the AGM on 20 July 2023
and John Bason, who joined the Board on
1 June 2022, and became a member of the
Audit Committee on appointment will take
over the role as Chair. John Bason was
Group Finance Director of Associated
British Foods plc until 28 April 2023 and
is a member of the Institute of Chartered
Accountants in England and Wales. Both
John Bason and Debbie Crosbie are also
considered by the Board to have recent and
relevant financial experience. The Board
considers that the Audit Committee as a
whole has competence relevant to the
sector, with two members having had
significant executive roles in the energy
sector, and all members possessing an
appropriate level of experience in corporate
financial matters. Biographical details of the
Audit Committee members can be found on
pages 116 to 120 and details of meeting
attendance are set out on page 123 .
Gregor Alexander, who joined SSE at its
inception in 1998 and has been Finance
Director since 2002, will step down from
the Board on 1 December 2023. Following a
competitive recruitment process supported
by an external executive search firm, Barry
O’Regan will be appointed as Chief Financial
Officer and as an Executive Director of SSE
plc with effect from 1 December 2023.
Barry trained as a chartered accountant
with PwC in Dublin before joining Airtricity
in 2005, and subsequently the SSE Group
in 2008. With nearly 20 years’ experience
working in the energy sector, Barry has
a wealth of knowledge across financial
control, corporate finance and M&A,
treasury, reporting and operational finance.
He is currently Finance Director of SSE
Renewables as well as having responsibility
for corporate finance across the whole
of SSE.
Meetings
The Committee has a structured forward-
looking planner to reflect the Group’s
annual financial reporting cycle. The
planner informs the business considered
at each meeting and is regularly reviewed
and updated to reflect areas identified for
additional focus. Much of the work of the
Committee is necessarily targeted around
the key areas of financial reporting, external
audit, internal audit, internal control and
risk management. The practice of effective
governance and quality reporting underpin
all aspects of the work of the Committee.
The Committee met on four occasions
during the year and has met once since
the end of the financial year. Before each
meeting, the Committee Chair meets with
the Finance Director and External Auditor
to ensure there is a shared understanding
of the key issues to be discussed. Committee
meetings are held in advance of Board
meetings to facilitate an effective and
timely reporting process. The Committee
Chair provides a report to the Board
following each meeting.
Meetings are routinely attended by: the
Chair of the Board; the Finance Director;
the Director of Group Risk and Audit;
Partners from the External Auditor; and
the Deputy Company Secretary (who
is Secretary to the Committee). Senior
finance and business managers are invited
to attend certain meetings to enable the
Committee to gain a deeper level of
insight on particular items of business. The
Committee meets with the External Auditor
privately at least twice each year in line with
the financial reporting calendar and also
with the Director of Group Risk and Audit.
Committee evaluation
The actions identified from the 2021/22 evaluation relating to Audit Committee
Chair transition and developing the approach to risk management have made good
progress in the year, and will continue to feature on the Committee agenda in the
year ahead. The annual review of Committee performance in 2022/23 was facilitated
by Lintstock (see pages 140 to 141 ), with the output considered and follow-up
actions agreed by the Committee. The evaluation confirmed the effective operation
of the Committee, and the Board endorsed the view that the Audit Committee
continued to effectively discharge its responsibilities.
Evaluation
confirmed
• Meetings were well managed and effectively chaired.
• The relationships between the Audit Committee and the Finance
Director, Director of Risk and Audit and other members of senior
management were open and honest and benefitted from a high
degree of constructive challenge.
• The key accounting judgements were given an appropriate
degree of focus and challenge.
Actions to
progress
during
2023/24
• Support to the new Audit Committee Chair.
• Arrange briefings to gain an external perspective on how
other organisations are dealing with matters such as risk
and audit reform.
• Focus in further developing the approach to risk management
and integrated assurance, underpinned by the Audit and
Assurance Policy.
• Continue to oversee the project to enhance the internal controls
over financial reporting, including the developments to enhance
the level of automation, process and standards.
External
audit
planning
Full-year
Results
External
Audit
control
testing
Half-year
Results
N
o
v
e
m
b
e
r
S
e
p
t
e
m
b
e
r
M
a
y
F
e
b
r
u
a
r
y
Audit
Committee
Annual financial reporting cycle
These engagements provide an additional
opportunity for open dialogue and feedback
without management being present.
In addition to the scheduled meetings,
the Committee Chair meets separately
with the Finance Director, Director of
Group Risk and Audit, External Auditor
and Committee Secretary to ensure the
work of the Committee is focused on key
and emerging issues.
152 SSE plc Annual Report 2023
Audit Committee Report continued
Focus of Audit Committee business over the year
Actions Outcomes September November February May
Cross
reference
Financial Reporting
Reviewed the financial statements prepared
for the half and full year, and challenged
management on the appropriateness of the
accounting in relation to the significant financial
judgements, estimates, exceptional items and
basis of preparation as a going concern. Received
a report from the External Auditor covering the
accounting, financial control and audit issues
identified during the half-year review and
full-year audit.
The Committee challenged management
on a number of its judgements and sought
detailed explanations including the opinion
of the External Auditor. The Committee made
a recommendation to the Board in support of
approving the financial statements, the going
concern statement, and letter of representation
issued to the External Auditor.
• •
Pages
154 to
156
Assessed the appropriateness and presentation
of APMs to enable comparability with other
companies.
The Committee concurred with management’s
approach that the APMs as defined were
appropriate and enabled comparability with
other companies.
• •
Pages
194 to
201
Reviewed a report on the Group’s tax position
covering adjusted underlying tax rate, areas
of potential tax exposure and provisioning
and Fair Tax Mark accreditation.
The Committee supported judgements around
the Energy Bill Relief Scheme and recognition of
the Electricity Generator Levy. The Committee
were satisfied with the enhanced disclosures
made in support of the Fair Tax Mark accreditation.
•
Pages
237 to
239
Reviewed and challenged the scenarios aligned
to the Group Principal risks to stress test the
viability assessment proposed by management
and reasons why a four-year assessment period
was appropriate.
The Committee were satisfied that the viability
assessment process was robust and that the
length of the period was appropriate, and
adequately disclosed.
• •
Page 71
Reviewed the impact of climate change
on disclosure, including the assurance
arrangements relating to the TCFD and
other ESG-related disclosures.
The Committee reviewed the impact of the
accelerated NZAP programme on financial risks,
judgements and disclosures. The Committee
challenged the consistency in key assumptions
and concluded that the impact of climate change
had been adequately addressed, and that the
assurance processes supporting the narrative
reporting for TCFD and other ESG-related
disclosures were satisfactory.
• •
Pages
42 to
45
Reviewed whether the company’s position
and prospects as presented in the 31 March
2023 annual report and financial statements
were considered to be a fair, balanced and
understandable assessment of the company’s
position and prospects.
The Committee sought confirmation that the
Fair, Balanced and Understandable assurance
framework had been adhered to and made
an affirmative recommendation to the Board.
•
Pages
154
and
191
External Audit
Reviewed and challenged the proposed
external audit strategy for 2022/23, including
the audit approach, significant risks and areas
of audit focus, scope and level of materiality.
The Committee monitored progress made by
the external audit team against the agreed plan,
and approved refinements to the audit strategy
in line with business developments.
• • • •
Page
156
Reviewed the effectiveness of the External
Auditor to ensure the independence, objectivity,
quality, rigour and challenge of the audit
process is maintained.
The Committee concluded that the external
auditor and audit process was effective and a
recommendation was made to the Board on the
reappointment of EY as the auditor for the year
ending 31 March 2024 at the forthcoming AGM.
• •
Page
156
Reviewed the non-audit services and related
fees provided by the external auditor for
2022/23 and the policy on non-audit services
provided by the auditor for 2022/23.
The Committee approved the non-audit
services and related fees provided by the
External Auditor for 2022/23 and made a
recommendation to the Board to adopt an
updated Non-Audit Services Policy to address
the application of pre-concurrence on non-audit
services as required by the International Ethics
Standards Board for Accountants.
• • • •
Page
157
Negotiated and agreed the statutory audit fee
for 2022/23.
The Committee approved the fee for the 2022/23
audit, including an adjustment to reflect changes
to the scope arising from developments in the year.
• • •
Page
157
Reviewed the findings from the External
Auditor’s controls report.
The Committee challenged management
to resolve non-material issues relating to the
internal controls. The Committee concluded that
the overall control environment was effective.
•
Page
156
153SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Actions Outcomes September November February May
Cross
reference
Internal Audit
Received updates on the work undertaken
by Internal Audit, including audit resource,
progress with the 2022/23 Internal Audit
Plan, significant findings and audit actions.
The Committee monitored the implementation
of the 2022/23 Internal Audit Plan and confirmed
they were satisfied with progress. The Committee
reviewed findings and audit actions and
challenged management to ensure remedial
actions were delivered in a timely manner.
• • • •
Page
158
Reviewed and challenged the integrated
assurance planning approach and the Internal
Audit Plan for 2023/24, in addition to the areas
of focus included in the rolling three-year
Internal Audit Plan.
The Committee approved the Internal Audit Plan
for 2023/24 and the rolling three-year Internal
Audit Plan focus areas.
•
Page
158
Reviewed and challenged the output of the
external quality assessment of the Internal Audit
function which had been delivered by PwC.
The Committee confirmed the effectiveness
of the Internal Audit function.
• •
Page
159
Internal control and risk management
Received an update on the work undertaken
by Group Compliance, including resource
and progress with the compliance review
programme and resulting actions.
The Committee monitored the implementation
of the 2022/23 Compliance Programme and
confirmed they were satisfied with progress and
that findings and actions were being closed-out
by management in a timely manner.
• •
Page
137
Received an update on the status of audit
reform, including progress with the project
to further strengthen and embed the financial
control framework.
The Committee reviewed progress against the
project plan at each meeting, and were satisfied
that the necessary preparations were being
progressed in line with or ahead of regulatory
change.
• • • •
Pages
150
and
158
Received an update on Cyber Risk and
Information Security covering both
Information and Operational Technology.
The Committee monitored progress in maturing
the level of cyber security across the organisation
and provided feedback to the Board.
• •
–
Received a report on the qualifying companies
in the Group required to publish reports on
their payment practices, policies and payments.
The Committee challenged management on
compliance with the Prompt Payment Code
and sought assurance that further improvement
plans were in place.
•
–
Reviewed Treasury operations, including
the funding plan, liquidity, going concern,
hedging and credit ratings.
In line with the authority delegated by the
Board, the Committee approved a range of
funding and treasury related transactions.
• •
Pages
89 to
92
Received an update on the programme to
enhance the approach to risk management.
The Committee approved the work-plan to
implement an expanded risk management
framework across the organisation.
•
Page
68
Received an update on the governance
arrangements to oversee the risk relating
to anti-financial crime including fraud, bribery
and corruption.
The Committee monitored the implementation
and integration of the anti-financial crime
governance arrangements against the expanded
international foot-print.
• •
-
Reviewed the effectiveness of the System of
Internal Control, including risk management.
The Committee reviewed and challenged
management on the assurance frameworks
to assess the effectiveness of the System of
Internal Control. The Committee made a
recommendation to the Board that the System
of Internal Control continued to be effective.
• •
Page
158
Governance
Reviewed the approach to all the governance
related activity carried out during the year to
support the work of the Committee, including
the forward plans of agenda items and areas
of focus for 2022/23.
The Committee were satisfied with the scope
and coverage of the governance related activity
relevant to the work of the Committee and
approved the forward plan of Agenda items.
• •
Page
151
Reviewed the Committee Terms of Reference. The Committee made a recommendation to
the Board to re-approve the Terms of Reference.
•
Page
150
Reviewed the content of the 2022/23 Audit
Committee Report and Principal Risk related
disclosures.
The Committee approved the 2022/23 Audit
Committee and Principal Risk related disclosures
for inclusion in the 2023 Annual Report.
•
Pages
150 to
159
Reviewed a report on the disclosure of
information to the External Auditor.
The Committee were satisfied that the disclosure
arrangements were appropriate.
•
Page
190
154 SSE plc Annual Report 2023
Audit Committee Report continued
Financial reporting
The Annual Report and Accounts seek
to provide the information necessary to
enable an assessment of SSE’s position and
performance, business model and strategy.
The Finance team worked closely with the
External Auditor to ensure SSE provides the
required level of disclosure, including the
appropriateness of alternative performance
measures (APMs) and their consistency with
IFRS financial information. In preparing the
Financial Statements for 2023 there are
several areas requiring the exercise of
judgement or a high degree of estimation.
This section outlines the significant areas
of judgement that have been considered by
the Committee – through discussion and
detailed reporting by both management
and the External Auditor – to ensure
appropriate rigour has been applied. Other
key accounting judgements and areas
of estimation uncertainty applied in the
preparation of the Financial Statements for
2023 are provided in notes 4.2 and 4.3 .
The Independent Auditor’s Report on
pages 326 to 336 sets out the audit
approach to Key Audit Matters. In addition,
EY drew other audit matters to the attention
of the Audit Committee. These areas of
audit focus include: customer debtor
recoverability; going concern; accounting
for Renewables‘ acquisition of the Siemens
Gamesa platform and the Thermal
acquisition of a 50% stake in Triton Power;
recoverability of Ovo loan note; goodwill
valuation for Renewables acquisitions in
Europe and Japan; Seagreen Contract for
Difference; Generation own use volume
breach; change in Renewables cash
generating units; taxation judgements;
exceptional items and APMs; accounting
for the sale of a 25% stake in SSEN
Transmission; climate considerations; and
decommissioning provisions. In addition,
the current volatility in the energy sector
has led to a number of new matters that
require consideration by management,
and through the audit, including: Electricity
Generator Levy (EGL); and the accounting
for Government Support Schemes.
Significant financial judgements
and estimates
In the process of applying the Group’s
accounting policies, management
necessarily makes judgements and
estimates that have a significant effect
on the amounts recognised in the
Financial Statements. Throughout the
year, management presents its up-to-date
view of the key accounting issues and its
resulting judgements to the Committee.
In consultation with the External Auditor,
the Committee reviewed the significant
financial judgement areas and identified
five specific areas for 2022/23. The
accounting for the Group’s disposal
programme, which was completed in
the prior financial year, was no longer
considered by the Committee to be a
significant financial judgement.
The Group’s most significant financial
judgement areas, some of which are
also areas of estimation uncertainty,
are explained on page 155 . For each
of these areas the Committee considered
the key facts and judgements outlined by
management, and requested the External
Auditor to provide a professional view on
whether the judgements were appropriate.
The Committee specifically discussed with
the External Auditor how management’s
judgement and assertions were challenged
and how professional scepticism was
demonstrated during their audit of
these areas. This also included the
adequacy of the disclosures within
the Financial Statements.
In the year ahead, the Committee will
continue to respond to energy market
reform and will consider any new and
emerging judgements and estimates.
Going Concern and
Viability Statement
The Committee reviewed the information
to support the assessment and disclosure
of the Going Concern Statement prior to
Board approval (see A6.3 Accompanying
Information to the Financial Statements).
Given the cash surplus of £0.9bn at 31 March
2023; the committed borrowing facilities of
£3.5bn maintained by the Group with £3.4bn
of these facilities undrawn at 31 March 2023;
the current commercial paper market
conditions, with £0.9bn outstanding at
31 March 2023; and the assumption the
Group will be able to refinance maturing
debt, the Directors have concluded that both
the Group and SSE plc as Parent Company
have sufficient headroom to continue as a
going concern. In coming to this conclusion,
the Directors have considered sensitivities
on future cashflow projections. In the very
unlikely event of not being able to access
the revolving credit facility or otherwise
refinance as may be required, the Group’s
options include deferring uncommitted
capex, delaying or deferring dividend
payments and implementing further cost
reductions. The Financial Statements are
therefore prepared on a going concern basis.
The Committee agreed the parameters
and reviewed the supporting report for the
Board’s assessment of the prospects of the
Company which is covered in the Viability
Statement on page 71 .
Fair, balanced and
understandable
assurance framework
The assurance framework used in
the preparation of the 2023 Annual
Report and Accounts to assist the
Directors in the discharge of their
requirement to state that, taken
as a whole, it is fair, balanced
and understandable and provides
the information necessary for
shareholders to assess the
Company’s performance, business
model and strategy is as follows:
• a verification process dealing
with the factual content;
• comprehensive reviews
undertaken independently
by senior management to
consider messaging and balance;
• comprehensive reviews
undertaken by the Company’s
Brokers to ensure consistency
and balance;
• reporting by the External Auditor
of any material inconsistencies;
and
• comprehensive review by
the Directors and the senior
management team during the
drafting process to ensure that
the key messages being followed
in the annual report were aligned
with the company’s performance
and strategy and that the narrative
sections of the annual report
were consistent with the
financial statements.
The Committee and Board received
confirmation from management that
the assurance framework had been
adhered to for the preparation of
the 2023 Annual Report.
155SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Significant financial judgements and
estimates for the year ended 31 March 2023 How those were addressed by the Audit Committee
Retirement benefit obligations (Estimation uncertainty)
The assumptions in relation to the cost of providing post-retirement
benefits during the period are based on the Group’s best estimates
and are set after consultation with qualified actuaries. While these
assumptions are believed to be appropriate, a change in these
assumptions would impact the level of the retirement benefit obligation
recorded and the cost to the Group of administering the schemes.
The assets and liabilities of the Group’s defined benefit retirement schemes
are regularly reviewed. Advice is taken from independent actuaries on the
IAS 19R valuation of the schemes. The Committee was updated on the
schemes’ valuation and considered the findings of the External Auditor
in relation to the scheme’s key assumptions relative to market practice.
Following this review, the Committee supported the judgements made.
Further details of the calculation basis and key assumptions used, the
resulting movements in obligations and the sensitivity of key assumptions
to the obligation is disclosed at note 23 .
Impairment testing and valuation of certain non-current assets (Financial judgement and estimation uncertainty)
The Group reviews the carrying amounts of its goodwill, other
intangible assets and specific property, plant, equipment and
investment assets to determine whether any impairment or reversal
of impairment of the carrying value of those assets requires to be
recorded. As well as its goodwill balances, the specific assets under
review in the year ended 31 March 2023 are intangible development
assets and specific property, plant and equipment assets related to
gas storage and thermal power generation. In addition, the Group
performed an impairment review over the carrying value of its equity
investments in Neos Networks Limited and Triton Power Holdings
Limited. Inconducting its reviews, the Group makes judgements and
estimates in considering both the level of cash generating unit (CGU)
at which common assets such as goodwill are assessed against, as well
as the estimates and assumptions behind the calculation of recoverable
amount of the respective assets or CGUs. Changes to the estimates
and assumptions arising from factors such as regulation and legislation
changes (including the Electricity Generator Levy and climate change
related regulation), power, gas, carbon and other commodity prices,
volatility of gas prices, plant running regimes and load factors, discount
rates and other inputs could impact the assessed recoverable value
of assets and CGUs and consequently impact the Group’s income
statement and balance sheet.
An annual valuation/impairment exercise is carried out, and the basis and
outcome of this review is presented to the Committee by management
and includes a description of the assumptions applied in deriving the
recoverable values. The Committee reviewed and challenged the
assumptions and projections presented in the management paper and
considered the detailed reporting from, and findings by, the External
Auditor. Further detail of the calculation basis and key assumptions used
in the impairment review, the resulting impairment charges and reversals,
and the sensitivity of this assessment to key assumptions is disclosed at
note 15 . Detail on the accounting policies applied is included in the
Accompanying Information section A1 . Following this review, the
Committee supported the recommendation to recognise impairment
reversals in the financial year of £63.5m in relation to gas storage assets
and the Great Island CCGT. During the year the Group acquired a
50% stake in Triton Power and due to significant movements in short
term-power prices recognised a bargain purchase gain in its Interim
Reporting to 30 September 2022. During the second half of the year,
the Group had realised a significant proportion of the short term benefit,
which resulted in an impairment in the second half of the financial
year. Over the whole year the Group recorded net impairment and
remeasurement of operating derivatives (net of tax) of £21.1m. In
addition, the Committee considered the significant judgement and
related disclosure, and supported the recommendation to recognise
impairments of £37.9m in relation to its retailed interest in Neos
Networks Limited.
Revenue recognition – customers unbilled supply of energy (Financial judgement and estimation uncertainty)
Revenue from energy supply activities undertaken by the Business
Energy and Airtricity businesses includes an estimate of the value
of electricity or gas supplied to customers between the date of the
last meter reading and the year end. This estimation comprises both
billed revenue (disclosed as trade receivables) and unbilled revenue
(disclosed as accrued income) and is calculated based on applying
the tariffs and contract rates applicable to customers against estimated
customer consumption and taking account of various factors including
usage patterns, weather trends and externally notified aggregated
volumes supplied to customers from national settlements bodies.
During the year both of the Group’s Supply businesses have
administered government backed customer support schemes, where
the Group provides discounts to customers based on estimated usage
and recovers amounts from government based on actual customer
usage. The administration of these support schemes has increased the
complexity and level of estimation uncertainty of the Group’s unbilled
calculations. The most material support scheme administered by the
Group in the year was the Energy Bills Relief Scheme (‘EBRS’) within
the GB Business Energy business (which is recorded as other income).
The accounting policy for customer support schemes and the balances
claimed from government is explained at A1.2 . A change in the
assumptions underpinning the calculation would have an impact
on the amount of other income recognised in any given period.
This estimation is subject to a process which compares calculated
unbilled volumes to a theoretical ‘perfect billing’ benchmark measure of
unbilled volumes (in GWh and millions of therms) derived from historical
weather-adjusted consumption patterns and aggregated metering data
used in industry reconciliation processes. Furthermore, actual meter
readings and billings continue to be compared to unbilled estimates
between the balance sheet date and the finalisation of the Financial
Statements. The estimation of the government receivable included
within the Group’s unbilled revenue accrual is based on claimed and
unclaimed values based on the same customer consumption detail
and derived from consideration of tariffs applied to customers, metered
and estimated volumes and other factors. The EBRS claims submitted by
SSE will be audited by the Department of Energy Security and Net Zero
and are subject to volumetric risk as estimated consumption data is
replaced by actual metered data over the 14 month electricity industry
reconciliation period. The value of outstanding EBRS claims included
within the Group’s unbilled accrual at 31 March 2023 was £253m,
which includes a risk provision of £15.1m related to amounts where the
Group has provided the discount to the customer but has assessed that
it will be unable to recover the amount from the government during the
open claim window. Given the non-routine process, the number and
the extent of differing inputs and the requirement of management to
apply judgement noted above, the estimated revenue is considered a
significant estimate made by management in preparing the financial
statements. A change in the assumptions underpinning the unbilled
calculation would have an impact on the amount of revenue recognised
in any given period. The Committee reviewed the practical process
issues and assumptions applied in determining the estimation
uncertainty and considered the findings of the External Auditor.
Following this review, the Committee considered the significant
judgement and related disclosure, and supported the estimate for
revenue recognition from energy supply activities. Further details of
the sensitivity associated with this judgement is disclosed at note 18 .
156 SSE plc Annual Report 2023
Significant financial judgements and
estimates for the year ended 31 March 2023 How those were addressed by the Audit Committee
Impact of climate change and transition to net zero (Financial judgement and estimation uncertainty)
Climate change, the transition to net zero and the Task Force on
Climate-related Financial Disclosures (TCFD) have been considered
in the preparation of these financial statements. The Group has a
clearly articulated Net Zero Acceleration Plus Programme set out on
pages 16 to 17 to lead in the UK’s transition to net zero and aligns
its investment plans and business activities to that strategy. These plans
are supported by the Group’s Green Bond framework under which the
fifth green bond was issued in July 2022 (see note 21 ). The proceeds
of the fifth green bond were allocated to fund Renewables’ wind
projects. The impact of future climate change regulation could have
a material impact on the currently reported amounts of the Group’s
assets and liabilities. In preparing these financial statements, the
following climate change related risks have been considered:
• Valuation of property, plant and equipment, and impairment
assessment of goodwill;
• Valuations of decommissioning provisions;
• Defined Benefit scheme assets; and
• Going concern and viability statement.
Climate change continues to be a key focus. The Committee
reviewed and challenged the implications of climate and the Net Zero
Acceleration Plus Programme for significant accounting judgements
and ensured that the disclosures were reflective. The process which
the Group adopted in relation to identification and quantification of its
climate-related risks and opportunities is explained at pages 36 to 51
along with the governance processes established to oversee and
approve the associated reporting. The Audit Committee reviewed the
approach adopted by the TCFD Steering Group in relation to this matter
and was also briefed by the External Auditor on the audit requirements
associated with the adoption of the TCFD including the need for
consistency of disclosure throughout the Annual Report and the
technical basis for those disclosures. Following presentation of the
proposed disclosures and the report of the External Auditor on SSE’s
approach, the Committee approved the basis of reporting and the
related financial judgement disclosures included throughout the
financial statements for the year ended 31 March 2023. Further details of
the sensitivity associated with this judgement is disclosed at note 4.1 .
Valuation of other receivables (Financial judgement and estimation uncertainty)
The Group holds a £100m loan note due from Ovo Energy Limited
following the disposal of SSE Energy Services on 15 January 2020. The
loan is repayable in full by 31 December 2029, carries interest at 13.25%
and is presented cumulative of accrued interest payments, discounted
at 13.25%. At 31 March 2023, the carrying value (net of expected credit
loss provision of £1.5m (2022: £1.8m) is £149.5m (2022: £131.0m). The
Group has assessed recoverability of the loan note receivable and has
recognised a provision for expected credit loss in accordance with the
requirements of IFRS 9. Due to previous energy supplier failures and
recent market volatility, the Group’s assessment of the recoverability
of the loan note is considered a significant financial judgement.
The Committee considered the steps applied by management in making
its assessment of the significant financial judgements associated with the
Ovo loan note. Management has assessed the recoverability of the loan
based on publicly available and recent financial information, including
Government support schemes and discussions with Ovo Energy Limited
management. The External Auditor explained the work carried out to
corroborate and challenge the position taken by management. While
the carrying value is considered to be appropriate, changes in economic
conditions could lead to a change in the expected credit loss incurred by
the Group in future periods.
Audit Committee Report continued
External audit
External Auditor
Following a competitive tender process,
EY were appointed by shareholders as
SSE’s External Auditor for the financial
year commencing 1 April 2019. EY were
re-appointed by shareholders at the 2022
AGM and have continued to serve as SSE’s
External Auditor. Hywel Ball is the Senior
Advisory Partner and Annie Graham is the
Lead Audit Partner with responsibility for
signing the SSE plc Audit Opinion on behalf
of EY. Annie Graham leads the engagement
team and has been in post since EY were
appointed and will be required to rotate
after five years.
EY presented the strategy and scope of the
audit for 2022/23 at the Committee meeting
held in September 2022, highlighting key
areas of audit focus (included within the
Auditor’s Report on pages 326 to 336 ).
EY reported against their audit scope at
subsequent Committee meetings, providing
an opportunity for the Committee to
monitor progress and raise questions,
and challenge both EY and management.
EY shared an independent perspective on
certain aspects of the Group’s financial
control and IT systems arising from its work,
and reported findings to the Committee in
February 2023.
During the course of the year, EY shared
insights and feedback with management,
and held debriefs to refine the planned
audit approach for the financial year ended
31 March 2023.
External Auditor and audit
process effectiveness
An important part of the Committee’s
work consists of overseeing the Group’s
relationship with the External Auditor to
ensure the independence, quality, rigour
and challenge of the external audit process
is maintained. The Committee reviews the
effectiveness of the audit throughout the
year taking into account:
• the detailed audit strategy for the year
and coverage of the highlighted risks,
scope, and level of fees for the audit;
• the quality, knowledge and expertise
of the engagement team;
• insight around the key accounting and
audit judgements and the competence
with which the External Auditor has
applied constructive challenge and
professional scepticism in dealing
with management; and
• the outcome of the review of
effectiveness of the External Auditor
and audit process discussed on
page 157 .
Independence and objectivity
In addition to the annual review of
effectiveness, the Committee considered
the independence and objectivity of the
External Auditor through: a combination of
assurances provided by the External Auditor
on the safeguards in place to maintain
independence; oversight of the Non-Audit
Services Policy and fees paid; and oversight
of SSE’s policy on employing former
auditors. The External Auditor confirmed
that all its partners and staff complied with
their ethics and independence policies
and procedures including that none of its
employees working on the audit hold any
shares in SSE plc.
External Auditor fees
The Committee considered the audit fee
proposal for the year to 31 March 2023 at
its meeting in September 2022. The factors
driving the increase in the level of fees over
the last three years were discussed with the
External Auditor. The impact of increasing
regulatory requirements, changes in the
business and composition of the Group
and the level of complexity requiring an
increased proportion of specialist resource
were amongst some of the factors taken
into consideration by the Committee when
agreeing fair commercial arrangements
with the External Auditor. Audit fees in the
current year include scope changes and
157SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
2020/212021/222022/23
£2.7m
£3.9m
£4.0
m
£0.2m
£0.1m
£0.1m
£2.5m
£3.8m
£3.9m
Effectiveness of External Audit
Feedback to inform the review of the effectiveness of External Audit
Outcome
Following consideration of all elements of the audit effectiveness review process, in addition to taking account of the
engagement and communication between the Audit Committee, management and External Auditor, the Committee
confirmed it was satisfied that the external audit process provided by EY had been delivered effectively. The Committee
concluded that EY had demonstrated a depth of knowledge, as well as an appreciation of complex issues, whilst providing
constructive, independent and objective challenge to management. The Committee requested that debrief sessions be
held between the External Auditor and the finance management teams across the organisation to consider any areas to
enhance the audit process control environment going forward.
Management
Assess output from
a survey of those
subject to the external
audit process.
Assurance on the
disclosure process
for the provision
of information to
the auditors.
Audit Process
Assess delivery of
the audit strategy
and Independent
Auditors’ Report.
Assess output from
survey of Audit
Partners on the
external audit process.
Assurance on the
operation of audit
quality process at
audit firm.
Audit Committee
Assess output
from annual Audit
Committee evaluation.
Assess output from
survey of Audit
Committee members,
regular attendees
and Group Finance.
External Auditor
Assurance from the
External Auditor
covering independence
(relationships, services
and related threats
and safeguards) and
the matters raised
in the FRC’s Annual
Quality Review
inspection reports
and remedial actions
taken (if any).
Audit and Audit-Related Services Non-Audit Services
External Auditor Fees
overruns of £0.4m related to the prior
year audit. Assurance and Tax service fees
incurred in the year were £0.5m (2022:
£0.5m). Non-Audit Services amounted to
£0.1m and principally related to regulatory
accounts and returns required by Ofgem
and comfort letters in connection with
funding and debt issuance. The Committee
was satisfied that the work was best
handled by the External Auditor because
of its knowledge of the Group and the
services provided did not give rise to threats
to independence. All Non-Audit Services
were approved in accordance with the
Non-Audit Services Policy and adhere
to the FRC Ethical Standard. Fees paid to
EY during the year are made in note 6
to the Financial Statements.
Non-Audit Services Policy
The Committee oversees the Non-Audit
Services Policy which governs the process
for approving certain Non-Audit Services
provided by the External Auditor. The Policy
was updated by the Committee during
the year to ensure that it remained fit for
purpose and aligned to the application
of pre-concurrence on non-audit services
as required by the International Ethics
Standards Board for Accountants. In
addition, SSE is required to cap the level of
non-audit fees paid to its External Auditor
at 70% of the average audit fees paid in the
previous three consecutive financial years.
Services provided by the External Auditor
are split into two categories for the
purposes of approval:
• Audit-Related Services. These services
are largely carried out by members of
the audit engagement team. The work
involved is closely related to the work
performed in the audit and the threats
to auditor independence are ‘clearly
insignificant’. Such engagements are
routinely pre-approved by the Audit
Committee as part of their approval
of the total annual audit fee. Before
engaging in any other work of this
type, approval is required from the
Audit Committee.
• Non-Audit Services. These are services
other than ‘Audit-Related Services’
for which the External Auditor is an
appropriate provider. The threats to
independence arising from such
services are not necessarily ‘clearly
insignificant’ and the Committee and
External Auditor must consider the
threats to independence and whether
any safeguards should be applied. In
the absence of any apparent threat to
auditor independence, approval for the
provision of any Non-Audit Service must
be obtained from the Audit Committee.
158 SSE plc Annual Report 2023
Audit Committee Report continued
Re-appointment of the External Auditor
The external audit contract will be put out
to tender at least every 10 years and will be
conducted by no later than 2029 in line with
prevailing best practice. The Committee
confirms ongoing compliance with the
Statutory Audit Services for Large Companies
Market Investigation (Mandatory Use of
Competitive Tender Processes and Audit
Committee Responsibilities) Order 2014.
The Committee concluded that it is satisfied
with the objectivity and independence of the
External Auditor, and that the effectiveness
of the external audit process delivered by
EY was robust. The Committee proposed
to the Board that it seeks shareholder
approval for the re-appointment of EY as
the External Auditor for the financial year
ending 31 March 2024.
Internal audit
Role of Internal Audit
Internal Audit plays an important role in
helping the organisation deliver its vision
and objectives by providing independent
and objective assurance to management,
the Committee and Board on the
effectiveness of SSE’s risk management
activities, internal controls and corporate
governance framework. Internal Audit, led
by the Director of Group Risk and Audit,
reports to the Committee and functionally
to the Finance Director. The purpose, scope
and authority of Internal Audit is defined
within its charter which is approved
annually by the Committee.
In fulfilling its role, Internal Audit seeks
to add value by encouraging continual
improvement in the effectiveness of
business planning, operations and systems,
promoting wherever possible enhancements
to internal control processes, and seeking
to embed ‘best practice’ throughout the
SSE Group.
At each Committee meeting, an update
on Internal Audit is provided covering
an overview of the work undertaken in
the period, actions arising from audits
conducted, the tracking of remedial
actions, and progress against the Internal
Audit Plan. The Committee routinely meets
independently with the Director of Group
Risk and Audit to discuss the results of the
audits performed and any additional insights
obtained on the risk management and
control environment across the organisation.
Internal Audit Plan
The Internal Audit Plan is structured to
align with SSE’s operating model, risk
profile, control environment and assurance
arrangements. The Internal Audit Plan
is split between a one-year plan and a
three-year strategy setting out the broader
areas of Internal Audit focus, together with
the vision and resource for the function.
External providers may be engaged to
support delivery of the Internal Audit
plan where specific skills and expertise
require to be co-sourced. An integrated
assurance mapping and planning process
is undertaken to ensure that Internal
Audit work is appropriately aligned to,
and coordinated with, the activities of
other relevant assurance providers across
the Group.
Internal Audit effectiveness
The Committee keeps under review
and assesses the independence and
effectiveness of Internal Audit. This year,
the Committee engaged PwC to carry
out a detailed External Quality Assessment
(EQA) of the Internal Audit function. The
process, approach and recommendations
were presented and discussed by the
Committee at its meeting in February
2023, and an overview is set out below.
Internal control and
risk management
Internal control
The Board has delegated to the Committee
responsibility for reviewing the effectiveness
of SSE’s System of Internal Control. This
covers all material controls including
financial, operational and compliance
controls, in addition to the financial
reporting process. Internal control and
risk management in relation to SSE’s energy
market related exposures are overseen
by the Energy Markets Risk Committee
and further information can be found on
pages 160 to 161 .
During the year, the Committee received
an update at each meeting from the project
team established to assess and strengthen
the financial reporting control environment
in anticipation or ahead of regulatory reform
in the UK. In addition, the Committee
received a presentation from KPMG with
a status update on their engagement to
support the project. The timing of the
implementation legislation remains unclear,
however, management has continued to
monitor regulatory developments and
provide regular updates to the Committee.
To assist the Committee’s review of the
System of Internal Control, the different
elements are evaluated by relevant key
stakeholders. These evaluations are then
holistically assessed by the Finance Director
and a letter is provided to the Committee
summarising the work conducted in the
year to improve the control environment and
making a recommendation on the overall
effectiveness of the System of Internal
Control. In addition, when undertaking the
review of the effectiveness of the System of
Internal Control, the Committee considers
the assurance evaluations undertaken
annually by the Managing Directors of
each of SSE’s seven Business Units. These
assurance evaluations consider each
framework of the system of internal control
from a Business Unit perspective and include
any planned improvements to enhance
controls. These improvements are tracked,
with updates reported to the executive-level
Group Risk Committee on a regular basis.
Risk management
The Group’s Risk Management Framework
is designed to manage rather than eliminate
the risk of failure to achieve business
objectives. It can only therefore provide
reasonable and not absolute assurance
against material misstatement or loss.
In addition to the ongoing review of
emerging risks, the Board carried out a
robust assessment of the Principal Risks
facing the Group, being those that have
the potential to threaten its business model,
future performance, solvency or liquidity.
Further details of the Group Principal Risks
are set out on pages 68 to 77 and also in
the Group Risk Report.
Internal control and risk
management effectiveness
Following the Committee’s review and
recommendation, the Board agreed that
SSE’s System of Internal Control (including
risk management) continues to be
effective. This was in accordance with the
requirements of the FRC Guidance on Risk
Management, Internal Control and related
Financial and Business Reporting. The
Board also confirms that no significant
failings or weaknesses have been identified
during the financial year. Processes are in
place to ensure that necessary action is
taken, and progress is monitored where
areas for improvement are identified.
159SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Outcome
Overall, the Internal Audit function was found to be well established and valued across the organisation. The Committee
recognised the progress made during the year and confirmed it was satisfied with the overall performance and effectiveness of
the Internal Audit function. The findings identified by the EQA will be taken forward and progress reviewed by the Committee.
Process
Assessed against:
• The Chartered Institute of Internal
Auditors’ (CIIA) Code of Ethics and
International Standards for the
Professional Practice of Internal
Auditing, including the Internal
Audit Code issued in January 2020;
• PwC’s Five Principles of Internal
Audit Excellence Framework; and
• A benchmark peer group of 8-10
relevant Internal Audit functions.
