Regulatory Filings • Jul 23, 2015
Regulatory Filings
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(incorporated in Scotland, with limited liability, registered number SC117119)
(incorporated in Scotland, with limited liability, registered number SC213460)
(incorporated in Scotland, with limited liability, registered number SC213461)
(incorporated in England and Wales, with limited liability, registered number 04094290)
Under the Euro Medium Term Note Programme described in this Prospectus (the "Programme"), SSE plc ("SSE"), Scottish Hydro Electric Power Distribution plc ("SHEPD"), Scottish Hydro Electric Transmission plc ("SHE Transmission"), and Southern Electric Power Distribution plc ("SEPD") (each an "Issuer" and together, the "Issuers"), subject to compliance with all relevant laws, regulations and directives, may from time to time issue Euro Medium Term Notes (the "Notes"). References in this Prospectus to the "Issuer" or the "relevant Issuer" when used in relation to a particular Tranche or Series (each as defined in "Overview of the Programme — Method of Issue") are to the Issuer of such Tranche or Series, as the case may be, of Notes. The aggregate nominal amount of Notes outstanding under the Programme will not at any time exceed €10,000,000,000 (or the equivalent in other currencies).
Application has been made to the Financial Conduct Authority under Part VI of the Financial Services and Markets Act 2000 ("FSMA") (the "UK Listing Authority") for Notes issued under the Programme for the period of 12 months from the date of this Prospectus to be admitted to the official list of the UK Listing Authority (the "Official List") and to the London Stock Exchange plc (the "London Stock Exchange") for such Notes to be admitted to trading on the London Stock Exchange's Regulated Market (the "Market"). References in this Prospectus to Notes being "listed" (and all related references) shall mean that such Notes have been admitted to the Official List and have been admitted to trading on the Market. The Market is a regulated market for the purposes of Directive 2004/39/EC of the European Parliament and of the Council on markets in financial instruments.
Each Series of Notes in bearer form will be represented on issue by a temporary global note in bearer form (each a "temporary Global Note") or a permanent global note in bearer form (each a "permanent Global Note"). Notes in registered form will be represented by registered certificates (each a "Certificate"), one Certificate being issued in respect of each Noteholder's entire holding of Registered Notes of one Series. Registered Notes issued in global form will be represented by registered global certificates. If the Global Notes are stated in the applicable Final Terms to be issued in new global note ("New Global Note" or "NGN") form they will be delivered on or prior to the original issue date of the relevant Tranche to a common safekeeper (the "Common Safekeeper") for Euroclear Bank S.A./N.V. ("Euroclear") and Clearstream Banking, société anonyme ("Clearstream, Luxembourg").
Global Notes which are not issued in NGN form ("Classic Global Notes" or "CGNs") and Certificates will be deposited on the issue date of the relevant Tranche with a common depositary on behalf of Euroclear and Clearstream, Luxembourg (the "Common Depositary").
The provisions governing the exchange of interests in Global Notes for other Global Notes and definitive Notes are described in "Summary of Provisions Relating to the Notes while in Global Form".
The Programme has been rated A3 by Moody's Investors Service Ltd. ("Moody's") and A- by Standard & Poor's Credit Market Services Europe Limited ("Standard & Poor's"). Each of Moody's and Standard & Poor's is established in the European Union and is registered under Regulation (EC) No. 1060/2009 (as amended) of the European Parliament and of the Council of 16 September 2009 on credit rating agencies (the "CRA Regulation").
Tranches of Notes to be issued under the Programme will be rated or unrated. Where a Tranche of Notes is to be rated, such rating will not necessarily be the same as the ratings assigned to the Programme nor will it necessarily be the same as the rating assigned to Notes already issued. Where a Tranche of Notes is rated, the applicable rating(s) will be specified in the relevant Final Terms. A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency.
Prospective investors should have regard to the factors described under the section headed "Risk Factors" in this Prospectus.
Dealers
Banco Bilbao Vizcaya Argentaria, S.A. BNP PARIBAS MUFG National Australia Bank Limited Santander Global Banking & Markets
Barclays Lloyds Bank Morgan Stanley RBC Capital Markets The Royal Bank of Scotland This document comprises a base prospectus for the purposes of Article 5.4 of Directive 2003/71/EC (the "Prospectus Directive") and for the purpose of giving information with regard to SSE and SSE and its subsidiaries (including SHEPD, SHE Transmission and SEPD) taken as a whole (together, the "SSE Group") (the "SSE Prospectus") which, according to the particular nature of SSE and the Notes, is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profit and losses and prospects of SSE.
With the exception of the information contained in the sections entitled "Description of the Issuers — SSE plc", "Description of the Issuers — Scottish Hydro Electric Transmission plc", "Description of the Issuers — Southern Electric Power Distribution plc" and "Description of the Issuers — the SSE Group", the information contained in the documents referred to in paragraphs (i), (iii) and (iv) of the section entitled "Documents Incorporated by Reference" and the information contained in paragraphs 2(a), (c) and (d) relating to the consents, approvals and authorisations in connection with the update of the Programme of SSE, SHE Transmission and SEPD, 3(a) and (b) relating to the significant change statement of SSE, SHE Transmission and SEPD, 4(a) and (b) relating to the material adverse change statement of SSE, SHE Transmission and SEPD and 5(a) and (b) relating to the litigation statement of SSE, SHE Transmission and SEPD, in each case of the section entitled "General Information", this document comprises a base prospectus for the purposes of Article 5.4 of the Prospectus Directive as amended and for the purpose of giving information with regard to SHEPD (the "SHEPD Prospectus") which, according to the particular nature of SHEPD and the Notes, is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profit and losses and prospects of SHEPD.
With the exception of the information contained in the sections entitled "Description of the Issuers — SSE plc", "Description of the Issuers — Scottish Hydro Electric Power Distribution plc", "Description of the Issuers — Southern Electric Power Distribution plc" and "Description of the Issuers — the SSE Group", the information contained in the documents referred to in paragraphs (i), (ii) and (iv) to (vii) (inclusive) of the section entitled "Documents Incorporated by Reference" and the information contained in paragraphs 2(a), (b) and (d) relating to the consents, approvals and authorisations in connection with the update of the Programme of SSE, SHEPD and SEPD, 3(a) and (b) relating to the significant change statement of SSE, SHEPD and SEPD, 4(a) and (b) relating to the material adverse change statement of SSE, SHEPD and SEPD and 5(a) and (b) relating to the litigation statement of SSE, SHEPD and SEPD, in each case of the section entitled "General Information", this document comprises a base prospectus for the purposes of Article 5.4 of the Prospectus Directive as amended and for the purpose of giving information with regard to SHE Transmission (the "SHE Transmission Prospectus") which, according to the particular nature of SHE Transmission and the Notes, is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profit and losses and prospects of SHE Transmission.
With the exception of the information contained in the sections entitled "Description of the Issuers — SSE plc", "Description of the Issuers — Scottish Hydro Electric Power Distribution plc", "Description of the Issuers — Scottish Hydro Electric Transmission plc" and "Description of the Issuer — the SSE Group", the information contained in the documents referred to in paragraphs (i), (ii) and (iii) of the section entitled "Documents Incorporated by Reference" and the information contained in paragraphs 2(a), (b) and (c) relating to the consents, approvals and authorisations in connection with the update of the Programme of SSE, SHEPD and SHE Transmission, 3(a) and (b) relating to the significant change statement of SSE, SHEPD and SHE Transmission, 4(a) and (b) relating to the material adverse change statement of SSE, SHEPD and SHE Transmission and 5(a) and (b) relating to the litigation statement of SSE, SHEPD and SHE Transmission, in each case of the section entitled "General Information", this document comprises a base prospectus for the purposes of Article 5.4 of the Prospectus Directive as amended and for the purpose of giving information with regard to SEPD (the "SEPD Prospectus" and together with the SSE Prospectus, the SHEPD Prospectus and the SHE Transmission Prospectus, the "Prospectus") which, according to the particular nature of SEPD and the Notes, is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profit and losses and prospects of SEPD.
SSE accepts responsibility for the information contained in the SSE Prospectus and the Final Terms for each tranche of Notes issued by SSE. To the best of the knowledge of SSE (having taken all reasonable care to ensure that such is the case) the information contained in the SSE Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information.
SHE Transmission accepts responsibility for the information contained in the SHE Transmission Prospectus and the Final Terms for each Tranche of Notes issued by SHE Transmission. To the best of the knowledge of SHE Transmission (having taken all reasonable care to ensure that such is the case) the information contained in the SHE Transmission Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information.
SHEPD accepts responsibility for the information contained in the SHEPD Prospectus and the Final Terms for each Tranche of Notes issued by SHEPD. To the best of the knowledge of SHEPD (having taken all reasonable care to ensure that such is the case) the information contained in the SHEPD Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information.
SEPD accepts responsibility for the information contained in the SEPD Prospectus and the Final Terms for each Tranche of Notes issued by SEPD. To the best of the knowledge of SEPD (having taken all reasonable care to ensure that such is the case) the information contained in the SEPD Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information.
This Prospectus is to be read in conjunction with all documents which are incorporated herein by reference (see "Documents Incorporated by Reference").
