REG - SSE Plc - Annual Financial Report <Origin Href="QuoteRef">SSE.L</Origin> - Part 5
16/07/2015 12:12
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profitability of SSE's asset base. Any such changes may require amendments to SSE's policies, procedures and operating practices and any failure to act and maintain
compliance could result in regulatory action, damage to SSE's reputation and impact upon its operations.The pace of change in, as well as the complexity of, the energy
sector is increasing; following the progressive implementation of electricity market reform, the GB market is the subject of investigation by the Competition and Markets
Authority (CMA) which is due to conclude at the end of 2015 and which could result in further significant changes to the structure of the market. Energy policy and the
legislation which may result from manifesto policies was a key focus in the run up to the 2015 UK General Election. Whilst it will take some time to become clear, any
ongoing ambiguity with regard to the market and its framework makes sustainable long-term strategy planning more challenging and can have an impact on investor
confidence.In addition to energy specific measures, SSE must also understand and comply with consumer, financial and health and safety legislation and regulation, amongst
others.
How do we mitigate it?· SSE has dedicated Corporate Affairs, Regulation, Legal and Compliance departments in place that provide advice to the Wholesale, Networks,
Retail and Enterprise businesses on the interpretation of political and regulatory changes and take the lead in engagement with regulators, politicians, officials and
other stakeholders.· There is regular engagement with the Board and Executive Committee on political and regulatory developments which may impact on SSE's operations
or strategy.· SSE takes a pro-active role in seeking to address sector-wide issues, as evidenced by the publication of its manifesto, "Proposals to deliver
affordable, secure and low-carbon energy" which set out SSE's recommendations to ensure a sustainable energy market in the future.· SSE has a dedicated CMA project
team, to manage the high volume of information gathering and analysis required to engage with the Authority and support its investigations. This team draws on expertise
from across SSE and will play a key role in ensuring it is able to quickly and effectively integrate the investigation's outcome into its operations and strategy. ·
SSE actively argues for political action to drive down non-commodity related costs which make up a significant part of the average customer energy bill, including
government-sponsored environmental and social policies and its smart meter roll-out costs. To protect customers, particularly the most vulnerable, SSE believes these
policies should be funded through general taxation and related to people's ability to pay.
Section 3.1 - Related Party Transactions: The following information is
extracted from Note 33 on page 186 of the 2015 Annual Report and Accounts. A
condensed version of this extract was published as Note 20 in the Preliminary
Results Statement for the year ended 31 March 2015.
33. Related party transactions
The immediate parent and ultimate controlling party of the Group is SSE plc
(incorporated in Scotland). Balances and transactions between the Company and
its subsidiaries, which are related parties of the Company, have been
eliminated on consolidation and are not disclosed in this note. Details of
transactions between the Group and other related parties are disclosed below.
Trading transactions
The following transactions took place during the year between the Group and
entities which are related to the Group but which are not members of the
Group. Related parties are defined as those in which the Group has control,
joint control or significant influence over.
Sale of goods and services2015£m Purchase of goods and services2015£m Amounts owed from2015£m Amounts owed to2015£m Sale of goods and services2014£m Purchase of goods and services2014£m Amounts owed from2014£m Amounts owed to2014£m
Joint ventures:
Seabank Power Ltd 20.1 (115.5) 1.8 11.1 22.9 (108.7) 1.2 9.1
Marchwood Power Ltd 28.7 (114.4) 3.4 12.7 33.5 (94.5) 0.2 8.1
Scotia Gas Networks Ltd 49.0 (166.4) 7.7 0.3 58.7 (175.2) 15.7 0.7
Other Joint Ventures 27.6 (6.0) 3.0 - 36.5 - 1.1 0.3
Associates 0.8 (41.9) 1.9 2.5 1.5 (28.2) 1.1 2.5
2.5
The transactions with Seabank Power Limited and Marchwood Power Limited relate
to the contracts for the provision of energy or the tolling of energy under
power purchase arrangements. Scotia Gas Networks Limited has operated the gas
distribution networks in Scotland and the South of England from 1 June 2005.
The Group's gas supply activity incurs gas distribution charges while the
Group also provides services to Scotia Gas Networks in the form of a
management service agreement for corporate services, stock procurement
services and the provision of the capital expenditure on the development of
front office management information systems.
The amounts outstanding are trading balances, are unsecured and will be
settled in cash. No guarantees have been given or received. No provisions have
been made for doubtful debts in respect of the amounts owed by related
parties. Aggregate capital loans to joint ventures and associates are shown in
note 15.