Approach
Work included:
• Interviews with 16 key
stakeholders, including: Audit
Committee Chair; non-Executive
Directors; Executive Directors; and
Managing Directors across the
business divisions;
• Meetings with five Internal Audit
team members;
• Review of survey sent to all
members of the Internal Audit
Team;
• Review of Internal Audit’s structure
and remit, audit approach and
resource; and
• Review of Internal Audit
documentation over the preceding
12 months across the areas of
planning, auditing and reporting.
Recommendations
Findings included:
• Develop the approach and
methodology to derive more
data driven analysis and insights;
• Enhance executive and Audit
Committee reporting to provide
more insight;
• Continue to develop the approach
to innovation through areas such
as digital capability and adopting
agile delivery methods;
• Develop further the strategic
resourcing model to accommodate
SSE’s international footprint as well
as leveraging internal and external
co-sourcing; and
• Enhancing the approach to
monitoring and driving
performance and productivity.
Effectiveness of Internal Audit
System of Internal Control
The elements that make up the System of Internal Control are:
• Governance Framework. Designed to
ensure focus on the key components
of high quality and effective decision
making – clarity, accountability,
transparency and efficiency. For further
details please see page 122 of the
Directors’ Report.
• Strategic Framework. This includes
SSE’s Purpose, Strategy, Goals and
Values, as well as the focus of its business
model and forms the basis for all activity
within the Risk Management Framework.
For further details please see pages 8 to
23 of the Strategic Report.
• Risk Management Framework. This
framework supports each Business Unit
in managing its risks and helps to ensure
that the Board can meet its obligations.
The framework is underpinned by the
fundamental principle that everyone at
SSE is responsible for the management
of risk.
• Assurance Framework. An integrated
programme of audit and assurance
activity that is independent of the day-
to-day operations of the Business Units
and corporate functions. It is made up of
Internal Audit, Group Compliance, Large
Capital Projects Services and Group
Safety, Health and Environment
• Standards and Quality Framework.
Sets out the expected standards and
guidelines to be followed in the delivery
of the Group’s core purpose.
Governance
Framework
Strategic
Framework
Risk Management
Framework
Standards and
Quality Framework
Assurance
Framework
Board and
Board Committees
Strategic
Objectives
Financial
Objective
Sustainability
Goals
Group Executive
Committee and
Executive sub-
Committees
Business Unit Executive
Committees and
Corporate Support
Functions
External Audit
Internal Audit
Group Compliance
Group Safety, Health
and Environment
Large Capital
Projects Services
Business
Assurance
Group Risk Management
and Internal Control Policy
Review of the
Effectiveness of the
System of
Internal Control
Principal Risk
Self-Assessment
Risk Appetite Statement
Viability Assessment
Key Risk Indicators
Business Unit Principal Risk
Self-Assessment
Assurance Evaluation
Risk Blueprint
Group Policies
Governance
Manuals
Business Unit, Policies,
Procedures, Processes
and Systems
160 SSE plc Annual Report 2023
Energy Markets Risk Committee Report
Role of the Committee
The Committee oversees SSE’s
energy markets risk exposures by:
• Monitoring and supervising
SSE’s hedging approach;
• Assessing any potential emerging
energy market issues and risks;
and
• Reviewing SSE’s internal control
and risk management in this area.
In doing so, it assists the Board
in the effective discharge of its
responsibilities in relation to risk
management and internal control
in this area.
The Committee’s Terms of Reference
are available on sse.com .
•
During 2023/24, as SSE continues to
grow internationally, the EMRC will remain
focused on providing effective oversight
in relation to the Group energy markets
risk exposures. We will also focus on the
impact, management, and mitigation of
relevant macroeconomic and geopolitical
events. This will include:
• the continued impact of the prolonged
conflict between Ukraine and Russia
on energy markets;
• commodity prices and volatility and
inflationary pressures; and
• changes to regulatory requirements.
I would like to thank the members
of the Committee for their continued
commitment throughout the year, the
open discussions that take place at our
meetings, and the contribution they
all provide in support of our work.
Tony Cocker
Chair of the EMRC
23 May 2023
metrics overseen by us to ensure they
remained appropriate in the current climate,
and recommended to the Board changes
to ensure operational effectiveness and
that the correct oversight and reporting
are in place.
The EMRC is assisted in its role by the
following two Group-level committees:
• Group Energy Markets Exposure
Committee which meets monthly
and provides a forum for SSE’s senior
management to discuss and consider
energy market risks and exposures.
• For the Customers Business Unit,
Demand Management Committee (DMC)
which meets monthly. The DMC was
originally created to monitor the impact
of the coronavirus pandemic on the
Business Unit’s demand profile but
continues in operation to monitor
demand in relation to market volatility.
The minutes of these committees are
provided to the EMRC for review and
comment.
In line with standing practice, the annual
Board evaluation is an assessment of our
performance as a committee. I am pleased
this concluded that we operate effectively
and that the Board takes assurance from the
quality of our work. Furthermore, the EMRC
members are seen to bring a wide range
and depth of recent and relevant experience
across various industries, which will be
bolstered further by Maarten Wetselaar,
who will join the EMRC on 1 September
2023, with extensive knowledge from his
career in the energy industry.
Dear Shareholder,
I am pleased to introduce the Energy
Markets Risk Committee (EMRC) Report
for 31 March 2023. This report details
the role we play throughout the year
to oversee SSE’s energy markets risk
exposures and ensure an effective system
of risk management controls and related
processes relevant to energy market risks.
We have continued to play a key role in
overseeing the governance arrangements
in relation to SSE’s approach to managing
portfolio exposures during a year of high
prices and significant market volatility. At
each meeting, we examine and discuss
reports of these exposures, consider any
proposals from the Executive Team, and
recommend any changes to SSE’s hedging
approach to the Board as required. In
addition, the EMRC reviews and endorses
the hedging approach statement which is
updated for material changes and published
as part of SSE’s interim and preliminary
results statements. SSE’s latest hedging
approach statement (as at 31 March 2023)
is also set out on page 86 of this Annual
Report. The EMRC will continue to monitor
and oversee these exposures and, should
circumstances lead to any change in
approach being required, these will
be fully discussed, challenged, and
appropriately reported.
As a committee, we believe that SSE has
been served well by its prudent approach
to hedging and has continued to manage
successfully the changing credit and
collateral requirements. To this end, we also
reviewed the governance controls and risk
Key activities in 2022/23
• Oversaw arrangements and
recommended actions in relation
to SSE’s approach to managing
portfolio exposures during a year
of high prices and significant
market volatility.
• Reviewed and recommended
changes to the risk and controls
monitoring metrics, ensuring
continued effective oversight of
operational effectiveness against
the backdrop of high prices and
significant market volatility.
161SSE plc Annual Report 2023
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Committee membership
and attendance
Four non-Executive Directors and
two Executive Directors make up the
composition of the EMRC. Full details
of membership and meeting attendance
are set out on page 123 . The Chief
Executive and the Managing Director
of Energy Portfolio Management also
routinely attend meetings, with an Assistant
Company Secretary acting as Secretary to
the EMRC. To assist the EMRC in carrying
out its responsibilities, relevant senior
managers can be invited to attend to
present certain items of business and
provide additional levels of insight.
The EMRC membership is approved by the
Board following recommendation of the
Nomination Committee. No changes were
made to the EMRC membership during
the year. Maarten Wetselaar, who joins
the Board on 1 September 2023, will join
the EMRC. Maarten’s experience from his
career in the energy industry will further
ensure that the EMRC has the sufficient
skills and expertise to discharge its duties.
The composition of the EMRC further
facilitates the sharing of relevant
experience held by the non-Executive
Directors. As EMRC Chair, Tony Cocker
brings extensive knowledge from his career
in the energy industry. Debbie Crosbie,
Melanie Smith and Sir John Manzoni,
provide invaluable insights and a wealth
of knowledge from various senior roles in
the private and public sectors. Biographical
information of the EMRC members’
backgrounds and experience is contained
on pages 116 to 120 .
Committee evaluation
The EMRC performance was assessed as
part of the annual Board evaluation (see
pages 140 to 141 ). The results of the
evaluation indicated that the EMRC is
operating effectively, and that it continues
to provide an appropriate level of challenge
and oversight of the areas within its remit.
No specific actions were identified.
Meetings and focus areas
in 2022/23
The EMRC held four meetings during the
year and reported to the Board on its work
following each meeting. Each meeting
agenda is informed by a forward plan of
business, which is designed to ensure that
the EMRC carries out its responsibilities in
line with its Terms of Reference. In addition,
outside the cycle of scheduled meetings,
the EMRC Chair meets with the Chief
Commercial Officer, Managing Director
of Energy Portfolio Management,
and the Committee Secretary to ensure
that key and emerging issues are brought
to the EMRC’s attention as appropriate.
The EMRC will continue to develop and
regularly review the Committee’s forward
plan of business to accommodate any
emerging issues and risks to the Group
concerning energy markets.
The table below sets out details of the key
focus areas and actions taken by the EMRC
in the year.
SSE approach to hedging
SSE has an established approach to
hedging through which it generally
seeks to reduce its broad exposure to
commodity price variation in relation
to electricity generation and supply at
least 12 months in advance of delivery.
As market conditions change, SSE may
be required to vary its hedging approach
to take account of any resultant new or
additional exposures. SSE will continue
to provide asummary of its current
hedging approach, including details
of any changes in the period, within its
Half and Full-year Results Statements.
Details of SSE’s latest hedging approach
and hedging position are set out on
page 86 .
Key EMRC focus areas in 2022/23
Areas of focus Actions taken
Overseeing SSE’s
hedging approach
• As part of a quarterly report on Energy Markets Risk, monitored:
– hedging arrangements;
– risk control metrics;
– Energy Portfolio Management’s counterparty credit risk exposures; and
– the liquidity of energy markets.
• Reviewed and endorsed the hedging approach and position on 31 March 2023 included in the Full-year
Results Statement and Annual Report 2023.
Energy Markets
Risks
• Received reports throughout the year on emerging energy market issues and risks (for example in relation
to volatile gas markets due to the ongoing conflict between Russia and Ukraine) and recommended relevant
matters to the Board on changes to risk management arrangements in line with SSE’s hedging approach.
• Considered a report on key energy market risks, risk appetites and risk management controls and governance.
• Received reports on reviews of GB and ROI energy markets.
• Received a report on SSE’s Trading Approach in relation to the UK Emissions Trading Scheme.
• Received reports throughout the year on SSE’s strategy to support entry to international markets for the asset
businesses by providing route to market and optimisation services.
Internal Control
and Risk
Management
relating to Energy
Market Exposures
• Considered a report on the key risks and controls arising from operations within Energy Portfolio Management.
• Reviewed the Energy Portfolio Management MD Letter of Assurance.
• Received an in-depth review of risk control metrics provided internally.
• Received quarterly reports from Internal Audit and details of resulting action plans related to the Energy
Portfolio Management business.
• Reviewed minutes from the Group-level Demand Management Committee which provided updates on
activities as a result of alterations to customer demand profile due to market volatility.
• Reviewed minutes from the Group-level Energy Markets Risk Committee which provides executive level
oversight of SSE’s energy market exposures and their associated management.
Governance
and other
• Considered the output of the EMRC performance evaluation.
• Approved the narrative of the 2023 EMRC Report.
• Regularly reviewed the forward business planner.
162 SSE plc Annual Report 2023
Safety, Sustainability, Health and Environment
Advisory Committee Report
Role of the Committee
• Supports and advises the Board
on matters relating to safety,
sustainability, health and the
environment.
• Provides a leadership forum
for non-Executive Directors to
work with senior management and
shape policy, targets and strategy
to improve safety, sustainability,
health, and environmental
performance.
• Reviews the effectiveness of
SSE’s strategy, initiatives, training
and targets in relation to safety,
sustainability, health, and the
environment.
• Reviews the implementation
of SSE’s Group Policies relating
to safety, sustainability, health
and wellbeing, the environment,
and climate change.
• Monitors the resource,
competence and commitment
in the management of safety,
sustainability, health, and
environmental issues to ensure
continuous improvement.
• Maintains access to a range of both
internal and external stakeholder
perspectives to better achieve the
creation of shared value for society.
• Supports SSE’s commitment to
being a sustainable company that
makes a positive contribution to the
communities in which it operates.
• Actively ensures the maintenance
of a healthy corporate culture in
respect of safety, sustainability,
health and environmental matters
based on a combination of values,
attitudes and behaviours.
The Committee’s Terms of Reference
are available on sse.com .
capital projects. We maintain focus on
developing SSE’s Environment Strategy,
strengthening our local SHE communities
and sharing SSE’s 2022+ SHE vision ‘making
it easier to do the right thing’.
Following on from last year, SSE’s
Sustainability Team presented two
significant pieces of work: an ESG gap
analysis and a materiality assessment. The
ESG gap analysis supported identification
of where improvements can and should
be made, not only in ESG disclosures,
but in practices and performance as well.
The in-depth materiality assessment
reconfirmed the most salient sustainability
issues to both the Company and its
stakeholders, identifying areas of
opportunity to develop.
An increased number of Committee site
visits were conducted in 2022/23, supporting
oversight of SSE’s safety culture in operation.
Positive impressions were reported back to
the SSHEAC alongside opportunities to
enhance working environments.
On behalf of the SSHEAC, I would like to
thank all employees and those that work
with SSE for their sustained effort, hard
work and commitment. I hope you find
the report a useful explanation of our work
and of SHE performance during the year.
Helen Mahy CBE
Chair of the SSHEAC
23 May 2023
contractors. Our commitment – that we all
get home safe – is the top priority for us.
The Committee has reviewed continued
efforts to enhance employees’ health and
wellbeing in the year. A focus has been
targeting areas in which we can make a
difference and ensuring it is easy for people
to access the help they need. In addition
to the employee benefits already offered,
last autumn saw the launch of SSE’s Health
Hub and ‘We Care’ for employees, which
offer fast access to different health and
wellbeing services. Whilst we have made
great progress in this area in the last few
years, there remain areas we would like to
continue to develop.
We recognise that SSE is part of the
natural world and want to support the
conservation, restoration and sustainable
use of the world’s land and water
resources; and promote the integration
of amenity, ecosystem and biodiversity
improvement into business activities.
As noted in the report that follows, SSE’s
Business Units signed up to achieve no
net loss in biodiversity by 2023 and net gain
in biodiversity by 2025 on onshore large
Dear Shareholder
I am pleased to present the Safety,
Sustainability, Health and Environment
Advisory Committee (SSHEAC) Report
for 2022/23; a difficult year which saw the
very sad fatality of one of our contractor’s
employees at Viking wind farm. This
incident made us re-think, re-energise and
be more determined than ever to deliver
on our Safety Family approach with robust
support for our employees.
This report explains the work of the
SSHEAC during the year, alongside the
progress that has been made in relation
to safety, sustainability, health and
wellbeing, and the environment. A more
in-depth review of these areas, can be
found on pages 34 to 67 and in SSE’s
Sustainability Report 2023 which is
available on sse.com .
Our Safety Family is an important and
distinctive part of SSE’s culture. Through
continuous development, we are looking
to strike the balance between adding more
energy to SSE’s approach whilst reinforcing
our existing Safety Family language
and principles for our employees and
Key activities in 2022/23
• Considered safety performance
and targets
• Enhanced oversight of employee
wellbeing initiatives
• Continued visits across sites
• Reviewed an ESG gap analysis
and materiality assessment
163SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Membership
The membership of the SSHEAC comprises
four non-Executive Directors; the Chair of
the Board; the Chief Commercial Officer;
the Chief Sustainability Officer; the
Managing Director, SSEN Distribution; the
Managing Director, SSE Distributed Energy;
and the Safety, Health and Environment
Director. An Assistant Company Secretary is
Secretary to the Committee and the Chief
Executive routinely attends meetings. The
Committee invites operational managers
and specialists to attend certain meetings
to gain a deeper level of insight on
particular items of business. Biographical
details of the non-Executive members can
be found on pages 116 to 120 .
Meetings and focus in 2022/23
The SSHEAC met five times in 2022/23
and details of non-Executive meeting
attendance are set out on page 123 .
One meeting provided specific
consideration to an ESG gap analysis to
allow identification of additional areas
of focus (see page 165 ). With this being
a new piece of work for the Committee,
Sir John Manzoni received a separate
briefing outside of the meeting, due to
being unable to attend the short-notice
session because of a prior commitment.
Working closely with the Group Safety,
Health and Environment Committee which
reports to the Group Executive Committee,
the SSHEAC has an annual work plan to
review SHE performance at Group-level
and in each of SSE’s seven business areas.
The Committee considers a wide range of
SHE performance and governance issues as
it shapes SSE’s SHE strategy. This year it has
had a specific focus on contractor safety
and health and wellbeing, recognising
the performance challenges of contract
partners and the need to take care of
colleagues’ health and wellbeing in
challenging times.
Other matters which the SSHEAC focused
on were:
• SHE engagement and culture
• SHE risks
• Fatigue management
• Climate adaptation and resilience
• ESG performance
• Sign-off of the plan for SSE’s
Sustainability Report 2023 .
SHE strategy
The SSHEAC reviewed the safety, health
and wellbeing, and environmental
strategies, priorities and plans for 2023/24,
underpinned by the SHE Risk Matrix and
SHE Assurance Plan. It is recognised that
the work being undertaken by contractors,
on SSE’s large capital projects can
represent a higher-risk environment than
normal operations. For this reason, SSE is
focusing on building strong relationships
with contract partners to align behind a
common goal to get everyone home safe.
SSE’s SHE Team also looked at SSE’s business
continuity and crisis management approach
and set out a strategy for operational
resilience and an accompanying three-year
plan. Across 2022/23, organised campaigns
supported SHE strategy implementation and
communication, with a digital enablement
project helping to develop more insights into
SHE performance reporting.
Maintaining SSE’s Safety Family approach
in the face of growth, new joiners and an
increased contractor workload is high
priority, and efforts to reinforce existing
Safety Family language and update the
tools already in place will remain key.
SHE performance
Safety
The SSHEAC oversees safety performance
using a number of different measures.
SSE uses the concept of ‘Safe Days’ to
monitor and track its safety progress and
performance. On a ‘Safe Day’, for SSE or
contractors, there are no minor, serious,
or major safety incidents; serious or major
environmental incidents; or any incident
with high potential for harm to people or
the environment. 255 Safe Days were
achieved during 2022/23, compared to
276 in the previous year. The comparative
figure for 2020/21 has been restated to
align with the current definition of a Safe
Day within SSE and the removal of Minor
Environmental Incidents from the measure.
In addition to Safe Days, SSE continues
to measure safety performance using
the rolling Total Recordable Injury Rate
(TRIR) for employees and contractors.
This measure is used for benchmarking and
trend analysis, and in 2022/23, it increased to
0.19 per 100,000 hours worked, compared
to 0.17 in the previous year. This increase
reflects a significant surge in investment
and construction, and the associated rise
in contractor hours worked. There will be
a separate target TRIR for 2023/24 for SSE
of 0.11, and contractors of 0.31, which,
considering the increased activities and
workload within all Business Units, will
be a challenging task, but is believed to
be achievable.
To enhance the safety of colleagues,
immersive training programmes are
being established at various locations in
the UK. This involves deep immersion in
an interactive environment that simulates
real-world scenarios. The programme will
be tailored to SSE’s needs and attempts
to change employees’ perspective when
working onsite. This will equip new
starters as well as other colleagues
with tools to support the overall goal
of getting home safe.
Committee evaluation
The actions identified from the evaluation of the SSHEAC in 2021/22 as reported on
last year were monitored through to completion.
The annual review of Committee performance was facilitated by Lintstock (see
pages 140 to 141 ) and the outputs considered by the full Committee. This saw
confirmation by the Board of the Committee’s continued effective operation and
agreement by the Committee of a number of actions for progression across 2023/24.
Evaluation
themes
• Good coverage of the key aspects of safety, sustainability and
environmental issues. Continue to define SSE’s Environment
Strategy and monitor environmental performance.
• Good recognition of the steps taken to improve SSE’s Health offer
to colleagues.
• The SSHEAC’s contribution has supported and encouraged the
ambition and direction taken on safety, sustainability, health and
environmental matters.
Actions for
2023/24
• Safety. Communication with contractors is a top priority.
• Meetings. Lengthen meetings and continue to undertake deep
dives on specific topics.
• Environment. Continue to define SSE’s Environment Strategy and
monitor environmental performance. Continue to promote
interactions with 3rd parties NGOs and regulators.
• Sustainability. Teachings on specific sustainability topics.
164 SSE plc Annual Report 2023
Safety, Sustainability, Health and Environment Advisory Committee Report continued
The operational focus of SSE’s Environmental
Strategy is across three priority pillars:
1. Environmental Management and
Governance; 2. Responsible Consumption
and Production; and 3. Natural Environment.
In 2022/23, the total number of
environmental incidents as a result of SSE’s
activities totaled 109 compared to 84 the
previous year, the majority of which were
minor. SSE’s 2021/22 total environmental
incident measure has been restated,
attributed to: enhanced governance
checks that have increased the accuracy of
reporting; and implementing a new SEARS
system which has helped in improving the
visibility of incidents and ensuring their
correct categorisation. This improved
reporting has also supported enhanced
oversight of environmental performance.
Following relatively stable performance
over the past three years, there was a
slight increase in serious environmental
incidents in 2022/23, increasing to 31 from
24 the previous year. Of these incidents
SSE saw an increase in the number of
silt-related issues associated with the scale
up of construction activities, offset by a
reduction in the number and scale of fluid
filled cable leaks of its assets. In order to
address these issues and take into account
the increased project activity, SSE has put
in place deep dives in four areas: silt, fluid
filled cables, SF
6
and waste.
The number of environmental permit
breaches increased to nine in 2022/23
from seven the previous year, the majority
of which were self-reported to the relevant
environmental agencies. All incidents were
dealt with quickly when identified.
Health and wellbeing
The SSHEAC has encouraged and endorsed
a significant focus on health and wellbeing
across SSE over 2022/23. The Committee
reviewed employee absence data and trends
to ensure that common reasons for absence
and wellbeing in the workplace were
considered and understood. Following this,
a new Health Hub was developed to allow
easy access to employee support services.
A new feature of the Health Hub was the
launch of the ’We Care’ health app. Through
this free of charge service, employees and
their immediate families can access 24/7
GP consultations and other health related
advice. A programme in partnership with the
British Heart Foundation on cardiovascular
assessments was also introduced and will
continue into 2023/24.
In addition, in response to employee
listening, a series of webinars has also
broached sensitive subjects such as suicide,
menopause and more, setting the wellbeing
objectives and values to build a strategy
that adapts to business needs. Initiatives to
support employees’ physical and mental
health continue to be provided through
Nuffield, SSE’s Employee Assistance
Programme and Thrive.
Environment
SSE’s Environment Strategy is underpinned
by an ethos of compliance. It provides a
pathway to engage internal and external
stakeholders by holding SSE accountable
for performance against targets and
indicators as a measurement of success.
Following a review of the environmental
vision, a set of targets were agreed for
2022/23. Further details of these targets
and performance against them in the
year can be found in SSE’s Sustainability
Report 2023 and on pages 53 to 55 .
Contractor safety
With the very sad news of the
fatality of one of SSE’s contractor’s
employees, and contractor incidents
and contractor TRIR being higher than
SSE’s, the Committee discussed how
SSE can provide more rigour and
support, especially as the level of
SSE’s delivery through contract
partners will increase.
SSE has formed a new central
Contractor Safety Team supported by
dedicated Contractor SHE Managers
and Assurance Auditors to improve
contractor safety performance. In
SSE’s plan for the next financial year,
key actions have been captured in
the following three categories: 1.
Collaborate – how SSE aligns all
parties to deliver; 2. Support – how to
provide direct support; and 3. Check
– conduct a comprehensive audit
across all businesses and directly
with contract partners to identify and
address any issues systematically.
SSE has been working to continually
improve SHE Specification for
contractors and provide guidance
for project management teams. In
addition to the Contractor Safety
Community, local SHE Communities
are embedded across all SSE Business
Units and the Committee saw good
examples of their work on different
sites during visits.
SSE’s current growth phase, and the
resulting increase in contractor hours
worked, has sharpened focus on keeping
the employees of our partners safe.
An example of this in action is an initiative
within SSE Thermal to introduce on-site
paramedics on large capital projects.
In partnership with SSE’s principal
contractors, it was decided paramedics
should not just treat injuries but should
also put a strong emphasis on prevention
and awareness when it comes to safety,
health and wellbeing.
By creating a positive safety culture, they
are responsible for tasks such as setting
up medical facilities, treatment and
wellness rooms, offering defibrillator and
CPR training, administering medication
and providing mental first aid services.
This approach has already been put
into action treating potential incidents
across sites. A recent survey of SSE
Thermal colleagues showed that
on-site paramedics were one of the top
three factors helping to create a positive
Safety, Health and Environment culture
on location.
Engagement in action
Suppliers, contractors and partners
Partnering for safety and wellbeing
165SSE plc Annual Report 2023
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Sustainability and ESG focus
Significant progress was made across the
most material areas of sustainability in
2022/23, with the SSHEAC reviewing SSE’s
performance in key investor environment,
social and governance (ESG) ratings, and
the results of an ESG gap analysis of SSE’s
performance in two key ratings, approving
areas for development and improvement in
the next financial year. The Committee also
approved the undertaking of a sustainability
materiality assessment, with the objective
of confirming the ESG issues most material
to SSE. The focus areas from the materiality
assessment and the ESG gap analysis align
with the UN Sustainable Development
Goals that SSE has previously identified
as being material, and around which it
has based its sustainability approach. The
recommendations from the two exercises
informed next steps, for example, at a
multi-stakeholder event in April 2023,
a first-of-a-kind, disclosure report was
published and designed to establish a
framework for measuring and disclosing
progress against SSE’s 20 Just Transition
Principles to SSE’s stakeholders.
In terms of SSE’s approach to the disclosure
of its sustainability impacts, the aim is
to bring about continuous improvement
in both the quality and quantity of
information disclosed. The objective for
the Sustainability Report 2023 is to
provide clarity around SSE’s most material
sustainability issues, including those which
represent key areas of opportunity for the
business, reinforcing SSE’s sustainability
hierarchy. SSE will use the Sustainability
Report 2023 to communicate enhanced
disclosures recommended by our materiality
assessment and ESG gap analysis.
More information can be found on
pages 34 to 67 and in the Sustainability
Report which is available at sse.com/
sustainability .
Site visits
The SSHEAC completes an annual
programme of site visits with the main
objective of providing support to, and
engaging with, colleagues working on
different sites. Physical visits resumed in
2022/23, with Committee members looking
at different sites in late summer and early
autumn. Locations visited included Reading,
Slough, Peterhead, Ridgeway (Oxford),
Perth Training School, Chalvey, Canal Street
in Willesden, SSE’s joint venture Activ8,
Leanamore wind farm, Galway wind park
and Tarbert power station.
The feedback from visits was encouraging
with teams working hard to have positive
impacts on the environment and local
communities and ensuring that a thorough
safety briefing is in place. A report of the
visit to Peterhead is provided above.
A structured approach to site visits ensures
that feedback is collected and acted upon.
This is facilitated by a dedicated feedback
template which is completed following
each site visit. The site visits agreed for
2023/24 will be reported on next year.
Mark Patterson, the Safety, Health and
Environment Director, and Helen Mahy,
Chair of the SSHEAC, visited Peterhead
Power Station in September 2022 to gain
insight into SSE’s Safety Family language
in action. Below is a summary of the
takeaways from the visit.
If it’s not safe, we don’t do it
The station’s team demonstrated
openess, a deep sense of trust, and
were supportive of each other and the
environment. Safety was embedded
across plant processes and Safety Family
language was evident across discussions.
We take pride in our work
and our environment
The overall impression was that the
station team are making good strides
towards building a positive SHE culture
and ensuring an engaged team.
We take care of ourselves
and each other
Overall housekeeping and station
planning, control and permit work
was positive and well ordered.
Communication between operational
teams, including apprentices, was
strong and responsive.
We plan, scan and adapt
There was a clear focus on building
capability and skills across the existing
team and getting the station in a position
to support any future developments.
It was positive to see new employees
joining the station from other industries
such as oil and gas.
What would make it easier for
people to do the right thing?
Covid-19 has presented some real
challenges for SSE’s sites. At the time
of this visit, some controls at Peterhead
were still in place to protect the control
room operators from Covid-19, such as
all visitors to the control room wearing
masks. The site induction was also
completed online to ensure the process
was efficient and safe.
Engagement in action
Employees
Visit to Peterhead
166 SSE plc Annual Report 2023
Remuneration Committee Report
Role of the Committee
• Determines and agrees SSE’s
broad policy for executive
remuneration and reviews the
ongoing appropriateness and
relevance of the policy.
• Ensures remuneration is
appropriate, enhances personal
performance and rewards
individual contributions towards
the success of SSE.
• Ensures directors’ remuneration
policy is transparent, takes
account of SSE’s risk appetite and
aligns to SSE’s long-term goals.
• Designs and determines measures
and targets for variable pay
including LTIPs for Executives
and approves payouts.
• Determines policy and scope of
pension arrangements, service
agreements, share ownership
and share retention policies,
termination payments and
compensation commitments.
• Gives due regard to relevant legal
requirements and corporate
governance guidelines.
• Reports on executive
remuneration through the
Directors’ Remuneration Report
and puts forward for shareholder
approval annually at the AGM.
The Terms of Reference for
the Committee are available
on sse.com
Delivery and performance
Our operating model and portfolio remain
highly complementary and balanced.
Our efficient operation of flexible thermal
generation and gas storage assets (see
page 78 ) contributed in a large part, to
strong 2022/23 financial performance. We
have historically tolerated weaker thermal
returns given our long-term belief that the
underlying value of thermal flexibility would
be key to transitioning to net zero. That
value was accentuated by the extreme
levels of market volatility we saw this year.
Strategic delivery in the year was strong,
with critical milestones delivered in
SSE’s flagship large capital projects
(see page 18 ). In light of 2022/23
performance, our financial strength and
the available opportunity set, we have
upgraded our plans and growth targets
to the NZAP Plus, details on page 16 .
2022/23 AIP outcomes
The AIP is determined against a broad
range of financial, operational, personal
and sustainability performance targets
collectively designed to reflect financial
and non-financial business performance
each year. The measures were reviewed
last year to support the delivery of the NZAP
and longer-term goals. Changes included
strengthening the cashflow measure, the
introduction of operational measures and
the addition of new sustainability metrics.
Performance in the year has been strong.
Financial measures exceeded target levels,
and good progress has been made in
respect of operational performance related
to the NZAP. Performance against external
sustainability indices, a new measure for
2022/23, has also been strong with upper
quintile ranking achieved across all indices.
A summary of the detailed AIP scorecard is
shown on pages 172 to 173 .
Each year, the Committee considers
whether there are appropriate reasons to
apply discretion to the AIP outturn. The
Committee was deeply saddened by
the death of Liam Macdonald, a young
contractor working on Shetland, in June
4. Stakeholders: reflecting SSE’s strategic
goal of creating value for shareholders
and society.
Our approach to pay is designed to support
SSE’s purpose to provide energy needed
today while building a better world of
energy for tomorrow. The performance
measures and targets on which the Annual
Incentive Plan (AIP) and the longer-term
performance share awards are directly
linked to execution of SSE’s strategy – the
Net Zero Acceleration Programme (NZAP).
Sustainability is at the heart of SSE’s strategy.
Progress is measured by science-based
business goals for 2030 that align with four
specific UN Sustainable Development
Goals. Progress against these goals,
which are detailed on page 183 , was
linked last year to the vesting of awards
made under the Performance Share Plan
(PSP). Shareholders also approved new
‘strategic’ measures which assesses
progress towards the successful delivery
of the NZAP. This means that 30% of the
shares awarded under the new PSP are
linked to sustainability, either directly
through sustainability measures or through
strategic measures by virtue of SSE’s
NZAP. The in-year focus on sustainability
continues through measures which have a
weighting of 40% within the 2023/24 AIP,
with 10% assessed against sustainability
indices and 30% relating to operational
performance linked to the NZAP.
Our remuneration policy is structured
to ensure that we have enough flexibility
to attract world-class talent. This is
particularly important as SSE is increasingly
exposed to new markets and technologies.
Dear Shareholder,
This is my first annual statement as Chair of
SSE’s Remuneration Committee, of which I
have been a member since January 2020.
On behalf of the Board, my thanks go to
Dame Sue Bruce for her extraordinary
contribution both as a member of the
Committee from December 2017 and
as its Chair from May 2018.
The Directors’ Remuneration Report sets
out the detail and rationale for Directors’
remuneration and covers:
• Linking remuneration to strategy
• Delivery and performance
– 2022/23 AIP outcomes
– Vesting of 2020 PSP award
– Wider workforce pay
– Salary changes
• Changes to the Board
• Pension arrangements
Linking remuneration to strategy
The current Directors’ Remuneration Policy
was approved at the July 2022 Annual
General Meeting with over 91% support.
Sue Bruce led an extensive consultation
exercise with our largest shareholders and
the Remuneration Committee is extremely
grateful for their support. The policy is built
on a set of enduring core reward principles:
1. Sustainability: reinforcing SSE’s
commitment to being a responsible
employer.
2. Simplicity: maximising transparency
and avoiding unnecessary complexity.
3. Stewardship: encouraging and fairly
rewarding good decision-making for
the long term.
167SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
2022. As a result, it used discretion to
reduce the outturn of the AIP.
The outturn for the 2022/23 AIP is 88%
of the maximum following the use of
downward discretion.
Vesting of 2020 PSP award
The PSP awards granted in June 2020 are
due to vest following the 2022/23 financial
year, subject to financial, operational, and
value-creation performance conditions
measured over the three-year performance
period ending 31 March 2023.
The Remuneration Committee objectively
assessed the vesting outcome against
the performance measures and targets.
This resulted in an outturn of 76% of the
maximum award. The Committee then
reviewed the quality of the overall
performance and the number of shares
awarded in 2020 in comparison with the
number of shares awarded in 2019 and
in 2018. The number of shares under
award in 2020 was 85% of the number of
shares awarded in 2019. The Remuneration
Committee was satisfied that the Executive
Directors have not benefited merely as a
result of share price volatility. It agreed that
the vesting outcome for these awards was
appropriate and no discretion was required.
More details on the performance measures,
the targets, and the performance outturns
are set out on page 174 .
Wider workforce pay
In setting pay policy and agreeing
pay outcomes for Executive Directors,
the Committee is mindful of the pay
arrangements of the wider workforce.
Throughout the year, a number of initiatives
were introduced as part of SSE’s improved
Employee Value Proposition including the
introduction of a new skills-based pay
system involving considerable investment,
increases to salary ranges and car
allowances, enhancements to ‘family
friendly’ policies and the introduction
of additional health benefits.
In recognition of SSE’s 2021/22 performance
employees below senior management
level were offered a £500 one-off payment
in May 2022. Later in response to the
worsening cost of living crisis part of the
annual salary increase was paid early in
October 2022 to help people through
the winter with the balance of CPI paid at
yearend. Further details on the Employee
Value Proposition and support offered to
employees in response to the cost of living
crisis can be found in the case study on
page 179 .
Salary changes
In reviewing the base salaries of Executive
Directors, the Committee considered
SSE’s strong performance and shareholder
returns, and NZAP progress. We also
considered the increases granted to the
wider employee population which were
linked to CPI expected to be in the region
of 8%.
SSE’s market capitalisation is in the FTSE
20-50 upper quartile (excluding financial
services). SSE total pay potential is below
the median for this benchmark set. SSE’s
market capitalisation is within the range
of the median of the FTSE 50 (excluding
financial services) and total pay potential
compared to this group is in the lower
quartile. As SSE scales and becomes
more international, the Committee will
increasingly keep a watching brief on pay
trends and pay levels across the FTSE 50.
The Committee decided that the increase
for each of the Executive Directors from
1 April 2023 should be 5% of salary.
Changes to the Board
Gregor Alexander – SSE announced
on 21 April 2023 that Gregor Alexander,
who has served as Finance Director since
2002, would step down from the Board
on 1 December 2023 and retire from SSE
at the end of March 2024. Gregor will
continue in his current positions as Chair of
SSE Transmission’s Board and as a Director
on the Board of Neos Networks Limited,
SSE’s joint venture with Infracapital
Partners. The Remuneration Committee
without hesitation exercised its discretion
to treat Gregor Alexander as a ‘good leaver’
in respect of his retirement, taking in to
account his long and distinguished service.
He will continue to be paid in the usual way
until he steps down from the Board. He will
be eligible for a time pro-rated bonus in
respect of his service in the financial year
2023/24. One third of his bonus will be
deferred into shares in the usual way. He
will not receive an award in 2023 under
the PSP. His outstanding share awards
under the PSP will be time pro-rated to
reflect the elapsed time between the start
of the performance period and the date of
cessation of employment, and the awards
will vest in accordance with the usual
timetable. He will be required to retain
a shareholding for at least two years
following the date of cessation of
employment in accordance with the
Directors’ Remuneration Policy.
Barry O’Regan – It was announced on
21 April 2023 that Barry would take up the
appointment of Chief Financial Officer
from 1 December 2023. Barry will join the
Board on the same date. As his home base
will remain in Ireland, he will be paid a Euro
base salary of the equivalent of £600,000
a year. It is planned that the base salary
will increase by 8.3% to the equivalent of
£650,000 with effect from 1 April 2024 and
to the Euro equivalent of £700,000 (an
increase of 7.7% of salary) with effect from
1 April 2025. The Committee believes that
the planned phased increases set out are
appropriate to achieve a competitive total
pay position and will be subject to review
at each point to ensure they reflect Barry’s
development in the role. His maximum
bonus under the AIP will be 130% of salary
and his annual award under the PSP will be
225% of salary. It is expected that an award
will be made under the PSP on 1 April 2024.
He will be required over time to build up a
shareholding to the value of 225% of salary
and to retain this holding for two years
after he leaves employment with SSE. His
existing incentive arrangements, including
in-flight share awards, will continue to run
on their original terms.
Pension arrangements
The Directors’ Remuneration Policy is clear
that any individual appointed to the Board
will receive pension arrangements which
are aligned, in terms of annual percentage
contribution, to those of the majority of
SSE employees.
