SSE : Full-year Results Statement 2020/21

POWERING

CHANGE

Preliminary Results for the year to 31 March 2021

Disclaimer

This financial report contains forward-looking statements about financial and operational matters. Because they relate to future events and are subject to future circumstances, these forward-looking statements are subject to risks, uncertainties and other factors. As a result, actual financial results, operational performance and other future developments could differ materially from those envisaged by the forward-looking statements.

SSE plc gives no express or implied warranty as to the impartiality, accuracy, completeness or correctness of the information, opinions or statements expressed herein. Neither SSE plc nor its affiliates assume liability of any kind for any damage or loss arising from any use of this document or its contents.

This document does not constitute an offer or invitation to underwrite, subscribe for, or otherwise acquire or dispose of any SSE shares or other securities and the information contained herein cannot be relied upon as a guide to future performance.

Definitions

These consolidated financial results for the year ended 31 March 2021 have been prepared in accordance with International Financial Reporting Standards ('IFRSs') and its interpretations as issued by the International Accounting Standards Board ('IASB') and adopted by the European Union ('adopted IFRS').

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 ordinary shareholders and other stakeholders.

The definitions SSE uses for adjusted measures are consistently applied and are explained in the Alternative Performance Measures section before the Summary Financial Statements. For the purpose of calculating the 'Net Debt to EBITDA' metric, 'adjusted EBITDA' is further adjusted to remove the proportion of adjusted EBITDA from equity-accounted joint ventures relating to off-balance sheet debt.

In preparing this financial report SSE has been mindful of the commentary issued in May 2016 by the Financial Reporting Council on the European Securities and Markets Authority's Guidelines on Alternative Performance Measures. SSE will monitor developing practice in the use of Alternative Performance Measures and will continue to prioritise this, ensuring the financial information in its results statements is clear, consistent, and relevant to the users of those statements.

Important note: Discontinued Operations - Gas Production and SSE Energy Services

At 31 March 2021 SSE has assessed that its Gas Production assets should continue to be classified as held for sale (see note 12.3 of the Summary Financial Statements) and on 15 January 2020 SSE completed the sale of its SSE Energy Services business to OVO Energy Limited (see note 12.2 of the Summary Financial Statements). Both businesses have been classified as discontinued operations. The Group's adjusted profit-based measures therefore exclude the contribution from both of these businesses in all periods presented.

Important note: Other disposals

At 31 March 2021 SSE has also assessed that its Enterprise Contracting and Rail business should be classified as held for sale (see note 12.3 of the Summary Financial Statements). SSE has further disposed of a 50% stake in Slough Multifuel on 2 April 2020, a 51% stake in Seagreen Wind Farm on 3 June 2020, its investment in Walney offshore wind farm on 2 September 2020, its investment in MapleCo smart-metering on 23 September 2020, its investment in Multifuel Energy on 7 January 2021 and a 10% stake in Dogger Bank Wind Farm on 26 February 2021.

As these businesses do not individually constitute a separate major line of business for SSE, they have not been classified as discontinued operations, and their result continues to be included within the Group's adjusted profit-based measures to the point of disposal.

Impact of discontinued operations on the Group's Alternative Performance Measures ('APM')

The following Alternative Performance Measures have been adjusted in all periods presented to exclude the contribution of the Group's Gas Production operations, which continues to be presented as a discontinued operation as at 31 March 2021, and SSE Energy Services, which was disposed on 15 January 2020:

• 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', and 'investment and capital expenditure' have not been adjusted as the Group continues to fund the discontinued operations and will continue to do so until the date of disposal. The discontinued operations have no external debt and all intercompany funding to the disposal group continues to eliminate on consolidation, therefore no adjustments are required to the Group's 'adjusted net finance cost' measure.

2

CONTENTS
HEADLINES.................................................................................................................................................	4
KEY PERFORMANCE INDICATORS FOR THE YEAR TO 31 MARCH....................................................	6
STRATEGIC OVERVIEW ............................................................................................................................	9
GROUP FINANCIAL REVIEW - YEAR TO 31 MARCH 2021 ..................................................................	11
GROUP FINANCIAL OUTLOOK - 2021/22 AND BEYOND ....................................................................	17
SUPPLEMENTAL FINANCIAL INFORMATION .......................................................................................	20
BUSINESS UNIT OPERATING REVIEW ..................................................................................................	32
SSEN TRANSMISSION .............................................................................................................................	33
SSEN DISTRIBUTION ...............................................................................................................................	36
INVESTMENT IN SCOTIA GAS NETWORKS (SGN) ...............................................................................	38
SSE RENEWABLES ..................................................................................................................................	39
SSE THERMAL ..........................................................................................................................................	44
GAS STORAGE .........................................................................................................................................	46
SSE BUSINESS ENERGY .........................................................................................................................	47
SSE AIRTRICITY .......................................................................................................................................	48
SSE ENTERPRISE ....................................................................................................................................	49
ENERGY PORTFOLIO MANAGEMENT....................................................................................................	50
ALTERNATIVE PERFORMANCE MEASURES........................................................................................	51
SUMMARY FINANCIAL STATEMENTS ...................................................................................................	58