Remuneration of key management personnel
The remuneration of the key management personnel of the Group (excluding
pension value increases), is set out below in aggregate.
2015£m 2014£m
Short-term employment benefits
Executive Directors 2.8 4.9
Other Executive Committee members 2.5 4.4
5.3 9.3
9.3
Key management personnel are responsible for planning, directing and
controlling the operations of the Group. These were conducted by the Executive
Committee, comprising the two Executive Directors and the Managing Directors
of the Networks, Retail, Wholesale and Enterprise businesses. The comparative
information represents benefits paid to the Management Board to 1 February
2014 and the Executive Committee thereafter.
In addition, the key management personnel receive share based remuneration,
details of which are found at note 31. Further information about the
remuneration of individual directors is provided in the audited part of the
Remuneration Report. The Executive Directors are employed by the Company.
Information regarding transactions with post-retirement benefit plans is
included in note 30.
Section 3.2 - Dividend Ratification: The following information is extracted
from page 6 of the 2015 Notice of Annual General Meeting.
The Board has recently become aware of a technical issue with regard to the
Company's procedure for the payment of the final dividend to shareholders in
September 2014 and the interim dividend to shareholders in March 2015
(together, the "Dividends").
The Company has always filed its accounts on time as required by the Companies
Act 2006 ("CA 2006") and had sufficient profits and funding in place to pay
its dividends. However, under CA 2006, a public company can only pay a
dividend out of its distributable profits as shown in the last accounts filed
with Companies House. A public company can file interim accounts with
Companies House showing a more recent distributable profit position if the
last filed accounts do not show sufficient distributable profits.
When the Company paid each of the Dividends, although it had sufficient
distributable reserves to make each payment at each payment date, interim
accounts showing the requisite level of distributable profits had not been
filed with the Registrar of Companies and as a result, each Dividend was paid
in technical infringement of CA 2006.
The Company has been advised that it may have claims against past and present
shareholders who were recipients of the Dividends to recover the amount paid
by way of the dividends. Similarly, the Company has also been advised that it
may have claims against Directors of the Company at the time the decision was
taken to pay each of the Dividends or who have subsequently been appointed.
It is clearly not the intention of the Company that any such claims should be
made by the Company against either its shareholders or its Directors. The
position can be remedied by the shareholders passing a resolution which puts
shareholders and directors into the position in which they were always
intended to be. Resolution 18, which is proposed as a Special Resolution, will
ratify the appropriation of profits to the payment of each Dividend, waive any
rights of the Company against both past and present shareholders of the
Company who received the Dividends, waive any rights of the Company against
past and present directors of the Company in respect of each Dividend, and
approve the Company entering into deeds of release in favour of such
shareholders and directors. Copies of the form of the deeds of release are
available for inspection in the manner described in paragraph 13 of the
Important notes.
By virtue of the deeds of release, the Company will release the shareholders
who appeared on the Register of Members on the record date for the Dividends
from any and all claims which it has or may have in respect of the payment of
the Dividends and will release the past and present directors of the Company
from any and all claims which it has or may have arising at any time in
respect of the payment of the Dividends.
As a result of their interest in its subject-matter, the Directors will not
vote on Resolution 18.
Section 3.3 - Smaller Related Party Transaction: The following sets out the
disclosures required by LR11.1.10R.
The Dividends as described above which were paid in excess of the
distributable profits equated to £441.2m in aggregate (or 2.9% as a percentage
of market capitalisation). If Resolution 18 is approved at the AGM being held
on 23 July 2015, the entry by the Company into the deed of release in favour
of such current and former Directors immediately following the AGM will
constitute a Smaller Related Party Transaction under LR11.1.10R of the Listing
Rules. Each person who was a Director of the Company when the decision was
taken to pay the Dividends is deemed to be a 'related party' of the Company.
The current directors of the Company are Lord Smith, Alistair Phillips-Davies,
Gregor Alexander, Jeremy Beeton, Katie Bickerstaffe, Sue Bruce, Richard
Gillingwater and Peter Lynas and the former Directors for the purpose of
Resolution 18 are Lady Rice and Thomas Thune Andersen.
A sponsor's written confirmation has been obtained stating the arrangements
are fair and reasonable as far as the Company's shareholders are concerned.
Subject to the passing of Resolution 18, the Company will confirm through the
Result of AGM announcement when it has entered into the deed of release in
favour of the Company's shareholders and the deed of release in favour of the
current and former Directors of the Company.
This information is provided by RNS
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