During the year, the Committee considered
the pension allowance of 15% of salary
payable to the Chief Commercial Officer,
Martin Pibworth, with effect from 1 January
2023 in the light of the UK Corporate
Governance Code, the views of many
investors and representative bodies
on the alignment of executive pension
arrangements with those for all employees.
It has made no further changes to Martin’s
pension allowance of 15%, which is in
line with the average employer cost for
employees with similar service.
As Chief Financial Officer, Barry O’Regan
will receive a cash allowance in lieu of
contribution to his pension equivalent
to 12% of salary aligned to the policy for
new appointments and the contribution for
the majority of employees in the UK and
Ireland irrespective of length of service.
The defined benefit arrangements for the
Chief Executive and the Finance Director
reflect their long service with the business
and, in terms of the benefits provided, are
in line with the arrangements for other
employees recruited at the same time.
Summary
The Remuneration Committee plans to
continue to apply SSE’s core principles of
transparency of decision-making and clarity
of reporting and to be fully cognisant of the
perspectives of SSE’s stakeholder groups. I
very much welcome any comments on the
2022 Directors’ Remuneration Report or on
any remuneration matters. I can be reached
via Sally Fairbairn at sally.fairbairn@sse.com.
Melanie Smith CBE
Chair of the Remuneration Committee
23 May 2023
168 SSE plc Annual Report 2023
Remuneration at a glance
Directors’ Remuneration Policy in 2023/24
The illustration below shows how SSE intends to operate its Directors’ Remuneration Policy in 2023/24.
Element Max 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29
Fixed pay
Salary Set with
reference to
pay increases
for the wider
employee base
Salary paid
Benefits Market
competitive
Benefits paid
Pension Final salary and
top up/pension
allowance
Pension
accrual/
allowance paid
1
Variable
pay –
at risk
Annual
Incentive Plan
(AIP)
CEO 150%
of salary.
FD and CCO
130% of salary
67% cash/33%
deferred shares
Performance
period
AIP cash paid
AIP deferred
share awards
granted
Vesting period Awards vest
Performance
Share Plan (PSP)
CEO 250%
of salary.
FD and CCO
225% of salary
2-year holding
period
PSP awards
granted
Performance/vesting
period
PSP awards
vest
Holding period Holding
period ends
Additional
governance
Share
ownership
requirement
250% of salary
for CEO and
225% of salary
for FD and CCO
Share ownership requirement
Recovery and
withholding
All incentives Malus and clawback: material misstatement or restatement of accounts; misconduct which results in
a materially adverse financial effect; serious reputational damage including material environmental or
safety issue, or material operational or business failing; factual error in calculating payment/vesting;
serious misconduct; corporate failure; material risk failure; material detriment to stakeholders or to
company’s market reputation; unreasonable failure to protect stakeholders’ interests
Post-
employment
Career shares
(up to 2022)
The holding requirement for career shares is until two years after cessation of employment. From
2022, PSP awards and deferred bonus shares will all count towards the two-year post cessation policy.
1 The Finance Director ceases to accrue further pension at age 60 in April 2023 and will receive no cash allowance in lieu.
Strategic performance
Executive Directors’ remuneration is strongly linked to strategic performance. Some of SSE’s strategic performance measures are
detailed below, with an indication of how they link to remuneration. SSE has delivered against its dividend target and performed well
against a range of financial and non-financial measures. Full details of SSE’s financial and non-financial KPIs can be seen on pages 24
and 25 .
Adjusted Earnings Per Share
166.0p
AIP and PSP
(2021/22 – 94.8p)
Cashflow (net debt/EBITDA)
2.7
AIP
(2021/22 – 4.3)
Dividend Per Share
96.7p
PSP
(2021/22 – 85.7p)
Total Shareholder Return
(FTSE 100)
Rank 24
of 95 PSP
(2021/22 – Rank 13 of 95)
Total Shareholder Return
(MSCI)
Rank 7
of 24 PSP
(2021/22 – Rank 6 of 23)
Total Recordable
Injury Rate
0.19
per 100,000 hours worked AIP
(2021/22 – 0.17)
169SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
88%
100%
10%10%
24%
30%
9%
10%
20%20%
30%30%
Adjusted
EPS
Cashflow Personal Operational Total
(% of
maximum
1
)
Sustainability
76%
100%
7%
20%
10%
20%20%20%
19%
20%20%20%
TSR v
FTSE100
TSR v
MSCI
EPS
growth
DPS
growth
Total
(% of
maximum)
Customer
Maximum
Actual
1 The overall total for AIP at 88% includes the Remuneration Committee’s use of downward discretion. See page 174 .
How pay links to the wider workforce at SSE
Base Salary Benefits Pension Short-term Incentive Long-term Incentive
Executive Directors
(3 employees)
Base salary is
typically set
with reference
to the market,
performance and
wider workforce
considerations.
Annual increases are
typically in line with
or less than those for
the wider employee
population.
A range of voluntary
benefits in line with
the wider workforce
plus contractual
car and private
medical benefits.
All employees
are members of a
defined contribution
pension scheme,
or one of our legacy
defined benefit
pension schemes,
unless they have
opted out.
The arrangements
are diverse and
the employer cost
typically ranges from
4.5% to 32.5% of
salary when both
defined contribution
and defined benefit
schemes are taken
into account.
Annual Incentive
Plan linked directly
to business
performance –
50% financial,
50% non-financial.
33% of the total
award is deferred
into shares for
three years.
The Performance
Share Plan is a
share award with
performance
linked to strategic
performance
measures.
Group Executive
Committee
(8 employees)
Annual Incentive
Plan considering
performance of the
Group (directly linked
to the above), the
business area and
the individual. 25%
of the total award is
deferred as shares
for three years.
The Leadership
Share Plan is also
linked to strategic
performance
measures over the
longer-term and
those with direct
impact on strategic
output are eligible.
Senior Management
(120 employees)
Wider workforce
(12,000 employees)
Base salary levels
are subject to
negotiation with
recognised trade
unions and/or are
set in line with
market requirements.
Annual increases
are either subject
to negotiation
or individual
performance.
A range of voluntary
benefits are available
to all employees, such
as a cycle to work
scheme, a holiday
purchase scheme,
health benefits, and
enhanced maternity,
paternity and
adoption leave.
All personal contract
employees will
participate in the
Annual Incentive
Plan (as above).
100% of the award
is paid in cash.
All employees may
participate in the
Share Incentive
Plan (SSE matches
three shares for
every three bought)
and the Sharesave
(SAYE) plan.
The above applies to employees across the UK and ROI where practically possible.
Annual Incentive Plan Performance Share Plan
Incentive Plan Performance in 2022/23
170 SSE plc Annual Report 2023
Annual report on remuneration
1. Single total figure of remuneration (audited)
The table below shows the single total figure of remuneration for each Executive Director for the financial year ending 31 March 2023
relative to the previous year.
Alistair Phillips-Davies Gregor Alexander Martin Pibworth Total
6
2022/23
£000s
2021/22
£000s
2022/23
£000s
2021/22
£000s
2022/23
£000s
2021/22
£000s
2022/23
£000s
2021/22
£000s
Fixed Pay Base Salary
1
952 924 736 714 655 636 2,343 2,274
Benefits
2
27 26 24 23 18 18 69 67
Pension
3
367 413 260 303 127 159 754 875
Total Fixed Pay 1,346 1,363 1,020 1,040 800 813 3,166 3,216
Variable Pay AIP
4
1,256 1,150 841 771 750 678 2,847 2,599
PSP
5
2,025 2,142 1,369 1,449 1,025 1,084 4,419 4,675
Total Variable Pay 3,281 3,292 2,210 2,220 1,775 1,762 7,266 7,274
Total 4,627 4,655 3,230 3,260 2,575 2,575 10,432 10,490
1 SSE offers all employees a range of voluntary benefits some of which operate under a salary sacrifice arrangement. The salaries shown above are reported before
any such adjustments are made.
2 Benefits relate to company car, Share Incentive Plan company contributions and medical benefits. These benefits are non-pensionable.
3 The pension values for Alistair Phillips-Davies and Gregor Alexander represent the increase in capital value of pension accrued over one-year times a multiple
of 20 (net of CPI and Directors’ contributions) in line with statutory reporting requirements.
4 The AIP figures above show the value of the award including the portion deferred as shares.
5 The PSP figures for 2021/22 have been readjusted in line with statutory reporting requirements, following last year’s report to show the actual value upon vesting.
The estimated value shown in the table for 2022/23 is based on the average share price in the three months to 31 March 2023 of £17.26, as required by the
reporting regulations. The value generated through share price appreciation is £849,657 (full details shown on page 175 ). The award remains subject to service
until May 2023 and so the prior year comparative will be restated in next year’s report to show the actual value on vesting, as is required by the regulations.
6 Directors have not received any other items in the nature of remuneration other than as disclosed in the table.
Rationale for 2022/23 single total figure of remuneration
There has been very little year-on-year change in the single total figure of remuneration with just a 0.5% reduction. For the Executive
Directors, total remuneration has either stayed the same or reduced by up to 0.9%. There have however, been changes in the individual
elements of pay. Executive Directors received a base salary increase lower than the wider workforce and AIP outcomes were increased
following a year of strong financial, operational and strategic performance. The single total figures reflect the Committee’s decision to
exercise discretion in relation to the AIP outturn. PSP outcomes also increased however, share price appreciation reduced from 52% in
2022 to 24% over the three years to the end of March 2023.
Values for pensions have all reduced during the year. Martin Pibworth’s pension allowance was subject to a phased reduction to bring it
in to line with the wider employee population from 1 January 2023. Alistair Phillips-Davies and Gregor Alexander participate in defined
benefit pension arrangements and there has been a reduction in the pension service cost which is a function of the valuation regulations
rather than any change in approach.
The Remuneration Committee is satisfied that the single total figure of remuneration for each Executive Director is appropriate.
Base salary
In line with the average base salary increase for the wider employee population, Executive Directors’ salaries were increased on 1 April
2022 by 3% from £923,924 to £951,642 for the Chief Executive, from £714,117 to £735,541 for the Finance Director and from £636,300
to £655,389 for the Chief Commercial Officer.
Benefits
Benefits are provided at an appropriate level taking into account market practice at similarly sized companies and the level of benefits
provided for other employees in the Company. Core benefits include car allowance, private medical insurance and health screening.
The Executive Directors also participate in the Company’s all-employee share schemes on the same terms as other employees.
Pension
The Chief Executive and Finance Director are members of the Southern Electric Pension Scheme and the Scottish Hydro Electric Pension
Scheme respectively, and their plan membership predates their Board appointments. They participate in the same defined benefit pension
arrangements that were available to all employees recruited at that time. The schemes were closed in 1999 and the service costs are 32.5%
of salary. These are both funded final salary pension schemes and the terms of these schemes apply equally to all members. The Executive
Directors’ service contracts provide for a possible maximum pension of two thirds final salary from the age of 60.
In relation to Executive Directors who are subject to the scheme-specific salary cap (which mirrors the provisions of the previous HMRC cap
arrangements) the Company provides top-up (unfunded) arrangements which are designed to provide an equivalent pension on retirement
from the age of 60 to that which they would have earned had they not been subject to the salary cap. From 1 April 2017 pensionable
earnings increases were capped at RPI +1%. These are legacy arrangements and will not be used for any new external appointments.
171SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
The Chief Executive and Finance Director, in common with all other employees who joined at the same time (26 and 32 years ago
respectively), have the following pension provisions relating to leaving the Company:
• for retirement through ill-health an unreduced pension based on service to expected retirement is paid;
• in the event of any reorganisation or redundancy an unreduced accrued pension is paid to a member who is aged 50 or above,
with at least five years’ service or, for a member who has not yet reached that age, it will be payable with effect from 50;
• and from the age of 55, a scheme member is entitled to leave the Company and receive a pension, reduced for early payment,
unless the Company gives consent and funds this pension on an unreduced basis.
Dependent on the circumstances surrounding the departure of the Executive Director and financial health of the Company at the time,
the Committee’s policy is to give consideration to a cash commutation of the unfunded unapproved retirement benefit (UURB) pension
at the time of leaving. Any cash commutation will limit SSE’s liability, taking into account valuations provided by independent actuarial
advisors, and will be calculated on what was judged to be a cost neutral basis to SSE.
The Finance Director will stop accruing pension under the scheme with effect from his 60th birthday in April 2023.
The Chief Commercial Officer, who has been with SSE since 1998, was already in receipt of a pension allowance of 30% of salary prior to
his appointment as an Executive Director. While the arrangement was consistent with the approach used for all other members who have
elected to receive a cash allowance in lieu of accruing future pension benefits, the Committee agreed that his future pension arrangements
would be aligned with the level of contributions available to the wider workforce at 15% of salary on a phased basis over five years. Following
confirmation of his expanded role from 1 November 2020, it was agreed that the phased reduction would be accelerated by two years. From
1 January 2023, his pension allowance has been in line with the employer contribution for the majority of SSE’s employees, taking into
account length of service, at 15% of salary.
The table below details pension accrued for each of the Executive Directors as at 31 March 2023 and 2022.
Accrued
pension as at
31 March 2023
£000s
Accrued
pension as at
31 March 2022
£000s
Alistair Phillips-Davies 549 513
Gregor Alexander 490 461
Martin Pibworth
1
0 0
1 Martin Pibworth received an allowance in lieu of a pension contribution of 20% of salary between 1 April and 31 December 2022, and 15% from 1 January 2023.
Annual Incentive Plan and Performance Share Plan
In setting targets and assessing performance, the Committee followed the process below for both the AIP and PSP:
1. Set performance
measures aligned
with strategy
2. Set stretching
performance targets
3. Assess performance
against targets
4. Take account of
wider environment
and stakeholders
5. Apply discretion
if required
2022/23 Annual Incentive Plan
1. Set performance measures aligned with strategy
AIP requires broad performance across financial metrics (Adjusted EPS and Cashflow) and strategic metrics (Personal, Operational and
Sustainability). The performance measures and their weightings are shown below.
Financial
(50%)
Operational
(30%)
Sustainability
(10%)
Personal
(10%)
Adjusted
EPS
(30%)
Cashflow
(20%)
People
Thermal
Renewables
Customer
Distribution
Other Growth & Transactions
Transmission
Moody’s Sustainalytics S&P Global
Individual
Objectives
(10%)
2. Set stretching performance targets
The financial performance targets were set at the start of the financial year taking into account internal financial plans, external consensus
where it exists and the expected impact of identified opportunities and threats to the business in the context of wider economic conditions.
The performance target range is set on a realistic basis but requires true outperformance for Executive Directors to achieve the maximum.
The Remuneration Committee has a history of setting challenging targets, evidenced by the average AIP payout of 60% since 2013/14 as
shown on page 178 .
The Committee had originally intended to use four ESG ratings agencies as the basis for assessing performance in relation to Sustainability
(as set out in the 2022 Annual Report). However, the provision of detailed comparative data for the MSCI ESG rating was not possible in
2022/23, and therefore, average performance over three indices rather than four has been used. SSE’s performance against the MSCI ESG
rating was in the upper quintile and as such, the Committee is satisfied that this issue has not made a material difference to the outturn of
this performance measure.
172 SSE plc Annual Report 2023
3. Assess performance against targets
The table below shows how performance measures are linked to strategy and how performance was ultimately delivered.
Performance measure
AIP Adjusted EPS Cashflow Personal Operational Sustainability Total
Link to strategy Simple
Stewardship
Stakeholders
Simple
Sustainable
Stakeholders
Simple
Sustainable
Stewardship
Stakeholders
Simple
Sustainable
Stewardship
Stakeholders
Simple
Sustainable
Stewardship
Stakeholders
Rationale Underlying
measure of
financial
performance and
strategic KPIs
Net debt/EBITDA To reflect those
activities which
go beyond the
responsibilities
of the role
Operational goals
relating to people,
the businesses
and other growth
and transactions
Three external
ratings agencies –
Moody’s,
Sustainalytics,
and S&P Global
Weighting 30% 20% 10% 30% 10%
Threshold 114p 5.0 See scoring
framework below
See scoring
framework below
Median
Max 132p 4.5 Upper quintile
Outcome 166.0p 2.7
See next section
Performance 100% 100% 90% 79% 100%
Outturn (% of max
incentive)
30% 20% 9% 24% 10% 93%
The Personal and Operational goals will be assessed using the scoring framework as follows:
Score Illustrative performance assessment Illustrative outturn as % of maximum
1
1 Below threshold Zero
2 Threshold performance 20%
3 Majority of goals at target 40%
4 Substantial majority of goals at or above target 70%
5 All goals at or above target 100%
1 The Remuneration Committee can decide to award an outturn between levels if warranted.
The tables below and on the following pages provide detail on each of the non-financial measures and the assessment of performance
against each one.
High-level
measure Detailed measure Factors to be assessed Summary performance
Assessment
(score 1-5)
Outcome
(% of max)
Personal
10%
Chief
Executive
Culture and the SSESET,
Financial, People Development,
Succession, Stakeholder
Management, Strategy
and Growth.
Overall, a strong year of performance.
Financial performance exceeded targets.
Delivered an updated and enhanced NZAP
Plus strategy. Successful disposal of a 25%
stake in the SSEN Transmission business.
Acquisition of Triton Power and a Southern
European onshore development platform
from SGRE. Pipeline progress in solar and
battery. Key appointments made during the
year. Seagreen has faced some challenges
and increased contractor hours have had
an impact on safety.
4+ 90%
Finance
Director
4+ 90%
Chief
Commercial
Officer
4+ 90%
Annual report on remuneration continued
173SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
High-level
measure Detailed measure Factors to be assessed Summary performance
Assessment
(score 1-5)
Outcome
(% of max)
Operations
30%
People
Health and Safety performance
as measured by Total Recordable
Injury Ratio (TRIR); recruitment
plans and inclusion and diversity
as measured by time to hire,
filling of vacancies and the
percentage increase in gender
diversity across SSE.
TRIR increased at 0.19 driven by contractor
safety performance. Gender Pay Gap
decreased. Female leadership increased.
4,400 vacancies filled (1,300 more than
in 2021/22). Time to hire remains steady at
48 days. Simplified Board I&D scorecard
introduced. Progress has been made
across all diversity groups.
4+ 83%
Renewables
Cost per MW hour, plant
availability, progress on
renewables pipeline.
Production down by c.15% on plan due to
weather. Plant availability at highest levels
across onshore sites and improvements
across offshore. 4GW of secured pipeline
added. Total pipeline is now >20GW. 2nd
in the balancing market.
3+ 65%
Distribution
Progress against ED2 business
plan; incentive income against
agreed target.
Good progress against ED2 business plan.
SHEPD and SEPD both performing well
following change activity. SSEN Distribution
the most improved DNO of the year. Some
good performance against incentive measures.
3+ 65%
Transmission
Contract awards achieved
against agreed plan; delivery of
outputs and approval of projects
that maintain a trajectory of RAV
greater than £6bn by 2026.
All T2 outputs are on track to be met.
Delivery of outputs are expected to
outperform despite challenging market
conditions. Trajectory of RAV expected
to be >£6bn.
4+ 90%
Thermal
Balancing market performance. Rank 1 generator in the balancing market. 5 100%
Customer
Finish above median in the
Citizen’s Advice non-domestic
supplier league table.
Ranking in Citizen’s Advice league around
upper quartile performance level. Airtricity
ranked 3rd out of 7 in annual CX survey but
showed largest year-on-year improvement.
3+ 65%
Other
Growth and
Transactions
Progress building pipeline across
business areas including solar,
storage, hydrogen, and other
priority business development
areas; progress made on financial
sell down of T&D businesses.
Solar and battery pipeline increased to
2GW+ incl 22 long-term/greenfield projects
up to 500MW each. Progress in Distributed
Energy. Delivery of first EV hub in Glasgow.
Transmission stake sale complete. Decision
to retain 100% of Distribution at this time.
4+ 85%
Total 79%
High-level
measure Detailed measure Factors taken into account in index scoring Assessment
Outcome
(% of max)
Sustainability
10%
Moody’s ESG
rating
(formerly V.E.)
Environment; Human Resources; Human Rights; Community Involvement;
Business Behaviour; Corporate Governance.
Peer group: Electric & Gas Utilities
Upper quintile
(Sep 2022)
Sustainalytics
sustainability
index
Carbon – own operations; Emissions, Effluents and Waste; Resource Use;
Land Use and Biodiversity; Business Ethics; Corporate Governance;
Product Governance; Community Relations; Human Capital; Occupational
Health and Safety.
Peer group: Electric Utilities
Upper quintile
(Nov 2022)
S&P Global
sustainability
index
27 different categories which cover all of the above and also additional
issues such as Policy Influence, Information and Cyber Security, Talent
Attraction and Retention, Stakeholder Engagement, and Climate Strategy.
Peer group: ELC Electric Utilities
Upper quintile
(Oct 2022)
Average performance across three assessments
85th percentile
(upper quintile) 100%
174 SSE plc Annual Report 2023
4. Take account of wider environment
The Remuneration Committee believes that the range of measures used in the AIP ensures that performance is assessed using a balanced
approach, without undue focus on a single metric which could be achieved at the expense of wider initiatives. AIP outturns for the wider
employee population were also taken into account by the Committee.
5. Apply discretion if required
Consideration is given to performance outcomes in light of SSE’s performance in the round and against our pay principles. The Committee
is clear that no matter their role, getting everyone who works for SSE home safe at the end of each day remains our priority. That focus is all
the keener following the tragic death of Liam Macdonald, a young contractor working on Shetland, in June 2022. More information on this
including SSE’s wider safety performance and response to this tragedy can be found on page 162 onwards.
While safety performance is measured in the formulaic assessment of AIP, the Committee also considered the extent to which a
discretionary adjustment should be applied. After careful consideration, the Committee decided to reduce the award outturn to 88%.
The discount is greater than the impact of reducing to zero any bonus under the people (and safety) element of the AIP.
AIP earned for each of the Executive Directors is shown in the table below. The total award is made up of 67% cash and 33% which is
deferred into shares and vests after three years.
Maximum
(% of salary) AIP earned
1
AIP cash AIP deferred
Alistair Phillips-Davies 150% 1,256,167 841,632 414,535
Gregor Alexander 130% 841,459 563,777 277,681
Martin Pibworth 130% 749,765 502,343 247,422
1 Both the cash and deferred element are subject to clawback provisions.
2020 – 2023 Performance Share Plan
1. Set performance measures aligned with strategy
PSP performance measures are designed to encourage sustainable value creation, consistent with effective stewardship, encouraging
good decision-making for the long term. The measures and their weightings are shown below:
Value Creation
(40%)
Total Shareholder Return
relative to FTSE 100
(20%)
Total Shareholder Return
relative to MSCI Europe Index
(20%)
Adjusted EPS growth
(20%)
DPS growth
(20%)
Customer:
Distribution
(10%)
Customer:
Business
Energy
(10%)
Operational
(20%)
Financial
(40%)
2. Set stretching performance targets
The performance target ranges for PSP are set each year to ensure they are stretching and represent value creation for shareholders.
3. Assess performance against targets
The vesting of shares under the PSP is subject to the performance measures and targets shown in the table below which also details the
actual outturn for the 2020 PSP award vesting this year.
Performance measure
PSP TSR v FTSE 100 TSR v MSCI Europe EPS growth DPS growth
Customer
(Distribution)
Customer (Business
Energy) Total
Link to strategy Simple
Stewardship
Stakeholders
Simple
Stewardship
Stakeholders
Simple
Stewardship
Stakeholders
Simple
Sustainable
Stakeholders
Simple
Stewardship
Stakeholders
Simple
Stewardship
Stakeholders
Rationale Relative
measure of
performance
Relative
measure of
performance
Underlying
measure of
financial
performance
Return on
investment
through
payment of
dividends
Meeting
customers
needs is at
core of our
business
Meeting
customers
needs is at core
of our business
Weighting 20% 20% 20% 20% 10% 10%
Threshold 50th percentile 50th percentile RPI RPI Median ranking Median ranking
Max 75th percentile 75th percentile RPI +10% RPI +5% Rank 1 Rank 1
Outcome Rank 24 of 95
(above 75th
percentile)
Rank 7 of 24
(just below
75th percentile)
In excess of
RPI + 10%
RPI Below
median
Average rank
4 of 16
Performance 100% 94% 100% 50% 0 68%
Outturn (% of max) 20% 19% 20% 10% 0 7%
76%
Annual report on remuneration continued
175SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
4. Take account of the wider environment
SSE’s TSR has performed at the maximum level relative to the FTSE 100 and just below upper quartile against the MSCI European Utilities
Index, and performance in relation to Business Energy customer service ranking is also above median. EPS growth over the performance
period has exceeded the level for maximum vesting. SSE’s dividend commitment has been met over the three-year period and therefore,
threshold performance at RPI has been achieved.
While the PSP applies to Executive Directors only, the Committee is mindful of the outturns of the long-term incentive arrangement, the
Leadership Share Plan (LSP), which applies to senior managers.
5. Apply discretion if required
The Committee believes that the formulaic outcome is a fair reflection of wider performance over this three-year period, in particular the
value created for shareholders and taking account of shareholders’ interests.
The Committee reviewed the quality of the overall performance and the number of shares awarded in 2020 in comparison with the number
of shares awarded in 2019 and in 2018. The number of shares under award in 2020 was 85% of the number of shares awarded in 2019. The
Remuneration Committee was satisfied that the Executive Directors have not benefited merely as a result of share price volatility.
The table below shows the maximum number of shares available, the dividends accrued over the three-year performance period,
the total number of shares vesting based on the performance outturn, the estimated value of these shares, and the value of any share
price appreciation.
Awards available
(% of salary)
Awards available
(number of
shares)
Additional
awards in
respect of
accrued
dividends
Total number of
shares vesting
Estimated value
of awards
vesting
1
Share price
appreciation
2
Alistair Phillips-Davies 200% 131,244 23,143 117, 334 £2,024,952 £389,315
Gregor Alexander 175% 88,761 15,651 79,353 £1,369,476 £263,294
Martin Pibworth 175% 66,430 11,712 59,388 £1,024,917 £197,049
1 The estimated value of the awards vesting has been calculated on the same basis as the PSP value in the single figure table on page 170 .
2 The share price at grant was £13.94 and £17.26 on vesting.
Other remuneration disclosures
Fees paid to the Chair and the other non-Executive Directors during 2022/23 were as follows:
Fees £000s
Non-Executive Directors 2022/23 2021/22
Elish Angiolini
1
75 42
John Bason
2
62 0
Sue Bruce
3
104 101
Tony Cocker 109 105
Debbie Crosbie
4
75 42
Peter Lynas 94 91
Helen Mahy 90 87
John Manzoni 412 400
Melanie Smith 75 73
Angela Strank 75 73
Total 1,171 1,014
1 Elish Angiolini joined the Board as a non-Executive Director on 1 September 2021.
2 John Bason joined the Board as a non-Executive Director on 1 June 2022.
3 Sue Bruce stepped down from the Board on 31 March 2023.
4 Debbie Crosbie joined the Board as a non-Executive Director on 1 September 2021.
176 SSE plc Annual Report 2023
Share interests and share awards (audited)
Directors’ share interests
The table below shows the share interests of the Executive and non-Executive Directors at 31 March 2023.
Number of shares Number of options
Director
Shareholding
requirement as a % of
salary (Actual/% met)
1
Shares owned
outright at
31 March 2023
Interests in
shares, awarded
without
performance
conditions at
31 March 2023
(DBS Awards)
Interests in
shares, awarded
subject to
performance
conditions at
31 March 2023
(PSP Awards)
Interests in share
options,
awarded without
performance
conditions at
31 March 2023
Interests in share
options,
awarded subject
to performance
conditions at
31 March 2023
Shares owned
outright at
31 March 2022
Gregor Alexander 717% (225%-met) 292,815 40,798 265,550 130 - 248,434
Elish Angiolini 2,000 – – – – 2,000
John Bason 0 – – – – –
Sue Bruce 2,484 – – – – 2,484
Tony Cocker 5,000 – – – – 5,000
Debbie Crosbie 2,000 – – – – 2,000
Peter Lynas 5,000 – – – – 5,000
Helen Mahy 3,310 – – – – 3,310
John Manzoni 2,519 – – – – 2,437
Alistair Phillips-Davies 680% (250%-met) 359,184 60,906 388,782 0 – 293,747
Martin Pibworth 357% (225%-met) 130,006 33,263 223,955 2,338 – 97, 525
Melanie Smith 2,174 – – – – 2,100
Angela Strank 2,152 – – – – 1,669
1 The Shareholding requirement is 250% of base salary for the Chief Executive and 225% for other Executive Directors. It is expected that non-Executive Directors
should build up a minimum shareholding of 2,000 shares. The share price at 31/03/2023 (£18.03) was used to calculate shareholding.
Directors’ Long-term Incentive Plan interests
Deferred Bonus awards granted in 2022 and PSP awards granted in 2022
The tables below shows the Deferred Bonus awards and PSP awards granted to Executive Directors in 2022.
Deferred Bonus awards granted 2022
Recipient Date of Grant Shares Granted
Market Value on
date of award Face Value
Gregor Alexander 22/07/2022 14,472 £17.2750 £250,004
Alistair Phillips-Davies 22/07/2022 21,604 £17. 2750 £373,209
Martin Pibworth 22/07/2022 12,739 £17.2750 £220,066
£843,279
PSP awards granted 2023
Recipient Date of Grant Shares Granted
Market Value on
date of award Face Value
Gregor Alexander 22/07/2022 94,192 £17.2750 £1,627,167
£1,627,167
Alistair Phillips-Davies 22/07/2022 135,407 £17.2750 £2,339,156
£2,339,156
Martin Pibworth 22/07/2022 83,928 £17.2750 £1,449,856
£1,449,856
Annual report on remuneration continued
177SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Directors’ Long-term Incentive Plan interests
The table below details the Executive Directors’ Long-term Incentive Plan interests.
Share Plan Date of Award
Normal Exercise
Period (or Vesting
Date)
No. of Shares
under award
as at 1 April
2022
Option
Exercise
Price
Additional
shares
awarded
during the year
No. of shares
lapsed during
the year incl.
dividend
shares
No. of shares
realised during
the year incl.
dividend
shares
No. of Shares
under award at
31 March 2023
Gregor
Alexander
DBP 2016
2
28/06/2019 28/06/2022 Nil Grant 0
4
DBP 2016
2
26/06/2020 26/06/2023 12,494 12,494
DBP 2016
2
06/07/2021 06/07/2024 13,832 13,832
DBP 2016
2
22/07/2022 22/07/2025 14,472
3
14,472
PSP
1
28/06/2019 28/06/2022 103,991 42,500 82,493
4
PSP
1
26/06/2020 26/06/2023 88,761 88,761
PSP
1
06/07/2021 06/07/2024 82,597 82,597
PSP
1
22/07/2022 22/07/2025 94,192
3
94,192
Sharesave 12/07/2019 24/11/2022 1,837 901p 1,837
Sharesave 21/07/2020
01/10/23
– 31/03/24 130 1,107p 130
Alistair
Phillips-Davies
DBP 2016
2
28/06/2019 28/06/2022 Nil Grant 0
4
0
DBP 2016
2
26/06/2020 26/06/2023 18,652 18,652
DBP 2016
2
06/07/2021 06/07/2024 20,650 20,650
DBP 2016
2
22/07/2022 22/07/2025 21,604
3
21,604
PSP
1
28/06/2019 28/06/2022 153,763 62,842 121,977
4
PSP
1
26/06/2020 26/06/2023 131,244 131,244
PSP
1
06/07/2021 06/07/2024 122,131 122,131
PSP
1
22/07/2022 22/07/2025 135,407
3
135,407
Sharesave 12/07/2019 26/01/2023 1,997 901p 1,997
Martin
Pibworth
DBP 2016
2
28/06/2019 28/06/2022 Nil Grant 0
4
DBP 2016
2
26/06/2020 26/06/2023 9,350 9,350
DBP 2016
2
06/07/2021 06/07/2024 11,174 11,174
DBP 2016
2
22/07/2022 22/07/2025 12,739
3
12,739
PSP
1
28/06/2019 28/06/2022 7 7,828 31,808 61,738
4
PSP
1
26/06/2020 26/06/2023 66,430 66,430
PSP
1
06/07/2021 06/07/2024 73,597 73,597
PSP
1
22/07/2022 22/07/2025 83,928
3
83,928
Sharesave 12/07/2019 24/11/2022 998 901p 998
Sharesave 12/07/2019
01/10/24
– 31/03/25 1,664 901p 1,664
Sharesave 13/07/2022
01/10/25
– 31/03/26 1,335p 674 674
Shares which are released under the DBP (Deferred Bonus Plan) 2016 and PSP Awards attract additional shares in respect of the notional reinvestment of dividends.
In addition to the shares released under these schemes, as indicated in the table above, the following shares were realised arising from such notional reinvestment of
dividends. Note no awards under the DBP 2016 granted to the Executive Directors in the 2019 award year:
Gregor Alexander received 13,860 shares, Alistair Phillips-Davies received 20,495 shares and Martin Pibworth received 10,372 shares.
1 The current performance conditions applicable to awards under the PSP are described on page 183 . The 2018 awards under the PSP vested at 66%.
2 25% of annual bonus payable to Executive Directors and senior managers is satisfied as a conditional award of shares under the DBP 2016. Vesting of shares under
the DBP 2016 is dependent on continued service over a three-year period. In view of the linkage to annual bonus. Note no awards under the DBP 2016 granted to
the Executive Directors in the 2019 award year.
3 The market value of a share on the date on which these awards were made was 1,72750p.
4 The market value of a share on the date on which these awards were realised was 1,72750p.
The closing market price of shares at 31 March 2023 was 1,803p and the range for the year was 1,428p to 1,920p. Awards granted during the year were granted under
the PSP. The aggregate amount of gains made by the Directors on the exercise of share options and realisation of awards during the year was £4,715,794 (2022 -
£2,506,172).
178 SSE plc Annual Report 2023
2. Historical remuneration disclosures
Change in Chief Executive total remuneration
The graph below shows SSE TSR performance over the last ten years relative to FTSE 100 performance.
SSE
FTSE 100
March
2023
80
100
120
140
160
180
200
220
240
260
280
TSR (rebased to 100)
March
2013
March
2014
March
2015
March
2017
March
2016
March
2018
March
2021
March
2022
March
2020
March
2019
The table below shows the Chief Executive’s annual remuneration over the same period.
Directors
Single total
figure of
remuneration
1
(£’000)
Annual variable
element award
2
(% of maximum)
Long-term
incentive
vesting
3
(% of
maximum) Application of discretion
2022/23 (Alistair Phillips-Davies) 4,627 88 76 Downward discretion applied to AIP
2021/22 (Alistair Phillips-Davies) 4,655 83 66
2020/21 (Alistair Phillips-Davies) 3,045 69 28 Downward discretion applied to AIP
2019/20 (Alistair Phillips-Davies) 2,418 59 27
2018/19 (Alistair Phillips-Davies) 1,639 0 26 Downward discretion applied to AIP
2017/18 (Alistair Phillips-Davies) 2,693 78 30
2016/17 (Alistair Phillips-Davies) 2,917 72 46 Downward discretion applied to AIP
2015/16 (Alistair Phillips-Davies) 1,696 54 0
2014/15 (Alistair Phillips-Davies) 2,311 64 0
2013/14 (Alistair Phillips-Davies and Ian Marchant)
4
2,546 63 22
1 The single total figure of remuneration is calculated on the same basis as the ‘single total figure of remuneration’ table on page 170 .
2 The annual variable element award (AIP) is the figure shown on page 174 and reflected in the ‘single total figure of remuneration table’ on page 170 .
3 The long-term incentive (PSP) vesting is the figure shown on page 175 , and reflected in the ‘single total figure of remuneration table’ on page 170 .
4 For 2013/14, an aggregate number has been applied by combining pro-rata values for each Chief Executive based upon their time in role.
Alignment of Directors’ Remuneration Policy with pay across the wider employee population
In setting Executive Directors’ pay, a number of factors are taken into account including importantly, relativity to the wider workforce.
For a number of years, a Chief Executive pay ratio was disclosed voluntarily. In 2018/19, the methodology was revised to meet the new
reporting requirements. The methodology used is a hybrid approach combining Gender Pay Gap (GPG) data (see page 61 ) with
additional elements of pay which are important components of SSE employees’ pay such as overtime, employer’s contribution to
pension and excluding salary sacrifice arrangements. This is believed to allow the most appropriate and consistent comparison.
As shown in the table on the following page, the pay ratio has changed from 102:1 at median in 2021/22 to 97:1 in 2022/23 even though
the Chief Executive’s remuneration has remained broadly unchanged. This is because employee remuneration at median has increased
by almost 10% which can be attributed to a number of initiatives relating to wider employee pay during the year. A skills based pay system
was introduced during 2021/22 for around 6,000 employees below senior management level, representing a significant investment in
employee pay. In addition, over the course of the year steps have been taken to enhance employee terms and conditions through an
improved Employee Value Proposition (EVP), and in response to the cost of living crisis. Further details can be found in the case study on
the following page. Some of these initiatives will not impact on employee remuneration until next year’s reporting on the CEO pay ratio.
Annual report on remuneration continued
179SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
25th percentile Median 75th percentile
Total employee earnings
(m)
1
Year
Calculation
Methodology Total Remuneration Ratio Total Remuneration Ratio Total Remuneration Ratio
2022/23 C £34,881 133:1 £47,864 97:1 £65,199 71:1 £543.5
2021/22 C £33,046 136:1 £43,793 102:1 £61,195 73:1 £591.0
2020/21 C £32,268 93:1 £42,295 71:1 £59,454 51:1 £543.1
2019/20 C £29,234 83:1 £40,908 59:1 £54,863 44:1 £510.0
2018/19 C £28,611 57:1 £39,010 41:1 £54,066 30:1 £495.3
1 The reduction in total employee earnings in 2022/23 is due to a reduction in the number of employees at the snapshot date used for capturing this data.