No person has been authorised to give any information or to make any representation other than as contained in this Prospectus in connection with the issue or sale of the Notes and, if given or made, such information or representation must not be relied upon as having been authorised by any Issuer or any of the Dealers or the Arranger (as defined in "Overview of the Programme"). Neither the delivery of this Prospectus nor any sale made in connection herewith shall, under any circumstances, create any implication that there has been no change in the affairs of any Issuer since the date hereof or the date upon which this Prospectus has been most recently amended or supplemented or that there has been no adverse change in the financial position of any Issuer since the date hereof or the date upon which this Prospectus has been most recently amended or supplemented or that any other information supplied in connection with the Programme is correct as of any time subsequent to the date on which it is supplied or, if different, the date indicated in the document containing the same.
The minimum specified denomination of the Notes issued under this Programme shall be €100,000 (or its equivalent in any other currency as at the date of issue of the Notes).
The distribution of this Prospectus and the offering or sale of the Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Prospectus comes are required by each Issuer, the Dealers and the Arranger to inform themselves about and to observe any such restriction. The Notes have not been and will not be registered under the United States Securities Act of 1933 as amended (the "Securities Act"), and include Notes in bearer form that are subject to U.S. tax law requirements. Subject to certain exceptions, Notes may not be offered, sold or delivered within the United States or to U.S. persons. For a description of certain restrictions on offers and sales of Notes and on distribution of this Prospectus, see "Subscription and Sale".
This Prospectus does not constitute an offer of, or an invitation by or on behalf of the Issuers, the Arranger or the Dealers to subscribe for, or purchase, any Notes.
To the fullest extent permitted by law, none of the Dealers or the Arranger accept any responsibility for the contents of this Prospectus or for any other statement, made or purported to be made by the Arranger or a Dealer or on its behalf in connection with the Issuers or the issue and offering of the Notes. The Arranger and each Dealer accordingly disclaims all and any liability whether arising in tort or contract or otherwise (save as referred to above) which it might otherwise have in respect of this Prospectus or any such statement. Neither this Prospectus nor any other financial statements should be considered as a recommendation by any of the Issuers, the Arranger or the Dealers that any recipient of this Prospectus or any other financial statements should purchase the Notes. Each potential purchaser of Notes should determine for itself the relevance of the information contained in this Prospectus and its purchase of Notes should be based upon such investigation as it deems necessary. None of the Dealers or the Arranger undertakes to review the financial condition or affairs of any Issuer during the life of the arrangements contemplated by this Prospectus nor to advise any investor or potential investor in the Notes of any information coming to the attention of any of the Dealers or the Arranger.
In connection with the issue of any Tranche (as defined in "Overview of the Programme — Method of Issue"), the Dealer or Dealers (if any) acting as the stabilising manager(s) (the "Stabilising Manager(s)") (or persons acting on behalf of any Stabilising Manager(s)) may over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, there is no assurance that the Stabilising Manager(s) (or persons acting on behalf of a Stabilising Manager) will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the relevant Tranche is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue date of the relevant Tranche and 60 days after the date of the allotment of the relevant Tranche. Any stabilisation action or overallotment must be conducted by the relevant Stabilising Manager(s) (or person(s) acting on behalf of any Stabilising Manager(s)) in accordance with all applicable laws and rules.
One or more independent credit rating agencies may assign credit ratings to an issue of Notes. The ratings may not reflect the potential impact of all risks related to structure, market, additional factors discussed above, and other factors that may affect the value of the relevant Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be revised or withdrawn by the rating agency at any time.
Each potential investor in any Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:
Some Notes are complex financial instruments and such instruments may be purchased as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to their overall portfolios. A potential investor should not invest in Notes which are complex financial instruments unless it has the expertise (either alone or with the help of a financial adviser) to evaluate how the Notes will perform under changing conditions, the resulting effects on the value of such Notes and the impact this investment will have on the potential investor's overall investment portfolio.
The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (1) Notes are legal investments for it, (2) Notes can be used as collateral for various types of borrowing and (3) other restrictions apply to its purchase or pledge of any Notes. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of Notes under any applicable risk-based capital or similar rules.
In this Prospectus, unless otherwise specified or the context otherwise requires, references to "euro", "Euro" and "€" are to the lawful currency introduced at the start of the third stage of European Economic and Monetary Union pursuant to the Treaty establishing the European Community as amended, references to "£", "Sterling", "pounds" and "pence" are to the lawful currency of the United Kingdom, references to "\$" and "U.S. dollars" are to the lawful currency of the United States of America and references to "¥", "yen" and "JPY" are to the lawful currency of Japan.
| Page | |
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| DOCUMENTS INCORPORATED BY REFERENCE 7 | |
| SUPPLEMENTARY PROSPECTUS 8 | |
| RISK FACTORS 9 | |
| OVERVIEW OF THE PROGRAMME19 | |
| TERMS AND CONDITIONS OF THE NOTES 23 | |
| SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM62 | |
| USE OF PROCEEDS68 | |
| DESCRIPTION OF THE ISSUERS 69 | |
| TAXATION90 | |
| SUBSCRIPTION AND SALE 94 | |
| FORM OF FINAL TERMS96 | |
| GENERAL INFORMATION103 | |
This Prospectus should be read and construed in conjunction with the following documents:
Such documents have been published and filed with the Financial Conduct Authority. Such documents shall be incorporated in and form part of this Prospectus, save that any statement contained in a document which is incorporated by reference herein shall be modified or superseded for the purpose of this Prospectus to the extent that a statement contained herein modifies or supersedes such earlier statement (whether expressly, by implication or otherwise). Any statement so modified or superseded shall not, except as so modified or superseded, constitute a part of this Prospectus. Any documents themselves incorporated by reference in the documents incorporated by reference in this Prospectus shall not form part of this Prospectus. Where only certain parts of the documents referred to above are incorporated by reference in this Prospectus, the parts of the document which are not incorporated by reference are either not relevant for prospective investors in the Notes or the relevant information is included elsewhere in this Prospectus.
Copies of documents incorporated by reference in this Prospectus may be obtained (without charge) from the registered office of the relevant Issuer and viewed on the website of the Regulatory News Service operated by the London Stock Exchange at http://www.londonstockexchange.com/exchange/news/market-news/market-newshome.html.
If at any time an Issuer shall be required to prepare a supplementary prospectus pursuant to section 87G of the FSMA, such Issuer will prepare and make available a supplement to this Prospectus which, in respect of any subsequent issue of Notes to be listed on the Official List and admitted to trading on the Market, shall constitute a supplementary prospectus as required by the UK Listing Authority and section 87G of the FSMA.
Each Issuer has given an undertaking to the Arranger and the Dealers that if at any time during the duration of the Programme there arises or is noted a significant new factor, material mistake or inaccuracy relating to information contained in this Prospectus which is capable of affecting an assessment by investors of the assets and liabilities, financial position, profits and losses and prospects of such Issuer and/or the rights attaching to the Notes to be issued by it, that Issuer shall prepare an amendment or supplement to this Prospectus or publish a replacement Prospectus for use in connection with any subsequent offering of Notes to be issued by it.
Each Issuer believes that the following factors may affect its ability to fulfil its obligations under the Notes issued under the Programme. All of these factors are contingencies which may or may not occur and the Issuers are not in a position to express a view on the likelihood of any such contingency occurring.
Factors which the Issuers believe may be material for the purpose of assessing the market risks associated with Notes issued under the Programme are also described below.
Each Issuer believes that the factors described below represent the principal risks inherent in investing in Notes issued under the Programme, but the relevant Issuer may be unable to pay interest, principal or other amounts on or in connection with any Notes for other reasons and no Issuer represents that the statements below regarding the risks of holding any Notes are exhaustive. Prospective investors should also read the detailed information set out elsewhere in this Prospectus (including any documents incorporated by reference herein) and reach their own views prior to making any investment decision.
Each Issuer is a member of the SSE Group. Although certain of the factors described below will not apply directly to all Issuers as individual entities, all factors will affect the SSE Group as a whole, and each Issuer may in turn be affected by matters affecting the SSE Group.
The current global economic and financial conditions may have an impact on the SSE Group's liquidity and financial condition that cannot currently be predicted. The current economic and financial conditions could lead to reduced demand for gas and electricity, which would have a negative impact on the SSE Group's financial position, operations and cash flows. The UK and Irish Governments are facing greater pressure on public finances, leading to a risk of increased taxation. These factors may also lead to intensified competition for market share and available margin, with consequential potential adverse effects on trading volumes. The current economic and financial conditions, the uncertainty as to the extent and timing of any recovery along with continuing concerns about credit risk (including sovereign credit risk) and the Eurozone crisis, may have a negative impact on third parties with whom the SSE Group does, or may do, business. While the ultimate outcome and impact of the current economic and financial conditions and outlook cannot be predicted with certainty, it may have a material adverse effect on the SSE Group's future liquidity, results of operations and financial condition.
The electricity and gas distribution and electricity transmission networks operations, the electricity generation operations and the gas and electricity supply operations of the SSE Group are subject to regulation and licensing requirements by the Gas and Electricity Markets Authority (the "Authority"). In addition, the electricity and gas distribution, as well as electricity transmission, are subject to direct price regulation by the Authority.
Decisions regarding, for example, the levels of permitted revenues, licence renewals, modifications to the terms and conditions of licences in issue, and constraints on business development opportunities which may be taken by the Authority may all potentially adversely impact on the operations and financial position of the SSE Group. Additionally, failure to operate the networks properly could lead to compensation payments or penalties, as could any failure to make capital expenditure in line with agreed programmes that in turn leads to deterioration of the networks.