3

SSE PLC

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2021

26 MAY 2021

POWERING CHANGE THROUGH PROGRESS, PERFORMANCE, VALUE CREATION AND OPPORTUNITIES

• Total Recordable Injuries during the year fell to 47, compared to 55 in the prior year.
• Strong underlying operational performance, with significant progress against strategy:
• • The £7.5bn capex plan is on track with construction well under way at flagship SSE Renewables projects including Seagreen, Viking and the world's largest offshore wind farm at Dogger Bank
  • SSEN Transmission's totex for RIIO-T2 is set to be around £2.8bn comprising its base case for RIIO-T2 together with the Shetland HVDC link, expected to take its RAV to over £5bn by March 2026.
  • Subject to a range of factors including generator commitment, planning and Ofgem approval additional potential SSEN Transmission projects could grow RAV to over £6bn by March 2026.
  • SSEN Distribution's ED2 draft plan to be submitted in July to include net-zero generated growth from well-evidenced,stakeholder-led proposals.
  • Completed transactions in the non-core asset disposal programme to date will yield over £1.5bn of cash proceeds, and SSE is set to exceed the £2bn target on completion of the prospective sale of Scotia Gas Networks (SGN).
  • Secured value for shareholders through its partnering approach in Renewables, delivering over £200m of cash proceeds and gains on Dogger Bank A&B stake sales alone.
  • Further medium- to long-term growth options continue to progress in areas such as international wind, pumped storage hydro, carbon capture and storage (CCS), hydrogen, and batteries.
• Continued to develop an attractive pipeline that would see SSE reach a run rate of at least 1GW of new assets a year during the second half of this decade and now expects to exceed its target for trebling its renewable output by 2030.
• Increasingly favourable policy environment with Ten Point Plan, Energy White Paper and refreshed binding emissions targets in the UK, Ireland and further afield underpinning net zero strategy.
• Established as a Principal Partner to the UK Government for the COP26 UN climate summit in November 2021 and progressing well against 2030 goals and Science Based Targets.
• Published ground-breaking Just Transition strategy on the social implications of delivering net zero and SSE's role in supporting fairness for employees, customers and communities.
• Raised over £2.5bn of funding including the March 2021 issuance of £500m of green bonds, SSE's fourth green bond in five years, reaffirming status as largest issuer of green bonds in the FTSE 100.
• Contributed over £5.2bn to UK GDP, supporting over 41,000 UK jobs, with €439m contribution to Ireland GDP and over 2,000 Irish jobs supported.

RESULTS FOR 2020/21*

• Adjusted operating profit up 1% to £1,506.5m / Reported operating profit up 185% to £2,743.5m
• Adjusted profit before tax up 4% to £1,064.9m / Reported profit before tax up 328% to £2,516.4m
• Coronavirus impact on operating profit estimated at £170m, towards the lower end of the guided range and reflected within adjusted and reported results
• Adjusted earnings per share up 5% to 87.5p, within the expected 85p - 90p range
• Reported earnings per share increased to 215.7p

4

• Adjusted investment and capital expenditure of £912.0m, after project finance development expenditure refunds of £428.6m.
• Disposal programme of non-core assets announced in June 2020 has delivered £877.6m of exceptional net gains on disposal during the period and over £1.4bn of cash proceeds to date.
• Adjusted net debt and hybrid capital at £8.9bn, down 15% on prior year, with £1.5bn of bonds and

over £1bn of hybrid bonds issued in the year increasing average debt maturity to 7.4 years.

*Unless otherwise started, excludes results from discontinuing operations: SSE Energy Services sold on 15 January 2020 and Gas Production assets held for sale at 31 March 2021.

FINAL DIVIDEND IN LINE WITH FIVE-YEAR DIVIDEND PLAN TO 2023

• Intention to recommend a final dividend of 56.6p per share for payment on 23 September 2021, representing an average annual RPI rate of 1.2%, making a full-year dividend of 81.0p per share.
• Continue to target RPI increases for the following two years to March 2023, measured against the average annual rate of RPI inflation, as set out in the 2023 dividend plan.

FINANCIAL OUTLOOK FOR 2021/22 AND BEYOND

• SSE remains committed to its five-year dividend plan to March 2023
• SSE is not providing full guidance for 2021/22 at this stage but expects the ongoing impact to the Group from the coronavirus pandemic to be mainly restricted to the performance of Enterprise and Business Energy where, it will be assumed within normal business performance and no longer separately reported.
• Completion of disposals of non-core assets in SSE's Contracting and Rail business, and SSE's Gas Production assets, expected by the end of June 2021 and the end of this calendar year respectively.
• Expected to commence a disposal process for all of SSE's interest in SGN during mid-summer 2021, with the intention of having an agreed sale by the end of the calendar year.
• Capital expenditure and investment is expected to total around £2bn in 2021/22 (net of project finance development expenditure refunds).
• Continuing to target a ratio of net debt to EBITDA at the lower end of a 4.5 to 5 times range between 2021/22 and 2024/25.
• SSE remains committed to delivering its £7.5bn capital investment plan to 2025; indeed much of this is now contracted, but there is considerable potential for future growth above and beyond.
• As emerging opportunities in SSE's core businesses become clearer in the coming months, SSE expects to be able to provide an update on its capital investment plans in November.

Sir John Manzoni, Chair of SSE, said:

"Thanks to the commitment of employees right across the business in 2020/21 we made an important contribution to the national pandemic response, delivering strong operational performance, and making significant strategic progress.

"We have also made significant progress on our non-core disposals programme, creating value for shareholders while continuing to sharpen the group's strategic focus on its low-carbon electricity core in networks and renewables, where our capital investment programme is progressing well.

"Looking ahead, a strong balance sheet, underpinned by world-class assets, gives us a firm footing from which to capitalise on the considerable future growth opportunities we are creating in the transition to net zero.

"Our ESG credentials continue to grow and, as a Principal Partner of COP26, we are focused on creating value for shareholders and society. We are reducing emissions, investing in a green recovery, creating over a thousand new jobs, making a major contribution to GDP and, financially, continuing to remunerate shareholders through delivery of our dividend plan to 2023."

5