SSE is committed to being a responsible employer, and the remuneration policy is designed with fairness in mind – fairness to Executive
Directors in recognition of the extent of their responsibilities and fairness relative to the rest of the SSE team. More information on SSE’s
commitment to decent work and economic growth can be found within the Sustainability Report which includes information on our
ambition to be a global leader for the just transition to net zero, with a guarantee of fair work and commitment to paying fair tax and sharing
economic value.
Over the course of the year, the Remuneration Committee has had the opportunity to review the remuneration arrangements for the
wider employee population. The impact of the cost of living crisis on employees was a key focus in the year and the Committee was
given the opportunity to input on employee cost of living support and SSE’s overall Employee Value Proposition.
An internal working group was set up
to tackle the challenge of improving
SSE’s Employee Value Proposition (EVP),
making it fit-for-purpose to support
the growth, attraction and retention
challenges we face on our NZAP journey.
As the year unfolded and the cost of living
crisis took hold, the scope of the group
expanded to also cover additional
support for employees in light of this.
EVP is wide-ranging and covers areas
such as terms and conditions, culture,
policies and employee communication.
Some of the activity carried out during
the year has included:
• Salary ranges were increased by
12% for grades covering around
5,500 employees.
• In response to high levels of inflation
and the cost of living crisis, an interim
advance of the annual pay award of up
to 5% was paid in October 2022. The
remaining balance of year 3 of the pay
deal was payable from 1 April 2023
and is expected to be in the region
of 8% of salary.
• Annual Incentive Plan (AIP) was
extended to include the lowest
graded personal contract employees.
• Payment of a £500 ‘thank you’ award
was made to all employees below
senior management level in
recognition of strong business
performance.
• Car cash allowances were reviewed
and subsequently increased.
• Electric vehicle business mileage rates
were improved beyond HMRC levels
to cushion varying fuel rates during
the cost of living crisis.
• Improvements were made to family
friendly policies, including:
– Introduction of Partner’s Leave –
an additional 7 weeks’ paid leave for
partners on top of Paternity Leave.
– Introduction of up to 2 weeks’
full pay for pregnancy loss or
fertility treatment.
– Enhancement to the statutory
allowance of 2 days’ unpaid leave
for partners to attend antenatal and
adoption appointments, to paid
leave and extended to fostering
appointments.
– Extension to our Gradual Return
from Maternity and Adoption Leave
to other types of leave for new
parents for continuous leave of
3 months or more.
• Launch of ‘My SSE Week’ – a week of
daily live Teams sessions showcasing
existing benefits with themes around
cost of living, wellbeing and career
development, attended by 7,600
employees with over 1,000 questions
submitted.
• A comprehensive benefits review was
carried out by an independent 3rd party
and gaps were identified with a plan for
implementation in 2023 and beyond.
• Agreement was made to introduce
an Employee Recognition Platform.
• Enhanced default pension award for
those in the Defined Contribution
scheme was agreed.
Engagement in action
Employees
SSE’s Employee Value Proposition and response
to the cost of living crisis
180 SSE plc Annual Report 2023
Annual percentage change in remuneration of the Directors
Each year, when the Remuneration Committee is considering salary increases, incentive outcomes and benefits for Executive Directors,
it is mindful of the treatment of the wider workforce. The table below shows how Executive and non-Executive Directors’ changes in
remuneration compares to that of the wider workforce.
2020/21 v 2019/20 2021/22 v 2020/21 2022/23 v 2021/22
Director
1
Base
salary/fee Benefits Bonus
Base
salary/fee Benefits Bonus
Base
salary/fee Benefits Bonus
Non-Executive Directors
Sue Bruce 2% 1% 3%
Tony Cocker
2
13% 11% 3%
Peter Lynas 2% 1% 3%
Helen Mahy 2% 1% 3%
John Manzoni 3%
Melanie Smith 3% 1% 3%
Angela Strank 3%
Executive Directors
Alistair Phillips-Davies 3% 0 20% 1% 4% 21% 3% 3% 9%
Gregor Alexander 3% 0 22% 1 5% 22% 3% 6% 9%
Martin Pibworth 11% 6% 30% 11% 0% 32% 3% 1% 11%
All employees 6% 8% 10% 6% 3% 51% 22% 16% 6%
1 Elish Angiolini, Debbi Crosbie and Jason Bason are excluded from this table as they have not been in post for a full two years to make a viable comparison.
2 Tony Cocker became the Senior Independent Director in October 2020 which accounts for the larger changes across the first two periods shown.
Relative importance of the spend on pay
The table below indicates how the earnings of Executive Directors compare with SSE’s other financial dispersals. For every £1 spent on
Executive Directors’ earnings by SSE in 2022/23, £48 was paid in tax, £74 was spent on employee costs and £270 was spent on capital and
investment expenditure. In addition, £92 was made in dividend payments to shareholders for every £1 spent on Executive Directors’ earnings.
2017/18
£m
2018/19
£m
2019/20
£m
2020/21
£m
2021/22
£m
2022/23
£m
Executive Directors’ earnings
1
5.3 3.6 5.1 6.8 10.4 10.4
Dividends to shareholders 926.1 973.0 948.5 836.4 862.3 955.8
Adjusted investment, capital and
acquisition expenditure 1,503.0 1,422.9 1,371.9 912.0 2,067.8 2,803.3
Total UK taxes paid (profits, property,
environment and employment taxes)
2
484.1 403.7 421.6 379.0 335.3 501.7
Staff costs
3
665.6 653.5 684.7 700.4 688.7 771.8
1 Calculated on the same basis as the ‘single total figure of remuneration’ table on page 170 .
2 Includes corporation tax, employers’ National Insurance contributions and business rates.
3 Staff costs for all employees, as per note 8.1 of the accounts, excluding Executive Directors.
3. Governance
External appointments
Executive Directors are able to accept a non-Executive appointment outside SSE with the consent of the Board, as such appointments
can enhance their experience and value to SSE. Any fees received are retained by the Director. Gregor Alexander was a non-Executive
Director of Stagecoach Group plc during 2022 and received £61,000 in fees. Alistair Phillips-Davies joined the Board of Anglian Water
Services Ltd as a non-Executive Director in November 2022 with an annual fee of £55,000.
Payments for loss of office and payments to past Directors
There were no payments for loss of office or to former Directors during the year.
Annual report on remuneration continued
181SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Advice to the Remuneration Committee
The Chief Executive, the Director of Human Resources and Head of Reward advised the Committee on certain remuneration matters
for the Executive Directors and senior executives although they were not present for any discussions related to their own remuneration.
The Director of Human Resources and Head of Reward advised on HR strategy and the application of HR policies across the wider
organisation.
FIT Remuneration Consultants LLP (FIT) provided a range of information to the Committee which included market data drawn from
published surveys, governance developments and their application to SSE, advice on remuneration disclosures and regulations and
comparator group pay. FIT received fees of £76,391 in relation to their work for the Committee, calculated on a time and materials basis.
FIT are founding members of, and adhere to, the Remuneration Consultants’ Group Code of Conduct. The Code defines the roles of
consultants, including the requirement to have due regard to the organisation’s strategy, financial situation, pay philosophy, the Board’s
statutory duties and the views of investors and other stakeholders. The Committee reviews the advisers’ performance annually to
determine that it is satisfied with the quality, relevance, objectivity and independence of advice being provided. FIT provides no other
services and has no other connection to SSE or individual Directors.
Freshfields LLP also provided advice on legal matters, such as share plan rules, during the year.
Evaluation
The annual review of Committee performance was facilitated by Lintstock (see pages 140 to 141 ) and the outputs considered by the
full Committee. This confirmed the Committee’s continued effective operation and agreement of actions for 2023/24.
Shareholder voting in 2022
On 21 July 2022, shareholders approved the Directors’ Remuneration Policy and the Annual Remuneration Report for the year ended
31 March 2022. The results of the resolutions are shown below.
Annual report on remuneration – shareholding voting in 2022
For – 97.42%
Against – 2.58%
Total votes cast: 678,690,885
Votes withheld: 7,337,070
Directors’ Remuneration Policy – shareholder voting in 2022
For – 91.43%
Against – 8.57%
Total votes cast: 678,277,304
Votes withheld: 7,750,651
Remuneration Committee
The Terms of Reference for the Committee were reviewed during 2022/23 and are available on SSE’s website (sse.com ). In summary,
the Committee determines and agrees with the Board, SSE’s framework and policy for executive remuneration including setting
remuneration for all Executive Directors, the Company Chair, the Group Executive Committee and Company Secretary. No material
changes were made to the Terms of Reference during the year.
The members of the Committee and the meetings attended are set out on page 123 . The following agenda items were considered:
Meeting date Agenda items
May 2022 Market and governance update, shareholder consultation, Annual Incentive Plan, Performance Share Plan, Leadership
Share Plan, below-Board pay, 2022 Directors’ Remuneration Report, share-plan leaver’s analysis, Remuneration
Committee advisor’s performance, 2022-24 Remuneration Committee plan.
November
2022
Market and governance update, AIP and PSP mid-year performance update, below-Board pay, Executive Director
pensions, 2022-24 Remuneration Committee plan.
March 2023 Market and governance update, AIP and PSP performance update, Executive Directors’ salaries and the Chair’s fee,
below-Board pay, 2023 Directors’ Remuneration Report, Remuneration Committee Terms of Reference review, 2022-24
Remuneration Committee plan, Remuneration Committee evaluation.
182 SSE plc Annual Report 2023
4. Implementation of the Directors’ Remuneration Policy for 2023/24
The table below sets out how the Remuneration Committee intends to operate the Remuneration Policy for the year ending 31 March 2024
.
Element of pay Implementation for 2022/23 Comment
Base salary Salaries will be increased by 5% with effect from
1 April 2023, as follows:
Alistair Phillips-Davies £951,642 to £999,224
Gregor Alexander £735,541 to £772,318
Martin Pibworth £655,389 to £688,158
The Committee took into account:
• Strong performance and progress made on
the NZAP
• TSR for the year
• Negotiated increase for employees linked to CPI
• The Committee’s responsibility to stakeholders
for ensuring total remuneration is competitive
but not excessive
• The flow through to other elements of pay
• The increasingly competitive market for
executive talent
• Relativity against FTSE 50 peer group
Benefits No changes proposed. In line with the wider employee population.
Pension No changes proposed. From 1 January 2023, the Chief Commercial
Officer’s pension is aligned with the majority of
employees with a similar length of service at 15%.
Annual Incentive Plan No changes in quantum.
No changes proposed to performance measures
which are shown in detail on the following page.
Current measures were revised ahead of the
2022/23 performance year and are considered
appropriate.
Performance Share Plan No changes in quantum.
No changes proposed to performance measures
which are shown in detail on the following page.
Current measures were revised last year
in advance of the 2022 PSP grant and are
considered appropriate.
AIP – the measures for 2023/24
AIP measures for 2023/24 will remain largely unchanged. Adjusted Earnings Per Share and cash flow remain key measures for the AIP.
Personal and operational targets are set annually and are aligned with the NZAP Plus. These will be disclosed in next year’s Directors’
Remuneration Report.
Performance measure Adjusted EPS Cash flow Personal/Individual
1
Operational
2
Sustainability
Weighting 30% 20% 10% 30% 10%
Description Underlying
measure of
financial
performance and
a strategic KPI.
Net debt divided
by EBITDA.
Rewards actions
which go beyond
the normal
responsibilities
of the role. May
be individual or
team based.
Measures and targets
are set in priority areas
including people (safety
and inclusion and
diversity), renewables,
distribution, transmission,
thermal, customers and
other growth and
transactions.
SSE’s performance will be
rated by three external
ratings agencies –
Moody’s, Sustainalytics
and S&P Global.
Performance at the
median will be deemed
the threshold and
performance at the
upper quintile or above,
the maximum.
1 Personal goals will take a holistic view of individual performance and will include measures related to safety, compliance, and regulation, stakeholder
management, team and personal development, strategy and transformation, and financial and operational performance.
2 Examples of the operational goals include: People: Health & Safety performance as measured by Total Recordable Injury Rate (TRIR); recruitment plans and
inclusion and diversity as measured by time to hire, filling of vacancies and the percentage increase in gender diversity across SSE. Renewables: European projects
in construction, cost per MW hour, plant availability, progress on renewables pipeline. Distribution: incentives against agreed targets. Transmission: contract awards
achieved against agreed plan; delivery of outputs and approval of projects that maintain a trajectory of RAV greater than £5.6bn by 2024. Thermal: balancing market
performance. Customer: finish above median in the Citizen’s Advice non-domestic supplier league table. Other Growth & Transactions: progress building pipeline
across business areas including solar, storage, hydrogen, and other priority business development areas; progress made on financial sell down of T & D businesses;
progress review of Large Capital projects reported to the Board.
Annual report on remuneration continued
183SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
The personal and operational goals will be assessed using a scoring framework as follows:
Score Illustrative performance assessment Illustrative outturn as % of maximum
1
1 Below threshold Zero
2 Threshold performance 20%
3 Majority of goals at target 40%
4 Substantial majority of goals at or above target 70%
5 All goals at or above target 100%
1 The Remuneration Committee can decide to award an outturn between levels if warranted.
The measures for awards under the Performance Share Plan for 2023
PSP measures for the 2023 award will remain largely unchanged. Relative Total Shareholder Return (TSR) and EPS account for 50% and
20% respectively of the total and the new sustainability and strategic measures 30% of the total award as follows:
Performance measure
Total Shareholder
Return relative to the
FTSE 100
Total Shareholder
Return relative to the
MSCI European Utilities
Adjusted
Earnings
Per Share Strategic Sustainability
Weighting 20% 30% 20% 15% 15%
Threshold performance 50th percentile
(20% outturn)
50th percentile
(20% outturn)
149p
(20% outturn)
See below See below
Maximum performance 80th percentile
(100% outturn)
80th percentile
(100% outturn)
178p
(100% outturn)
See below See below
The TSR performance targets were strengthened last year with 20% of that element vesting for median performance (previously 25%)
and full vesting of that element only achieved at 80th percentile ranking (increased from 75th percentile).
The growth targets for EPS have been set based on SSE’s plan over the next three years and represents a CAGR between 12% and 17% based
off FY22 EPS of 94.8p. The top end of the range exceeds the Board’s expectations and is considered stretching. The Committee will assess
the growth targets for future awards under the PSP to ensure that they remain challenging and linked to the business plan.
Strategic measures and targets for the 2023 PSP award
The measures and targets for this element are linked to the Remuneration Committee’s assessment of SSE’s performance over the three
years to 31 March 2025 in the three main areas of the implementation strategy which have been updated this year to reflect the NZAP Plus.
Strategic area in NZAP Measures and targets
Renewables 8GW pipeline of net installed capacity potential and 0.5GW of international under construction by FY26.
Networks growth Transmission and Distribution to exceed the NZAP Plus RAV growth targets of £7 and £6 billion respectively.
Energy businesses Solar and battery installed capacity to meet 1GW by FY26.
Customer On course to be a leading ppa player in the market by 2026.
Sustainability measures and targets for the 2023 PSP award
SSE’s UN SDG 2030 Goal Measure and Targets
SDG 13 Climate Action:
Reduce scope 1 carbon intensity by 80% by 2030, compared
to 2017/18 levels, to 61gCO
2
e/kWh.
Scope 1 carbon intensity reduction to 61gCO
2
e/kWh
SDG 7 Affordable and Clean Energy:
Build a renewable energy portfolio that generates at least
50TWh of renewable electricity a year by 2030.
Renewables output TWh tracked to 2026/27.
Renewables output TWh by 2030/31.
SDG 9 Industry, Innovation and Infrastructure:
Enable at least 20GW of renewable generation and facilitate
around 2 million EVs and 1 million heat pumps on SSEN’s
electricity networks by 2030.
GW renewable generation capacity connected to SSEN’s electricity
transmission network by 2026.
Low-carbon technologies connected to SSEN’s local electricity
distribution networks by 2028.
SDG 8 Decent Work and Economic Growth:
Be a global leader for the just transition to net zero, with
a guarantee of fair work and commitment to paying fair tax
and sharing economic value.
Achieve performance in the top 10% of rankings on average for
progress on Just Transition, including in the World Benchmarking
Alliance (WBA) and others as they emerge.
Performance against the strategic and sustainability measures and targets will be assessed using the same scoring framework shown
above in respect of the personal and operational measures and targets for the AIP.
184 SSE plc Annual Report 2023
Annual report on remuneration continued
Chair’s and non-Executive Directors’ fees
Last year, Sir John Manzoni’s fee was increased by 3%, in line with the wider employee population, to £412,000. For 2023/24, his fee will
be increased by 5%, in line with Executive Directors, to £432,600.
Non-Executive Directors’ fees were also increased by 3% last year in line with the wider employee population. For 2023/24, it was agreed
that the base fee will increase by 5% to £78,610. In addition, the Board reflected on the time commitments of the various Committee
Chairs and agreed to slightly larger increases to these fees. The fees for the Senior Independent Director, Audit Committee Chair and
Remuneration Committee Chair will increase by 7% to £20,000. The SSHEAC Chair and Energy Markets Risk Committee Chair will
increase to £17,000, an increase of 14%.
The non-Executive Director for Employee Engagement’s fee will be brought into alignment with the SSHEAC and Energy Markets Risk
Committee Chairs as the time commitment is considered to be equivalent, and will increase from £11,223 to £17,000.
Chair and non-Executive Director fee levels for 2023/24 are shown in the table below. Non-Executive Directors receive a base fee plus
an additional fee for chairing a Committee or for performing the role of Non-Executive Director for Employee Engagement.
Fee 2023/24
Chair £432,600
Base fee £78,610
Senior Independent Director £20,000
Audit Committee Chair £20,000
Remuneration Committee Chair £20,000
SSHEAC Chair £17,000
Energy Markets Risk Committee Chair £17,000
Non-Executive Director for Employee Engagement £17,000
185SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Directors’ Remuneration Policy – a summary
Introduction
SSE’s Directors’ Remuneration Policy (the ‘Policy’) was approved with over 91% of shareholders support at the AGM on 21 July 2022. It is
intended that the Policy will apply for a period of up to three years and will need to be re-approved at the 2025 AGM at the latest. The full
Policy is provided in the 2022 Annual Report .
Principles
The Committee believes it is essential that our overall Remuneration Policy is strongly aligned to SSE’s purpose and strategy. It aims to
ensure this by focusing on our core principles which are: Sustainable, Simple, Stewardship, Stakeholder-focused. In addition, we believe
that SSE’s Directors’ Remuneration Policy, practice and engagement with employees and shareholders complies fully with the UK
Corporate Governance Code which encourages a description of how the policy addresses the following:
Clarity
• Our Directors’ Remuneration Policy is designed to be
sustainable and simple and to support and reward diligent and
effective stewardship that is vital to the delivery of SSE’s core
purpose of providing energy needed today while building a
better world of energy for tomorrow, and our strategy of
creating value for shareholders and all stakeholders.
• The Policy updates the previous Policy, with minimal structural
changes so is already embedded into the business and is well
understood by participants and shareholders alike.
• The Policy clearly sets out the terms under which it can be
operated including appropriate limits in terms of quantum,
the measures which can be used and discretions which could
be applied if appropriate.
• Transparency in approach has been a cornerstone of our
Policy. Detailed disclosure of the relevant performance
assessments and outcomes is provided for shareholders
to consider.
Simplicity
• Our pay arrangements include a market standard annual
incentive and long-term share plan, each of which is
explained in detail in our Policy.
• No complex or artificial structures are required to operate
the plans.
• We explain our approach to pay clearly and simply.
Risk
• Appropriate limits are stipulated in the Policy and within the
respective plan rules.
• The Committee also has appropriate discretions to override
formulaic outturns under the assessment of the variable
incentive plans.
• The Committee undertakes an annual risk review of the
Policy and its operation. Identified risks are considered with
appropriate mitigation strategies or tolerance levels agreed.
• Regular interaction with the Audit Committee and the SSHEA
Committee ensures relevant risk factors are considered when
setting or assessing performance targets.
• Clawback and malus provisions are in place across all incentive
plans and the ‘triggers’ have been reviewed and strengthened.
Predictability
• The possible reward outcomes can be easily quantified,
and these are reviewed by the Committee.
• The graphical illustrations provided in the Policy clearly show
the potential scenarios of performance and pay outcomes
which would result.
• Performance is reviewed regularly so there are no surprises
when performance is assessed at the end of the period.
Proportionality
• Variable incentive pay outcomes are clearly dependent
on delivering the strategy.
• Performance is assessed on a broad basis, including a
combination of financial, operational and sustainability which
ensures there is no undue focus on a single metric which may
be at the detriment of other stakeholders.
• The Committee also has the discretion – which it has
used – to override formulaic outcomes if they are deemed
inappropriate in light of the wider performance of the
Company and considering the experience of stakeholders.
Alignment to culture
• At the heart of the Policy is a focus on the long-term
sustainability of the business.
• This reflects the whole business culture which is aligned to
effective stewardship which creates value for all stakeholders.
• Our incentive plans and, in particular the approach to
measuring performance, reflects our values which means
doing the right thing, promoting fairness at work and paying
our fair share.
186 SSE plc Annual Report 2023
Directors’ Remuneration Policy – a summary continued
Policy summary
The Policy is summarised in the table below. There are no changes to the operation of the Policy for 2023/24 aside from changes
in wording or presentation which are considered to be immaterial.
Base Salary
Purpose and link to strategy Supports the retention and recruitment of Executive Directors of the calibre required to develop the
Company’s strategy.
Operation and maximum
opportunity
Base salary is normally reviewed annually with changes effective from 1 April.
Salary increases will normally be capped at the typical level of increases awarded to other employees
in the Company, although increases may be above this level in certain circumstances.
Performance measures Broad review of performance is included in the annual review process.
Pension
Purpose and link to strategy Pension planning is an important part of SSE’s remuneration strategy because it is consistent with the
long-term goals of the business.
Operation and maximum
opportunity
For the Chief Executive and Finance Director, funded final salary and top-up unfunded arrangements up
to the maximum two-thirds of final salary at age 60. From 1 April 2017, future pensionable pay increases
are capped at RPI + 1%.
The Chief Commercial Officer receives a pension contribution of 15% of base salary (effective from
1 January 2023) which reflects the wider employee population taking length of service into account.
For new appointments, employer’s pension contributions are capped at 12% of base salary in line with
arrangements for SSE employees.
Performance measures Not applicable.
Benefits
Purpose and link to strategy To provide a market-competitive level of benefits for Executive Directors.
Operation and maximum
opportunity
Core benefits – currently include car allowance, private medical insurance and health screening.
Participation in the Company’s all-employee share plans on the same terms as UK colleagues.
Relocation assistance if required.
Reimbursement of travel and business-related expenses incurred.
The cost will depend on the cost to the Company of providing individual items and the individual’s
circumstances and there is no maximum benefit level.
Performance measures Not applicable.
Annual Incentive Plan (AIP )
Purpose and link to strategy Reward Executive Directors for achievement of performance targets linked to SSE’s strategy and core
purpose.
Operation and maximum
opportunity
Maximum annual incentive opportunity is 150% of base salary for the Chief Executive and 130% of base
salary for the Finance Director and Chief Commercial Officer.
The award will normally be delivered:
• 67% in cash; and
• 33% in deferred shares.
Subject to malus and/or claw back provisions.
Performance measures The annual incentive is normally based on a mix of financial, operational, strategic and stakeholder
measures reflecting the key values and priorities of the business.
A minimum of 50% of the annual incentive will be based on financial performance.
187SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Performance Share Plan (PSP)
Purpose and link to strategy Reward Executive Directors for their part in delivering the sustained success of SSE and to ensure that
their interests are aligned with those of the shareholders.
Operation and maximum
opportunity
Maximum value of award is 250% of base salary for the Chief Executive and 225% of base salary for the
Finance Director and Chief Commercial Officer.
Shares are awarded which normally vest based on performance over a period of three years with an
additional two-year post-vesting holding period during which time the Executive must retain the
post-tax number of shares vesting under the award.
Subject to malus and/or claw back provisions.
Performance measures Awards vest based on relative total shareholder return, financial, operational, strategic, or stakeholder-
based measures.
At least 70% of the award will be based on financial and relative total shareholder return measures.
Share Ownership Policy
Purpose and link to strategy Align the interests of Executive Directors with those of shareholders who invest in the Company.
Operation and maximum
opportunity
The Chief Executive is expected to maintain a shareholding equivalent to 250% of base salary. The
Finance Director and Chief Commercial Officer will be expected to maintain a shareholding of 225%
of base salary. Shareholding should be built up within a reasonable timescale.
Normally built up via shares vesting through the PSP, deferred shares from the AIP and all employee
share schemes and Executive Directors may also choose to buy shares.
The requirement to retain shares continues after employment and Executive Directors are required
to hold their in-employment shares for a further two years following cessation of employment.
Performance measures Not applicable.
Chair and non-Executive Directors’ Fees
Purpose and link to strategy Reward for undertaking the role and are sufficient to attract and retain individuals with the calibre and
experience to contribute effectively at Board level.
Operation and maximum
opportunity
The aggregate level of non-Executive Director fees shall not exceed the maximum limit set out in the
Articles of Association.
Fees are reviewed at appropriate intervals against companies of a similar size and complexity. Fees are
set in a way that is consistent with the wider remuneration policy.
The fee structure may be made up of:
• a basic Board fee or Chair fee;
• an additional fee for any committee chairship or membership; and
• an additional fee for further responsibilities e.g. Senior Independent Director, non-Executive Director
for Employee Engagement or periods of increased activity.
Reasonable travelling and other expenses for costs incurred in the course of the non-Executive
Directors undertaking their duties are reimbursed (including any tax due on the expenses).
It is also expected that all non-Executive Directors should build up a minimum of 2,000 shares in the
Company.
Performance measures There are no direct performance measures relating to Chair and non-Executive Director fees.
The full Policy also includes further information on:
• Performance measures and targets.
• Committee discretion.
• Legacy commitments.
• Directors’ service contracts and non-Executive Directors’ letters
of appointment.
• Loss of office policy.
• Recovery provisions.
• Recruitment policy.
• Shareholders’ views.
• Remuneration engagement across the Group.
• Illustration of the Policy.
Melanie Smith CBE
Chair of the Remuneration Committee
23 May 2023
188 SSE plc Annual Report 2023
The Directors submit their Annual Report and Accounts for SSE plc, together with the consolidated Financial Statements of the SSE
Group of companies, for the year ended 31 March 2023.
The Strategic Report is set out on pages 1 to 109 and the Directors’ Report, which is also SSE’s corporate governance statement,
is set out on pages 110 to 191 . The Strategic Report and the Directors’ Report together constitute the management report as
required under Rule 4.1.8R of the Disclosure Guidance and Transparency Rules.
As permitted by section 414C (11) of Companies Act 2006 the below matters have been disclosed in the Strategic Report:
Page reference
An indication of likely future developments in the business of the Company
pages 1 to 109
Particulars of important events affecting the Company since the financial year end
page 275
Greenhouse gas emissions
page 49
Energy consumption
page 54
Energy efficiency action
page 54
Employee engagement and involvement
pages 28 and 134 to 138
Engagement with suppliers, customers and others in a business relationship with the Company
pages 30, 33 and 56 to 66
A summary of the principal risks facing the Company
pages 68 to 77
Information required to be disclosed under Listing Rule 9.8.4R is contained on the pages detailed below.
Page reference
Statement of amount of interest capitalised by the Group during the financial year
pages 236 to 237
Details of any long-term incentive schemes
pages 168 to 169
Results and dividends
The Group’s results and performance highlights for the year are set out on pages 24 to 25 and 78 to 94 . An interim dividend of 29.0
pence per Ordinary Share was paid on 9 March 2023. The Directors propose a final dividend of 67.7p per Ordinary Share. Subject to
approval at the AGM 2023, the final dividend will be paid on 21 September 2023 to shareholders on the Register of Members at close
of business on 28 July 2023.
Board of Directors
Director appointment and retirement
The Company’s Directors who served during the financial year ending 31 March 2023 are provided within the attendance table on
page 123 . The biographies of those individuals who were Directors of the Company on 23 May 2023 are on pages 116 to 120 .
Details of Board changes are confirmed on page 115 .
The rules governing the appointment and retirement of Directors are set out in the Company’s Articles of Association, the UK Corporate
Governance Code, the Companies Act 2006 and other related legislation.
Indemnification of Directors and insurance
The Directors have the benefit of an indemnity provision contained in the Company’s Articles of Association. In addition, the Directors
have been granted a qualifying third-party indemnity provision which was in force throughout the financial year and remains in force.
Also, throughout the financial year, the Company purchased and maintained Directors’ and Officers’ liability insurance in respect of
itself and for its Directors and Officers.
Political donations and expenditure
SSE operates on a politically neutral basis and does not make any donations to political parties, political organisations, or independent
election candidates. During the year, no political expenditure was incurred, and no political donations were made by the Group.
Accounting policies, financial instruments, and risk
Details of the Group’s accounting policies, together with details of financial instruments and risk, are provided in note 24 to the
Financial Statements and notes A6 to A8 of the Accompanying Information.
Research and development
SSE is involved in a range of innovative projects and programmes which are designed to progressively transform the energy system.
A number of these projects and programmes are referred to in the Strategic Report in pages 1 to 109 .
Employment of disabled people
SSE has a range of employment policies which clearly detail the standards, processes, expectations and responsibilities of its people and
the organisation. These policies were in place for the duration of the year, and are designed to ensure that everyone, including those
with existing or new disabilities and people of all backgrounds, are dealt with in an inclusive and fair way from the recruiting process on
through their career at SSE. This include access to appropriate training, development opportunities and job progression. Further details
of this approach can be found on pages 58 to 62 .
Other statutory information
189SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Shares
Share capital
The Company has a single share class which is divided into Ordinary Shares of 50 pence each. The issued share capital of the Company
as of 31 March 2023, together with details of any changes during the year, is set out in note 22 to the Financial Statements. As of
31 March 2023, the issued share capital of the Company consisted of 1,093,938,615 Ordinary Shares. This figure includes 3,602,178
ordinary shares which are held in treasury (representing 0.33% of the Company’s issued share capital), with these shares voting and
dividend rights automatically suspended.
The Company was authorised at the AGM 2022 to allot shares or grant rights over shares up to an aggregate nominal amount equal to
£177,945,283 (representing 355,890,566 Ordinary Shares of 50 pence each excluding Treasury Shares), representing one-third of its
issued share capital. A renewal of this authority will be proposed at the AGM 2023.
The Company was authorised at the AGM 2022 to allot up to an aggregate nominal amount of £26,691,792 (representing 53,383,584)
Ordinary Shares of 50 pence each and 5% of issued share capital) for cash without first offering them to existing shareholders in proportion
to their holding. A renewal of this authority will be proposed at the AGM 2023.
Transfer of Ordinary Shares
There are no restrictions on the transfer of Ordinary Shares in the Company other than certain restrictions which may from time-to-time
be imposed by law. The Company is not aware of any agreements between shareholders that may result in restrictions on the transfer of
securities and/or voting rights.
Substantial shareholdings
At 31 March 2023, the following percentage interests in the Ordinary Share capital of the Company, had been notified under Rule 5 of the
Disclosure Guidance and Transparency Rules, (‘DTR 5’). The Company is not aware of any changes in the interests disclosed under DTR 5
between 31 March 2023 and 23 May 2023.
Shareholder
Date of receipt of
notification
Voting rights
attached to
shares*
Voting rights through
financial instruments* Total of both in % Nature of holding
BlackRock, Inc. 19 January 2023 60,792,041 5.62% 15,780,780 1.63% 7.25% Indirect, ADR, Securities
Lending, CFD
The Capital Group
Companies, Inc.
17 September
2020
50,981,817 4.90.% – – 4.90% Indirect, ADR
Invesco Limited 7 May 2014 45,775,918 4.69% – – 4.69% Indirect
Caisse de dépôt et
placement du Québec
7 January 2021 41,492,159 3.98% – – 3.98% Direct
Barclays Bank Plc 1 August 2022 35,834,843 3.35% 19,978,657 1.87% 5.22% Indirect, ADR, Options,
Right to Recall (loan and
collateral)
JPMorgan Chase & Co. 19 January 2023 54,673,418 5.06% 374,155 0.14% 5.2% Indirect, Depository
Receipt, Physically Settled
Call Option
* At date of disclosure by relevant entity.
Authority to purchase shares
At the AGM 2022, the Company obtained shareholder approval to purchase up to 106,767,170 of its own Ordinary Shares (representing
10% of its issued share capital) up until the earlier of the conclusion of the AGM 2023 and close of business on 30 September 2023.
There was one active share repurchase programme during the year in light of the SCRIP take-up of the final dividend for the year ended
31 March 2022 exceeding 25% announced on 28 September 2022. The programme was carried out in accordance with the authority
granted by shareholders at the Company’s Annual General Meeting on 21 July 2022 (being 106,767,170 shares), the Market Abuse
Regulation (596/2014) and Chapter 12 of the Listing Rules. The details of the shares repurchased under the programme are set out
below and can also be found on sse.com . All shares purchased were cancelled.
Share repurchase programme
Number of shares
repurchased
Nominal value of
shares purchased Aggregate amount paid
Percentage of called-up share
capital as at 23 May 2023
represented by shares
repurchased
Scrip take-up 6,904,083 £3,452,041.50 £106,927,042.11 0.63%
During the financial year, and up until 31 March 2023, the Company used 1,856,282 of the treasury shares acquired under the 2016/17
share repurchase programme to satisfy the requirements of the all-employee Sharesave scheme.
The Directors will, again, seek renewal of their authority to purchase in the market the Company’s own shares at the AGM 2023.
190 SSE plc Annual Report 2023
Other statutory information continued
Voting
Each Ordinary Share of the Company carries one vote at general meetings of the Company. Any Ordinary Shares held in treasury have
no voting rights.
A shareholder entitled to attend, speak and vote at a general meeting may exercise their right to vote in person or electronically, by proxy,
or in relation to corporate members, by corporate representatives. To be valid, notification of the appointment of a proxy must be received
not less than 48 hours before the general meeting at which the person named in the proxy notice proposes to vote. The Directors may in
their discretion determine that in calculating the 48-hour period, no account be taken of any part of a day which is not a working day.
Employees who participate in the Share Incentive Plan whose shares remain in the schemes’ trust give directions to the trustees to vote
on their behalf by way of a Form of Direction. SSE also has a Share Plan Account service with Computershare available to employees
with shares arising from a SAYE option maturity, which are voted through the nominee.
Annual General Meeting (AGM)
The AGM of the Company will be held at the Perth Concert Hall, Mill Street, Perth PH1 5HZ on Thursday 20 July 2023 at 12.30pm.
Shareholders will also be able to attend the meeting electronically via the use of an electronic platform and ask questions and vote in real
time. Details of the full arrangements for the AGM, resolutions to be proposed, how to vote and ask questions are set out in the Notice of
Annual General Meeting 2023 which accompanies this report for shareholders receiving hard copy documents, and which is available at
sse.com for those who elected to receive documents electronically.
Articles of Association changes
The Company’s latest Articles of Association were adopted at the 2021 AGM. Any amendments to the Articles of Association can only be
made by a special resolution at a general meeting of shareholders.
Change of control
The Company is party to several agreements that take effect, alter or terminate upon a change of control of the Company following a
takeover. At 31 March 2023, change of control provisions were included in agreements for committed credit facilities, EIB debt, US Private
Placements, Senior Bonds and Hybrid instruments. The Company is not aware of any other agreements with change of control provisions
that are significant in terms of their potential impact to the business.
Disclosure of information to the auditor
Each of the Directors who held office at the date of approval of this Directors’ Report confirms that, so far as each Director is aware,
there is no relevant audit information of which the Company’s Auditors are unaware and each Director has taken all the steps that ought
to have been taken in his or her duty as a Director to make himself or herself aware of any relevant audit information and to establish that
the Company’s Auditors are aware of that information.
Related party transactions
Related party transactions are set out in note A5 of the Accompanying Information.
Post-balance sheet events
Information relating to post balance sheet events is provided on page 275 .
The Directors’ Report set out on pages 110 to 191 has been approved by the Board of Directors in accordance with the Companies Act
2006.
By order of the Board
Sally Fairbairn
Company Secretary, SSE plc
23 May 2023
191SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Statement of Directors’ responsibilities in respect
of the Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report and the Group and parent Company Financial Statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. Under that
law they are required to prepare the Group financial statements in accordance with UK-adopted international accounting standards
(‘IFRS’), and have elected to prepare the parent Company financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable law) including Financial Reporting Standard 101, ‘Reduced
Disclosure Framework’.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of
the state of affairs of the Group and parent Company and of their profit or loss for that period. In preparing each of the Group and parent
Company financial statements, the Directors are required to:
• select suitable accounting policies in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and
then apply them consistently;
• make judgements and accounting estimates that are reasonable, relevant and reliable;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable
information;
• provide additional disclosures when compliance with the specific requirements in IFRSs (and in respect of the parent Company
financial statements, FRS 101) is insufficient to enable users to understand the impact of particular transactions, other events and
conditions on the Group and parent Company financial position and financial performance;
• in respect of the Group financial statements, state whether UK-adopted international accounting standards have been followed,
subject to any material departures disclosed and explained in the financial statements;
• in respect of the parent Company financial statements, state whether applicable UK Accounting Standards, including FRS 101, have
been followed, subject to any material departures disclosed and explained in the financial statements;
• assess the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern; and
• use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company, or to cease
operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure
that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and
have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and
detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors’ Report, Directors’
Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s
website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other
jurisdictions.
Responsibility statement of the Directors in respect of the annual financial report
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with UK-adopted international accounting standards give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a
whole; and
• the annual report, including the strategic report, includes a fair review of the development and performance of the business and the
position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal
risks and uncertainties that they face.
We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group’s position and performance, business model and strategy.