In particular, there can be no assurance that future networks' price controls will permit the generation of sufficient revenues to enable the Issuers to meet their payment obligations under the Notes, and there can also be no assurance that net operating revenues generated by the SSE Group will be sufficient to enable the Issuers to meet such payment obligations.
Any failure by any holder of a licence within the SSE Group to comply with the terms of its licence may lead to the making of an enforcement order by The Office of Gas and Electricity Markets ("OFGEM") that could have a material adverse impact on the relevant Issuer and/or the SSE Group.
OFGEM completed a review of its enforcement policies in 2014. Upon completion of the review, OFGEM introduced an enforcement board and an independent enforcement panel to deliver credible deterrence for companies with visible and meaningful consequences where they do not comply. OFGEM's first enforcement overview (in respect of the period of April 2014 – March 2015) was published in March 2015.
OFGEM's retail market reforms are now fully in force with new rules in place to improve supplier communications such as bills and annual summaries. Standards of conduct have been put in place setting out obligations with which gas and electricity suppliers must comply when dealing with their customers. Despite these reforms, following a consultation on its State of the Market Assessment in June 2014, OFGEM referred the energy market to the Competition and Markets Authority ("CMA"). According to OFGEM, a fuller market investigation by the CMA would once and for all clear the air and allow the CMA to ensure that there are no further barriers to effective competition. The CMA is now carrying out its own independent investigation to see whether there are any features of the energy market which prevent, restrict or distort competition and, if it finds any adverse effects on competition, determine what action might be taken to remedy them. The CMA's investigation, which is overseen by an independent panel, will conclude with the publication of its final report by 25 December 2015.
These changes and the consequence of a CMA review could have a significant impact on the relevant Issuer and/or the SSE Group.
Furthermore, in March 2015 British Gas Trading Limited and Northern Powergrid lodged an appeal with the CMA on the RIIO-ED1 final determination affecting five distribution network operator groups, including SHEPD. Whilst the outcome of the appeal will not be known until September 2015, the CMA's determination of the appeal will not have an impact on distribution companies' base revenues in 2015/16. There can, however, be no guarantee that it will not have a material adverse impact on distribution companies' base revenues beyond 2016, which could by extension have a material adverse impact on the relevant Issuer and/or the SSE Group.
The SSE Group owns and operates a diverse range of complex generating plant, gas storage facilities, and extensive energy networks. Poor performance or failure of these assets could occur as a result of accidental or deliberate damage, component failure, lack of appropriate maintenance or poor management. Any such substandard performance could result in lost revenues and may lead to supply interruptions, adverse publicity, regulatory action or damage to the reputation of the SSE Group.
Exposures to the physical volume and price risk of certain commodities - including electricity, gas, coal, credits relating to CO2 emissions permits and oil – arise from two main sources.
Firstly, there is a requirement to match volumes of purchased gas and electricity with customer demand. This exposure is influenced by a number of factors including customer numbers, the weather and changes in energy use. In addition, exposures arise due to the difference in the cost of fuel and other commodities required for generation, and the electricity revenue derived from SSE Group's long-life generation asset investments.
A significant proportion of SSE Group's profitability, including return on investment in power generation assets as well as the ability to price competitively in the retail market, is dependent on the successful management of these exposures. A sub-optimal trading strategy could lead to significant financial loss, loss of customers and increased political scrutiny.
The markets for these commodities are driven by global supply and demand, itself influenced by a number of complexities including geopolitical events, global economic growth, the weather and technology. The global commodity price makes up a significant part of the energy cost to the customer. Increasing commodity prices affect the overall affordability of energy and can have an impact on demand and customers' ability to pay.
Although the SSE Group routinely enters into long-term contracts for the supply of key commodities to protect its commercial position, significant price fluctuations and/or failure to secure key materials and/or maintain adequate supply chains and strategic alliances could have a significant adverse effect on its operations and/or financial position of the SSE Group.
Energy costs make up around 5 per cent. of the average UK household expenditure, a figure which for the poorest fifth of households rises to 11 per cent. (2012 Office of National Statistics figures). The total cost of energy is driven by a number of factors, including commodity costs, infrastructure costs, energy sector overheads and government levies aimed at supporting measures for the reduction of carbon emissions and increased energy efficiency.
The SSE Group is involved in all points of the value chain for energy in the UK and Ireland including production, storage, transmission, distribution, supply and related services. The decisions the SSE Group takes in delivering these services contribute to the overall cost of energy to the consumer. The SSE Group is equally committed to keeping the cost of energy as affordable as possible, both now and over the long term, as it is to delivering the standard of service required by a modern economy.
If the cost of conventional energy production does not remain competitive, there is likely to be increasing pressure from alternative sources of energy as well as public and political pressure. This could have a significant effect on the long term performance of all areas of the business with knock on effects to both demand and the customers' ability to pay and by extension could have a significant adverse effect on the operations and/or financial position of the SSE Group.
The ability of the SSE Group to maintain and grow its business and profits could be adversely affected by the actions of its competitors and the general competitive landscape of the markets in which it operates. Further consolidation within the utilities market may also affect the SSE Group's competitive position, either directly or indirectly. Additionally, changes in macroeconomic conditions could negatively impact on the SSE Group as a result of both reduced levels of business activity and potential increases in bad debt write-offs.
The SSE Group'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.
The SSE Group 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. The SSE Group'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.
Many key activities relating to electricity, gas and construction operations are by their nature potentially hazardous. Safety is the SSE Group's number one value, but nevertheless a failure to comply with legislation or the occurrence of a preventable incident that results in injury, death or environmental damage could result in prosecution. Any such incident could therefore have a material adverse effect on the SSE Group's reputation and financial position.
The SSE Group must at all times fully comply with its obligations in respect of all legal, regulatory, environmental and corporate governance requirements. Failure to do so may result in adverse publicity, fines, loss of licence or legal proceedings being commenced against members of the SSE Group. Additionally future changes in law at EU level and in the jurisdictions in which the SSE Group operates and/or political direction could adversely impact on the SSE Group's market position, financial position or competitiveness. An example is the ongoing development of European Electricity and Gas Network Codes to implement the internal energy market.
The UK government legislated for a major process of electricity market reform in Great Britain through the Energy Act 2013 (the "Energy Act"). This included the introduction of new long term contracts to support low carbon generation as well as a capacity mechanism to ensure resource adequacy. In particular, the Energy Act provides for consumer protection, domestic tariffs and licensable activities. The UK government is continuing the electricity market reform programme. There can be no assurance that these on-going reforms will not have a material adverse impact on the SSE Group and its revenues.
A failure to maintain quality customer services levels can have a material adverse effect on the SSE Group's reputation and financial position as well as the increased risk of regulatory scrutiny which could result in fines from OFGEM.
It is the responsibility of the Boards of Directors to consider carefully strategic issues including capital investment in merger projects, acquisitions, disposals, investments, market positioning, climate change, sustainable development and new technologies. Failure to do so and to identify step changes in the industry sectors and react appropriately could adversely affect the SSE Group's financial position, market position or reputation.
The SSE Group is exposed to a variety of financial risks, including interest rate, foreign exchange, counterparty credit, liquidity and taxation. Although these risks are wherever possible monitored, reported on and managed within a strict framework of controls and procedures, adverse market, political or legislative developments or a failure to meet the SSE Group funding requirements and obligations could have a material adverse effect on the SSE Group's financial position.
The SSE Group's businesses are increasingly influenced by global climate change. Not adhering to current or future EU and UK legislation aimed at addressing climate change, including amendment to the current carbon emission allowance regime or renewable obligation certificate regime in the UK, could adversely impact on the SSE Group's operations or commercial position. Climate change induced changes to the environment, such as increased frequency of extreme weather, may pose operational challenges. Customer response to climate change also presents risks to the SSE Group, including risk to sales volumes due to growing customer demand for lowcarbon products and services. Failure to respond adequately to the risks posed by climate change may represent added reputational risk.
The SSE Group's activities are subject to a broad range of environmental laws and regulations, many of which require advance approval in the form of permits, licences or other forms of formal authorisation. Failure to secure and adhere to the terms of all such necessary requirements, or indeed damage to the environment caused by the SSE Group's business activities, could result in legal proceedings or other measures being taken against members of the SSE Group.
Changes in temperature can affect demand for power and gas and consequently impact the price of these commodities and the number of units distributed. Additionally rainfall and/or snow melt conditions impact on hydroelectric generation output, and wind conditions impact on wind generation output. Extreme weather conditions may result in network damage, which in turn is likely to result in disruption to electricity supply.
All of the above have the potential to adversely affect SSE Group earnings, whilst supply interruptions could result in adverse publicity, negative customer perception and possible regulatory action.
The SSE Group is reliant on a number of key IT systems to support ongoing operations and cash flow. In particular the customer management system, the main trading support systems and real-time network management systems are critical. A loss of any of these systems could be caused by malicious activity, software or hardware issues including telecoms network connectivity and power supply issues to data centres, or poor operational performance. Interruption of service or compromise of these systems for any reason could significantly affect the service levels provided to customers, could affect operation of the electricity network, compromise sensitive customer data, divert resource from the business as contingency plans are implemented and in some cases may affect a material proportion of the SSE Group's cash flow. The SSE Group has robust business continuity and disaster recovery plans in place to cover such eventualities and regularly tests these plans. However, no assurance can be given to their effectiveness going forward.
