REG - SSE Plc - Annual Financial Report <Origin Href="QuoteRef">SSE.L</Origin> - Part 4
16/07/2015 12:12
- Part 4: For the preceding part double click ID:nRSW9283Qc
construction project, the Caithness-Moray high voltage transmission link, now underway.It is critical that these projects are delivered on time and on budget, supported
by its Large Capital Projects Governance Framework. In addition, SSE needs to ensure that projects are built to a high quality standard as they generally have an economic
life of between 15 and 30 years and in many cases longer. SSE will typically manage the development process and organise the delivery of the project by 3rd party
contractors, taking a pro-active oversight role during the construction phase.Whilst this model ensures that the correct skills are leveraged, SSE has experienced
supplier failures in the past most notably in terms of quality control. Whilst contractual warranties will cover the faulty components, there is often a significant
unrecoverable cost associated with these events in addition to potential impacts to the service SSE can provide to customers. Added to this, any quality defects may not
show up until sometime after the construction of an asset resulting in an expensive and disruptive process of recovery. How does SSE mitigate it?· SSE has a Large
Capital Projects Governance framework in place which ensures a consistent approach to project development and delivery and includes a statement of Supplier Quality
Requirements.· Any main contract suppliers are subject to a number of verification processes which include quality assessments. · SSE's standard practice is to
ensure it has the contractual right to inspect any manufacturing facility, be present at all tests and inspections and require the supplier to provide verification of
various criteria including the origin and history of materials used and the competency of the workforce.· In major projects, SSE generally manages the insurance
placement by organising owner controlled insurance. This 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.· Once new assets are commissioned, SSE's
dedicated Engineering Centre of Excellence monitors the operational performance of assets to provide early visibility of any significant issues.· Strategic spares,
agreed in conjunction with the suppliers, operators and subject matter experts, are in place to mitigate the impact of any quality issues.
Political and regulatory change Safety and environmental management
What is the risk?The markets in which SSE operates are subject to a high degree of regulatory and legislative intervention at both domestic and EU level. This legal What is the risk?SSE's operations are in many cases undertaken in hazardous environments. It constructs, maintains and operates complex assets including hydro dams, power stations and major gas storage facilities. These assets require the storage of a significant volume of water, fuel, oil and other chemicals, and any uncontrolled release of these could result in injury to staff, contractors or members of the public and damage to the environment. SSE also owns interests in offshore oil and gas exploration and production assets, the operation of which is undertaken by partners who are proven and approved industry operators. SSE's ownership interest means it has a responsibility to ensure a high safety standard is adopted in order to prevent incidents and to protect its interests and liabilities more generally. How does SSE mitigate it?· Safety is the Group's number one value and is overseen by the Safety, Health and Environment Committee and supported by the Board's Safety Health and Environment Advisory Committee.· SSE's dedicated Engineering Centre of Excellence reviews and develops plans to ensure the integrity of its assets is maintained and is independent of the operations teams.· SSE undertakes regular hazard studies on key areas of exposure with support and oversight provided by the Group Safety, Health and Environment team.· For exploration and production assets offshore where SSE is not the operator, there are a number of assurance measures in place to ensure that the proven and approved operator partners maintain and adopt high standards for their safe management and operation. This includes regular engagement across all disciplines, with an emphasis on safety and technical assurance facilitated by audits and verification using both internal and third party resources.· The Group has crisis management and business continuity plans in place, which are designed for the management of, and recovery from, significant safety or environmental interruption events.
framework can change explicitly with the introduction of new or revised legislation, or indirectly due to evolving interpretation and legal precedent. Changes, either
explicit or indirect, can lead to additional reporting requirements, the creation of new products or market structures and can have a significant effect on the
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