Alistair Phillips-Davies Gregor Alexander
Chief Executive Finance Director
23 May 2023
192 SSE plc Annual Report 2023
Financial
Statements
In this section
Alternative Performance Measures 194
Consolidated income statement 203
Consolidated statement
of comprehensive income 204
Consolidated balance sheet 205
Consolidated statement
of changes in equity 206
Consolidated cash flow statement 208
Notes to the consolidated
financial statements 209
Accompanying information 276
Company balance sheet 314
Company statement of changes in equity 315
Notes to the Company
financial statements 316
Independent auditor’s report 326
Consolidated segmental statement 337
Independent auditor’s report to the Consolidated
Segmental Statement 343
Shareholder information 345
Glossary 347
193SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
194 SSE plc Annual Report 2023
Alternative performance measures
When assessing, discussing and measuring the Group’s financial performance, management refer to measures used for internal
performance management. These measures are not defined or specified under International Financial Reporting Standards (‘IFRS’)
and as such are considered to be Alternative Performance Measures (‘APMs’).
By their nature, APMs are not uniformly applied by all preparers including other participants in the Group’s industry. Accordingly,
APMs used by the Group may not be comparable to other companies within the Group’s industry.
Purpose
APMs are used by management to aid comparison and assess historical performance against internal performance benchmarks and
across reporting periods. These measures provide an ongoing and consistent basis to assess performance by excluding items that are
materially non-recurring, uncontrollable or exceptional. These measures can be classified in terms of their key financial characteristics:
• Profit measures allow management to assess and benchmark underlying business performance during the year. They are primarily
used by operational management to measure operating profit contribution and are also used by the Board to assess performance
against business plan. The Group has six profit measures, of which adjusted operating profit and adjusted profit before tax are the
main focus of management through the financial year and adjusted Earnings Per Share is the main focus of management on an
annual basis. In order to derive adjusted Earnings Per Share, the Group has defined adjusted operating profit, adjusted net finance
costs, and adjusted current tax charge as components of the adjusted Earnings Per Share calculation. Adjusted EBITDA is used by
management as a proxy for cash derived from ordinary operations of the Group.
• Capital measures allow management to track and assess the progress of the Group’s significant ongoing investment in capital assets
and projects against their investment cases, including the expected timing of their operational deployment and also to provide a
measure of progress against the Group’s strategic Net Zero Acceleration Programme Plus objectives.
• Debt measures allow management to record and monitor both operating cash generation and the Group’s ongoing financing and
liquidity position.
Changes to APMs in the year
In the year the Group has refined its profit measures for the treatment of fair value gains arising from an acquisition of a business or a
joint venture interest, which generates an exceptional opening gain on acquisition. The rationale for including this adjustment to these
APMs is set out in adjustment number 6.
The following section explains the key APMs applied by the Group and referred to in these statements:
Profit measures
Group APM Purpose
Closest equivalent
IFRS measure Adjustments to reconcile to primary financial statements
Adjusted EBITDA
(earnings before
interest, tax,
depreciation and
amortisation)
Profit
measure
Operating profit
• Movement on operating and joint venture financing derivatives
(‘certain re-measurements‘)
• Exceptional items
• Adjustments to retained Gas Production decommissioning provision
• Share of joint ventures and associates’ interest and tax
• Depreciation and amortisation before exceptional charges (including
depreciation and amortisation expense on fair value uplifts)
• Share of joint venture and associates’ depreciation and amortisation
• Non-controlling share of operating profit
• Non-controlling share of depreciation and amortisation
• Release of deferred income
Adjusted
Operating Profit
Profit
measure
Operating profit
• Movement on operating and joint venture financing derivatives
(‘certain re-measurements’)
• Exceptional items
• Adjustments to retained Gas Production decommissioning provision
• Depreciation and amortisation expense on fair value uplifts
• Share of joint ventures and associates’ interest and tax
• Non-controlling share of operating profit
Adjusted Profit
Before Tax
Profit
measure
Profit before tax
• Movement on operating and financing derivatives
(‘certain re-measurements’)
• Exceptional items
• Adjustments to retained Gas Production decommissioning provision
• Non-controlling share of profit before tax
• Depreciation and amortisation expense on fair value uplifts
• Interest on net pension assets/liabilities (IAS 19)
• Share of joint ventures and associates’ tax
195SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Group APM Purpose
Closest equivalent
IFRS measure Adjustments to reconcile to primary financial statements
Adjusted Net
Finance Costs
Profit
measure
Net finance costs
• Exceptional items
• Movement on financing derivatives
• Share of joint ventures and associates’ interest
• Non-controlling share of financing costs
• Interest on net pension assets/liabilities (IAS 19)
Adjusted Current
Tax Charge
Profit
measure
Tax charge
• Share of joint ventures and associates’ tax
• Non-controlling share of current tax
• Deferred tax including share of joint ventures, associates and non-
controlling interests
• Tax on exceptional items and certain re-measurements
• Reclassification of tax liabilities
Adjusted Earnings
Per Share
Profit
measure
Earnings Per Share
• Exceptional items
• Adjustments to retained Gas Production decommissioning provision
• Movements on operating and financing derivatives (‘certain re-
measurements’)
• Depreciation and amortisation expense on fair value uplifts
• Interest on net pension assets/liabilities (IAS 19)
• Deferred tax including share of joint ventures, associates and non-
controlling interests
Rationale for adjustments to profit measure
1 Movement on operating and financing derivatives (‘certain re-measurements’)
This adjustment can be designated between operating and financing derivatives.
Operating derivatives are contracts where the Group’s Energy Portfolio Management (‘EPM’) function enters into forward commitments
or options to buy or sell electricity, gas and other commodities to meet the future demand requirements of the Group’s Business Energy
and SSE Airtricity operating units, to optimise the value of the production from SSE Renewables and Thermal generation assets or
to conduct other trading subject to the value at risk limits set out by the Energy Markets Risk Committee. Certain of these contracts
(predominately purchase contracts) are determined to be derivative financial instruments under IFRS 9 and as such are required to
be recorded at their fair value. Changes in the fair value of those commodity contracts designated as IFRS 9 financial instruments are
reflected in the income statement (as part of ‘certain re-measurements’). The Group shows the change in the fair value of these forward
contracts separately as this mark-to-market movement is not relevant to the underlying performance of its operating segments due to
the volatility that can arise on revaluation. The Group will recognise the underlying value of these contracts as the relevant commodity
is delivered, which will predominantly be within the subsequent 12 to 24 months. Conversely, commodity contracts that are not financial
instruments under IFRS 9 (predominately sales contracts) are accounted for as ‘own use’ contracts and are consequently not recorded
until the commodity is delivered and the contract is settled. Gas inventory purchased by the Group’s Gas Storage business for secondary
trading opportunities is also held at fair value with gains and losses on re-measurement recognised as part of ‘certain re-measurements’
in the income statement. Finally, the mark-to-market valuation movements on the Group’s contracts for difference contracts entered
into by SSE Renewables that are not designated as government grants and which are measured as Level 3 fair value financial instruments
are also included within ‘certain re-measurements’.
Financing derivatives include all fair value and cash flow interest rate hedges, non-hedge accounted (mark-to-market) interest rate
derivatives, cash flow foreign exchange hedges and non-hedge accounted foreign exchange contracts entered into by the Group to
manage its banking and liquidity requirements as well as risk management relating to interest rate and foreign exchange exposures.
Changes in the fair value of those financing derivatives are reflected in the income statement (as part of ‘certain re-measurements”).
The Group shows the change in the fair value of these forward contracts separately as this mark-to-market movement is not relevant
to the underlying performance of its operating segments.
The re-measurements arising from operating and financing derivatives, and the tax effects thereof, are disclosed separately to aid
understanding of the underlying performance of the Group.
2 Exceptional items
Exceptional charges or credits, and the tax effects thereof, are considered unusual by nature or scale and of such significance that
separate disclosure is required for the underlying performance of the Group to be properly understood. Further explanation for the
classification of an item as exceptional is included in note 3.2.
3 Adjustments to retained Gas Production decommissioning provision
The Group retains an obligation for 60% of the decommissioning liabilities of its former Gas Production business which was disposed
in October 2021. The revaluation adjustments relating to these decommissioning liabilities are accounted for through the Group’s
consolidated income statement and are removed from the Group’s adjusted profit measures as the revaluation of the provision is not
considered to be part of the Group’s core continuing operations.
196 SSE plc Annual Report 2023
Alternative performance measures continued
Rationale for adjustments to profit measure continued
4 Share of joint ventures and associates’ interest and tax
This adjustment can be split between the Group’s share of interest and the Group’s share of tax arising from its investments in equity
accounted joint ventures and associates. The Group is required to report profit before interest and tax (‘operating profit’) including its
share of the profit after tax from its equity accounted joint ventures and associates. However, for internal performance management
purposes and for consistency of treatment, SSE reports its adjusted operating profit measures before its share of the interest and/or
tax on joint ventures and associates.
5 Share of joint ventures and associates’ depreciation and amortisation
For management purposes, the Group considers EBITDA (earnings before interest, tax, depreciation and amortisation) based on a
sum-of-the-parts derived metric which includes a share of the EBITDA from equity accounted investments. While this is not equal
to adjusted cash generated from operating activities, it is considered useful by management in assessing a proxy for such a measure,
given the complexity of the Group structure and the range of investment structures utilised. For the purpose of calculating the ‘Net
Debt to EBITDA’ metric referred at page 89 , ‘adjusted EBITDA’ is further refined to remove the proportion of adjusted EBITDA from
equity-accounted joint ventures relating to off-balance sheet debt (see note 5.1(v)).
6 Depreciation and amortisation expense on fair value uplifts
The Group’s strategy includes the realisation of value (developer gains) from divestments of stakes in SSE Renewables’ offshore and
international developments. In addition, for strategic purposes the Group may also decide to bring in equity partners to other businesses
and assets. Where SSE’s interest in such vehicles changes from full to joint control, and the subsequent arrangement is classified as an
equity accounted joint venture, SSE may recognise a fair value uplift on the remeasurement of its retained equity investment. Those
non-cash accounting uplifts will be treated as exceptional gains in the year of the relevant transactions completing. Furthermore, SSE
may acquire businesses or joint venture interests which are determined to generate an exceptional opening gain on acquisition and
accordingly will record an accounting fair value uplift to the opening assets acquired. These uplifts create assets or adjustments to assets,
which are depreciated or amortised over the remaining life of the underlying assets or contracts in those businesses with the charge
being included in the Group’s depreciation and amortisation expense. The Group’s adjusted operating profit, adjusted profit before
tax and adjusted Earnings Per Share are adjusted to exclude any additional depreciation, amortisation and impairment expense arising
from the fair value uplifts given these charges are derived from significant one-off gains, which are treated as exceptional when initially
recognised.
7 Release of deferred income
The Group deducts the release of deferred income in the year from its adjusted EBITDA metric as it principally relates to customer
contributions against depreciating assets. As the metric adds back depreciation, the income is also deducted.
8 Interest on net pension assets/liabilities (IAS 19 ‘Employee Benefits’)
The Group’s interest income relating to defined benefit pension schemes is derived from the net assets of the schemes as valued under
IAS 19. This will mean that the credit or charge recognised in any given year will be dependent on the impact of actuarial assumptions
such as inflation and discount rates. The Group excludes these from its adjusted profit measures due to the non-cash nature of these
charges or credits.
9 Deferred tax
The Group adjusts for deferred tax when arriving at adjusted profit after tax, adjusted Earnings Per Share and its adjusted effective rate of
tax. Deferred tax arises as a result of differences in accounting and tax bases that give rise to potential future accounting credits or charges.
As the Group remains committed to its ongoing capital programme, the liabilities associated are not expected to reverse and accordingly
the Group excludes these from its adjusted profit measures.
10 Results attributable to non-controlling interest holders
The Group’s structure includes non-wholly owned but controlled subsidiaries which are consolidated within the financial statements of
the Group under IFRS. The most significant of those is SSEN Transmission, a 25% stake in which was divested on 30 November 2022 (see
note 12.2 in the financial statements for more details of that transaction). There is no impact to disclosures for prior years but in the current
year the Group has removed the share of profit attributable to holders of non-controlling equity stakes in such businesses from the point
when the ownership structure changed (i.e. for SSEN Transmission, with effect from 1 December 2022) from all of its profit measures,
to report all metrics based on the share of profits items attributable to the ordinary equity holders of the Group. The adjustment has been
applied consistently to all of the Group’s adjusted profit measures, including removing proportionate non-controlling share of operating
profit and depreciation and amortisation from the Group’s adjusted EBITDA metric; removing the non-controlling share of operating profit
from the Group’s adjusted operating profit metric; removing the non-controlling share of net finance costs from the Group’s adjusted net
finance costs metric; and removing the non-controlling interest share of current tax from the Group’s adjusted current tax metric.
197SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
March 2023
Continuing
operations
Reported
£m
Movement
on
derivatives
£m
Exceptional
items
£m
Adjustments to
Gas Production
decommissioning
provision
£m
Depreciation
on FV uplifts
£m
Joint
venture
interest
and tax
£m
Interest
on net
pension
asset
£m
Deferred
tax
£m
Share of
profit
attributable
to
non-
controlling
interests
£m
Adjusted
£m
Operating
(loss)/profit (146.3) 2,514.3 0.6 (50.5) 28.8 213.2 – – (30.9) 2,529.2
Net finance
costs (59.3) (201.9) (0.2) – – (70.1) (16.2) – 2.1 (345.6)
(Loss)/profit
before
taxation (205.6) 2,312.4 0.4 (50.5) 28.8 143.1 (16.2) – (28.8) 2,183.6
Taxation 110.0 (460.5) 34.1 – – (143.1) – 99.6 1.1 (358.8)
(Loss)/profit
after taxation (95.6) 1,851.9 34.5 (50.5) 28.8 – (16.2) 99.6 (27.7) 1,824.8
Attributable to
other equity
holders (62.4) – – – – – – (4.1) 27.7 (38.8)
(Loss)/profit
attributable to
ordinary
shareholders (158.0) 1,851.9 34.5 (50.5) 28.8 – (16.2) 95.5 – 1,786.0
Number of
shares for EPS 1,075.6 1,075.6
(Losses)/
Earnings Per
Share (14.7) 166.0
EBITDA
Adjusted
operating profit
from continuing
operations
£m
Share of joint
venture and
associates’
depreciation
and
amortisation
£m
Release of
deferred
income
£m
Depreciation
on FV uplifts
£m
Depreciation,
impairment and
amortisation
before
exceptional
charges
£m
Share of
depreciation,
impairment and
amortisation
before
exceptional items
attributable to
non-controlling
interests
£m
Adjusted
EBITDA
£m
Adjusted operating profit from
continuing operations 2,529.2 201.1 (13.9) (28.8) 704.2 (9.7) 3,382.1
March 2022 (restated*)
Continuing operations
Reported
£m
Movement
on
derivatives
£m
Exceptional
items
£m
Adjustments to
Gas Production
decommissioning
provision
£m
Depreciation
on FV uplifts
£m
Joint venture
interest and
tax
£m
Interest on net
pension asset
£m
Deferred
tax
£m
Adjusted
£m
Operating profit 3,749.5 (2,097.8) (301.8) 13.1 20.6 147.3 – – 1,530.9
Net finance costs (273.2) (21.0) (3.2) – – (67.8) (7.6) – (372.8)
Profit before
taxation 3,476.3 (2,118.8) (305.0) 13.1 20.6 79.5 (7.6) – 1,158.1
Taxation (881.3) 408.0 323.7 – – (79.5) – 122.0 (107.1)
Profit after taxation 2,595.0 (1,710.8) 18.7 13.1 20.6 – (7.6) 122.0 1,051.0
Attributable to
other equity
holders (50.7) – – – – – – – (50.7)
Profit attributable
to ordinary
shareholders 2,544.3 (1,710.8) 18.7 13.1 20.6 – (7.6) 122.0 1,000.3
Number of shares
for EPS 1,055.0 1,055.0
Earnings Per Share 241.2 94.8
198 SSE plc Annual Report 2023
Alternative performance measures continued
Rationale for adjustments to profit measure continued
March 2022 (restated*) continued
EBITDA
Adjusted
operating profit
from continuing
operations
£m
Share of joint
venture and
associates’
depreciation and
amortisation
£m
Release of
deferred income
£m
Depreciation on
FV uplifts
£m
Depreciation,
impairment and
amortisation
before
exceptional
charges
£m
Adjusted
EBITDA
£m
Adjusted operating profit from continuing
operations 1,530.9 146.6 (17.6) (20.6) 612.0 2,251.3
* The comparative Alternative Performance Measures have been restated. See note 2.1.
March 2021
Continuing operations
Reported
£m
Movement
on
derivatives
£m
Exceptional
items
£m
Depreciation
on FV uplifts
£m
Joint
venture
interest
and tax
£m
Interest on
net pension
asset
£m
Deferred
tax
£m
Adjusted
£m
Operating profit 2,654.9 (597.8) (848.9) 20.6 104.7 – – 1,333.5
Net finance costs (236.9) (55.6) (1.4) – (82.4) (8.3) – (384.6)
Profit before taxation 2,418.0 (653.4) (850.3) 20.6 22.3 (8.3) – 948.9
Taxation (224.3) 125.9 (3.1) – (22.3) – 37.9 (85.9)
Profit after taxation 2,193.7 (527.5) (853.4) 20.6 – (8.3) 37.9 863.0
Attributable to other equity holders (46.6) – – – – – – (46.6)
Profit attributable to ordinary
shareholders 2,147.1 (527.5) (853.4) 20.6 – (8.3) 37.9 816.4
Number of shares for EPS 1,040.9 1,040.9
Earnings Per Share 206.3 78.4
EBITDA
Adjusted
operating profit
from continuing
operations
£m
Share of joint
venture and
associates’
depreciation and
amortisation
£m
Release of
deferred income
£m
Depreciation on
FV uplifts
£m
Depreciation,
impairment and
amortisation
before
exceptional
charges
£m
Adjusted
EBITDA
£m
Adjusted operating profit from continuing
operations 1,333.5 143.9 (17.7) (20.6) 556.2 1,995.3
Debt measure
Group APM Purpose
Closest equivalent IFRS
measure Adjustments to reconcile to primary financial statements
Adjusted Net Debt
and Hybrid Capital
Debt
measure
Unadjusted
net debt
• Hybrid equity
• Cash posted as collateral
• Lease obligations
• Non-controlling share of borrowings and cash
Rationale for adjustments to debt measure
11 Hybrid equity
The characteristics of certain hybrid capital securities mean that they qualify for recognition as equity rather than debt under IFRS.
Consequently, their coupon payments are presented within equity rather than within finance costs. As a result, the coupon payments
are not included in SSE’s adjusted profit before tax measure. In order to present total funding provided from sources other than ordinary
shareholders, SSE presents its adjusted net debt measure inclusive of hybrid capital to better reflect the Group’s funding position.
12 Cash posted as collateral
Cash posted as collateral are SSE cash balances held by counterparties including trading exchanges. Collateral balances mostly represent
initial and variation margin, required as part of the management of the Group’s exposures on commodity contracts, that will be received
on maturity of the related trades. Loans with a maturity of less than three months are also included in this adjustment. The Group includes
this adjustment in order to better reflect the immediate cash resources to which it has access, which in turn better reflects the Group’s
funding position.
13 Lease obligations
SSE’s reported loans and borrowings include lease liabilities on contracts within the scope of IFRS 16, which are not directly related to
external financing of the Group. The Group excludes these liabilities from its adjusted net debt and hybrid capital measure to better
reflect the Group’s underlying funding position with its primary sources of capital.
199SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
14 Debt and cash attributable to non-controlling interests
The Group’s structure includes non-wholly owned but controlled subsidiaries which are consolidated within the financial statements of the
Group under IFRS. The most significant of those is SSEN Transmission, a 25% stake in which was divested on 30 November 2022 (see note
12.2 in the financial statements for more details of that transaction). Following completion of the transaction, the Group has removed the
share of external debt and cash in these subsidiaries proportionately attributable to the non-controlling interest holders from its adjusted
net debt and hybrid capital metric. While legal entitlement to these items has not changed, the Group makes this adjustment to present net
debt attributable to ordinary equity holders of the Group.
March 2023
£m
March 2022
£m
March 2021
£m
Unadjusted net debt (8,168.1) (8,015.4) (7,810.4)
Cash posted as collateral 316.3 74.7 (37.1)
Lease obligations 405.9 393.5 421.0
External net debt attributable to non-controlling interests 434.2 – –
Adjusted Net Debt (7,011.7) (7,547.2) (7,426.5)
Hybrid equity (1,882.4) (1,051.0) (1,472.4)
Adjusted Net Debt and Hybrid Capital (8,894.1) (8,598.2) (8,898.9)
Capital measures
Group APM Purpose Closest equivalent IFRS measure Adjustments to reconcile to primary financial statements
Adjusted
Investment and
Capital
Expenditure
Capital
measure
Capital additions to intangible
assets and property, plant and
equipment
• Customer funded additions
• Allowances and certificates
• Additions acquired through business combinations
• Disposed or impaired additions
• Joint ventures and associates’ additions funding
• Non-controlling share of capital expenditure
• Refinancing proceeds/refunds
Adjusted
Investment, Capital
and Acquisition
Expenditure
Capital
measure
Capital additions to intangible
assets and property, plant and
equipment
• Customer funded additions
• Allowances and certificates
• Additions acquired through business combinations
• Disposed or impaired additions
• Joint ventures and associates’ additions funding
• Non-controlling share of capital expenditure
• Refinancing proceeds/refunds
• Acquisition cash consideration
Adjustments to capital measures
15 Customer funded additions
Customer funded additions represents additions to electricity and other networks funded by customer contributions. Given these are
directly funded by customers, these additions have been excluded to better reflect the Group’s underlying investment position.
16 Allowances and certificates
Allowances and certificates consist of purchased carbon emissions allowances and generated or purchased renewable obligations
certificates (ROCs) and additions in the year are not included in the Group’s ‘capital expenditure and investment’ APM to better reflect
the Group’s investment in enduring operational assets.
17 Additions acquired through business combinations
Where the Group acquires an early-stage development company, which is classified as the acquisition of an asset, or group of assets
and not the acquisition of a business, the acquisition is treated as an addition to intangible assets or property, plant and equipment
and is included within ‘adjusted investment and capital expenditure’. Where the Group acquires an established business or interest in
an equity-accounted joint venture requiring a fair value assessment in line with the principles of IFRS 3 ‘Business Combinations’, the fair
value of acquired consolidated tangible or intangible assets are excluded from the Group’s ‘adjusted investment and capital expenditure’,
as they are not direct capital expenditure by the Group. However, the fair valuation of consideration paid for the business or investment is
included in the Group’s ‘adjusted investment, capital and acquisition expenditure’ metric, see 23 below. Please refer to note 12 for detail
of the Group’s acquisitions in the year.
18 Additions subsequently disposed or impaired
For consistency of presentation, any capital additions in the year that are subsequently written-down or disposed are removed from the
APM. In the prior year there were capex additions of £13.9m related to the Gas Production business, which was disposed on 14 October
2021. This adjustment also includes any subsequently derecognised development expenditure.
200 SSE plc Annual Report 2023
Alternative performance measures continued
Adjustments to capital measures continued
19 Joint ventures and associates’ additions funding
Joint ventures and associates’ additions included in the Group’s capital measures represent the direct loan or equity funding provided by
the Group to joint venture and associate arrangements in relation to capital expenditure projects. This has been included to better reflect
the Group’s use of directly funded equity accounted vehicles to grow the Group’s asset base. Asset additions funded by project finance
raised within the Group’s joint ventures and associates are not included in this adjustment.
20 Non-controlling share of capital expenditure
The Group’s structure includes non-wholly owned but controlled subsidiaries which are consolidated within the financial statements
of the Group under IFRS. The most significant of those is SSEN Transmission, a 25% stake in which was divested on 30 November 2022
(see note 12.2 in the financial statements for more details of that transaction). In the current year, the Group has removed the share of
capital additions attributable proportionately to these equity holders from the point when the ownership structure changed (i.e. for SSEN
Transmission, with effect from 1 December 2022) from its ‘adjusted investment and capital expenditure’ and ‘adjusted investment, capital
and acquisition expenditure’ metrics. This is consistent with the adjustments noted elsewhere related to these non-controlling interests.
This has no impact on the prior year metrics.
21 Refinancing proceeds/refunds
The Group’s model for developing large scale capital projects within joint ventures and associates involves project finance being raised
within those entities. Where the Group funds early-stage capex which is then subsequently reimbursed to SSE following the receipt of
project finance within the vehicle, the refinancing proceeds are included in the Group’s net adjusted investment and capital expenditure
metric. This is consistent with the inclusion of the initial investment in the metric as explained at 17 above. There were no refinancing
proceeds in the year ended 31 March 2023. In the year ended 31 March 2022, Doggerbank windfarm reimbursed SSE for previous funding
of £136.7m. In the year ended 31 March 2021, the Group received reimbursed capex of £246.1m in relation to Seagreen windfarm and
£182.5m in relation to Doggerbank windfarm. These receipts have been deducted from the Group’s adjusted investment and capital
expenditure metric.
22 Lease additions
Additions of right of use assets under the Group’s IFRS 16 compliant policies for lease contracts are excluded from the Group’s adjusted
capital measures as they do not represent directly funded capital investment. This is consistent with the treatment of lease obligations
explained at 13, above.
23 Acquisition cash consideration in relation to business combinations
The Group has outlined a significant investment programme which will partly be achieved through the acquisition of businesses
with development opportunities for the Group. The cash consideration paid for these entities is included within the Group’s adjusted
investment, capital and acquisition expenditure metric as it provides stakeholders an accurate basis of cash investment into the Group’s
total development pipeline and is consistent with the reporting of the Group’s Net Zero Acceleration Programme Plus.
March 2023
£m
March 2022
(restated*)
£m
March 2021
£m
Capital additions to intangible assets 1,688.6 921.0 701.3
Capital additions to property, plant and equipment 1,500.1 1,392.9 1,102.5
Capital additions to intangible assets and property, plant and equipment 3,188.7 2,313.9 1,803.8
Customer funded additions (80.9) (91.3) (61.8)
Allowances and certificates (805.2) (544.5) (509.0)
Additions through business combinations (515.2) (197.8) –
Additions subsequently disposed/impaired – (13.9) (19.7)
Joint ventures and associates’ additions 498.4 682.5 172.7
Non-controlled interests share of capital expenditure (46.7) – –
Refinancing (proceeds)/refunds – (136.7) (428.6)
Lease asset additions (78.5) (85.7) (45.4)
Adjusted Investment and Capital expenditure 2,160.6 1,926.5 912.0
Acquisition cash consideration 642.7 141.3 –
Adjusted Investment, Capital and Acquisition Expenditure 2,803.3 2,067.8 912.0
* The comparative Alternative Performance Measures have been restated. See note 2.1.
201SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Impact of discontinued operations on the Group’s APMs
The following metrics have been adjusted in all years presented to exclude the contribution of the Group’s investment in Scotia Gas
Networks Limited (‘SGN’) which was disposed on 22 March 2022 (see note 12) and Group’s Gas Production operations which were
disposed on 14 October 2021:
• Adjusted EBITDA;
• Adjusted operating profit;
• Adjusted net finance costs;
• Adjusted profit before tax;
• Adjusted current tax charge; and
• Adjusted Earnings Per Share.
‘Adjusted net debt and hybrid capital’, ‘adjusted investment and capital expenditure’, and ‘adjusted investment, capital and acquisition
expenditure’ have not been adjusted as the Group continues to fund the discontinued operations until the date of disposal.
The following table summarises the impact of excluding discontinued operations from the APMs of the continuing activities of the Group
in current and prior years:
March 2023
£m
March 2022
(restated*)
£m
March 2021
£m
Adjusted EBITDA of SSE Group (including discontinued operations) 3,382.1 2,384.8 2,262.9
Less: Gas Production profit – (101.4) (33.0)
Less: SGN profit – (32.1) (234.6)
Adjusted EBITDA of continuing operations
APM
3,382.1 2,251.3 1,995.3
Adjusted operating profit of SSE Group (including discontinued operations) 2,529.2 1,653.3 1,539.5
Less: Gas Production profit – (101.4) (33.0)
Less: SGN profit – (21.0) (173.0)
Adjusted operating profit of continuing operations
APM
2,529.2 1,530.9 1,333.5
Adjusted net finance costs of SSE Group (including discontinued operations) 345.6 377.6 443.9
Less: Gas Production – (0.1) (2.3)
Less: SGN – (4.7) (57.0)
Adjusted net finance costs of continuing operations
APM
345.6 372.8 384.6
Adjusted profit before tax of SSE Group (including discontinued operations) 2,183.6 1,275.7 1,095.6
Less: Gas Production profit – (101.3) (30.7)
Less: SGN profit – (16.3) (116.0)
Adjusted profit before tax of continuing operations
APM
2,183.6 1,158.1 948.9
Adjusted current tax of SSE Group (including discontinued operations) 358.8 109.4 107.8
Less: SGN current tax charge – (2.3) (21.9)
Adjusted current tax of continuing operations
APM
358.8 107.1 85.9
Adjusted Earnings Per Share of SSE Group (including discontinued operations) 166.0 105.6 90.5
Less: Gas Production Earnings Per Share – (9.6) (3.0)
Less: SGN Earnings Per Share – (1.2) (9.1)
Adjusted Earnings Per Share of continuing operations
APM
166.0 94.8 78.4
* The comparative Alternative Performance Measures have been restated. See note 2.1.
The remaining APMs presented by the Group are unchanged in all periods presented by the discontinued operations.
202 SSE plc Annual Report 2023
Primary statements
Consolidated income statement 203
Consolidated statement of comprehensive income 204
Consolidated balance sheet 205
Consolidated statement of changes in equity 206
Consolidated cash flow statement 208
Notes to the consolidated financial statements
1. General information and basis of preparation 209
2. New accounting policies and reporting changes 209
3. Adjusted accounting measures 210
4. Accounting judgements and
estimation uncertainty 212
5. Segmental information 215
6. Other operating income and cost 227
7. Exceptional items and certain re-measurements 228
8. Directors and employees 234
9. Finance income and costs 236
10. Taxation 237
11. Dividends and Earnings Per Share 239
12. Acquisitions and disposals 241
13. Intangible assets 246
14. Property, plant and equipment 248
15. Impairment testing 249
16. Investments 257
17. Inventories 259
18. Trade and other receivables 259
19. Trade and other payables 260
20. Provisions 260
21. Sources of finance 262
22. Equity 268
23. Retirement benefit obligations 269
24. Financial instruments 274
25. Commitments and contingencies 275
26. Post balance sheet events 275
Accompanying information
A1. Basis of consolidation and significant
accounting policies 276
A2. Taxation 287
A3. Related undertakings 289
A4. Joint ventures and associates 296
A5. Related party transactions 299
A6. Financial risk management 300
A7. Fair value of financial instruments 310
A8. Hedge accounting 313
Company financial statements
Company balance sheet 314
Company statement of changes in equity 315
Notes to the Company financial statements
1. Principal accounting policies 316
2. Supplementary financial information 317
3. Investments in associates and joint ventures 317
4. Subsidiary undertakings 317
5. Trade and other receivables 318
6. Trade and other payables 318
7. Taxation 318
8. Loans and borrowings 318
9. Equity 320
10. Retirement benefit obligations 321
11. Financial instruments 324
12. Commitments and contingencies 324
13. Provisions 325
Contents
203SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
2023 2022
Note
Before
exceptional
items and
certain
re-
measurements
£m
Exceptional
items and
certain
re-
measurements
(note 7)
£m
Total
£m
Before
exceptional
items and
certain
re-
measurements
(restated*)
£m
Exceptional
items and
certain
re-
measurements
(note 7)
£m
Total
(restated*)
£m
Continuing operations
Revenue 5 12 ,490 .7 – 12 ,49 0.7 8 , 6 9 7. 2 – 8 , 6 9 7. 2
Cost of sales 6 (9, 933 . 2 ) (2 , 7 1 7. 2 ) (1 2,650.4 ) (6,40 5. 5 ) 2 , 0 9 7. 8 (4 , 3 0 7. 7 )
Gross profit/(loss) 2 , 5 5 7. 5 (2 , 7 1 7. 2 ) (1 59.7 ) 2, 2 91 .7 2 , 0 97. 8 4, 3 8 9. 5
Operating costs 6 (1 ,431 .6 ) (2 30. 4 ) (1 ,662 .0 ) (1 , 1 1 7. 6 ) 2 9 7. 5 (8 20. 1 )
Debt impairment charges A6.2 (91 .0 ) – (91 .0 ) (1 . 1 ) – (1 . 1 )
Other operating income 6 1 ,01 5. 0 8 9. 1 1 , 10 4. 1 6 7. 1 4.3 7 1.4
Operating profit/(loss) before joint ventures
and associates 2,049.9 (2,858 .5 ) (8 08 .6 ) 1 , 24 0 . 1 2, 399.6 3, 639. 7
Joint ventures and associates:
Share of operating profit 531 . 9 140. 7 672 .6 2 5 7. 1 – 2 5 7. 1
Share of interest (70 . 1 ) – (70. 1 ) (6 7. 8 ) – (6 7. 8 )
Share of movement in derivatives – 202 .9 202. 9 – – –
Share of tax (104 .0 ) (39. 1 ) (1 43. 1 ) (46 . 3 ) (33. 2 ) (79. 5 )
Share of profit on joint ventures and
associates 16 3 5 7. 8 304.5 662. 3 143 .0 (33. 2 ) 109. 8
Operating profit/(loss) from continuing
operations 5 2,407.7 (2 ,55 4.0 ) (146. 3 ) 1, 383 .1 2,36 6.4 3 , 74 9 . 5
Finance income 9 1 35. 3 202 . 1 3 3 7. 4 79. 0 24. 2 103 . 2
Finance costs 9 (396 .7 ) – (396 .7 ) (3 76 . 4 ) – (3 76 . 4 )
Profit/(loss) before taxation 2 , 146 . 3 (2 , 351 . 9 ) (205 .6 ) 1 ,08 5.7 2 , 39 0.6 3 ,476 . 3
Taxation 10 (355 .5 ) 465 .5 110 .0 (149. 6 ) (7 31 . 7 ) (881 . 3 )
Profit/(loss) for the year from continuing
operations 1 ,790. 8 (1 ,8 86 .4 ) (95.6 ) 936 . 1 1 ,65 8 .9 2, 595 .0
Discontinued operations
Profit from discontinued operation, net of tax 12 – 35 .0 35.0 1 16 . 3 366.4 4 82.7
Profit/(loss) for the year 1 ,790. 8 (1 , 851 .4 ) (6 0.6 ) 1 ,052.4 2,025.3 3,077.7
Attributable to:
Ordinary shareholders of the parent 11 1,7 28.4 (1 ,8 51 . 4 ) (1 23 .0 ) 1 ,001 .7 2,025.3 3,027 .0
Non-controlling interests 23.6 – 2 3.6 – – –
Other equity holders 38.8 – 38. 8 50.7 – 50.7
(Losses)/Earnings Per Share
Basic (pence) 11 (11 .4 ) 2 86 .9
Diluted (pence) 11 (11 . 4 ) 286 .4
(Losses)/Earnings Per Share – continuing
operations
Basic (pence) 11 (14.7 ) 2 4 1.2
Diluted (pence) 11 (14.7 ) 24 0 . 7
* The comparative Consolidated Income Statement has been restated. See note 2.1.
The accompanying notes are an integral part of these financial statements.
Consolidated income statement
For the year ended 31 March 2023
204 SSE plc Annual Report 2023
Consolidated statement of comprehensive income
For the year ended 31 March 2023
2023
£m
2022
(restated*)
£m
(Loss)/profit for the year
Continuing operations (95.6 ) 2 , 595 .0
Discontinued operations 35.0 4 82.7
(60.6 ) 3,077.7
Other comprehensive income:
Items that will be reclassified subsequently to profit or loss:
Net gains on cash flow hedges 43. 3 2 2 .9
Transferred to assets and liabilities on cash flow hedges (12 .7 ) 11.2
Taxation on cashflow hedges (8. 1 ) (4 .4 )
Share of other comprehensive gain of joint ventures and associates, net of taxation 342 .4 181 .4
Exchange difference on translation of foreign operations 72. 5 (3. 2 )
(Loss)/gain on net investment hedge (43 . 1 ) 9.4
Items that will not be reclassified to profit or loss:
Actuarial (loss)/gain on retirement benefit schemes, net of taxation (59. 4 ) 1 24 . 7
Share of other comprehensive loss of joint ventures and associates, net of taxation – (1 .7 )
Losses on revaluation of investments in equity instruments, net of taxation (0. 4 ) –
(59. 8 ) 1 23.0
Other comprehensive gain, net of taxation 334 . 5 34 0. 3
Total comprehensive income for the year 273. 9 3 ,41 8 . 0
Total comprehensive income for the year arises from:
Continuing operations 238.9 2, 908.4
Discontinued operations
Items that will be reclassified subsequently to profit or loss:
Share of other comprehensive gain of joint venture and associates, net of taxation – 28.6
Items that will not be reclassified to the profit or loss:
Share of other comprehensive loss of joint ventures, net of taxation – (1 .7 )
Other comprehensive gain from discontinued operations – 26 .9
Profit from discontinued operations 35.0 4 82.7
Total comprehensive income from discontinued operations 35 .0 5 09. 6
Total comprehensive income for the year 273. 9 3 ,41 8 . 0
Attributable to:
Ordinary shareholders of the parent 20 6.4 3 , 3 6 7. 3
Non-controlling interests 28.7 –
Other equity holders 38.8 50.7
* The comparative Consolidated Statement of Comprehensive Income has been restated. See note 2.1.
The accompanying notes are an integral part of these financial statements.
205SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Consolidated balance sheet
As at 31 March 2023
Note
2023
£m
2022
(restated*)
£m
Assets
Property, plant and equipment 14 1 5, 395 .9 14 ,61 2. 8
Goodwill and other intangible assets 13 1 ,960.3 1,12 7 .8
Equity investments in joint ventures and associates 16 1 , 9 3 7. 0 1 , 23 9. 5
Loans to joint ventures and associates 16 1, 11 5.4 7 3 6.9
Other investments 16 2 7. 4 8.7
Other receivables 18 14 9. 5 1 36.4
Derivative financial assets 24 24 6 .0 371 .7
Retirement benefit assets 23 5 41 . 1 58 4 .9
Non-current assets 21 , 372 .6 18 ,818.7
Intangible assets 13 45 4.9 459. 3
Inventories 17 394.9 26 6 .6
Trade and other receivables 18 3 , 24 5 . 1 2, 21 1 .0
Current tax asset 10 19. 9 8.8
Cash and cash equivalents 21 891 . 8 1,0 4 9. 3
Derivative financial assets 24 75 9. 2 2,9 41 . 8
Current assets 5 ,76 5 . 8 6 ,93 6 . 8
Total assets 2 7, 1 3 8 . 4 25,755 . 5
Liabilities
Loans and other borrowings 21 1 , 820.6 1,190.8
Trade and other payables 19 2,6 58 .6 2,67 2.6
Current tax liabilities 10 9. 1 –
Provisions 20 2 9. 4 93 . 3
Derivative financial liabilities 24 24 3. 3 701 . 5
Current liabilities 4 , 761 . 0 4,65 8. 2
Loans and other borrowings 21 7, 2 3 9 . 3 7, 8 7 3 . 9
Deferred tax liabilities 10 1 , 2 99. 1 1,644.1
Trade and other payables 19 9 59. 9 8 42.4
Provisions 20 74 2 . 7 1 , 0 1 7. 9
Derivative financial liabilities 24 1 ,021 .0 5 49. 6
Non-current liabilities 11 , 2 62 .0 1 1 , 9 2 7. 9
Total liabilities 16,0 23 .0 16, 58 6 . 1
Net assets 11 ,115.4 9,16 9.4
Equity:
Share capital 22 5 4 7. 0 536.5
Share premium 821 . 2 835. 1
Capital redemption reserve 52 .6 4 9. 2
Hedge reserve 441 . 2 7 7. 5
Translation reserve 32 . 1 6 .6
Retained earnings 6, 68 9. 8 6 , 57 2 .9
Equity attributable to ordinary shareholders of the parent 8,583.9 8 , 0 7 7. 8
Hybrid equity 22 1 ,882 . 4 1 ,0 51 . 0
Attributable to non-controlling interests 22 6 4 9. 1 40.6
Total equity 11 ,115.4 9,16 9.4
* The comparative Consolidated Balance Sheet has been restated. See note 2.1.
The accompanying notes are an integral part of the financial statements.
These financial statements were approved by the Board of Directors on 23 May 2023 and signed on their behalf by:
Gregor Alexander Sir John Manzoni
Finance Director Chairman
SSE plc
Registered No: SC117119
206 SSE plc Annual Report 2023
Consolidated statement of changes in equity
For the year ended 31 March 2023
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Hedge
reserve
£m
Translation
reserve
£m
Retained
earnings
£m
Total
attributable
to ordinary
shareholders
£m
Hybrid
equity
£m
Total equity
before
non-
controlling
interests
£m
Non-
controlling
interests
£m
Total
equity
£m
At 1 April 2022
(restated*) 536 .5 835. 1 4 9. 2 7 7. 5 6.6 6 , 572 .9 8, 07 7. 8 1 ,051 .0 9,128.8 40.6 9, 1 69. 4
Profit for the year – – – – – (12 3.0 ) (1 23 .0 ) 38.8 (84 . 2 ) 23.6 (6 0.6 )
Other
comprehensive
income – – – 363 .7 25 .5 (59. 8 ) 3 29. 4 – 32 9.4 5.1 334 . 5
Total
comprehensive
income for the
year – – – 363.7 25.5 (1 82 .8 ) 206 .4 38.8 24 5. 2 28.7 27 3. 9
Dividends to
shareholders – – – – – (955. 8 ) (95 5. 8 ) – (955 .8 ) – (955 .8 )
Scrip dividend
related share
issue 1 3.9 (1 3. 9 ) – – – 4 81 . 5 4 81 . 5 – 481 . 5 – 481 . 5
Issue of treasury
shares – – – – – 18 .0 1 8.0 – 18 .0 – 18.0
Distributions to
Hybrid equity
holders – – – – – – – (38.8 ) (38 .8 ) – (38 .8 )
Issue of
Hybrid equity
(note 22.5) – – – – – – – 8 31 . 4 831 .4 – 831 . 4
Share buy back
(note 22.1) (3 .4 ) – 3.4 – – (107 .6 ) (107 .6 ) – (107 .6 ) – (107 .6 )
Partial disposal of
interest in SSEN
Transmission
transaction
(note 12) – – – – – 868.3 868. 3 – 868.3 579. 8 1 ,4 48 .1
Credit in respect
of employee
share awards – – – – – 18 .7 18.7 – 18.7 – 18.7
Investment in own
shares – – – – – (2 3. 4 ) (23 .4 ) – (2 3. 4 ) – (23. 4 )
At 31 March 2023 5 4 7. 0 821 . 2 52 .6 4 41 . 2 32 . 1 6, 68 9. 8 8,583.9 1 ,8 82 .4 10,46 6. 3 6 49. 1 11,11 5.4
207SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Consolidated statement of changes in equity
For the year ended 31 March 2022
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Hedge
reserve
£m
Translation
reserve
£m
Retained
earnings
£m
Total
attributable
to ordinary
shareholders
£m
Hybrid
equity
£m
Total equity
before
non-
controlling
interests
£m
Non-
controlling
interests
£m
Total
equity
£m
At 1 April 2021 5 24 . 5 8 4 7. 1 49. 2 (133 .6 ) 0.4 3,921 . 1 5,208.7 1 , 47 2 .4 6 ,681 .1 – 6,6 81 .1
Profit for the year
(restated*) – – – – – 3,027 .0 3,027.0 50.7 3,077.7 – 3,077.7
Other
comprehensive
income – – – 211 .1 6. 2 123 .0 3 40. 3 – 34 0.3 – 340. 3
Total
comprehensive
income for the
year (restated*) – – – 211 .1 6. 2 3,1 50.0 3 , 3 6 7. 3 50.7 3 ,41 8 . 0 – 3 , 41 8 .0
Dividends to
shareholders – – – – – (862.3 ) (862.3 ) – (862.3 ) – (862.3 )
Scrip dividend
related share issue 12.0 (12.0 ) – – – 355 .7 355 .7 – 355.7 – 355 .7
Issue of treasury
shares – – – – – 6.3 6. 3 – 6.3 – 6.3
Distributions to
Hybrid equity
holders – – – – – – – (5 0.7 ) (50.7 ) – (50.7 )
Redemption of
Hybrid equity – – – – – (4. 6 ) (4 .6 ) (421.4 ) (426.0 ) – (426.0 )
Credit in respect of
employee share
awards – – – – – 20.8 20. 8 – 20. 8 – 20. 8
Investment in own
shares – – – – – (14 . 1 ) (14. 1 ) – (14 . 1 ) – (14 . 1 )
Acquisition of
subsidiary – – – – – – – – – 4 0.6 40.6
At 31 March 2022
(restated*) 5 36. 5 835.1 49. 2 7 7. 5 6 .6 6, 57 2 .9
* The comparative Statement of Changes in Equity has been restated. See note 2.1.
208 SSE plc Annual Report 2023
Note
2023
£m
2022
£m
(restated*)
Operating (loss)/profit – continuing operations
(146. 3 )
Operating loss – discontinued operations 12
(10 0. 5 )
Operating profit – total operations (146. 3 )
Less share of profit of joint ventures and associates
(662 . 3 )
(28.7 )
Operating (loss)/profit before jointly controlled entities and associates
(808 .6 )
Pension service charges less contributions paid 23
(19.2 )
(23.0 )
Movement on operating derivatives 24
(2,100.4 )
Depreciation, amortisation, write downs and impairments
Impairment of joint venture investment 7,16
Charge in respect of employee share awards (before tax)
Profit on disposal of assets and businesses 7,12
(89. 1 )
(48 . 2 )
Release of provisions 20
(114 .9 )
(1 .6 )
Release of deferred income 6
(13 .9 )
(1 7. 6 )
Cash generated from operations before working capital movements 2 ,6 34 .6
Increase in inventories
(137.3 )
(24 . 4 )
Increase in receivables
(996.0 )
(625.6 )
Increase in payables
(Decrease)/increase in provisions
(15 . 3 )
Cash generated from operations
Dividends received from investments 16
Interest paid
(19 9. 9 )
(273 . 5 )
Taxes paid
(255 . 3 )
(91 . 5 )
Net cash from operating activities 1 ,494.0
Purchase of property, plant and equipment 5
(1 , 47 9. 7 )
(1, 27 3 .6 )
Purchase of other intangible assets 5
(336 .4 )
(182. 2 )
Deferred income received
Proceeds from disposals 12
Purchase of businesses, joint ventures and subsidiaries 12
(642 . 7 )
(14 5 . 3 )
Joint venture development expenditure refunds 16
Loans and equity provided to joint ventures and associates 16
(621 .8 )
(676.0 )
Loans and equity repaid by joint ventures 16
Increase in other investments 16
(19. 1 )
Net cash from investing activities (2,964.4 )
(74 4 . 9 )
Proceeds from issue of share capital 22
Dividends paid to company’s equity holders 11
(4 74 . 3 )
(506 .6 )
Share buy backs 22
(107 .6 )
Proceeds from divestments 12
Hybrid equity dividend payments 22
(38. 8 )
(50.7 )
Employee share awards share purchase 22
(23 .4 )
(14 . 1 )
Issue of hybrid instruments 22
Redemption of hybrid instruments
(426.0 )
New borrowings 21
Repayment of borrowings 21
(2 , 242. 5 )
(960 .1 )
Settlement of cashflow hedges
(12 .7 )
Net cash from financing activities 1 , 31 2 . 9
(1 , 433 .9 )
Net decrease in cash and cash equivalents (1 5 7. 5 )
(55 0.9 )
Cash and cash equivalents at the start of year
21
Net decrease in cash and cash equivalents (1 5 7. 5 )
(55 0.9 )
Cash and cash equivalents at the end of year 21 891 . 8 1, 0 49. 3
The accompanying notes are an integral part of these financial statements.
* The comparative Consolidated Cash Flow Statement has been restated. See note 2.1.
Consolidated cash flow statement
For the year ended 31 March 2023
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Notes to the consolidated financial statements continued
For the year ended 31 March 2023
2. New accounting policies and reporting changes continued
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Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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4. Accounting judgements and estimation uncertainty continued
Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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5. Segmental information continued
5.1 Segmental information disclosure continued
Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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5. Segmental information continued
5.1 Segmental information disclosure continued
Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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5. Segmental information continued
5.1 Segmental information disclosure continued
Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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5. Segmental information continued
5.1 Segmental information disclosure continued
Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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5. Segmental information continued
5.1 Segmental information disclosure continued
Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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Notes to the consolidated financial statements continued
For the year ended 31 March 2023
7. Exceptional items and certain re-measurements continued
7.1 Exceptional items
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Notes to the consolidated financial statements continued
For the year ended 31 March 2023
7. Exceptional items and certain re-measurements continued
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Notes to the consolidated financial statements continued
For the year ended 31 March 2023
7. Exceptional items and certain re-measurements continued
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Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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Notes to the consolidated financial statements continued
For the year ended 31 March 2023
10. Taxation continued
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Notes to the consolidated financial statements continued
For the year ended 31 March 2023
11. Dividends and Earnings Per Share continued
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Notes to the consolidated financial statements continued
For the year ended 31 March 2023
12. Acquisitions and disposals continued
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Notes to the consolidated financial statements continued
For the year ended 31 March 2023
12. Acquisitions and disposals continued
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Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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15. Impairment testing continued
Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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16. Investments continued
Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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21. Sources of finance continued
Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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21. Sources of finance continued
Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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23. Retirement benefit obligations continued
Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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23. Retirement benefit obligations continued
Notes to the consolidated financial statements continued
For the year ended 31 March 2023
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Notes to the consolidated financial statements continued
For the year ended 31 March 2023
23. Retirement benefit obligations continued
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A1. Basis of consolidation and significant accounting policies continued
A1.2 Significant accounting policies continued
Accompanying information continued
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Accompanying information continued
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A1. Basis of consolidation and significant accounting policies continued
A1.2 Significant accounting policies continued
Accompanying information continued
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A1. Basis of consolidation and significant accounting policies continued
A1.2 Significant accounting policies continued
Accompanying information continued
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A1. Basis of consolidation and significant accounting policies continued
A1.2 Significant accounting policies continued
Accompanying information continued
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A2. Taxation continued
Accompanying information continued
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Accompanying information continued
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Accompanying information continued
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Accompanying information continued
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A3. Related undertakings continued
Accompanying information continued
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A4. Joint ventures and associates continued
Accompanying information continued
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Accompanying information continued
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A6. Financial risk management continued
Accompanying information continued
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A6. Financial risk management continued
Accompanying information continued
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A6. Financial risk management continued
Accompanying information continued
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A6. Financial risk management continued
Accompanying information continued
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Accompanying information continued
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A7. Fair value of financial instruments continued
Accompanying information continued
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Company balance sheet
As at 31 March 2023
Note
2023
£m
2022
£m
Assets
Equity investments in joint ventures and associates 3 50.4 12.7
Loans to joint ventures and associates 3 81.6 129.2
Investments in subsidiaries 4 1,904.1 1,883.6
Trade and other receivables 5 11,382.6 9,365.5
Derivative financial assets 11 48.2 64.6
Retirement benefit assets 10 366.6 517.5
Non-current assets 13,833.5 11,973.1
Trade and other receivables 5 1,002.1 720.1
Current tax asset 7 1.4 3.8
Cash and cash equivalents 8 788.9 1,006.7
Derivative financial assets 11 167.1 112.0
Current assets 1,959.5 1,842.6
Total assets 15,793.0 13,815.7
Liabilities
Loans and other borrowings 8 1,588.5 968.7
Trade and other payables 6 2,667.1 2,035.3
Provisions 13 5.3 84.0
Derivative financial liabilities 11 13.5 70.6
Current liabilities 4,274.4 3,158.6
Loans and other borrowings 8 4,307.8 5,284.7
Deferred tax liabilities 7 78.3 65.0
Provisions 13 196.5 242.9
Derivative financial liabilities 11 79.2 301.1
Non-current liabilities 4,661.8 5,893.7
Total liabilities 8,936.2 9,052.3
Net assets 6,856.8 4,763.4
Equity:
Share capital 9 547.0 536.5
Share premium 821.2 835.1
Capital redemption reserve 52.6 49.2
Hedge reserve (3.0) 13.3
Retained earnings 3,556.6 2,278.3
Equity attributable to ordinary shareholders of the parent 4,974.4 3,712.4
Hybrid equity 9 1,882.4 1,051.0
Total equity 6,856.8 4,763.4
Result for the year
The profit for the year attributable to ordinary shareholders dealt with in the financial statements of the Company was £1,999.4m (2022:
£902.9m) including dividends received from subsidiaries of £1,669.7m.
These financial statements were approved by the Board of Directors on 23 May 2023 and signed on their behalf by
Gregor Alexander Sir John Manzoni
Finance Director Chairman
SSE plc
Registered No: SC117119
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Statement of changes in equity
Share
capital
£m
Share
premium
account
£m
Capital
redemption
reserve
£m
Hedge
reserve
£m
Retained
earnings
£m
Total
attributable
to ordinary
shareholders
£m
Hybrid
Capital
£m
Total
£m
At 1 April 2022 536.5 835.1 49.2 13.3 2,278.3 3,712.4 1,051.0 4,763.4
Profit for the year – – – – 1,960.6 1,960.6 38.8 1,999.4
Other comprehensive income – – – (16.3) (113.7) (130.0) – (130.0)
Total comprehensive income for the
year – – – (16.3) 1,846.9 1,830.6 38.8 1,869.4
Dividends to shareholders – – – – (955.8) (955.8) – (955.8)
Scrip dividend related share issue 13.9 (13.9) – – 481.5 481.5 – 481.5
Issue of treasury shares – – – – 18.0 18.0 – 18.0
Distributions to Hybrid equity holders – – – – – – (38.8) (38.8)
Redemption of Hybrid equity – – – – – – – –
Issue of Hybrid – – – – – – 831.4 831.4
Share buy back – – – – (107.6) (107.6) – (107.6)
Credit in respect of employee share
awards – – – – 18.7 18.7 – 18.7
Investment in own shares
(i)
(3.4) – 3.4 – (23.4) (23.4) – (23.4)
At 31 March 2023 547.0 821.2 52.6 (3.0) 3,556.6 4,974.4 1,882.4 6,856.8
Share
capital
£m
Share
premium
account
£m
Capital
redemption
reserve
£m
Hedge
reserve
£m
Retained
earnings
£m
Total
attributable
to ordinary
shareholders
£m
Hybrid
Capital
£m
Total
£m
At 1 April 2021 524.5 847.1 49.2 (14.2) 1,972.3 3,378.9 1,472.4 4,851.3
Profit for the year – – – – 852.2 852.2 50.7 902.9
Other comprehensive income – – – 27.5 (48.0) (20.5) – (20.5)
Total comprehensive income for the year – – – 27.5 804.2 831.7 50.7 882.4
Dividends to shareholders – – – – (862.3) (862.3) – (862.3)
Scrip dividend related share issue 12.0 (12.0) – – 355.7 355.7 – 355.7
Issue of treasury shares – – – – 6.3 6.3 – 6.3
Distributions to Hybrid equity holders – – – – – – (50.7) (50.7)
Redemption of Hybrid equity – – – – (4.6) (4.6) (421.4) (426.0)
Credit in respect of employee
share awards – – – – 20.8 20.8 – 20.8
Investment in own shares
(i)
– – – – (14.1) (14.1) – (14.1)
At 31 March 2022 536.5 835.1 49.2 13.3 2,278.3 3,712.4 1,051.0 4,763.4
(i) Investment in own shares is the purchase of own shares less the settlement of Treasury shares for sharesave schemes.
Company statement of changes in equity
For the year ended 31 March 2023
316 SSE plc Annual Report 2023
Notes to the Company financial statements
For the year ended 31 March 2023
1. Principal accounting policies
1.1 General information
SSE plc (the Company) is a company domiciled in Scotland. The address of the registered office is given on the back cover. The Company
financial statements present information about the Company as a separate entity and not about the Group.
1.2 Basis of preparation
The financial statements have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law) including Financial Reporting Standard 101, ‘Reduced Disclosure Framework’.
Under section 408 of the Companies Act 2006 the Company is exempt from the requirement to present its own income statement and
related notes.
It has also taken advantage of the following disclosure exemptions available under FRS 101.
• A Cash flow statement and related notes;
• Related party disclosures;
• Disclosures in respect of capital management; and
• The effects of new but not yet effective IFRSs.
As the consolidated financial statements of SSE plc include the equivalent disclosure, the Company has also taken advantage of the
exemptions, under FRS 101, available in respect of the following disclosure:
• Certain disclosures required by IFRS 13 Fair value measurement and the disclosures required by IFRS 7 Financial instrumentdisclosures
The Company previously assessed that, on the basis of materiality, the disclosures required under IFRS 2 Share-based Payment
shouldberemoved. The Company has assessed that at 31 March 2023 these disclosures continue to be immaterial to the Company’s
financial statements.
Going concern
The Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future
(further details are contained in A6 Accompanying Information of the consolidated financial statements). The financial statements
are therefore prepared on a going concern basis.
Basis of measurement
The financial statements of the Company are prepared on the historical cost basis except for derivative financial instruments, available-
for-sale financial assets and assets of the Company pension scheme which are stated at their fair value, and liabilities of the Company
pension scheme which are measured using the projected unit credit method. The directors believe the financial statements present a
true and fair view. The financial statements of the Company are presented in pounds sterling.
Critical accounting judgements and estimation uncertainty
In the process of applying the Company’s accounting policies, management necessarily makes judgements and estimates that have a
significant effect on the amounts recognised in the financial statements. Changes in the assumptions underlying the estimates could
result in a significant impact to the financial statements. The Group’s key accounting judgement and estimation areas are noted in note
4.1 of the consolidated financial statements, with the most significant financial judgement areas as specifically discussed by the Audit
Committee being highlighted separately. In particular, note 4.1(ii) Retirement benefit obligations, and the related disclosures in note 23,
note 4.1(iv) Valuation of other receivables and note 4.3(ii) Decommissioning costs, of the consolidated financial statements are relevant
to the Company.
Significant accounting policies
The significant accounting policies applied in the preparation of these individual financial statements are set out below. These policies
have been applied consistently to all the years presented, unless otherwise stated.
Investments
Investments in subsidiaries are carried at cost less any impairment charges.
Interests in joint arrangements and associates
Associates are those investments over which the Company has significant influence but neither control nor joint control.
The Company’s joint ventures and associates are stated at cost less any impairment.
Applicable Group accounting policies
The following significant accounting policies are consistent with those applied for the Group consolidated financial statements:
• Equity and equity-related compensation benefits (Supplementary information A1.2 )
• Defined benefit pension scheme (Supplementary information A1.2 )
• Taxation (Supplementary information A1.2 )
• Financial instruments (Supplementary information A1 and A6 )
317SSE plc Annual Report 2023
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2. Supplementary financial information
2.1 Auditor remuneration
The amounts paid to the Company’s auditor in respect of the audit of these financial statements was £0.4m (2022: £0.4m).
Amounts paid to the Company’s auditor in respect of services to the Company other than the audit of the Company’s financial
statements have not been disclosed as the information is required instead to be disclosed on a consolidated basis.
2.2 Employee numbers
The average number of people employed by the Company (including Executive Directors) during the year was 3 (2022: 3).
The costs associated with the employees of the Company, who are the Executive Directors of the Group, are borne by Group
companies. No amounts are charged to the Company.
2.3 Directors’ remuneration and interests
Information concerning Directors’ remuneration, shareholdings, options, long term incentive schemes and pensions is shown in the
Remuneration Report on pages 166 to 187 . No Director had, during or at the end of the year, any material interest in any other
contract of significance in relation to the Group’s business.
3. Investments in associates and joint ventures
2023 2022
Equity
£m
Loans
£m
Total
£m
Equity
£m
Loans
£m
Total
£m
Share of net assets/cost
At 1 April 12.7 129.2 141.9 139.2 226.8 366.0
Additions 19.5 15.8 35.3 – 29.3 29.3
Disposal – – – (126.5) (118.8) (245.3)
Transfers 50.0 (50.0) – – – –
Repayment of shareholder loans – (13.4) (13.4) – (8.1) (8.1)
Impairment (31.8) – (31.8) – – –
At 31 March 50.4 81.6 132.0 12.7 129.2 141.9
The transfer in the year related to a Neos Networks Limited debt for equity swap of £50.0m. The impairment recognised in the year
related to the equity investment in Neos Networks Limited (see note 15). The disposal recognised during the prior year of £245.3m
related to the disposal of Company’s investment in SGN, which completed on 22 March 2022.
4. Subsidiary undertakings
Details of the Company’s subsidiary undertakings are disclosed in the Accompanying Information section (A3 ).
Investment in subsidiaries
2023
£m
2022
£m
At 1 April 1,883.6 2,004.5
Increase/(decrease) in existing investments
(i)
20.5 (120.9)
At 31 March 1,904.1 1,883.6
(i) The overall increase in investments held by the Company primarily relates to equity shares in the Company awarded to the employees of the subsidiaries of the
Group under the Group’s share schemes, which are recognised as an increase in the cost of investment in those subsidiaries as directed by IFRIC 11 (2023: £20.7m;
2022: £18.8m (both before tax)). The movement in the year also includes the transfer of ownership of Scottish and Southern Energy Power Distribution Limited to
the Company at a carrying value of £423.0m from wholly owned subsidiary Beithe AG. The transfer represented a return of capital from Beithe AG reducing the
Company’s investment in this subsidiary by £423.0m prior to its liquidation. In the year ended 31 March 2022 the Company’s decrease in investments also related to
the transfer of SSE Generation Limited investment to another Group company and the disposal of its Gas Production investment on 14 October 2021, which was
carried at a £nil value.
318 SSE plc Annual Report 2023
5. Trade and other receivables
The balances of current and non-current trade and other receivables in the current and prior financial year predominantly consists of
amounts owed by subsidiary undertakings. At 31 March 2023 the Company assessed its exposure to expected credit losses on related
party receivables under IFRS 9 and held a provision against future losses of £137.8m (2022: £126.5m).
6. Trade and other payables
The balances of current trade and other payables in the current and prior financial year predominantly consists of amounts due to
subsidiary undertakings.
7. Taxation
Current tax asset
2023
£m
2022
£m
Corporation tax asset 1.4 3.8
Deferred taxation
The following are the deferred tax liabilities and assets recognised by the Company and movements thereon during the current and prior
reporting periods:
Fair value gains/
(losses) on
derivatives
£m
Retirement
benefit
obligations
£m
Other
£m
Total
£m
At 31 March 2021 (51.7) 103.2 (2.4) 49.1
Credit to income statement (10.2) (0.2) (0.2) (10.6)
Charge to other comprehensive income/(loss) 5.2 26.4 – 31.6
Credit to equity – – (5.1) (5.1)
At 31 March 2022 (56.7) 129.4 (7.7 ) 65.0
Charge to income statement 50.0 0.2 – 50.2
Credit to other comprehensive income/(loss) (0.9) (38.0) – (38.9)
Charge to equity – – 2.0 2.0
At 31 March 2023 (7.6) 91.6 (5.7) 78.3
Certain deferred tax assets and liabilities have been offset, including the asset balances analysed in the tables above. The following is an
analysis of the deferred tax balances (after offset) for financial reporting purposes:
2023
£m
2022
£m
Deferred tax liabilities 92.1 129.4
Deferred tax assets (13.8) (64.4)
Net deferred tax liability 78.3 65.0
The deferred tax assets/liabilities disclosed include the deferred tax relating to the Company’s pension scheme liabilities.
8. Loans and borrowings
2023
£m
2022
£m
Current
Other short-term loans 1,588.5 968.7
1,588.5 968.7
Non-current
Loans 4,307.8 5,284.7
4,307.8 5,284.7
Total loans and borrowings 5,896.3 6,253.4
Cash and cash equivalents (788.9) (1,006.7)
Unadjusted Net Debt 5,107.4 5,246.7
Add:
Hybrid equity (note 9) 1,882.4 1,051.0
Adjusted net debt and hybrid capital 6,989.8 6,297.7
Cash and cash equivalents (which are presented as a single class of assets in the face of the balance sheet) comprise cash at bank and
short term highly liquid investments with a maturity of three months or less.
Notes to the Company financial statements continued
For the year ended 31 March 2023
319SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
8.1 Borrowing facilities
The Company has an established €1.5bn Euro commercial paper programme (paper can be issued in a range of currencies and swapped
into Sterling) and as at 31 March 2023 there was £919m commercial paper outstanding (2022: £507m).
During the year to 31 March 2023 SSE plc issued a 7 year €650m Eurobond at a coupon of 2.875% with an all-in cost of funding rate of
just below 3% once fees and cost of pre-hedging have been included. The bond will be left in Euros as part of the Group’s net investment
hedge of Euro denominated businesses. In April 2022 SSE plc issued a €1bn NC6 equity accounted Hybrid bond at 4% to re-finance the
dual tranche debt accounted Hybrid bonds whose first call date occurred on 16 September 2022, with SSE taking advantage of the 3
month par call option on these Hybrid bonds meaning the bonds were repaid on 16 June 2022.
The Company also has £2.5bn of revolving credit facilities (see note 21.3). These facilities continue to provide back-up to the commercial
paper programme and, as at 31 March 2023 these facilities were undrawn (2022: undrawn).
Analysis of borrowings
2023
Weighted
average
interest
rate
2023
Face
value
2023
Fair
value
2023
Carrying
amount
2022
Weighted
average
interest
rate
2022
Face
value
£m
2022
Fair
value
£m
2022
Carrying
amount
£m
Current
Other short term loans – non-amortising
(ii)
4.5% 929.4 933.5 919.2 0.8% 507.1 507.5 506.1
US Private Placement 16 April 2022 – – – – 4.3% 162.7 197.8 162.7
5.875% Eurobond repayable 22 September 2022 – – – – 5.9% 300.0 306.1 299.9
US Private Placement 28 April 2023 2.8% 35.0 35.3 35.0 – – – –
US Private Placement 6 September 2023 2.9% 120.0 118.8 119.8 – – – –
1.75% €700m Eurobond repayable
8 September 2023
(iv)
1.8% 514.6 510.8 514.5 – – – –
Total current borrowings 1,599.0 1,598.4 1,588.5 969.8 1,011.4 968.7
Non-current
Bank loans – non-amortising
(i)
5.3% 100.0 102.4 100.0 – – – –
US Private Placement 28 April 2023 – – – – 2.8% 35.0 35.4 34.9
US Private Placement 6 September 2023 – – – – 2.9% 120.0 120.1 119.4
US Private Placement 16 April 2024 4.4% 204.1 259.6 204.1 4.4% 204.1 250.6 204.0
1.75% €700m Eurobond repayable
8 September 2023
(iv)
– – – – 1.8% 514.6 524.0 514.3
1.25% Eurobond Repayable 16 April 2025
(v)
1.3% 531.4 508.3 531.4 1.3% 531.4 533.4 531.4
0.875% €600m Eurobond Repayable
8 September 2025
(ix)
0.9% 527.5 495.3 526.2 0.9% 510.9 504.3 504.2
US Private Placement 8 June 2026 3.1% 64.0 59.9 63.5 3.1% 64.0 63.8 63.3
US Private Placement 6 September 2026 3.2% 247. 1 257.4 245.0 3.2% 247.1 258.7 244.3
US Private Placement 6 September 2027 3.2% 35.0 31.7 34.7 – – – –
1.375% €650m Eurobond repayable
4 September 2027
(vii)(ix)
1.4% 591.4 545.8 590.5 – – – –
Between two and five years 2,300.5 2,260.4 2,295.4 2,227.1 2,290.3 2,215.8
Bank loans – non-amortising
(i)
– – – – 0.8% 100.0 100.4 100.0
US Private Placement 6 September 2027 – – – – 3.2% 35.0 34.8 34.6
1.375% €650m Eurobond repayable
4 September 2027
(vii)
– – – – 1.4% 591.4 588.7 590.2
8.375% Eurobond repayable on
20 November 2028 8.4% 500.0 575.0 497.6 8.4% 500.0 659.0 497.2
2.875% Eurobond repayable on 1 August 2029
(ix)
2.9% 571.5 548.3 569.8 – – – –
1.750% Eurobond Repayable 16 April 2030
(viii)
1.8% 442.9 388.1 442.9 1.8% 442.9 439.6 442.9
6.25% Eurobond repayable on 27 August 2038 6.3% 350.0 372.0 347.5 6.3% 350.0 473.3 347.4
4.75% $900m NC5.5 Hybrid maturing
16 September 2077
(vi)
– – – – 4.8% 725.4 727.6 725.1
3.625% NC5.5 Hybrid maturing
16 September 2077 – – – – 3.6% 300.0 301.6 299.9
Over five years 1,864.4 1,883.4 1,857.8 3,044.7 3,325.0 3,037.3
Fair value adjustment
(iii)
154.6 31.6
Total non-current borrowings 4,164.9 4,143.8 4,307.8 5,271.8 5,615.3 5,284.7
Total borrowings 5,763.9 5,742.2 5,896.3 6,241.6 6,626.7 6,253.4
320 SSE plc Annual Report 2023
8. Loans and borrowings continued
8.1 Borrowing facilities continued
Analysis of borrowings continued
(i) Balances include term loans and EIB debt and is a mixture of fixed and floating rate debt.
(ii) Balances include Commercial Paper and facility advances (£919m of Commercial Paper outstanding at 31 March 2023).
(iii) The fair value adjustment relates to the change in the carrying amount of the borrowings as a result of fair value hedges that are in place. The movement in the fair
value adjustment is recognised in the income statement with a corresponding movement on the hedging instrument also being recognised in the income statement.
(iv) The 1.75% €700m Eurobond maturing 8 September 2023 has been swapped to Sterling giving an effective interest rate of 3.16%.
(v) The 1.250% €600m Eurobond maturing 16 April 2025 has been swapped to Sterling giving an effective interest rate of 2.43%.
(vi) The 4.75% $900m NC5.5 Hybrid maturing 16 September 2077 has been swapped to Euros ($605m) and Sterling ($295m) giving an effective interest rate of 2.25%
and 3.29% respectively. This and the 3.625% NC5.5 Hybrid maturing 16 September 2077 were the Group’s debt-accounted Hybrids, both were redeemed on
16 June 2022 using a 3 month par call option.
(vii) The 1.375% €650m Eurobond maturing 4 September 2027 has been swapped to Sterling giving an effective interest rate of 2.56%.
(viii) The 1.750% €500m Eurobond maturing 16 April 2030 has been swapped to Sterling giving an effective interest rate of 2.89%.
(ix) Bonds have been issued under the Group’s Green Bond Framework.
9. Equity
Share capital
Number
(millions) £m
Allotted, called up and fully paid:
At 1 April 2021 1,049.1 524.5
Issue of shares
(i)
24.0 12.0
At 31 March 2022 1,073.1 536.5
Issue of shares
(i)
27.7 13.9
Share repurchases
(ii)
(6.9) (3.4)
At 31 March 2023 1,093.9 547.0
The Company has one class of ordinary share which carries no right to fixed income. The holders of ordinary shares are entitled to
receive dividends as declared and are entitled to one vote per share at meetings of the Company.
(i) Shareholders were able to elect to receive ordinary shares in place of the final dividend of 60.2p per ordinary share (in relation to year ended 31 March 2022) and
the interim dividend of 29.0p (in relation to the current year) under the terms of the Company’s scrip dividend scheme. This resulted in the issue of 18,241,941 and
9,413,103 new fully paid ordinary shares respectively (2022: 122,201,443 and 1,782,473). In addition, the Company issued 1.9m (2022: 0.6m) shares during the year
under the savings-related share option schemes (all of which were settled by shares held in Treasury) for a consideration of £18.0m (2022: £6.3m).
(ii) Under the share buyback programme announced on 28 September 2022 6.9m of shares were repurchased and cancelled in the year to 31 March 2023 for a total
consideration of £107.6m (including stamp duty and commission). The nominal value of share capital repurchased and cancelled is transferred out of share capital
and into the capital redemption reserve.
Of the 1,093.9m shares in issue, 3.6m are held as treasury shares. These shares will be held by the Group and used to award shares to
employees under the Sharesave scheme in the UK.
During the year, on behalf of the Company, the employee share trust purchased 1.4m shares for a total consideration of £23.4m (2022:
0.9m shares, consideration of £14.1m) to be held in trust for the benefit of employee share schemes. At 31 March 2023, the trust held
6.5m shares (2022: 6.3m) which had a market value of £118.0m (2022: £110.0m).
Capital redemption reserve
The capital redemption reserve comprises the value of shares redeemed or purchased by the Company from distributable profits.
Hedge reserve
The hedge reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedge derivative
instruments related to hedged transactions that have not yet occurred.
Hybrid equity
2023
£m
2022
£m
GBP 600m 3.74% perpetual subordinated capital securities 598.0 598.0
EUR 500m 3.125% perpetual subordinated capital securities 453.0 453.0
EUR 1,000m 4.00% perpetual subordinated capital securities 831.4 –
1,882.4 1,051.0
Further details regarding the hybrid equity can be found in note 22 of the Group consolidated financial statements.
Notes to the Company financial statements continued
For the year ended 31 March 2023
321SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
10. Retirement benefit obligations
Defined benefit scheme
The Company has a funded final salary pension scheme (‘Scottish Hydro Electric Pension Scheme’) which provides defined benefits
based on final pensionable pay. The scheme is subject to an independent valuation at least every three years. The future benefit
obligations are valued by actuarial methods on the basis of an appropriate assessment of the relevant parameters.
Pension summary:
Scheme type
Net actuarial loss recognised in
respect of the pension asset in the
statement of comprehensive income
Net pension asset
2023
£m
2022
£m
2023
£m
2022
£m
Scottish Hydro Electric Defined benefit (152.0) (24.6) 366.6 517.5
Net actuarial loss (152.0) (24.6) 366.6 517.5
IFRIC 14 surplus restrictions
The value of Scottish Hydro Electric Pension Scheme assets recognised was previously impacted by the asset ceiling test which restricts
the surplus that can be recognised to assets that can be recovered through future refunds or reductions in future contributions to the
schemes, and may increase the value of scheme liabilities where there are minimum funding liabilities in relation to agreed contributions.
In 2016/17 the Group agreed with the trustees to the Scottish Hydro Electric Pension Scheme an amendment to the scheme rules to
clarify that the Company has a clear right to any surplus upon final winding up of the scheme. This amendment removes the previous
restriction on recognition of any surplus. The net pension asset of the Scottish Hydro Electric Pension Scheme at 31 March 2023 was
equal to £366.6m (2022: £517.5m).
The individual pension scheme details based on the latest formal actuarial valuations are as follows:
Scottish Hydro Electric
Latest formal actuarial valuation 31 March 2021
Valuation carried out by Hymans Robertson
Value of assets based on valuation £2,050.5m
Value of liabilities based on valuation £1,782.2m
Valuation method adopted Projected Unit
Average salary increase RPI +0.5%
Average pension increase RPI
Value of fund assets/accrued benefits 115.1%
10.1 Pension scheme assumptions
The scheme has been updated to 31 March 2023 by qualified independent actuaries. The valuations have been prepared for the
purposes of meeting the requirements of IAS 19. The major assumptions used by the actuaries in the scheme were:
At
31 March
2023
At
31 March
2022
Rate of increase in pensionable salaries 3.5% 4.2%
Rate of increase in pension payments 3.2% 3.7%
Discount rate 4.8% 2.7%
Inflation rate 3.2% 3.7%
322 SSE plc Annual Report 2023
10. Retirement benefit obligations continued
10.1 Pension scheme assumptions continued
The assumptions relating to longevity underlying the pension liabilities at 31 March 2023 are based on standard actuarial mortality tables,
and include an allowance for future improvements in longevity. The assumptions, equivalent to future longevity for members in normal
health at age 65, are as follows:
At
31 March
2023
Male
At
31 March
2023
Female
At
31 March
2022
Male
At
31 March
2022
Female
Currently aged 65 22 24 22 24
Currently aged 45 24 26 24 27
The impact on the scheme’s liabilities of changing certain of the major assumptions is as follows:
At 31 March 2023 At 31 March 2022
Increase/
decrease in
assumption
Effect on
scheme
liabilities
Increase/
decrease in
assumption
Effect on
scheme liabilities
Rate of increase in pensionable salaries 0.1% +/-0.1% 0.1% +/-0.1%
Rate of increase in pension payments 0.1% +/-0.7% 0.1% +/-0.9%
Discount rate 0.1% +/-0.7% 0.1% +/-1.0%
Longevity 1 year +/-1.9% 1 year +/-2.0%
These assumptions are considered to have the most significant impact on the scheme valuations.