The SSE Group's electricity network is one of the UK's critical national infrastructure assets, central to the functioning of a modern economy. Ensuring the security of this asset is vital as is its safe, efficient, reliable and compliant operation in order to maintain the confidence of regulators, politicians, customers, investors, and ultimately to protect the SSE Group's licences to operate. Any failure in the systems which sustain the security of this asset could result in lost revenues and may lead to supply interruptions, adverse publicity, regulatory action or damage to the reputation of the SSE Group.
Nothing in this risk factor should be taken as implying that any of the Issuers or any of the other entities within the SSE Group will be unable to comply with its obligations as a company with securities admitted to the Official List.
The energy sector is undergoing constant technological improvement and political and regulatory change. It is important that the SSE Group is able to stay at the forefront of the industry by identifying emerging trends, developing strategies to exploit competitive opportunities and question the status quo and striving for continuous improvement in all areas of activity. In retail markets, competitive pressure means a failure to keep up with fastdeveloping customer needs and new technologies could reduce the SSE Group's market share and adversely affect service levels to customers. The advent of smart metering and the changing needs of the customer require a reorganisation of people, processes and supporting systems. In the networks business, the SSE Group has proposed significant reductions in overall cost and improvements in the standard of service that customers can expect to receive. To achieve this, it needs to deliver major cost efficiencies and improvements in customer service. Longer term, any large-scale adoption of smaller-scale distributed (local) generation could result in increased pressure on revenues and overheads which could adversely affect return on investment.
In the UK generation market, it will be critical to understand and adopt the latest, most efficient technologies to maximise competitiveness for revenue support payments. An inability to do so could pose a threat to the SSE Group's capital investment plans and threaten its position in the market as a significant electricity generator.
The SSE Group's enterprise business was created to integrate expertise in contracting, lighting services, utility solutions, telecoms and business relationship management, forming a new standalone business-to business arm of the SSE Group.
The projects to deliver these business transformations are large and complex. It is vital that the SSE Group successfully delivers these in order to give customers the services they require whilst maintaining an efficient cost in connection with the provision of such services. Failure to do this could result in falling sales and customer numbers due to a lack of price competitiveness and a poor reputation for service. Poor service standards would in turn impact on revenues through foregone incentive payments as well as damaging the SSE Group's relationship with customers, regulators and other key stakeholders.
These projects will draw on resources from across the SSE Group and poor management of these resources, poor integration or inadequate scoping of project requirements and benefits could impact on business as usual activities, increase project costs and adversely affect service standards.
The SSE Group operates defined benefit pension schemes. At present, in aggregate, there is an actuarial deficit between the value of the projected liabilities of these schemes and the value of the assets that they hold. The deficit level in such schemes can be affected by a number of factors including asset volatility, changes in bond yields, fluctuations in interest rates, inflation, and changes in the life expectancy of scheme members. Adverse changes in the valuation of assets and/or liabilities in the defined benefit schemes may occur due to both market movements and changes in the assumptions used to calculate the funding levels of such schemes. This in turn may result in SSE being required to make higher ongoing contributions, and/or make deficit repair payments which could be material.
The SSE Group is reliant on the employment of competent and qualified staff in all areas of its business. Failure to attract or retain key staff could materially adversely affect SSE Group operations. The SSE Group undertakes a number of activities to ensure that it attracts and retains the right level of staff. This includes, planning and monitoring of all recruitment needs; analysis of regretted attrition; annual succession planning reviews; reviews of difficult to fill roles; and operation of a number of trainee programmes to produce effective, skilled staff. The SSE Group operates a number of training centres which allow upskilling and refresher training of employees. In addition, effective resource planning and succession planning are key activities to ensure identification of future potential talent which is critical in the successful execution of the SSE Group's strategy.
The SSE Group continues to deliver its capital investment programme with a number of ongoing construction and IT projects nearing completion and its single biggest 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, the SSE Group 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.
The SSE Group will typically manage the development process and organise the delivery of the project by third party contractors, taking a pro active oversight role during the construction phase. Whilst this model ensures that the correct skills are leveraged, the SSE Group 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 the SSE Group 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.
Russia is an important source of European gas supply, covering around 30 per cent. of European demand (including supply to the UK, the Netherlands, Germany, France, Spain, Italy and Belgium). Ukraine represents one of the major transit routes. The UK interconnection with continental Europe via BBL (the Balgzand Bacton Line) and Interconnector UK gas pipelines means that developments in the European gas market have a significant impact on gas prices in the UK. The ongoing conflict in the Ukraine creates uncertainty about the security of gas supply in Europe. Gas payment disputes arising between state-controlled companies in the Russian Federation and Ukraine pose a key risk. Previous disputes over prices, payments and debt have led to gas supply interruptions of up to 18 days during the winters of 2005/2006, 2007/2008 and 2008/2009. Intensification of political tensions could lead to fresh disputes and to the curtailing of Russian gas supplies to Europe. This in turn would put pressure on European gas prices. As a result of the increased interconnection of gas markets, the SSE Group is exposed to the risks associated with global geopolitical events through its Energy Portfolio Management activities. However, SSE operates a policy of purchasing a proportion of its gas requirements in advance of delivery in order to manage market price volatility. In addition, SSE's upstream production interests help to ensure cost effective gas procurement for its customers. More generally, SSE ownership and operation of a balanced portfolio of thermal, wind and hydro generation assets seeks to reduce exposure to wider market and geopolitical risks.
An optional redemption feature is likely to limit the market value of Notes. During any period when the relevant Issuer may elect to redeem Notes, the market value of those Notes generally will not rise substantially above the price at which they can be redeemed. This also may be true prior to any redemption period.
The relevant Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on the Notes. At those times, an investor generally would not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Notes being redeemed and may only be able to do so at a significantly lower rate. Potential investors should consider reinvestment risk in light of other investments available at that time.
The relevant Issuer may issue Notes with principal or interest determined by reference to the United Kingdom General Index of Retail Prices (for all items) as published by the Office for National Statistics (the "RPI"). Potential investors should be aware that: (i) the market price of such Notes may be volatile; (ii) they may receive no interest; (iii) the amount of principal payable at redemption may be less than the nominal amount of such Notes or even zero; (iv) the RPI may be subject to significant fluctuations that may not correlate with changes in interest rates, currencies or other indices; and (v) the timing of changes in the RPI may affect the actual yield to investors, even if the average level is consistent with their expectations. In general, the earlier the change in the RPI, the greater the effect on yield. The historical experience of the RPI should not be viewed as an indication of the future performance during the term of any RPI Linked Notes. Accordingly, prospective investors should consult their own financial and legal advisers about the risks entailed by an investment in any RPI Linked Notes and the suitability of such Notes in light of their particular circumstances.
Fixed/Floating Rate Notes may bear interest at a rate that the relevant Issuer may elect to convert from a fixed rate to a floating rate, or from a floating rate to a fixed rate. The relevant Issuer's ability to convert the interest rate will affect the secondary market and the market value of such Notes since the relevant Issuer may be expected to convert the rate when it is likely to produce a lower overall cost of borrowing. If the relevant Issuer converts from a fixed rate to a floating rate, the spread on the Fixed/Floating Rate Notes may be less favourable than then prevailing spreads on comparable Floating Rate Notes tied to the same reference rate. In addition, the new floating rate at any time may be lower than the rates on other Notes. If the relevant Issuer converts from a floating rate to a fixed rate, the fixed rate may be lower than then prevailing rates on its Notes.
The market values of securities issued at a substantial discount or premium to their nominal amount tend to fluctuate more in relation to general changes in interest rates than do prices for conventional interest-bearing securities. Generally, the longer the remaining term of the securities, the greater the price volatility as compared to conventional interest-bearing securities with comparable maturities.
The Terms and Conditions of the Notes (the "Conditions") contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority.
The Conditions also provide that the Trustee may, without the consent of Noteholders, agree to (i) any modification of, or to the waiver or authorisation of any breach or proposed breach of, any of the provisions of Notes or (ii) determine without the consent of the Noteholders that any Event of Default or potential Event of Default shall not be treated as such or (iii) the substitution of another company as principal debtor under any Notes in place of the relevant Issuer, in the circumstances described in Condition 12 of the Conditions.
If the United Kingdom joins the European Monetary Union prior to the maturity of the Notes, there is no assurance that this would not adversely affect investors in the Notes. It is possible that prior to the maturity of the Notes the United Kingdom may become a participating Member State and that the Euro may become the lawful currency of the United Kingdom. In that event (i) all amounts payable in respect of any Notes denominated in Sterling may become payable in Euro (ii) the law may allow or require such Notes to be re-denominated into Euro and additional measures to be taken in respect of such Notes; and (iii) there may no longer be available published or displayed rates for deposits in Sterling used to determine the rates of interest on such Notes or changes in the way those rates are calculated, quoted and published or displayed. The introduction of the Euro could also be accompanied by a volatile interest rate environment, which could adversely affect investors in the Notes.
Under EU Council Directive 2003/48/EC on the taxation of savings income (the "Directive" or "Savings Directive"), each EU Member State is required to provide to the tax authorities of another EU Member State details of payments of interest (and similar income) paid by a person established within its jurisdiction to (or for the benefit of) an individual resident or to (or secured for) certain limited types of entity established in that other EU Member State. However, for a transitional period, Austria is instead required (unless during that period it elects otherwise) to operate a withholding system in relation to such payments (subject to a procedure whereby, on meeting certain conditions, the beneficial owner of the interest or other income may request that no tax be withheld). Luxembourg, which before 1 January 2015 also operated a withholding tax under transitional rules, has now replaced such withholding tax with the information reporting regime described above. The ending of such transitional period is dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries. A number of non-EU countries and territories have adopted similar measures.
The Council of the European Union has adopted a Directive (the "Amending Directive") which would, when implemented, amend and broaden the scope of the requirements of the Savings Directive described above. The Amending Directive would expand the range of payments covered by the Savings Directive, in particular to include additional types of income payable on securities, and the circumstances in which payments must be reported or paid subject to withholding. For example, payments made to (or secured for) (i) an entity or legal arrangement effectively managed in an EU Member State that is not subject to effective taxation, or (ii) a person, entity or legal arrangement established or effectively managed outside of the EU (and outside any third country or territory that has adopted similar measures to the Savings Directive) which indirectly benefit an individual resident in an EU Member State, may fall within the scope of the Savings Directive, as amended. The Amending Directive requires EU Member States to adopt national legislation necessary to comply with it by 1 January 2016, which legislation must apply from 1 January 2017.
The European Commission has published a proposal for a Council Directive repealing the Savings Directive from 1 January 2016 (1 January 2017 in the case of Austria) (in each case subject to transitional arrangements). The proposal also provides that, if it is adopted, EU Member States will not be required to implement the Amending Directive.
If a payment were to be made or collected through an EU Member State which has opted for a withholding system or through a non-EU country which has adopted similar measures and has opted for a withholding system, or through certain dependent or associated territories which have adopted similar measures and which have opted for a withholding system and an amount of, or in respect of, tax were to be withheld from that payment pursuant to the Directive or any law implementing or complying with, or introduced in order to conform to the Directive, neither the relevant Issuer nor any Paying Agent nor any other person would be obliged to pay additional amounts with respect to any Note as a result of the imposition of such withholding tax. Furthermore, once the Amending Directive is implemented and takes effect in EU Member States, such withholding may occur in a wider range of circumstances than at present, as explained above. The relevant Issuer is required to maintain a Paying Agent in an EU Member State that is not obliged to withhold or deduct tax pursuant to the Directive or any law implementing or complying with, or introduced in order to conform to the Directive, which may mitigate an element of this risk if the Noteholder is able to arrange for payment through such a Paying Agent. However, investors should choose their custodians and intermediaries with care, and provide each custodian and intermediary with any information that may be necessary to enable such persons to make payments free from withholding and in compliance with the Savings Directive, as amended.
Investors who are in any doubt as to their position should consult their professional advisers.
Whilst the Notes are in global form and held within Euroclear and Clearstream, Luxembourg (together, the "ICSDs"), in all but the most remote circumstances, it is not expected that FATCA (as defined in "Taxation – FATCA Withholding") will affect the amount of any payment received by the ICSDs (see "Taxation – FATCA Withholding"). However, FATCA may affect payments made to custodians or intermediaries in the subsequent payment chain leading to the ultimate investor if any such custodian or intermediary generally is unable to receive payments free of FATCA withholding. It also may affect payments to any ultimate investor that is a financial institution that is not entitled to receive payments free of withholding under FATCA, or an ultimate investor that fails to provide its broker (or other custodian or intermediary from which it receives payment) with any information, forms, other documentation or consents that may be necessary for the payments to be made free of FATCA withholding. Investors should choose the custodians or intermediaries with care (to ensure each is compliant with FATCA or other laws or agreements related to FATCA), provide each custodian or intermediary with any information, forms, other documentation or consents that may be necessary for such custodian or intermediary to make a payment free of FATCA withholding. Investors should consult their own tax adviser to obtain a more detailed explanation of FATCA and how FATCA may affect them. The Issuers' obligations under the Notes are discharged once it has paid the Common Depositary or Common Safekeeper for the ICSDs (as bearer, or registered holder, of the Notes) and the Issuers have therefore no responsibility for any amount thereafter transmitted through hands of the ICSDs and custodians or intermediaries. If an amount in respect of U.S. withholding tax were to be deducted or withheld from interest, principal or other payments on the Notes as a result of FATCA, none of the Issuer, any paying agent or any other person would,, pursuant to the Terms and Conditions of the Notes be required to pay additional amounts as a result of the deduction or withholding. As a result, investors may receive less interest or principal than expected. Please see "Taxation – FATCA Withholding" for more information on this legislation.
The Conditions are based on English law in effect as at the date of issue of the relevant Notes. No assurance can be given as to the impact of any possible judicial decision or change to English law or administrative practice after the date of issue of the relevant Notes.
In relation to any issue of Notes in bearer form which have denominations consisting of a minimum Specified Denomination plus one or more higher integral multiples of another smaller amount, it is possible that the Notes may be traded in amounts that are not integral multiples of such minimum Specified Denominations (as defined in the Conditions). In such a case a Noteholder who, as a result of trading such amounts, holds a principal amount of less than the minimum Specified Denomination in his account with the relevant clearing system at the relevant time will not receive a definitive Note in respect of such holding (should definitive Notes be printed) and would need to purchase a principal amount of Notes such that it holds an amount equal to one or more Specified Denominations.
If definitive Notes are issued, holders should be aware that definitive Notes which have a denomination that is not an integral multiple of the minimum Specified Denomination may be illiquid and difficult to trade.
Notes may have no established trading market when issued, and one may never develop. If a market does develop, it may not be liquid. Therefore, investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market. This is particularly the case for Notes that are especially sensitive to interest rate, currency or market risks, are designed for specific investment objectives or strategies or have been structured to meet the investment requirements of limited categories of investors. These types of Notes generally would have a more limited secondary market and more price volatility than conventional debt securities. Illiquidity may have a severely adverse effect on the market value of Notes.
The relevant Issuer will pay principal and interest on the Notes in the Specified Currency. This presents certain risks relating to currency conversions if an investor's financial activities are denominated principally in a currency or currency unit (the "Investor's Currency") other than the Specified Currency. These include the risk that exchange rates may significantly change (including changes due to devaluation of the Specified Currency or revaluation of the Investor's Currency) and the risk that authorities with jurisdiction over the Investor's Currency may impose or modify exchange controls. An appreciation in the value of the Investor's Currency relative to the Specified Currency would decrease (1) the Investor's Currency-equivalent yield on the Notes, (2) the Investor's Currency equivalent value of the principal payable on the Notes and (3) the Investor's Currency equivalent market value of the Notes.
Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal.
Investment in Fixed Rate Notes involves the risk that subsequent changes in market interest rates may adversely affect the value of Fixed Rate Notes.
The following overview is qualified in its entirety by the remainder of this Prospectus and any decision to invest in Notes should be based on consideration of this Prospectus as a whole, including the documents incorporated by reference.
| Issuers: | SSE plc Scottish Hydro Electric Power Distribution plc Scottish Hydro Electric Transmission plc Southern Electric Power Distribution plc |
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| Description: | Euro Medium Term Note Programme |
| Size: | Up to €10,000,000,000 (or the equivalent in other currencies at the date of issue) aggregate nominal amount of Notes outstanding at any one time. |
| Arranger: | The Royal Bank of Scotland plc |
| Dealers: | Banco Bilbao Vizcaya Argentaria, S.A. Banco Santander, S.A. Barclays Bank PLC BNP Paribas Lloyds Bank plc Mitsubishi UFJ Securities International plc Morgan Stanley & Co. International plc National Australia Bank Limited ABN 12 004 044 937 RBC Europe Limited The Royal Bank of Scotland plc |
| The Issuers may from time to time terminate the appointment of any dealer under the Programme or appoint additional dealers either in respect of one or more Tranches or in respect of the whole Programme. References in this Prospectus to "Permanent Dealers" are to the persons listed above as Dealers and to such additional persons that are appointed as dealers in respect of the whole Programme (and whose appointment has not been terminated) and references to "Dealers" are to all Permanent Dealers and all persons appointed as a dealer in respect of one or more Tranches. |
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| Trustee: | BNY Mellon Corporate Trustee Services Limited |
| Issuing and Paying Agent, Transfer Agent and Calculation Agent: |
The Bank of New York Mellon, London Branch |
| Registrar, Paying Agent and Transfer Agent: |
The Bank of New York Mellon (Luxembourg) S.A. |
| Method of Issue: | The Notes will be issued on a syndicated or non-syndicated basis. The Notes will be issued in series (each a "Series") having one or more issue dates and on terms otherwise identical (or identical other than in respect of the first payment of interest), the Notes of each Series being intended to be interchangeable with all other Notes of that Series. Each Series may be issued in tranches (each a "Tranche") on the same or different issue dates. The specific terms of each Tranche will be completed in the final terms (the "Final |
Issue Price: Notes may be issued at their nominal amount or at a discount or premium to their nominal amount.