Asset buy-in
On 1 October 2019, the Scottish Hydro Electric Pension Scheme entered into an asset buy-in, transferring the risk of volatility in the
assumptions used to calculate the obligation for 1,800 pensioners and 567 dependents (covering c.£800m of the scheme’s liabilities) to
a third party. The asset buy-in is valued under the accounting principles of IFRS 13 and is considered a Level 3 instrument in the fair value
hierarchy. This is in addition to a previous buy-in completed during the year ended 31 March 2018 when c.£250m of the scheme’s assets
and liabilities related to 617 pensioners and 190 dependents were transferred to a third party. The Company has now insured against
volatility in obligations related to all pensioners to third parties (insurer PIC) and is now only exposed to valuation fluctuations related to
active and deferred members.
10.2 Valuation of pension scheme
Quoted
£m
Unquoted
£m
Value at
31 March 2023
£m
Quoted
£m
Unquoted
£m
Value at
31 March 2022
£m
Equities 34.3 – 34.3 39.5 – 39.5
Government bonds 441.8 – 441.8 719.1 – 719.1
Insurance contracts – 532.4 532.4 – 713.5 713.5
Other investments 381.0 – 381.0 448.9 – 448.9
Total fair value of plan assets 1,389.5 1,921.0
Present value of defined benefit obligation (1,022.9) (1,403.5)
Surplus in the scheme 366.6 517.5
Deferred tax thereon
(i)
(91.7) (129.4)
Net pension asset 274.9 388.1
(i) Deferred tax is recognised at 25% (2022: 25%) on the surplus.
Notes to the Company financial statements continued
For the year ended 31 March 2023
323SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
10.3 Movements in the defined benefit assets and obligations during the year:
2023 2022
Assets
£m
Obligations
£m
Total
£m
Assets
£m
Obligations
£m
Total
£m
At 1 April 1,921.0 (1,403.5) 517.5 1,974.1 (1,431.0) 543.1
Included in income statement
Current service cost – (11.1) (11.1) – (12.9) (12.9)
Past service cost – (2.8) (2.8) – – –
Interest income/(cost) 51.0 (37.0) 14.0 38.8 (27.9) 10.9
51.0 (50.9) 0.1 38.8 (40.8) (2.0)
Included in other comprehensive income
Actuarial (loss)/gain arising from:
Demographic assumptions – 23.3 23.3 – 13.1 13.1
Financial assumptions – 416.9 416.9 – 72.5 72.5
Experience assumptions – (74.2) (74.2) – (90.6) (90.6)
Return on plan assets excluding
interest income (518.0) – (518.0) (19.6) – (19.6)
(518.0) 366.0 (152.0) (19.6) (5.0) (24.6)
Other
Contributions paid by the employer 1.0 – 1.0 1.0 – 1.0
Benefits paid (65.5) 65.5 – (73.3) 73.3 –
(64.5) 65.5 1.0 (72.3) 73.3 1.0
Balance at 31 March 1,389.5 (1,022.9) 366.6 1,921.0 (1,403.5) 517.5
10.4 Pension scheme contributions and costs
Charges/(credits) recognised:
2023
£m
2022
£m
Current service cost (charged to operating profit) 11.1 12.9
Past service cost 2.8 –
13.9 12.9
Charged/(credited) to finance costs:
Interest from pension scheme assets (51.0) (38.8)
Interest on pension scheme liabilities 37.0 27.9
(14.0) (10.9)
The return on pension scheme assets is as follows:
2023
£m
2022
£m
Return on pension scheme assets (467.0) 19.2
Employer financed retirement benefit (‘EFRB’) pension costs
The decrease in the year in relation EFRB was £8.9m (2022: decrease of £1.1m). This is included in other provisions.
Further discussion of the pension scheme assets, liabilities, polices, risk and strategy can be found in note 23 of the Group consolidated
financial statements.
324 SSE plc Annual Report 2023
11. Financial instruments
For financial reporting purposes, the Company has classified derivative financial instruments as financing derivatives. Financing derivatives
include all fair value and cash flow interest rate hedges, non-hedge accounted (mark-to-market) interest rate derivatives, cash flow foreign
exchange hedges and non-hedge accounted foreign exchange contracts. Non-hedge accounted contracts are treated as held for trading.
The derivative financial assets and liabilities are represented as follows:
2023
£m
2022
£m
Derivative Assets
Non-current 48.2 64.6
Current 167.1 112.0
Total derivative assets 215.3 176.6
Derivative Liabilities
Non-current (79.2) (301.1)
Current (13.5) (70.6)
Total derivative liabilities (92.7) (371.7)
Net asset/(liability) 122.6 (195.1)
Information on the Group’s Financial risk management and the fair value of financial instruments is available at A6 and A7 .
12. Commitments and contingencies
Guarantees, indemnities and other contingent liabilities
SSE plc has provided guarantees on behalf of subsidiary, joint venture and associated undertakings as follows:
2023 2022
SSE on behalf of
subsidiary
£m
SSE on behalf of
joint operations
and ventures
£m
SSE on behalf of
3
rd
parties
£m
Total
£m
Total
£m
Bank borrowing 452.9 – – 452.9 604.6
Performance of contracts 2,451.9 1 ,247.7 139.4 3,839.0 4,640.7
Subsidiaries have provided guarantees on behalf of the Company as follows:
2023
£m
2022
£m
Bank borrowing 811.6 1,286.5
During the year a £705m guarantee provided in relation to the Seagreen Offshore Wind Farm Projects; £330m of guarantees in relation
to the Keadby 2 project; and a guarantee in respect of a £300m loan facility all expired.
The Company provided new guarantees in the year of £411m. £250m has been guaranteed on behalf of Saltend Cogeneration Company
Limited a joint arrangement acquired as part of Triton Power 50% equity accounted joint venture.
The Company provided unlimited guarantees on behalf of subsidiary undertakings in relation to ten contracts in respect of performance of
work and any liabilities arising. Two unlimited guarantees are provided on behalf of SSE Renewables Developments (UK) Limited, a wholly
owned subsidiary of the Company, both in favour of Total Gas and Power Infrastructure Limited in respect of a Share Purchase Agreement
and payment obligations for Seagreen Wind Energy Limited. SSE Services plc, a wholly owned subsidiary of the Company, has provided a
guarantee to Group Trustee Independent Trustees in respect of Southern Electric Group of the Electricity Supply Pension Scheme in respect
of funding required by the Scheme.
On behalf of Scottish Hydro Electric Transmission plc, SSE plc has provided a guarantee to ABB Limited in connection with the use of
HVDC Replica Control Panels for Caithness-Moray Project.
On behalf of SSE Contracting Limited (which was disposed on 30 June 2021), SSE plc continues to provide a guarantee to Tay Street
Lighting (Leeds) Limited, Tay Valley Lighting (Newcastle & North Tayside) Limited and Tay Valley Lighting (Stroke on Trent) Limited in
respect of provision and maintenance of public street lighting and illuminated traffic signage. Furthermore, on behalf of SSE E&P (UK)
Limited, previously a wholly owned subsidiary of the Company, now owned by a third party, SSE plc has provided the following 3
guarantees: a guarantee to Hess Limited in respect of decommissioning liabilities, a guarantee to Britoil Limited and Arco British Limited
in respect of the acquisition of the Sean Field and also a guarantee to Perenco UK Limited in respect of a Sale and Purchase Agreement
for the Minerva, Apollo and Mercury Fields.
Where the Company enters into financial guarantee contracts to guarantee indebtedness of the other companies within its Group,
the Company considers these to be insurance arrangements, and accounts for them as such. In this respect, the Company treats the
guarantee contract as a contingent liability until such time as it becomes probable that the Company will be required to make payment
under the guarantee. The Company is continuing to assess the impact of the adoption of IFRS 17 to this treatment, which will be effective
from 1 April 2023.
Notes to the Company financial statements continued
For the year ended 31 March 2023
325SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
13. Provisions
Decommissioning
£m
Legal and
restructuring
£m
Total
£m
At 31 March 2021 – 20.3 20.3
Charged in the year 251.3 57.2 308.5
Utilised during the year (1.9) – (1.9)
At 31 March 2022 249.4 77.5 326.9
Charged in the year – – –
Decrease in decommissioning provision (50.5) – (50.5)
Unwind of discount 6.7 – 6.7
Released during the year – (38.3) (38.3)
Utilised during the year (4.2) (38.8) (43.0)
At 31 March 2023 201.4 0.4 201.8
At 31 March 2023
Non-current 196.5 – 196.5
Current 4.9 0.4 5.3
201.4 0.4 201.8
At 31 March 2022
Non-current 241.8 1.1 242.9
Current 7.6 76.4 84.0
249.4 7 7.5 326.9
Decommissioning provision
The Company recognises a provision for the estimated net present value of decommissioning of Gas Production assets (retained as
part of the disposal agreement for this business). Estimates are based on the forecast remediation or clean-up costs at the projected
date of decommissioning and are discounted for the time value of money. Within the agreement for the disposal of its Gas Production
assets to Viaro Energy on 14 October 2021 (see note 12), the Company agreed to retain 60% (£238.2m) of the decommissioning
provision within the business. £50.5m (2022: £13.1m) has been released for decommissioning during the current year due to a post
disposal reassessment and movements in inflation and discounting assumptions. It is expected that the costs associated with
decommissioning of these Gas Production assets will be incurred between 2023 and 2038.
Legal and restructuring provisions
The Company holds provisions related to reorganisation of the Group and certain provisions arising on disposal of subsidiaries or
investments. In the year the Company released provisions in total of £38.3m, of which £35.0m for a tax indemnity provided to RockRose
Energy Limited following the disposal of SSE E&P Limited on 14 October 2021 was released. In the year the Company utilised £38.8m of
the provision relating to restructuring and disposals. The remainder of this provision is expected to be settled in the next financial year.
326 SSE plc Annual Report 2023
Opinion
In our opinion:
• SSE plc’s group financial statements and parent company financial statements (the ‘financial statements’) give a true and fair view
of the state of the group’s and of the parent company’s affairs as at 31 March 2023 and of the group’s profit for the year then ended;
• the group financial statements have been properly prepared in accordance with UK adopted international accounting standards;
• the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice, including FRS101 ‘Reduced Disclosure Framework’; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of SSE plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31 March
2023 which comprise:
Group Parent company
Consolidated income statement for the year ended 31 March 2023
Consolidated statement of comprehensive income for the year then ended
Consolidated balance sheet as at 31 March 2023 Balance sheet as at 31 March 2023
Consolidated statement of changes in equity for the year then ended Statement of changes in equity for the year then ended
Consolidated cash flow statement for the year then ended
Related notes 1 to 26 and A1 to A8 to the group financial statements,
including a summary of significant accounting policies
Related notes 1 to 13 to the company financial statements
including a summary of significant accounting policies
The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and UK
adopted international accounting standards. The financial reporting framework that has been applied in the preparation of the parent
company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 ‘Reduced Disclosure
Framework’ (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the group and parent in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company and we remain
independent of the group and the parent company in conducting the audit.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group and parent company’s ability to continue
to adopt the going concern basis of accounting included:
• Confirming our understanding of management’s Going Concern process as well as the review controls in place over the preparation
of the group’s Going Concern model and the memoranda on going concern;
• Engaging early with management to ensure all key matters were considered in their assessment;
• Obtaining management’s board approved forecast cash flows, covenant forecasts and sensitivities prepared by management to
31 December 2024, ensuring the same forecasts are used elsewhere within the group for accounting estimates and that the forecasts
reflect the spend to come on the £12.5bn committed as part of the NZAP Plus programme. We tested the models for arithmetical
accuracy, as well as checking the net debt position at the year-end date which is the starting point for the model. We assessed the
reasonableness of the cashflow forecast by analysing management’s historical forecasting accuracy. We also ensured climate change
considerations were factored into future cash flows. We performed reverse stress testing to understand how severe the downside
scenarios would need be to result in negative liquidity or a covenant breach and how plausible were the scenarios. The EY assessment
included consideration of all maturing debt through to 31 March 2025;
• Reviewing management’s assessment of mitigating options potentially available to the group to reduce cash flow spend in the Going
Concern period, to determine their plausibility and whether such actions could be implemented by management. We have obtained
support to determine whether these were within the control of management and evaluated the impact of these mitigations in light of
our understanding of the business and its cost structures;
• Reading the borrowing facilities agreements to assess their continued availability to the group and to ensure completeness of
covenants identified by management;
• Reviewing market data for indicators of potential contradictory evidence to challenge the company’s going concern assessment
including review of profit warnings within the sector and review of industry analyst reports. We held discussions with the Audit
Committee to confirm the going concern position prepared by management; and
• Considering whether management’s disclosures in the financial statements sufficiently and appropriately reflect the going concern
assessment and outcomes.
Independent auditor’s report to the members of SSE plc
327SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
The audit procedures performed in evaluating the director’s assessment were performed by the Group audit team. We also considered
the financial and non-financial information communicated to us from our component teams for sources of potential contrary indicators
which may cast doubt over the going concern assessment.
Our key observations
The group is forecast to continue to be profitable and generate positive cashflows during the going concern period. Our reverse stress
test scenario indicated that the group would need to be exposed to severe downside events impacting profitability and cash flows in
order to breach liquidity or covenants. The severe downside scenario assumed full repayment of debt maturing over the going concern
period, no new refinancing over the going concern period, no uncommitted disposal proceeds, a £500m group contingency to mitigate
any downside performance against budget, offset by mitigating actions within managements control. We consider such a scenario to be
highly unlikely, however, in unlikely events, including the business not performing in line with budget, management consider that the
impact can be mitigated by further cash and cost saving measures, which are within their control, or through external fund raising,
or a combination of both during the going concern period.
The group’s principal source of funding (the revolving credit facility) extends beyond the going concern period (to 2025/2026). Having
considered our severe downside and reverse stress test scenarios, we have not identified a plausible scenario where the Group would be
unable to maintain cash flow liquidity and covenant headroom during the going concern period.
We found the capital commitments in the cash flow forecasts to be reflective of the spend to come on the £12.5bn committed as part of
the NZAP Plus programme.
Going concern conclusion
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the group and parent company’s ability to continue as a going concern for a period to
31 December 2024.
In relation to the group and parent company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered
it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this
report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the group’s ability
to continue as a going concern.
Overview of our audit approach
Audit scope
• We performed an audit of the complete financial information of 19 components and audit procedures on
specific balances for a further 21 components.
• The components where we performed full or specific audit procedures accounted for 95% of Adjusted Profit
before tax, 95% of Revenue and 94% of Total assets.
Key audit matters
• Impairment and reversal of impairment of certain power stations and gas storage assets;
• Group and parent pension obligations;
• Accounting for estimated revenue recognised.
Materiality
• Overall Group materiality of £85.2m, which represents 5% of normalised adjusted profit before tax.
An overview of the scope of the parent company and group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for
each company within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into
account size, risk profile, the organisation of the group and effectiveness of group-wide controls, changes in the business environment, the
potential impact of climate change and other factors such as recent Internal audit results when assessing the level of work to be performed
at each company.
In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage
of significant accounts in the financial statements, of the 220 (2022: 149) reporting components of the Group, we selected 38 (2022: 35)
components covering entities within the UK and Ireland, which represent the principal business units within the Group.
Of the 38 components selected, we performed an audit of the complete financial information of 19 (2022: 19) components (‘full scope
components’) which were selected based on their size or risk characteristics. For the remaining 21 (2022: 16) components (‘specific scope
components’), we performed audit procedures on specific accounts within that component that we considered had the potential for the
greatest impact on the significant accounts in the financial statements either because of the size of these accounts or their risk profile.
328 SSE plc Annual Report 2023
An overview of the scope of the parent company and group audits continued
Tailoring the scope continued
The reporting components where audit procedures were performed accounted for 95% (2022: 98%) of the Group’s adjusted profit
before tax, 95% (2022: 96%) of the Group’s Revenue and 94% (2022: 93%) of the Group’s Total assets. For the current year, the full scope
components contributed 82% (2022: 78%) of the Group’s adjusted profit before tax, 94% (2022: 94%) of the Group’s Revenue and 48%
(2022: 77%) of the Group’s Total assets. The specific scope component contributed 13% (2022: 20%) of the Group’s adjusted profit before
tax, 1% (2022: 2%) of the Group’s Revenue and 46% (2022: 16%) of the Group’s Total assets. The audit scope of these components may
not have included testing of all significant accounts of the component but will have contributed to the coverage of significant accounts
tested for the Group. We also instructed 3 locations to perform specified procedures over certain aspects of Cash & Bank, Goodwill and
Equity Investments in associates and jointly controlled entities, due to significant balances held within each location.
Of the remaining 182 (2022: 114) components that together represent 9% (2022: 2%) of the Group’s adjusted profit before tax, none are
individually greater than 1% (2022: 1%) of the Group’s adjusted profit before tax. For these components, we performed other procedures,
including analytical review, intercompany eliminations and obtaining audit evidence to respond to any potential risks of material
misstatement to the Group financial statements.
The charts below illustrate the coverage obtained from the work performed by our audit teams.
82% Full scope components
13% Specific scope components
5% Other procedures
94% Full scope components
1% Specific scope components
5% Other procedures
48% Full scope components
46% Specific scope components
6% Other procedures
ADJUSTED PROFIT BEFORE TAX REVENUE TOTAL ASSETS
Changes from the prior year
There have been minimal changes in scoping from the prior year, other than scoping in the acquisition of Triton (allocated as a full scope
component). There have been some modifications to specific scope entities to reflect higher levels of trading within certain entities
compared to the prior period to maintain appropriate coverage.
Involvement with component teams
In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at each of the
components by us, as the primary audit engagement team, by component auditors from other EY global network firms operating under our
instruction, or by third party auditors where we issued instructions. Of the 19 full scope components, audit procedures were performed on
2 of these directly by the primary audit team. For the 17 full scope and 21 specific scope components, where the work was performed by
component auditors, we determined the appropriate level of involvement to enable us to determine that sufficient audit evidence had been
obtained as a basis for our opinion on the Group as a whole.
The majority of full and specific scope components were led by the lead audit engagement partner, Annie Graham. For the remaining
entities there were regular calls held between the lead audit engagement partner and component partners, with either file reviews
performed by the primary team over audit documentation that has not been retained within the group audit file, or retention of key audit
documentation on the group audit file.
This was the first year where a non-EY auditor was involved in a specific scope component, following the acquisition of Triton. We issued
instructions, held regular calls with them and attended an on site file review and closing meeting. Other than the Irish Airtricity and Triton
entities in scope, all other entities in scope were based within Scotland (Perth and Glasgow), where lead audit partner Annie Graham
visited UK divisions throughout the year-end audit. Management meetings were held in person and remotely throughout the year across
both the UK and Ireland. Annie also visited the non-EY component auditors of Triton.
The division and non-EY component visits involved discussion of audit approach, attending planning and closing meetings (some of
which were held virtually), meeting with local management and reviewing relevant audit working papers on risk areas. The primary team
interacted regularly with the component teams where appropriate during various stages of the audit, reviewed relevant working papers
and were responsible for the scope and direction of the audit process. This, together with the additional procedures performed at Group
level, gave us appropriate evidence for our opinion on the Group financial statements.
Climate change
The financial statement and audit risks related to climate change and the energy transition remain an area of audit focus in FY23. There
continues to be increasing interest from stakeholders as to how climate change will impact SSE plc. The energy sector has a critical role
to play in decarbonisation, by removing carbon from electricity which in turn will support other sectors. SSE operates principally within
the UK and Ireland and both are seeking to achieve net zero across their economies by 2050.
Independent auditor’s report to the members of SSE plc continued
329SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
This year saw the government make targets and policy actions to tackle the UK energy crises on climate impacts, affordability and
supply. The UK Governments targets include plans to decarbonise the UK’s power system by 2035, support for up to 59,000 jobs in 2024
and up to 120,000 jobs in 2030 and mobilisation of additional public and private investment of £150-270 billion in line with their 2037
delivery pathway. The importance of cheap, clean and homegrown energy has become more important in order to reduce the UKs
reliance on expensive and volatile overseas gas markets. In addition to the UK, governments across Europe and the world looked to
recalibrate and expedite their renewable energy ambitions including publishing their carbon neutral pathways to meet 2050 targets.
During the year, SSE has continued to make progress against their Net Zero Acceleration Plan and updated their strategy in November 2022
to take account of feedback from shareholders and other stakeholders. The changes involved the inclusion of scope 3 investments to
recognise SSE’s joint acquisition of Triton Power, the addition of cross-cutting issues to recognise the importance that climate adaptation
and resilience play in the transition to net zero and further enhancement of the definition of net zero to SSE. As part of the 31 March 23
results, SSE announced a £5.5bn increase to the committed capital pathway through NZAP Plus to further accelerate target delivery.
SSE’s long-term net zero ambitions are supported by a series of interim targets approved by the Science Based Targets Initiative (SBTi),
as referenced by SSE within page 40 . The Group committed to a £12.5bn five-year investment plan. SSE intend to cut absolute scope 1
and 2 emissions by 72.5% between 2017 and 2030, are targeting net zero for scopes 1 and 2 by 2040 and net zero for all remaining scope
3 emissions by 2050, providing the appropriate policy mechanisms are in place to support security of supply for customers as noted on
page 39 .
In FY23, for the first time, SSE is compliant with the TCFD recommendations and recommended disclosures. The Group has determined
that the most significant future impacts from climate change on its operations will be from variable wind generation risk caused by
changes in climate patterns, storm damage network risk through increased severity of extreme weather events, accelerated gas closure
risk through climate change and wind-capture market risk where the average wholesale power prices are lower as a result of more zero
marginal cost wind generation coming on to the electricity system. These are explained on pages 42 to 45 in the required Task Force
for Climate related Financial Disclosures and on pages 68 to 69 in the principal risks and uncertainties, which form part of the ‘Other
information,’ rather than the audited financial statements. Our procedures on these disclosures therefore consisted solely of considering
whether they are materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise
appear to be materially misstated. As described in note 4, the financial statement impact of climate is considered to have most impact on
impairment, decommissioning, going concern & viability and decommissioning estimates.
Government and societal responses to climate change risks are still developing, and are interdependent upon each other, and consequently
financial statements cannot capture all possible future outcomes as these are not yet known. The degree of certainty of these changes may
also mean that they cannot be taken into account when determining asset and liability valuations and the timing of future cash flows under
the requirements of IAS 36. Budgets and forecasts for SSE plc reflect the spend to come on the £12.5bn investment programme. In notes 15
and 20 to the financial statements supplementary sensitivity disclosures reflecting the impact of climate with regards to valuation of property,
plant and equipment, impairment assessment of goodwill and valuation of decommissioning provisions and the impact of reasonably
possible changes in key assumptions have been provided and significant judgements and estimates relating to climate change have been
described within the aforementioned notes. We have ensured the completeness of climate consideration as part of our impairment audit
procedures, including those referred to within our impairment KAM below.
In order to respond to the impact of climate change, we ensured we had the appropriate skills and experience on the audit team. Our audit
team included professionals with significant experience in climate change and energy valuations. Our audit procedures were carried out by
the group and component teams, with the component teams working under the direction of the group team. Our audit effort in considering
climate change focused on ensuring that the effects of material climate risks disclosed on pages 42 to 45 have been appropriately reflected
in asset values and useful life and associated disclosures where values are determined through modelling future cash flows, being impairment
considerations over Intangible assets and PP&E, and in the timing and nature of liabilities recognised, being decommissioning provisions. In
addition, we performed detailed testing of the sensitivities noted in the accounts. Details of our procedures and findings on impairment are
included in our key audit matters below.
In FY23 SSE conducted scenario analysis of its material climate related opportunities and risks. With the support of our climate change
internal specialists, we considered managements scenario planning and modelling of these four risks and five opportunities disclosed on
pages 42 to 45 . We reviewed and challenged the impact pathways developed and basis of the key assumptions included within these
scenarios. We verified the transition risk scenario frameworks used within the modelling to challenge the appropriateness, applicability to
SSE current and future business model to ensure the accuracy of the financial impact ranges disclosed on pages 42 to 45 . We challenged
the Directors’ considerations of climate change in their assessment of going concern and viability and associated disclosures. We also
read the Other information in the annual report, and in doing so, considered whether the Other information, which includes SSE’s climate
targets, is materially consistent with the financial statements. We also considered consistency to other areas of assumptions, judgements
and estimates and where applicable the procedures performed have been included within our KAMs below.
Whilst the group have stated their commitment to the Paris Agreement to achieve net zero emissions by 2050, and also to their
acceleration plan of their net zero ambitions which plans a short term (to 2025), medium term (2025-2035) and long term (2035-2050)
roadmap, there may still be some areas in which the group currently unable to determine the full future economic impact on their
business model, operational plans and customers to achieve this and therefore as set out above the potential impacts are incorporated
to the extent of management’s best estimate at 31 March 2023.
330 SSE plc Annual Report 2023
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we
identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
Risk Our response to the risk
Key observations communicated
to the Audit Committee
Impairment or reversal of
impairment of certain power
stations & gas storage assets
(Impairment reversal 2023: £63.5m,
Impairment reversal 2022: £428.9m)
Refer to the Audit Committee Report
(page 155 ); Accounting policies –
significant judgements (page 212 );
and note 15.2 of the Consolidated
Financial Statements (page 253 )
Forecast based estimate:
Certain power stations and gas storage
assets are at risk of impairment or
impairment reversal. This is due to a
number of global and national factors
reducing or increasing their value in
use or fair value less costs of disposal,
triggering an impairment assessment.
Our risk focussed on the following
assets: Great Island, Peterhead, Keadby,
Keadby 2, Medway, Marchwood and
Tarbert power plants and Aldbrough
and Atwick gas storage assets.
The key assumptions include future
power prices, price volatility, mean
reversion rate, forecast power
demand, carbon prices, load factors,
discount rate, useful economic life
and operating expenditure.
The estimated recoverable amount
is subjective due to the inherent
uncertainty involved in forecasting
and discounting future cash flows
as a result of the above factors.
In the current year the risk is against
both impairment and impairment
reversals.
Scoping:
Testing was performed over this risk area, covering both
full and specific scope components (covering seven
components), which represented 100% of the risk amount.
All audit work in relation to this key audit matter was
undertaken by the component audit teams, with oversight
from the group audit team.
We obtained management’s assessment of potential
impairment indicators in accordance with IAS 36 for
powerplants and for gas storage assets.
Audit procedures included:
We have understood management’s process and
methodology for assessing assets for indicators of
impairment, including indicators of reversal and, where
applicable, we have understood management’s modelling
of value in use cash flows including the source of the key
input assumptions.
We checked the historical accuracy of management’s
forecasting and verified that the assumptions are consistent
with those used in other areas such as fixed asset useful life
and decommissioning provision.
We considered prior period impairments for indication of
reversal. This involved considering indicators of reversal,
focussed on demand, load factors and prices.
We involved three EY specialists in our assessment: a
specialist with energy industry experience; a discount rate
specialist and a specialist with experience of assessing
forward energy prices. Using our sector experience and our
specialists, we assessed any unusual or unexpected trends
identified within the cashflows year on year and assessed
the impact on the overall forecasted position.
We considered incremental repairs and committed
capital expenditure on commenced projects and obtained
management’s assessment of the technical feasibility of
the extensions and reviewed the extension to the revised
contracted power period.
We embedded modelling expertise within the audit team
to assess the appropriateness of the model parameters and
clerical accuracy of the models used.
We considered load factors relative to the UK Governments
as yet unlegislated target of no unabated gas post 2030 and
reviewed impact on carrying values included within the
disclosures should this legislation arise.
We applied sensitivities to management’s models to evaluate
headroom, including sensitivities relating to climate change
reflecting useful life assessment versus climate commitments
and price and margin sensitivities.
We confirmed that the
impairment reversal of £17.8m
recognised by management for
Great Island and £45.7m for Gas
Storage assets (Aldbrough) was
appropriate and was driven
predominately by increased
market driven demand and
price assumptions and was
correctly recorded in the
current period.
We communicated that the
pricing assumptions applied
were appropriate. We concluded
that, while the discount rates
used were above the top end
of EY accepted range, any
adjustment to bring in line with
EY independent range would
only increase the headroom
(previous impairments have
already fully reversed). The other
assumptions were in line with EY
assessment of expected future
price movements.
We also noted that we are
satisfied with the adequacy
of disclosure within the group
financial statements including
climate related disclosures.
Independent auditor’s report to the members of SSE plc continued
331SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Risk Our response to the risk
Key observations communicated
to the Audit Committee
Key assumptions:
Using our sector experience and our specialists we
benchmarked to industry sources, where appropriate, the
directors’ judgement on the key assumptions including,
future power prices, power volatility, forecast power
demand, carbon prices, load factors, discount rate,
useful economic life and operating expenditure.
We verified that the assumptions are consistent with those
used in other areas.
Disclosures:
We assessed the accuracy and adequacy of the disclosures
in line with IAS 36, ensuring key assumptions are included
and that the disclosures adequately reflect the risks inherent
in the valuation of non-current assets and the impact of
changes in assumptions on the reversal of impairment
booked or headroom remaining.
Group and parent pension
obligation (2023: £541.1m,
2022: £584.9m)
Refer to the Audit Committee Report
(page 155 ); Accounting policies –
significant judgements (page 212 );
and note 23 of the group financial
statements (page 269 )
Subjective valuation:
Small changes in the assumptions and
estimates used to value the group and
parent company pension obligations
(before deducting scheme assets)
would have a significant effect on
the carrying value of those pension
obligations.
The effect of these matters is that,
as part of our risk assessment, we
determined that the group and parent
company’s pension obligation has a
high degree of estimation uncertainty,
with a potential range of reasonable
outcomes greater than our materiality
for the financial statements as a whole.
Additional focus in FY23 has been
given to the results of the SEPS pension
triennial valuation completed in 2023.
The principal assumptions considered
include rate of increase in pensionable
salaries and pension payments,
discount rate and mortality rates.
There has been no change in this risk
from the prior year, however additional
procedures have been performed to
consider the results of the triennial
valuation for SEPS.
Scoping:
We performed audit procedures over this risk area centrally
by the group team, which covered 100% of the risk amount.
Our procedures included:
Assessing management process:
We have understood management’s process and
methodology for calculating the pension liability for each
scheme, including discussions with management’s external
actuaries, walkthrough of the processes, understanding the
key inputs and the design and implementation of key controls.
We performed a fully substantive audit approach rather than
testing the operating effectiveness of key controls.
For the SEPS scheme we checked the member data used
in the triennial valuation for consistency with that of the
IAS 19 valuation and understood the difference in basis
for key assumptions which we found to be in line with
our expectations.
Assessing management experts:
We have assessed the independence, objectivity and
competence of the group’s external actuaries, which
included understanding of the scope of services being
provided and considering the appropriateness of the
qualifications of the external actuary.
Assessing source data:
We tested a sample of the membership data used by the
actuaries to the group’s records. We performed an additional
sample for source data used for the SEPS triennial valuation
to ensure consistency of source data used.
Benchmarking assumptions:
With the support of our pension actuarial specialists, we
assessed the appropriateness of the assumptions adopted
by the directors by comparing them to the expectations of
our pension actuarial specialists which they derived from
broader market data.
Disclosure:
We considered the adequacy of IAS 19 disclosures, including
presentation of commitments associated with deficit
recovery plans and in respect of sensitivity of the defined
benefit obligation to changes in the key assumptions.
We conclude that
management’s actuarial
assumptions are appropriate
and sit in the centre of our
independently determined
range. We are satisfied with the
adequacy of disclosure within
the financial statements.
332 SSE plc Annual Report 2023
Risk Our response to the risk
Key observations communicated
to the Audit Committee
Accounting for estimated revenue
recognition & EBRS other income
Unbilled energy income (2023:
£666.1m, 2022: £492.7m) and
GB EBRS claims 2023: £326.7m,
2022: £nil)
Refer to the Audit Committee Report
(page 155 ); Accounting policies –
significant judgements (page 212 );
and note 18 of the group financial
statements (page 259 )
Subjective estimate:
58% of the unbilled revenue (excluding
EBRS) is recognised within the
Business Energy division and is based
on estimates of values and volumes of
electricity and gas supplied between
last meter date and year end date.
The method of estimating such
revenues is complex, judgemental and
significant for UK business customers.
Estimation complexity has increased
in the year as a result of emerging
consumption patterns, volumes of
tariff changes and interplay with EBRS.
The key estimates and assumptions are
in relation to:
1. the volumes of electricity and gas
supplied to the customers between
the meter reading and year-end;
2. the value attributed to those
volumes in the range of tariffs; and
3. embedded impairment risk over the
unbilled revenue.
As a result of the estimation uncertainty
this has been identified as a significant
risk.
Change to this risk from the
prior year:
The administration of the Government
backed support scheme, EBRS, within
the GB Business Energy Division, has
increased the complexity and level of
estimation uncertainty of the unbilled
calculation. We have refined the KAM to
include the unbilled portion of the GB
EBRS claim which is £326.7m, recorded
as other prepayments and accrued
income at 31 March 2023. The income
assessment is derived from the same
underlying source data and models as
the unbilled judgement.
Scope:
This balance relates to one component, Business Energy.
Testing was performed covering 100% of the unbilled and
EBRS balances in GB Business Energy which accounts
for 58% of the unbilled balance and 52% of the other
prepayments and accrued income balance at 31 March 2023.
Unbilled energy income in Airtricity and EBRS in Northern
Ireland was not included in the scope of this KAM due to
reduced estimation complexity and materiality respectively.
All audit work in relation to this key audit matter was
undertaken by the component audit teams with oversight
from the group audit team.
Audit methodology:
Our response to the assessed risk included understanding
the process for estimating unbilled revenue, testing selected
IT general and application key controls, substantive audit
procedures and revenue data analytics.
Tests of detail:
We agreed the opening unbilled accrued income to the
closing 31 March 2022 balance sheet.
We agreed the volume data for customer usage of energy
in the year used in the calculation to external settlement
systems and agreed the volume data in relation to customer
billings for the year to SSE’s internal billing systems to assess
for consistency and to understand remaining estimation risk.
We have tested the unbilled unit pricing by agreeing
historical pricing to sample bills, sensitising the pricing to
understand the impact of different pricing assumptions,
tested a sample of billing dates from the listing to confirm
billing frequency and agreeing to post year end billing prices.
We have understood and tested the historical accuracy of
management’s forecasting of unbilled revenue by comparing
estimates to final billed and settlement amounts.
We considered contra indicators to management’s
assumptions by assessing the impact of macro-economic
conditions on demand and consumption volatility and
benchmarked assumptions in the underlying unbilled
calculations to external publications from the industry.
Specifically to EBRS:
We validated the eligibility criteria of meters claimed and
tested a sample of customers tariffs to source documents.
We sample tested volume data to supporting evidence and
agreed claim amounts to submissions and subsequent
settled cash receipts.
Using a custom-built analytics tool we recalculated the
discount applicable under the scheme rules on a meter level
and applied that to volumes and claims submitted to date.
In performing our procedures
we independently calculated
an estimated range for accrued
income of £130m-£144m
with SSE’s position being
within the top end of our
acceptable range.
We independently assessed
an EBRS reasonable range
of accrued income of
£123m-£150m, with SSE’s
estimate being within the top
end of our acceptable range.
Overall, through procedures
performed over accrued
revenue within the Business
Energy business, we are
satisfied that the accrued
revenue recognised by
management in relation to
unbilled revenue and accrued
government grant EBRS income
is appropriate.
Independent auditor’s report to the members of SSE plc continued
Key audit matters continued
333SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Risk Our response to the risk
Key observations communicated
to the Audit Committee
Analytical Review:
We set expectations as to the likely level of total unbilled
revenue, and compared this with actual unbilled revenue
accrual, obtaining explanation for significant variances.
We compared the unbilled revenue estimation to
benchmark expectation. Benchmark expectation was
derived from the external settlements data combined with
billing frequency at an MPAN (Meter Point Administration
Number) level, usage and price movement from last billing
date to year end. We have analysed and assessed
explanations for variances arising from the benchmark
expectation. We also tested the appropriateness of manual
adjustments made by management.
Specifically to the EBRS projected claim:
Using our custom-built analytics tool, we prepared an
independent projection of the total claim forecast to
31 March 2023 and compared this to the EBRS income
recognised. We used claims submitted to date as our base
point and adjusted for extrapolated claimed invoices for the
remaining claim period, incorporated an estimated range of
outcomes on circa 18,000 of meters where claims have not
yet been made; and adjusted for reductions in rebilled
invoices claimed based on estimated meter reading.
Disclosure:
We assessed the adequacy of the group’s disclosures about
the degree of estimation and judgement involved in arriving
at the estimated revenue.
We have removed the prior year KAM relating to the SSE disposal programme given this was completed in prior year.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the
audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the
economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our
audit procedures.
We determined materiality for the Group to be £85.2 million (2022: £57.9 million), which is 5% (2022: 5% of adjusted profit before tax)
of normalised adjusted profit before tax. Our key criterion in determining materiality remains our perception of the needs of SSE’s
stakeholders. We consider which earnings, activity or capital-based measure aligns best with their expectations. With the volatility in the
Energy market seen this year, we changed our materiality basis from adjusted profit before tax to normalised adjusted profit before tax.