Form of Notes: The Notes may be issued in bearer form ("Bearer Notes") or in registered form ("Registered Notes") only. Each Tranche of Bearer Notes will be represented on issue by a temporary Global Note if (i) definitive Notes are to be made available to Noteholders following the expiry of 40 days after their issue date or (ii) such Notes have an initial maturity of more than one year and are being issued in compliance with the D Rules (as defined in "Overview of the Programme — Selling Restrictions" below), otherwise such Tranche will be represented by a permanent Global Note. Registered Notes will be represented by Certificates, one Certificate being issued in respect of each Noteholder's entire holding of Registered Notes of one Series. Certificates representing Registered Notes that are registered in the name of a nominee for one or more clearing systems are referred to as "Global Certificates".
Clearing Systems: Clearstream, Luxembourg, Euroclear and, in relation to any Tranche, such other clearing system as may be agreed between the relevant Issuer, the Issuing and Paying Agent, the Trustee and the relevant Dealer.
Initial Delivery of Notes: On or before the issue date for each Tranche, if the relevant Global Note is a NGN, the Global Note will be delivered to a Common Safekeeper for Euroclear and Clearstream, Luxembourg. On or before the issue date for each Tranche, if the relevant Global Note is a CGN, the Global Note representing Bearer Notes or the Certificate representing Registered Notes may be deposited with a common depositary for Euroclear and Clearstream, Luxembourg. Global Notes or Certificates may also be deposited with any other clearing system or may be delivered outside any clearing system provided that the method of such delivery has been agreed in advance by the relevant Issuer, the Issuing and Paying Agent, the Trustee and the relevant Dealer. Registered Notes that are to be credited to one or more clearing systems on issue will be registered in the name of nominees or a common nominee for such clearing systems.
Currencies: Subject to compliance with all relevant laws, regulations and directives, Notes may be issued in any currency agreed between the relevant Issuer and the relevant Dealers.
Maturities: Subject to compliance with all relevant laws, regulations and directives, any maturity between one month and 60 years.
Specified Denomination: Definitive Notes will be in such denominations as may be specified in the relevant Final Terms save that the minimum denomination of each Note will be €100,000 (or, if the Notes are denominated in a currency other than euro, the equivalent amount of such currency).
Fixed Rate Notes: Fixed interest will be payable in arrear on the date or dates in each year specified in the relevant Final Terms.
Floating Rate Notes: Floating Rate Notes will bear interest determined separately for each
Series as follows:
| (i) on the same basis as the floating rate under a notional interest rate swap transaction in the relevant Specified Currency governed by an agreement incorporating the 2006 ISDA Definitions, as published by the International Swaps and Derivatives Association, Inc.; or (ii) by reference to LIBOR or EURIBOR as adjusted for any |
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| applicable margin. Interest periods will be specified in the relevant Final Terms. |
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| Zero Coupon Notes: | Zero Coupon Notes (as defined in "Terms and Conditions of the Notes") may be issued at their nominal amount or at a discount to it and will not bear interest. |
| RPI Linked Notes: | Payments of principal in respect of RPI Linked Notes (as defined in "Terms and Conditions of the Notes") or of interest in respect of RPI Linked Interest Notes will be calculated as specified in "Terms and Conditions of the Notes". |
| Interest Periods and Interest Rates: | The length of the interest periods for the Notes and the applicable interest rate or its method of calculation may differ from time to time or be constant for any Series. Notes may have a maximum interest rate, a minimum interest rate, or both. The use of interest accrual periods permits the Notes to bear interest at different rates in the same interest period. All such information will be set out in the relevant Final Terms. |
| Redemption: | The relevant Final Terms will specify the basis for calculating the redemption amounts payable. Unless permitted by then current laws and regulations, Notes which have a maturity of less than one year must have a minimum redemption amount of £100,000 (or its equivalent in other currencies). |
| Optional Redemption: | The Final Terms issued in respect of each issue of Notes will state whether such Notes may be redeemed prior to their stated maturity at the option of the relevant Issuer (either in whole or in part) and/or the holders, and if so the terms applicable to such redemption. |
| Status of Notes: | The Notes will constitute unsubordinated and unsecured obligations of the relevant Issuer, all as described in "Terms and Conditions of the Notes — Status". |
| Negative Pledge: | The Notes will contain a Negative Pledge, all as described in "Terms and Conditions of the Notes — Negative Pledge". |
| Cross Acceleration: | The Notes will contain a Cross Acceleration, all as described in "Terms and Conditions of the Notes — Events of Default". |
| Ratings: | Moody's has rated the Programme 'A3' and Standard & Poor's has rated the Programme 'A-'. Each of Moody's and Standard & Poor's is established in the European Union and is registered under the CRA Regulation. Tranches of Notes will be rated or unrated. |
| A rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. |
| Early Redemption: | Except as provided in "— Optional Redemption" above, Notes will be redeemable at the option of the relevant Issuer prior to maturity only for tax reasons. See "Terms and Conditions of the Notes — Redemption, Purchase and Options". |
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| Withholding Tax: | All payments of principal and interest in respect of the Notes will be made free and clear of withholding taxes of the United Kingdom, unless the withholding is required by law. In such event, the Issuer shall, subject to customary exceptions (including the ICMA Standard EU Tax exemption Tax Language), pay such additional amounts as shall result in receipt by the Noteholder of such amounts as would have been received by it had no such withholding been required, all as described in "Terms and Conditions of the Notes — Taxation". |
| Governing Law: | English. |
| Listing and Admission to Trading: | Application has been made to list Notes issued under the Programme on the Official List and to admit them to trading on the Market and references to listing shall be construed accordingly. |
| Selling Restrictions: | The United States, the United Kingdom and Japan. See "Subscription and Sale". |
| Category 2 selling restrictions will apply for the purposes of Regulation S under the Securities Act. |
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| Bearer Notes will be issued in compliance with U.S. Treas. Reg. §1.163-5(c)(2)(i)(D) (the "D Rules") unless (i) the relevant Final Terms states that Notes are issued in compliance with U.S. Treas. Reg. §1.163-5(c)(2)(i)(C) (the "C Rules") or (ii) the Bearer Notes are issued other than in compliance with the D Rules or the C Rules but in circumstances in which the Notes will not constitute "registration required obligations" under the United States Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA"), which circumstances will be referred to in the relevant Final Terms as a transaction to which TEFRA is not applicable. |
The following is the text of the terms and conditions (the "Conditions" and each a "Condition") that, subject to completion in accordance with the provisions of Part A of the relevant final terms (the "Final Terms"), shall be applicable to the Notes in definitive form (if any) issued in exchange for the Global Note(s) representing each Series. The full text of these Conditions together with the relevant provisions of Part A of the Final Terms shall be endorsed on such Bearer Notes or on the Certificates relating to such Registered Notes. All capitalised terms that are not defined in these Conditions will have the meanings given to them in Part A of the relevant Final Terms. Those definitions will be endorsed on the definitive Notes or Certificates, as the case may be. References in these Conditions to "Notes" are to the Notes of one Series only, not to all Notes that may be issued under the Programme.
SSE plc ("SSE"), Scottish Hydro Electric Power Distribution plc ("SHEPD"), Scottish Hydro Electric Transmission plc ("SHE Transmission") and Southern Electric Power Distribution plc ("SEPD") (each an "Issuer" and together, the "Issuers") have established a Euro Medium Term Note Programme (the "Programme") for the issuance of notes (the "Notes") in an aggregate principal amount outstanding at any time not exceeding the Programme Limit (as defined in the Trust Deed referred to below). The Notes are constituted by an Amended and Restated Trust Deed (as amended or supplemented as at the date of issue of the Notes (the "Issue Date"), the "Trust Deed") dated 23 July 2015 between the Issuers and BNY Mellon Corporate Trustee Services Limited (the "Trustee", which expression shall include all persons for the time being the trustee or trustees under the Trust Deed) as trustee for the Noteholders (as defined below). These Conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed, which includes the form of the Bearer Notes, Certificates, Coupons and Talons referred to below. An Amended and Restated Agency Agreement (as amended or supplemented as at the Issue Date, the "Agency Agreement") dated 31 July 2014 has been entered into in relation to the Notes between the Issuers, the Trustee, The Bank of New York Mellon, London Branch as initial issuing and paying agent and the other agent named in it. The issuing and paying agent, the paying agents, the registrar, the transfer agents and the calculation agent(s) for the time being (if any) are referred to below respectively as the "Issuing and Paying Agent", the "Paying Agents" (which expression shall include the Issuing and Paying Agent), the "Registrar", the "Transfer Agents" (which expression shall include the Registrar) and the "Calculation Agent(s)". Copies of the Trust Deed and the Agency Agreement are available for inspection during usual business hours at the principal office of the Trustee (presently at One Canada Square, London E14 5AL, United Kingdom) and at the specified offices of the Paying Agents and the Transfer Agents.
The Noteholders, the holders of the interest coupons (the "Coupons") relating to interest bearing Notes in bearer form and, where applicable in the case of such Notes, talons for further Coupons (the "Talons") (the "Couponholders") are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and are deemed to have notice of those provisions of the Agency Agreement applicable to them.
As used in these Conditions, "Tranche" means, in relation to a series of Notes, those Notes which are identical in all respects.
Any reference in these Conditions to a matter being "shown hereon" or "specified hereon" means as the same may be specified in the relevant Final Terms.
The Notes are issued in bearer form ("Bearer Notes") or in registered form ("Registered Notes") in each case in the Specified Denomination(s) shown hereon provided that the minimum Specified Denomination shall be €100,000 (or its equivalent in any other currency as at the date of issue of the relevant Notes).
This Note is a Fixed Rate Note, a Floating Rate Note, a Zero Coupon Note or a RPI Linked Note, a combination of any of the foregoing or any other kind of Note, depending upon the Interest and Redemption/Payment Basis shown hereon.
Bearer Notes are serially numbered and are issued with Coupons (and, where appropriate, a Talon) attached, save in the case of Zero Coupon Notes in which case references to interest (other than in relation to interest due after the Maturity Date), Coupons and Talons in these Conditions are not applicable.
Registered Notes are represented by registered certificates ("Certificates") and, save as provided in Condition 2(c), each Certificate shall represent the entire holding of Registered Notes by the same holder.
Title to the Bearer Notes and the Coupons and Talons shall pass by delivery. Title to the Registered Notes shall pass by registration in the register that the Issuer shall procure to be kept by the Registrar in accordance with the provisions of the Agency Agreement (the "Register"). Except as ordered by a court of competent jurisdiction or as required by law, the holder (as defined below) of any Note, Coupon or Talon shall be deemed to be and may be treated as its absolute owner for all purposes whether or not it is overdue and regardless of any notice of ownership, trust or an interest in it, any writing on it (or on the Certificate representing it) or its theft or loss (or that of the related Certificate) and no person shall be liable for so treating the holder.
In these Conditions, "Noteholder" means the bearer of any Bearer Note or the person in whose name a Registered Note is registered (as the case may be), "holder" (in relation to a Note, Coupon or Talon) means the bearer of any Bearer Note, Coupon or Talon or the person in whose name a Registered Note is registered (as the case may be) and capitalised terms have the meanings given to them hereon, the absence of any such meaning indicating that such term is not applicable to the Notes.
terms. New Certificates shall only be issued against surrender of the existing Certificates to the Registrar or any Transfer Agent. In the case of a transfer of Registered Notes to a person who is already a holder of Registered Notes, a new Certificate representing the enlarged holding shall only be issued against surrender of the Certificate representing the existing holding.
The Notes and the Coupons relating to them constitute direct, unconditional and (subject to Condition 4) unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves. The payment obligations of the Issuer under the Notes and the Coupons relating to them shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 4, at all times rank at least equally with all other unsecured and unsubordinated indebtedness and monetary obligations of the Issuer, present and future, but, in the event of insolvency, only to the extent permitted by applicable laws relating to creditors' rights.
So long as any Note or Coupon remains outstanding (as defined in the Trust Deed), the Issuer will ensure that no Relevant Indebtedness of the Issuer or any Relevant Subsidiary or of any other person and no guarantee by the Issuer or any Relevant Subsidiary of any Relevant Indebtedness of any person will be secured by a mortgage, charge, lien, pledge or other security interest (each a "Security Interest") upon, or with respect to, any of the present or future business, undertaking, assets or revenues (including any uncalled capital) of the Issuer or any Relevant Subsidiary unless the Issuer shall, before or at the same time as the creation of such Security Interest, take any and all action necessary to ensure that:
save that the Issuer or any Relevant Subsidiary may create or have outstanding a Security Interest in respect of any Relevant Indebtedness and/or any guarantees given by the Issuer or any Relevant Subsidiary in respect of any Relevant Indebtedness of any person (without the obligation to provide a Security Interest or guarantee or other arrangement in respect of the Notes, the Coupons and the Trust Deed as aforesaid) where (1) such Relevant Indebtedness has an initial maturity of not less than 20 years and is of a maximum aggregate amount outstanding at any time not exceeding the greater of £250,000,000 and 20 per cent, of the Capital and Reserves or (2) such Security Interest is provided in respect of a company becoming a Subsidiary of the Issuer after the date on which agreement is reached to issue the first Tranche of the Notes and where such Security Interest existed at the time that company becomes a Subsidiary of the Issuer (provided that such Security Interest was not created in contemplation of that company becoming a Subsidiary of the Issuer and the nominal amount secured at the time of that company becoming a Subsidiary of the Issuer is not subsequently increased).
(a) Interest on Fixed Rate Notes: Each Fixed Rate Note bears interest on its outstanding nominal amount from the Interest Commencement Date at the rate per annum (expressed as a percentage) equal to the Rate of Interest, such interest being payable in arrear on each Interest Payment Date. The amount of interest payable shall be determined in accordance with Condition 5(f).
(B) the Following Business Day Convention, such date shall be postponed to the next day that is a Business Day,
(C) the Modified Following Business Day Convention, such date shall be postponed to the next day that is a Business Day unless it would thereby fall into the next calendar month, in which event such date shall be brought forward to the immediately preceding Business Day or
Where ISDA Determination is specified hereon as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Accrual Period shall be determined by the Calculation Agent as a rate equal to the relevant ISDA Rate. For the purposes of this sub-paragraph (A), "ISDA Rate" for an Interest Accrual Period means a rate equal to the Floating Rate that would be determined by the Calculation Agent under a Swap Transaction under the terms of an agreement incorporating the ISDA Definitions and under which:
For the purposes of this sub-paragraph (A), "Floating Rate", "Calculation Agent", "Floating Rate Option", "Designated Maturity", "Reset Date" and "Swap Transaction" have the meanings given to those terms in the ISDA Definitions.
(expressed as a percentage rate per annum) for the Reference Rate which appears or appear, as the case may be, on the Relevant Screen Page as at either 11.00 a.m. (London time in the case of LIBOR or Brussels time in the case of EURIBOR) on the Interest Determination Date in question as determined by the Calculation Agent. If five or more of such offered quotations are available on the Relevant Screen Page, the highest (or, if there is more than one such highest quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest quotation, one only of such quotations) shall be disregarded by the Calculation Agent for the purpose of determining the arithmetic mean of such offered quotations.
(y) if the Relevant Screen Page is not available or if sub-paragraph (x)(l) applies and no such offered quotation appears on the Relevant Screen Page or if subparagraph (x)(2) above applies and fewer than three such offered quotations appear on the Relevant Screen Page in each case as at the time specified above, subject as provided below, the Calculation Agent shall request, if the Reference Rate is LIBOR, the principal London office of each of the Reference Banks or, if the Reference Rate is EURIBOR, the principal Euro-zone office of each of the Reference Banks, to provide the Calculation Agent with its offered quotation (expressed as a percentage rate per annum) for the Reference Rate if the Reference Rate is LIBOR, at approximately 11.00 a.m. (London time), or if the Reference Rate is EURIBOR, at approximately 11.00 a.m. (Brussels time) on the Interest Determination Date in question. If two or more of the Reference Banks provide the Calculation Agent with such offered quotations, the Rate of Interest for such Interest Accrual Period shall be the arithmetic mean of such offered quotations as determined by the Calculation Agent; and
(z) if paragraph (y) above applies and the Calculation Agent determines that fewer than two Reference Banks are providing offered quotations, subject as provided below, the Rate of Interest shall be the arithmetic mean of the rates per annum (expressed as a percentage) as communicated to (and at the request of) the Calculation Agent by the Reference Banks or any two or more of them, at which such rates were offered, if the Reference Rate is LIBOR, at approximately 11.00 a.m. (London time) or, if the Reference Rate is EURIBOR, at approximately 11.00 a.m. (Brussels time) on the relevant Interest Determination Date, deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate by leading banks in, if the Reference Rate is LIBOR, the London inter-bank market or, if the Reference Rate is EURIBOR, the Euro-zone inter-bank market, as the case may be, or, if fewer than two of the Reference Banks provide the Calculation Agent with such offered rates, the offered rate for deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate, or the arithmetic mean of the offered rates for deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate, at which, if the Reference Rate is LIBOR, at approximately 11.00 a.m. (London time) or, if the Reference Rate is EURIBOR, at approximately 11.00 a.m. (Brussels time), on the relevant Interest Determination Date, any one or more banks (which bank or banks is or are in the opinion of the Trustee and the Issuer suitable for such purpose) informs the Calculation Agent it is quoting to leading banks in, if the Reference Rate is LIBOR, the London inter-bank market or, if the
Reference Rate is EURIBOR, the Euro-zone inter-bank market, as the case may be, provided that, if the Rate of Interest cannot be determined in accordance with the foregoing provisions of this paragraph, the Rate of Interest shall be determined as at the last preceding Interest Determination Date (though substituting, where a different Margin or Maximum or Minimum Rate of Interest is to be applied to the relevant Interest Accrual Period from that which applied to the last preceding Interest Accrual Period, the Margin or Maximum or Minimum Rate of Interest relating to the relevant Interest Accrual Period, in place of the Margin or Maximum or Minimum Rate of Interest relating to that last preceding Interest Accrual Period).
(C) Linear Interpolation
Where Linear Interpolation is specified hereon as applicable in respect of an Interest Accrual Period, the Rate of Interest for such Interest Accrual Period shall be calculated by the Calculation Agent by straight line linear interpolation by reference to two rates based on the relevant Reference Rate (where Screen Rate Determination is specified hereon as applicable) or the relevant Floating Rate Option (where ISDA Determination is specified hereon as applicable), one of which shall be determined as if the Applicable Maturity were the period of time for which rates are available next shorter than the length of the relevant Interest Accrual Period and the other of which shall be determined as if the Applicable Maturity were the period of time for which rates are available next longer than the length of the relevant Interest Accrual Period provided however that if there is no rate available for the period of time next shorter or, as the case may be, next longer, then the Calculation Agent shall determine such rate at such time and by reference to such sources as it determines appropriate.