We believe that normalised adjusted profit before tax provides us with a consistent measure of underlying year-on-year performance as it
excludes the impact of non-recurring items which can significantly fluctuate year-on-year and do not provide a true picture of the profit
benchmark that would affect the decisions of the users of the financial statements. Through applying a normalised earnings approach,
large year-on-year swings driven primarily by price fluctuations rather than specific structural changes to SSE’s business are minimised.
We determined materiality for the Parent Company to be £137.1 million (2022: £95 million), which is 2% (2022: 2%) of Net Assets.
The materiality has been capped at the group materiality of £85.2 million.
Starting basis
• FY23 loss before tax – £205.6m (FY22: £3,482.2m profit)
• Movement on operating and financing derivatives –
FY23 £2,351.5m; FY22 (£2,121.4m)
• Non-recurring exceptional items – FY23 £0.4m; FY22 (£269.2m)
• JV Tax – FY23 £104m; FY22 £46.3m
• Variance from forecast to actual PBT FY23 nil; FY22 £21.2m
• Totals FY23 £2,250.3m adjusted profit before tax; FY22 £1,159m
• Average to normalise FY23 £1,704.7m
• Materiality of £85.2m (5% of materaility basis)
Materiality
Adjustments
334 SSE plc Annual Report 2023
Materiality continued
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that
performance materiality was 75% (2022: 50%) of our planning materiality, namely £63.9 million (2022: £28.9 million). The move from 50%
to 75% reflects the continued process improvements and a low number and value of corrected and uncorrected errors in the prior year.
Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is
undertaken based on a percentage of total performance materiality. The performance materiality set for each component is based on
the relative scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement at that component.
In the current year, the range of performance materiality allocated to components was £8.9m to £21.0m (2022: £4.9m to £15.9m).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £4.3m (2022: £2.9m),
which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative
grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other
relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report set out on pages 1 to 191 , including the strategic report
and the directors’ report set out on pages 1 to 109 and 110 to 191 respectively, other than the financial statements and our auditor’s
report thereon. The directors are responsible for the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this
report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement
in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the
other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the
audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if,
in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with
the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Independent auditor’s report to the members of SSE plc continued
335SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Corporate Governance Statement
We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance
Statement relating to the group and company’s compliance with the provisions of the UK Corporate Governance Code specified for our
review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit:
• Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified set out on page 91 ;
• Directors’ explanation as to its assessment of the company’s prospects, the period this assessment covers and why the period is
appropriate set out on page 71 ;
• Director’s statement on whether it has a reasonable expectation that the group will be able to continue in operation and meet its
liabilities set out on page 191 ;
• Directors’ statement on fair, balanced and understandable set out on page 154 ;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 68 and 158 ;
• The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out
on page 158 ; and;
• The section describing the work of the audit committee set out on page 150 .
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 191 , the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group and parent company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is
higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or
intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including
fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the
company and management.
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and determined that the most
significant are IFRS, FRS101, the Companies Act 2006 and UK Corporate Governance Code and relevant tax compliance regulations
in the jurisdictions in which the group operates. We also considered non-compliance of regulatory requirements, including the Office of
Gas and Electricity Markets (Ofgem) and regulations levied by the UK Financial Conduct Authority and Prudential Regulatory Authority.
We confirmed our understanding with the Internal Head of Regulation.
• We understood how SSE plc is complying with those frameworks by making enquiries of management, internal audit, those responsible
for legal and compliance procedures and the company Secretary. We verified our enquiries through our review of board minutes and
papers provided to the Audit Committee.
• We assessed the susceptibility of the group’s financial statements to material misstatement, including how fraud might occur by meeting
with management from various parts of the business to understand where it considered there was susceptibility to fraud. We also
considered performance targets and their propensity to influence on efforts made by management to manage earnings. We considered
the programmes and controls that the group has established to address risks identified, or that otherwise prevent, deter and detect fraud;
and how senior management monitors those programmes and controls. Where the risk was considered to be higher, we performed audit
procedures to address each identified fraud risk.
• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our
procedures involved: journal entry testing, with a focus on manual consolidation journals and journals indicating large or unusual
transactions based on our understanding of the business; enquiries of legal counsel, group management, internal audit, business area
management at all full and specific scope management; and focused testing. In addition, we completed procedures to conclude on
the compliance of the disclosures in the annual report and accounts with all applicable requirements.
336 SSE plc Annual Report 2023
Explanation as to what extent the audit was considered capable of detecting irregularities,
including fraud continued
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at https://www.frc.org.uk/auditorsresponsibilities . This description forms part of our auditor’s report.
Other matters we are required to address
• Following the recommendation from the audit committee we were appointed by the company on 18 July 2019 to audit the financial
statements for the year ending 31 March 2020 and subsequent financial periods.
• The period of total uninterrupted engagement including previous renewals and reappointments is 4 years, covering the years ending
31 March 2020 to 31 March 2023.
• The audit opinion is consistent with the additional report to the audit committee.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Annie Graham (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Glasgow
23 May 2023
Independent auditor’s report to the members of SSE plc continued
337SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Consolidated segmental statement
For the year ended 31 March 2023
SSE consolidated segmental statement for the year ended 31 March 2023
Year ended 31 March 2023 Unit
Electricity Generation
Aggregate
Generation
business
Electricity
supply
Gas supply
Aggregate
Supply
businessThermal Renewable Non-domestic Non-domestic
Total revenue £m 5,087.8 1,228.5 6,316.3 3,624.7 469.2 4,093.9
Sales of electricity and gas £m 4,510.9 1,113.6 5,624.5 2,981.8 391.1 3,372.9
Other revenue £m 576.9 114.9 691.8 642.9 78.1 721.0
Total operating costs £m 3,992.5 482.3 4,474.8 3,664.9 406.1 4,071.0
Direct fuel costs £m 2,693.4 – 2,693.4 2,486.9 314.4 2,801.3
Transportation costs £m 150.2 136.9 287.1 520.1 43.2 563.3
Environmental and social obligation costs £m 559.1 – 559.1 441.5 0.7 442.2
Other direct costs £m 438.1 64.7 502.8 10.3 1.9 12.2
Indirect costs £m 151.7 280.7 432.4 206.1 45.9 252.0
EBITDA £m 1,095.3 746.2 1,841.5 (40.2) 63.1 22.9
Depreciation and amortisation £m 125.2 189.7 314.9 4.2 0.8 5.0
EBIT £m 970.1 556.5 1,526.6 (44.4) 62.3 17.9
Volume TWh/
mTherms
15.6 9.7 25.3 12.1 200.3 212.4
WACOF/E/G £/MWh/p/th 208.9 – 205.4 157.0
Customer numbers ‘000s 382.8 68.9 451.7
Basis of preparation and disclosure notes
The Group’s operating segments are those used internally by the Board to run the business and make strategic decisions. The types of
products and services from which each reportable segment derives its revenues are:
Business area Reported segments Description
Continuing operations
Transmission
SSEN
Transmission
The economically regulated high voltage transmission of electricity from generating plant to the
distribution network in the North of Scotland. Revenue earned from constructing, maintaining
and renovating our transmission network is determined in accordance with the regulatory
licence, based on an Ofgem approved revenue model and is recognised as charged to National
Grid. The revenue earned from other transmission services such as generator plant connections
is recognised in line with delivery of that service over the expected contractual period and at the
contracted rate. On 25 November 2022 the Group sold a 25.0% non-controlling interest in this
business to the Ontario Teachers’ Pension Plan.
Distribution
SSEN
Distribution
The economically regulated lower voltage distribution of electricity to customer premises in the
North of Scotland and the South of England. Revenue earned from delivery of electricity supply to
customers is recognised based on the volume of electricity distributed to those customers and
the set customer tariff. The revenue earned from other distribution services such as domestic
customer connections is recognised in line with delivery of that service over the expected
contractual period and at the contracted rate.
Renewables
SSE Renewables
(covered by CSS)
The generation of electricity from renewable sources, such as onshore and offshore windfarms
and run of river and pumped storage hydro assets in the UK and Ireland, the development of
similar wind assets in Japan and Southern Europe and the development of wind, solar and
battery opportunities. Revenue from physical generation of electricity in Great Britain is sold
to SSE EPM and in Ireland is sold to Airtricity and is recognised as generated, based on the
contracted or spot price at the time of delivery. Revenue from national support schemes
(such as Renewable Obligation Certificates or the Capacity Market in Great Britain or REFIT
in Ireland) may either be recognised in line with electricity being physically generated or
over the contractual period, depending on the underlying performance obligation.
Thermal
SSE Thermal
(covered by CSS)
The generation of electricity from thermal plant and the Group’s interests in multifuel assets in
the UK and Ireland. Revenue from physical generation of electricity in Great Britain and Ireland is
sold to SSE EPM and is recognised as generated, based on the contract or spot price at the time
of delivery. Revenue from national support schemes (such as the Capacity Market) and ancillary
generation services may either be recognised in line with electricity being physically generated
or over the contractual period, depending on the underlying performance obligation.
Gas Storage The operation of gas storage facilities in Great Britain, utilising capacity to optimise trading
opportunity associated with the assets. Contribution arising from trading activities is recognised
as realised based on the executed trades or withdrawal of gas from caverns.
338 SSE plc Annual Report 2023
Business area Reported segments Description
Energy
Customers
Solutions
Business Energy
(covered by CSS)
The supply of electricity gas to business customers in Great Britain. Revenue earned from the
supply of energy is recognised in line with the volume delivered to the customer, based on actual
and estimated volumes, and reflecting the applicable customer tariff after deductions or discounts.
Airtricity The supply of electricity, gas and energy related services to residential and business customers
in the Republic of Ireland and Northern Ireland. Revenue earned from the supply of energy is
recognised in line with the volume delivered to the customer, based on actual and estimated
volumes, and reflecting the applicable customer tariff after deductions or discounts. Revenue
earned from energy related services may either be recognised over the expected contractual period
or following performance of the service, depending on the underlying performance obligation.
Distributed
Energy
Distributed
Energy
The provision of services to enable customers to optimise and manage low-carbon energy use;
development and management of battery storage and solar assets; distributed generation,
independent distribution, heat and cooling networks, smart buildings and EV charging activities.
EPM & I
Energy Portfolio
Management
(EPM)
The provision of a route to market for the Group’s Renewable and Thermal generation businesses
and commodity procurement for the Group’s energy supply businesses in line with the Group’s
stated hedging policies. Revenue from physical sales of electricity, gas and other commodities
produced by SSE is recognised as supplied to either the national settlements body or the customer,
based on either the spot price at the time of delivery or trade price where that trade is eligible for
‘own use’ designation. The sale of commodity optimisation trades is presented net in cost of sales
alongside purchase commodity optimisation trades.
The Group’s reportable operating segments for ‘Renewables’, ‘Thermal’ and ‘Business Energy’ are substantially aligned to the business
segments reported in the Consolidated Segmental Statement (CSS). However, it should be recognised that there are differences between
the two disclosures, primarily driven by the Licence requirements – these are described in the notes below and shown in the table
reconciling the CSS to the financial statements.
How the accounts are presented
The financial information presented in the CSS is based on operating activities of the Group’s electricity generation businesses
(‘Renewables’ and ‘Thermal’ segments described above) and the non-domestic electricity and gas supply business (‘Business Energy’
segment described above) in Great Britain. The paragraphs that follow describe how SSE’s Renewables, Thermal and Business Energy
(non-domestic supply) businesses interact with Energy Portfolio Management (EPM), which is the Group’s energy markets business. The
basis of preparation defines the revenues, costs and profits of each business and describe in more detail the transfer pricing arrangements
in place for the financial year ended 31 March 2023. The CSS has been prepared on a going concern basis as set out in note A6.3 of
SSE plc’s Annual Report.
Summary
The Group’s ‘Renewables’ business sells electricity and Renewable Obligation Certificates (ROCs) from onshore and offshore windfarms
and qualifying hydro to the Group’s EPM business.
‘Thermal’ sells electricity in respect of gas generation to EPM. It also receives external income in respect of ancillary services, balancing
market participation and other contractual arrangements with third parties including government. It purchases its requirement for gas,
oil and carbon from EPM.
‘Business Energy’ sells electricity and gas to circa 0.2m business customer accounts in Great Britain and procures electricity, gas REGOS,
RGGOs and ROCs from EPM.
EPM acts as a route to market for Renewables and Thermal, and as counterparty with the external market for the procurement of
electricity and gas for SSE Energy Services and Business Energy. EPM does not form part of the CSS as it is not within the scope defined
by Ofgem. The policies governing the forward hedging activity undertaken by EPM are overseen by Energy Markets Risk Committee,
whose responsibilities and roles are described on page 160 of SSE Annual Report for the year ended 31 March 2023.
Consolidated segmental statement continued
For the year ended 31 March 2023
Basis of preparation and disclosure notes continued
339SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Renewable Electricity Generation
The Renewables profit and loss account above is based on the Group’s electricity generation activity derived from natural sources of
energy to produce electricity which includes wind, hydro and pump storage powered generation.
Renewables as presented in the CSS includes revenue and operating profit for wholly owned renewable generation assets and also a
proportion of turnover and operating profit in respect of joint ventures, joint operations and associate generation companies
1
. The
principal joint ventures, joint operations and associates included are Beatrice Offshore Windfarm Limited, Clyde Windfarm (Scotland)
Limited, Stronelairg Windfarm Limited, Dunmaglass Windfarm Limited, Greater Gabbard Offshore Winds Limited and Seagreen Wind
Energy Limited. A full list can be found in note A3 of SSE’s audited financial statements.
The Renewables profitability statement bears the risks and rewards for plant performance and renewable generation output, changes in
the power price achieved for renewable generation and the impact of weather.
Individual line items in the Renewables profit and loss account above are comprised of:
Revenue From Sales of Electricity – revenue is recognised as generated and supplied to the national settlements body. Revenue is sold
to the wholesale market through EPM at either the spot price at the time of delivery, or trade price where that trade is eligible for ‘own
use’ designation. Revenue includes the sale of ROCs generated from qualifying plant to EPM. Generation volumes are the volume of
power actually sold to the wholesale market.
Other Revenue – includes ancillary services, capacity income, balancing market participation and other miscellaneous income.
Transportation Costs – include Use of System charges and market participation costs.
Other Direct Costs –include power purchase agreement (‘PPA’) costs, site costs and management charges from EPM.
Indirect Costs – include salaries and other people costs, asset maintenance, rates, corporate costs and IT charges.
Depreciation and Amortisation – the depreciation shown in the CSS is the underlying charge based on the useful remaining life of the
assets.
1 The PPA’s that SSE has with its joint venture companies Clyde Windfarm (Scotland) Limited, Stronelairg Windfarm Limited and Dunmaglass Windfarm Limited
provide SSE with contractual entitlement to 100% of the output of the windfarms. Accordingly, SSE has reported its rights to those volumes within its Renewables
statistics and has also, as mandated by Ofgem, included 50% of the JV revenue in the CSS.
Thermal Electricity Generation
The Thermal profit and loss account above is based on the Group’s conventional (thermal) electricity generation activity. Conventional
generation is considered to be any generation where fuel is consumed to produce electricity and includes gas and oil fueled generation.
Thermal as presented in the CSS includes revenue and operating profit for wholly owned thermal generation assets and also a proportion
of turnover and operating profit in respect of joint ventures
2
. The principal joint ventures included are Seabank Power Limited, Marchwood
Power Limited and Triton Power Holdings Limited (acquired 1 September 2022). A full list can be found in note A3 of SSE’s audited
financial statements.
The Thermal profitability statement bears the risks and rewards for plant performance, changes in market ‘spark’ (the marginal profit for
generating electricity by gas), changes in government and EU policy particularly surrounding emissions.
Individual line items in the Thermal profit and loss account above are comprised of:
Revenue From Sales of Electricity – revenue is recognised as generated and supplied to the national settlements body. Revenue is sold
to the wholesale market through EPM at either the spot price at the time of delivery, or trade price where that trade is eligible for ‘own
use’ designation. Generation volumes are the volume of power sold to the wholesale market.
Other Revenue – includes ancillary services, capacity income, balancing market participation and other miscellaneous income.
Direct Fuel Costs – Thermal procures fuel and carbon from EPM at wholesale market prices. The cost of fuel also includes the long term
external purchase contracts and the impact of financial hedges. The WACOF (weighted average cost of fuel) calculation includes the costs
of carbon emissions (reported in the environmental and social obligations cost line in the CSS).
Transportation Costs – include Use of System charges and market participation costs.
Environmental and Social Costs – include carbon costs.
2 The tolling arrangements that SSE has with its joint venture Marchwood Power Limited provide SSE with contractual entitlement to 100% of the output of the
power station. Accordingly, SSE has reported its rights to those volumes within its Thermal statistics and has also, as mandated by Ofgem, included 50% of the JV
revenue in the CSS.
340 SSE plc Annual Report 2023
Thermal Electricity Generation continued
Other Direct Costs – include power purchase agreement (‘PPA’) costs, site costs and management charges from EPM.
Indirect Costs – include salaries and other people costs, asset maintenance, rates, corporate costs and IT charges.
Depreciation and Amortisation – the depreciation shown in the CSS is the underlying charge based on the useful remaining life of the
assets and excludes exceptional asset impairments.
Business Energy (Non-Domestic)
Revenue from Sales of Electricity and Gas – revenues are the value of electricity and gas supplied to business customers in Great Britain
during the year and includes an estimate of the value of units supplied between the date of the last bill and the year end. Non-domestic
volumes are expressed at customer meter point. Also included in ‘Other revenue’ is £0.7bn recognised from the Energy Bill Relief
Government Scheme which commenced in October 2022 to support non-domestic customers.
Direct Fuel Costs – Business Energy does not engage in the trading of electricity and gas and procures all of its electricity and gas
from EPM. The method by which EPM procures energy is at an arm’s length arrangement on behalf of Business Energy is governed by
Business Energy’s forward hedging policy. The forward trades between Business Energy and EPM are priced at wholesale market prices
at the time of execution and any differences in volume and reconciliation at the time of delivery is marked to the spot price on the day.
WACOG (weighted average cost of gas) also includes all Allocation reconciliations and Unidentified Gas. The WACOE and WACOG also
consist of trades marked to wholesale prices when committed at the point of sale for fixed price customer contracts or when a customer
instructs SSE to purchase energy in respect of flexi-priced contracts. This transfer pricing methodology reflects how Business Energy
actually acquired its energy. There have been no material changes in the transfer pricing policy in respect of Business Energy since the
CSS for the financial year ending 31 March 2023.
Transportation Costs – these include transportation, transmission and distribution use of system costs and BSUOS.
Environmental and Social Obligation Costs – relate to policies designed to modernise and decarbonise the energy system in Great
Britain and include ROCs, Feed in Tariff, charges under the Capacity Mechanism and CfD schemes and charges in relation to ‘assistance
for areas with high electricity distribution costs’ (AAHEDC). REGO, RGGOs and GOO costs related to these schemes are also included in
this section of the CSS. Industry Mutualisation costs have also been allocated to this element of the statement.
Other Direct Costs – include: industry settlement costs, management and market access charges from EPM and other miscellaneous costs.
Indirect Costs – include: sales and marketing, customer service, bad debts and collections, metering costs, commercial costs, central
costs – including information technology, property, corporate, telecoms costs and costs incurred to meet Smart Metering rollout
obligations for the year. Where costs cannot be directly allocated to a fuel (electricity/gas), they have been allocated using costing
models based on activity, customer revenue or customer numbers – whichever is the most appropriate.
Business Energy’s profit and loss account bears the risk and rewards arising from the volatility in demand for energy, caused by the
weather, consumption per customer and customer churn. It is also exposed to swings in wholesale costs and the uncertainty
surrounding its share of government environmental and social schemes.
EPM
EPM is responsible for optimising the Group’s electricity, gas and other commodity requirements. The hedging activity undertaken by
EPM is governed by the Group’s Energy and Markets Risk Committee in accordance with the Statement on SSE’s Approach to Hedging
published in November 2018.
Consolidated segmental statement continued
For the year ended 31 March 2023
341SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Business Functions
The business functions in SSE have already been described in this document. The column headed ‘Not included in the CSS’ principally
relates to EPM.
Business function Note Generation Supply
Not
included in
CSS
Operates and maintains generation assets 3
Responsible for scheduling decisions 1 P/L F
Responsible for interactions with the Balancing Market 2 P/L F
Responsible for determining hedging policy 3 3 3
Responsible for implementing hedging policy/makes decisions to buy/sell energy 4 P/L P/L F
Interacts with wider market participants to buy/sell energy 5 3
Holds unhedged positions (either short or long) 3 3 3 3
Procures fuel for generation P/L F
Procures allowances for generation P/L F
Holds volume risk on positions sold (either internal or external) 3 3
Matches own generation with own supply 6 3
Forecasts total system demand 7 P/L P/L F
Forecasts wholesale price P/L P/L F
Forecasts customer demand 8 P/L F
Determines retail pricing and marketing strategies 3
Bears shape risk after initial hedge until market allows full hedge 9 P/L P/L F
Bears short term risk for variance between demand and forecast 10 3
Key:
3 function and P&L impacting that area;
P/L profit/losses of function recorded in that area;
F function performed in that area.
Glossary and notes
1 ‘Scheduling decisions’ means the decision to run individual power generation assets.
2 ‘Responsible for interactions with the Balancing Market’ means interactions with the Balancing Mechanism in electricity.
3 Hedging policy was the responsibility of the Energy Markets Risk Committee which is a sub committee of the SSE Executive Committee.
4 SSE EPM implements the hedging policy determined by the Energy Markets Risk committee on behalf of Renewables, Thermal, Business Energy and SSE Energy
Services.
5 ‘Interacts with wider market participants to buy/sell energy’ means the business unit responsible for interacting with wider market participants to buy/sell energy,
not the entity responsible for the buy/sell decision itself, which falls under ‘Responsible for implementing hedging policy/makes decisions to buy/sell energy’.
6 ‘Matches own generation with own supply’ means where there is some internal matching of generation and supply before either generation or supply interact with
the wider market. The total electricity demand for Business Energy and SSE Energy Services (expressed at NBP) was 13.1TWh and the total UK Generation output
was 23.0TWh (57%).
7 ‘Forecasts total system demand’ means forecasting total system electricity demand or total system gas demand.
8 ‘Forecasts customer demand’ means forecasting the total demand of own supply customers.
9 ‘Bears shape risk after initial hedge until market allows full hedge’ means the business unit which bears financial risk associated with hedges made before the
market allows fully shaped hedging.
10 ‘Bears short term risk for variance between demand and forecast’ means the business unit which bears financial risk associated with too little or too much supply
for own customer demand.
342 SSE plc Annual Report 2023
Reconciliation of CSS to SSE Financial Statements 2022/23
The table below shows how the CSS reconciles with the adjusted earnings before tax in the SSE financial statements (note 5 of SSE’s
financial statements):
Reconciliation of CSS to Financial Statements Note
Revenue
£m
EBIT
£m
Business Energy
CSS Supply – Business Energy 4,093.9 17.9
Government support scheme income 1 (721.0) –
Total Business Energy in SSE Financial Statements 3,372.9 17.9
Generation Business
Renewables
CSS Renewables Electricity Generation 1,228.5 556.5
Non-GB Generation 2 175.7 23.5
JVs/Associates revenue in CSS 3 (466.7) –
Total Renewables in SSE Financial Statements 937.5 580.0
Thermal
CSS Thermal Electricity Generation 5,087.8 976.0
Non-GB Generation 4 519.9 61.8
JVs/Associates revenue in CSS 3 (1,003.5) –
Total Thermal in SSE Financial Statements 4,604.2 1,031.9
There are some differences between SSE’s financial statements and the CSS. There are items which are in the financial statements and
not in the CSS; and also there are items which Ofgem has requested be included in the CSS which are not in the financial statements.
Notes
1 Income from the Energy Bill Relief Government Scheme which commenced in October 2022 to support non-domestic customers, recognised in ‘Other operating
income’ in the SSE Financial Statements;
2 Non-GB Electricity Generation relates to SSE’s Renewables business in the Republic of Ireland and Northern Ireland;
3 SSE applies equity accounting for the majority of its investments in JVs and Associates (which means it only includes its share of the profits/losses), in accordance
with International Financial Reporting Standards (IFRS). The Ofgem mandated basis of preparation of the CSS requires that the proportionate share of revenue,
costs and profits are shown in the CSS. The revenue shown in the CSS for JVs and Associates is not present in the financial statements and is therefore a
reconciling item. The share of profits however are present in both CSS and financial statements, therefore no reconciliation is necessary;
4 Non-GB Electricity Generation relates to SSE’s Thermal business in the Republic of Ireland.
Adjustments to reported profit before tax
SSE focuses its internal and external reporting on ‘adjusted profit before tax’ which excludes exceptional items, re-measurements arising
from IFRS 9, depreciation on fair value uplifts and removes taxation on profits of joint ventures and associates, because this reflects the
underlying profits of SSE, reflects the basis on which it is managed and avoids the volatility that arises out of IFRS 9. Therefore, these
items have been excluded from the CSS.
Consolidated segmental statement continued
For the year ended 31 March 2023
343SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Opinion
We have audited the Consolidated Segmental Statement financial statements of SSE plc (the Company) for the year ended 31 March 2023,
which comprise the Consolidated Segmental Statement (CSS), Basis of preparation, Reconciliation of CSS to the Annual Report of SSE plc
and the related disclosure notes. The financial reporting framework that has been applied in their preparation is a special purpose framework
comprising the financial reporting provisions of Ofgem’s Standard condition 16B of Electricity Generation licences and Standard 19A of
Electricity and Gas Supply Licenses.
In our opinion, the accompanying CSS of the Company for the year ended 31 March 2023 is prepared, in all material respects, in
accordance with the requirements of Standard condition 16B of Electricity Generation licences and Standard 19A of Electricity and
Gas Supply Licenses and the basis of preparation on pages 337 to 341 .
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) including ‘ISA (UK) 800 (Revised) Special
Considerations – Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks’. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.
We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the CSS financial
statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with
these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the CSS, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the CSS
is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for a period of 19 months through to
31 December 2024.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this
report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the group’s ability
to continue as a going concern.
Emphasis of Matter – Basis of Accounting and Restriction on Distribution and Use
We draw attention to pages 337 to 341 of the CSS, which describes the basis of accounting. The CSS is prepared to assist the Company
in complying with the financial reporting provisions of the contract referred to above. As a result, the CSS may not be suitable for another
purpose. Our report is intended solely for the Company, in accordance with our engagement letter dated 14 April 2023, and should not be
distributed to or used by parties other than the Company. Our opinion is not modified in respect of this matter.
Other information
The other information comprises the information included in the annual report, other than the CSS and our auditor’s report thereon.
The directors are responsible for the other information contained within the annual report.
Our opinion on the CSS does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do
not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent
with the CSS or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in
the CSS itself. If, based on the work we have performed, we conclude that there is a material misstatement of the other information,
we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of directors
Management is responsible for the preparation of the CSS in accordance with the financial reporting provisions of Section Z of the
contract, and for such internal control as management determines is necessary to enable the preparation of the CSS that is free from
material misstatement, whether due to fraud or error.
In preparing the CSS, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing,
as applicable, matters relating to going concern and using the going concern basis of accounting unless management either intends
to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Independent auditor’s report to the Consolidated Segmental Statement
344 SSE plc Annual Report 2023
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the CSS as a whole is free from material misstatement, whether due
to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of the CSS.
Explanation as to what extent the audit was considered capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud
is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery
or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below. However, the primary responsibility for the prevention and detection of fraud rests with both those
charged with governance of the entity and management.
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Company and determined that
the most significant to the CSS is consideration of any non-compliance of regulatory requirements, including the Office of Gas and
Electricity Markets (Ofgem) and regulations levied by the UK Financial Conduct Authority and Prudential Regulatory Authority. We
have spoken with the SSE head of regulation to confirm our understanding.
• We understood how SSE plc is complying with those frameworks by making enquiries of management, internal audit, those responsible
for legal and compliance procedures and the company Secretary. We verified our enquiries through our review of board minutes and
papers provided to the Audit Committee.
• We assessed the susceptibility of the Company’s CSS to material misstatement, including how fraud might occur by meeting with
management from various parts of the business to understand where it considered there was susceptibility to fraud. We also considered
performance targets and their prosperity to influence on efforts made by management to manage earnings. We considered the
programmes and controls that the Group has established to address risks identified, or that otherwise prevent, deter, and detect fraud;
and how senior management monitors those programmes and controls. Where the risk was considered to be higher, we performed
audit procedures to address each identified fraud risk.
• Based on this understanding we designed our audit procedures to identify noncompliance with such laws and regulations. Our
procedures involved: enquiries of legal counsel, Group management, internal audit, and focused testing. In addition, we completed
procedures to conclude on the compliance of the disclosures in the CSS with all applicable requirements.
A further description of our responsibilities for the audit of the CSS financial statements is located on the Financial Reporting Council’s
website at https://www.frc.org.uk/auditorsresponsibilities . This description forms part of our auditor’s report.
Other matter
We have reported separately on the statutory financial statements of SSE plc.
Ernst & Young LLP
Glasgow
23 May 2023
Independent auditor’s report to the Consolidated Segmental Statement continued
345SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
Shareholder enquiries
The Company’s register of members is maintained by our appointed
Registrar, Link Group. Shareholders with queries relating to their
shareholdings should contact Link directly:
Link Group
Central Square
29 Wellington Street
Leeds
LS1 4DL
Telephone: 0345 143 4005
Email: SSE@linkgroup.co.uk
Financial calendar
Publication of Annual Report 16 June 2023
Q1 Trading Statement 20 July 2023
AGM 20 July 2023
Ex-dividend date for final dividend 27 July 2023
Record date for final dividend 28 July 2023
Final date for Scrip elections 24 August 2023
Payment date 21 September 2023
Notification of Close Period by
for six months to 30 September
4 October 2023
Results for six months to 30 September 15 November 2023
Website
SSE maintains its website, www.sse.com , to provide ease
of shareholder access to information about the Company and
its performance. It includes a dedicated Investors section where
you can find electronic copies of Company reports and further
information about shareholder services including:
• share price information;
• dividend history and trading graphs;
• the Scrip dividend scheme;
• telephone and internet share dealing; and
• downloadable shareholder forms.
Digital news
SSE uses a dedicated news and views website (available at
www.sse.com/news-and-views ) and Twitter (www.twitter.com/
sse ) to keep shareholders, investors, journalists, employees and
other interested parties up-to-date with news from the Company.
Sustainable communications
SSE’s sustainable communications strategy aims to reduce
the volume of paper being used in its communications with
shareholders and other stakeholders. Shareholders are able to
access a wide range of shareholder documentation, including
Annual Reports, the Notice of Annual General Meeting and
useful forms through the Investors section of SSE’s website,
www.sse.com/investors . We encourage shareholders to
accept electronic formats as the default method for accessing
shareholder documentation and dividend information.
All new shareholders are automatically registered as opting to
access shareholder documentation through the ‘Investors’ area
of our website. These shareholders receive a notification, by
post, when new relevant documentation has been placed on the
website. Shareholders who wish to opt for printed documentation
and communication should confirm this in writing to Link Group.
Shareholder portal
www.sse-shares.com
This free online service, provided by Link Group, allows
shareholders to easily manage their share portfolios, including:
• View, update and calculate the market value of their
shareholdings.
• Change address details and dividend payment instructions.
• View share price histories and trading graphs of listed
companies.
E-communications programme
You can also choose to go a step further and sign-up to SSE’s
eCommunication programme which allows you to receive
notification of the availability of new shareholder documentation.
Simply register on our shareholder portal www.sse-shares.com .
You will require your Investor Code (IVC), which can be found on
any recent shareholder communications from SSE.
Where delivery of an email fails, we will attempt to contact
you by post to update your details. Keep us informed of
changes to your email address through our shareholder portal
www.sse-shares.com .
Dividends
The Company typically pays dividends twice yearly. Interim
dividends are paid in March, and final dividends are paid in
September once approved by shareholders at the AGM. With
significant focus on payment methods for dividends in recent
years, in terms of efficiency, cost and security, SSE plc made
the decision that from September 2019, it would no longer be
paying dividends by cheque. All dividends are now credited to a
shareholder’s nominated UK bank/building society account. If you
haven’t already registered your UK bank/building society account
details with Link Registrar or would like to amend the details on
your account, you can do this by:
• logging in to the dedicated Shareholder Portal at
www.sse-shares.com ; or
• calling Link on 0345 143 4005* and speaking to one of
the team.
If you do not have a UK bank or building society account, your
dividends can be paid directly into a bank account outside of
the UK using the International Payment service. Please visit
https://ww2.linkgroup.eu/ips for further information.
Scrip dividend
Alternatively, shareholders may want to join the Scrip dividend
scheme and receive future dividends in the form of additional
new shares. Further details of the Scrip dividend scheme can be
found at https://www.sse.com/investors/shareholder-services/
dividends-and-scrip-scheme . You should still complete a bank
mandate to enable future dividend payments should you ever
withdraw from the Scrip scheme.
Share dealing
Share dealing services are available from Link Share Dealing Services.
Telephone dealing
For information on the telephone dealing service call
0371 664 0445
Lines are open Monday-Friday, 8.00am – 4.30pm
Please have your Investor Code (IVC) ready.
Shareholder information
346 SSE plc Annual Report 2023
Internet dealing
For information on the internet dealing service log on to:
https:// ww2.linkgroup.eu/share-deal/. Information provided on
these services should not be construed as a recommendation to
buy, sell or hold shares in SSE plc, nor to use the services of Link
Share Dealing Services. Link Share Dealing Services is a trading
name of Link Market Services Trustees Limited which is authorised
and regulated by the Financial Conduct Authority. If you live
in a country where the provisions of such services would be
contrary to local laws or regulations, this should be treated for
information only.
Dissentient shareholders
Scottish and Southern Energy plc (now known as SSE plc) was
formed in 1998 following the merger of Scottish Hydro Electric plc
and Southern Electric plc. The terms of the offer through which
the merger was effected was that for every Southern Electric plc
ordinary share held, shareholders received one Scottish and
Southern Energy plc (now SSE plc) ordinary share. A number of
shareholders did not respond to the original merger offer, resulting
in subsequent tracing communications over the following years.
In 2017, more than 12 years after the formation of SSE, a complete
tracing programme was initiated through the asset reunification
company Capita Employee Benefits (Consulting) Limited (Capita
Tracing), to locate dissentient shareholders and reunite them with
their funds. The steps agreed were designed to enable the best
possible outcome for dissentient shareholders and provided clear
details of the actions required to claim their asset entitlement.
Following the completion of all reasonable steps over £2m (in a
combination of shares and accrued dividends) was returned to
dissentient shareholders. As required by the Companies Act 2006,
the remainder totaling over £9m was transferred to the Chancery
Division of the High Court of Justice. Unclaimed monies can still
be claimed through direct application to the Chancery Division
of the High Court of Justice. The process for making such an
application was provided to outstanding claimants and further
details are provided at www.sse.com/investors/shareholder-
services/useful-information/southern-electric-unclaimed-
dividends/
Shareholder information continued
347SSE plc Annual Report 2023
Financial StatementsStrategic Report Directors’ Report
AIP
Annual Incentive Plan, a short-term salary incentive plan that all personal contract employees are eligible for
APM
Alternative Performance Measures used to track financial performance
ASTI
Ofgem’s Accelerated Strategic Transmission Investment framework
CAGR
Combined Annual Growth Rate
CCGT
Combined Cycle Gas Turbine
CCS
Carbon capture and storage
CfD
Contract for Difference
COP27
The 27th Conference of Parties climate summit held in Egypt in November 2022
DNO
Distribution Network Operator
DSO
Distribution System Operator
EBITDA
Earnings before interest, taxes, depreciation, and amortisation
EBRS
The UK Government’s Energy Bill Relief Scheme
EGL
The UK Government’s Energy Generator Levy
EPS
Earnings Per Share
EV
Electric Vehicle
FID
Final Investment Decision
FFO
Funds From Operations
GHG
Greenhouse gas, used in relation to GHG emissions
GW
Gigawatt
HVDC
High Voltage Direct Current
HVO
Hydrotreated Vegetable Oil, a fossil-free alternative to diesel
IEA
International Energy Agency
IRA
The US Government’s $250bn Inflation Reduction Act
kV
Kilovolt
MW
Megawatt
Net zero
Cutting greenhouse gas emissions to a level that is equal to or less than the emissions removed from the
environment
NZAP
SSE’s Net Zero Acceleration Programme, updated in May 2023 to ‘NZAP Plus’
OCGT
Open-cycle Gas Turbine
ORESS
Ireland’s Offshore Renewable Energy Support Scheme
PSP
Performance Share Plan, the Executive Directors’ long-term incentive plan
PSR
Priority Services Register
RAV
Regulated Asset Value as applies to SSE’s networks businesses
RCF
Retained Cash Flow
REFIT
Renewable Energy Feed-in Tariffs
REMA
The UK Government’s Review of Electricity Market Arrangements
RIIO
The ‘Revenue = Incentives + Innovation + Outputs’ regulatory framework by which SSE’s networks businesses are
remunerated
Scope 1, 2 and 3
emissions
Scope 1 and 2 are those emissions that are owned or controlled by SSE. Scope 3 emissions are from sources not
directly owned or controlled by SSE
Spark spread
The difference between the price received by SSE for electricity produced and the cost of the natural gas needed
to produce that electricity
TCFD
Task Force on Climate-related Financial Disclosures
Totex
Total expenditure
TWh
Terawatt-hour
VaR
Value at Risk
WACC
Weighted Average Cost of Capital
Glossary
348 SSE plc Annual Report 2023
Notes
Printed on material from well-managed, FSC
®
-
certified forests and other controlled sources.
This publication was printed with vegetable oil-
based inks by an FSC
®
-recognised printer that
holds an ISO 14001 certification.
The outer cover of this report has been laminated
with a biodegradable film. Around 20 months
after composting, an additive within the film
will initiate the process of oxidation.
SSE plc Annual Report 2023
For further information about SSE,
please contact:
SSE plc
+44 (0)1738 456000
info@sse.com
Registered in Scotland No. 117119
sse.com
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@SSE