"Applicable Maturity" means: (a) in relation to Screen Rate Determination, the period of time designated in the Reference Rate, and (b) in relation to ISDA Determination, the Designated Maturity.
(iii) For the purposes of any calculations required pursuant to these Conditions (unless otherwise specified), (x) all percentages resulting from such calculations shall be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point (with halves being rounded up), (y) all figures shall be rounded to seven significant figures (with halves being rounded up) and (z) all currency amounts that fall due and payable shall be rounded to the nearest unit of such currency (with halves being rounded up), save in the case of yen, which shall be rounded down to the nearest yen. For these purposes "unit" means the lowest amount of such currency that is available as legal tender in the country of such currency.
(f) Calculations: The amount of interest payable per Calculation Amount in respect of any Note for any Interest Accrual Period shall be equal to the product of the Rate of Interest, the Calculation Amount specified hereon, and the Day Count Fraction for such Interest Accrual Period, unless an Interest Amount (or a formula for its calculation) is applicable to such Interest Accrual Period, in which case the amount of interest payable per Calculation Amount in respect of such Note for such Interest Accrual Period shall equal such Interest Amount (or be calculated in accordance with such formula). Where any Interest Period comprises two or more Interest Accrual Periods, the amount of interest payable per Calculation Amount in respect of such Interest Period shall be the sum of the Interest Amounts payable in respect of each of those Interest Accrual Periods. In respect of any other period for which interest is required to be calculated, the provisions above shall apply save that the Day Count Fraction shall be for the period for which interest is required to be calculated.
"Business Day" means:
"Day Count Fraction" means, in respect of the calculation of an amount of interest on any Note for any period of time (from and including the first day of such period to but excluding the last) (whether or not constituting an Interest Period or an Interest Accrual Period, the "Calculation Period"):
Day Count Fraction =
$$
\frac{[360 \times (Y_2 - Y_1)] + [30 \times (M_2 - M_1)] + (D_2 - D_1)}{360}
$$
where:
"Y1" is the year, expressed as a number, in which the first day of the Calculation Period falls;
"Y2" is the year, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;
"M1" is the calendar month, expressed as a number, in which the first day of the Calculation Period falls;
"M2" is the calendar month, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;
"D1" is the first calendar day, expressed as a number, of the Calculation Period, unless such number would be 31, in which case D1 will be 30; and
"D2" is the calendar day, expressed as a number, immediately following the last day included in the Calculation Period, unless such number would be 31 and D1 is greater than 29, in which case D2 will be 30
(v) if "30E/360" or "Eurobond Basis" is specified hereon, the number of days in the Calculation Period divided by 360, calculated on a formula basis as follows:
Day Count Fraction = [360 x (Y2 - Y1)] +[30 x (M2 - M1)] +(D2 - D1) 360
where:
"Y1" is the year, expressed as a number, in which the first day of the Calculation Period falls;
"Y2" is the year, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;
"M1" is the calendar month, expressed as a number, in which the first day of the Calculation Period falls;
"M2" is the calendar month, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;
"D1" is the first calendar day, expressed as a number, of the Calculation Period, unless such number would be 31, in which case D1 will be 30; and
"D2" is the calendar day, expressed as a number, immediately following the last day included in the Calculation Period, unless such number would be 31, in which case D2 will be 30
(vi) if "30E/360 (ISDA)" is specified hereon, the number of days in the Calculation Period divided by 360, calculated on a formula basis as follows:
Day Count Fraction =
$$
\frac{[360 \times (Y_2 - Y_1)] + [30 \times (M_2 - M_1)] + (D_2 - D_1)}{360}
$$
where:
"Y1" is the year, expressed as a number, in which the first day of the Calculation Period falls;
"Y2" is the year, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;
"M1" is the calendar month, expressed as a number, in which the first day of the Calculation Period falls;
"M2" is the calendar month, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;
"D1" is the first calendar day, expressed as a number, of the Calculation Period, unless (i) that day is the last day of February or (ii) such number would be 31, in which case D1 will be 30; and
"D2" is the calendar day, expressed as a number, immediately following the last day included in the Calculation Period, unless (i) that day is the last day of February but not the Maturity Date or (ii) such number would be 31, in which case D2 will be 30
Determination Period and (2) the number of Determination Periods normally ending in any year; and
(y) the number of days in such Calculation Period falling in the next Determination Period divided by the product of (1) the number of days in such Determination Period and (2) the number of Determination Periods normally ending in any year
where:
"Determination Period" means the period from and including a Determination Date in any year to but excluding the next Determination Date; and
"Determination Date" means the date(s) specified as such hereon or, if none is so specified, the Interest Payment Date(s).
"EURIBOR" means, in respect of any specified currency and any specified period, the interest rate benchmark known as the Euro zone interbank offered rate which is calculated and published by a designated distributor (currently Thomson Reuters) in accordance with the requirements from time to time of the European Banking Federation based on estimated interbank borrowing rates for a number of designated currencies and maturities which are provided, in respect of each such currency, by a panel of contributor banks (details of historic EURIBOR rates can be obtained from the designated distributor).
"Euro-zone" means the region comprised of member states of the European Union that adopt the single currency in accordance with the Treaty establishing the European Community, as amended.
"Interest Accrual Period" means the period beginning on (and including) the Interest Commencement Date and ending on (but excluding) the first Interest Period Date and each successive period beginning on (and including) an Interest Period Date and ending on (but excluding) the next succeeding Interest Period Date.
"Interest Commencement Date" means the Issue Date or such other date as may be specified hereon.
"Interest Determination Date" means, with respect to a Rate of Interest and Interest Accrual Period, the date specified as such hereon or, if none is so specified, (i) the first day of such Interest Accrual Period if the Specified Currency is Sterling or (ii) the day falling two Business Days in London for the Specified Currency prior to the first day of such Interest Accrual Period if the Specified Currency is neither Sterling nor euro or (iii) the day falling two TARGET Business Days prior to the first day of such Interest Accrual Period if the Specified Currency is euro.
"Interest Period" means the period beginning on (and including) the Interest Commencement Date and ending on (but excluding) the first Interest Payment Date and each successive period beginning on (and including) an Interest Payment Date and ending on (but excluding) the next succeeding Interest Payment Date.
"Interest Period Date" means each Interest Payment Date unless otherwise specified hereon.
"ISDA Definitions" means the 2006 ISDA Definitions, as published by the International Swaps and Derivatives Association, Inc.
"LIBOR" means, in respect of any specified currency and any specified period, the London inter-bank offered rate for that currency and period displayed on the appropriate page (being currently Reuters screen page LIBOR01 or LIBOR02) on the information service which publishes that rate.
"Rate of Interest" means the rate of interest payable from time to time in respect of this Note and that is either specified or calculated in accordance with the provisions hereon.
"Reference Banks" means, in the case of a determination of LIBOR, the principal London office of four major banks in the London inter-bank market and, in the case of a determination of EURIBOR, the principal Euro-zone office of four major banks in the Euro-zone inter-bank market, in each case selected by the Calculation Agent or as specified hereon.
"Reference Rate" means the rate specified as such hereon.
"Relevant Screen Page" means such page, section, caption, column or other part of a particular information service as may be specified hereon.
"Specified Currency" means the currency specified as such hereon or, if none is specified, the currency in which the Notes are denominated.
"TARGET System" means the Trans-European Automated Real-Time Gross Settlement Express Transfer (known as TARGET2) System or any successor thereto.
(j) Calculation Agent: The Issuer shall procure that there shall at all times be one or more Calculation Agents if provision is made for them hereon and for so long as any Note is outstanding (as defined in the Trust Deed). Where more than one Calculation Agent is appointed in respect of the Notes, references in these Conditions to the Calculation Agent shall be construed as each Calculation Agent performing its respective duties under these Conditions. If the Calculation Agent is unable or unwilling to act as such or if the Calculation Agent fails duly to establish the Rate of Interest for an Interest Accrual Period or to calculate any Interest Amount, Final Redemption Amount, Early Redemption Amount or Optional Redemption Amount, as the case may be, or to comply with any other requirement, the Issuer shall (with the prior approval of the Trustee) appoint a leading bank or investment banking firm engaged in the interbank market (or, if appropriate, money, swap or over-thecounter index options market) that is most closely connected with the calculation or determination to be made by the Calculation Agent (acting through its principal London office or any other office actively involved in such market) to act as such in its place. The Calculation Agent may not resign its duties without a successor having been appointed as aforesaid.
Unless previously redeemed, purchased and cancelled as provided below, each Note shall be finally redeemed on the Maturity Date specified hereon at its Final Redemption Amount (which, unless otherwise provided hereon, is its nominal amount) subject to adjustment in accordance with Condition 7 if Indexation is specified hereon.
Where such calculation is to be made for a period of less than one year, it shall be made on the basis of the Day Count Fraction shown hereon.
1 Only applicable where SHEPD, SHE Transmission or SEPD is the Issuer.
2 Only applicable where SSE is the Issuer.
the first Tranche of the Notes, and (ii) such obligation cannot be avoided by the Issuer taking reasonable measures available to it, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay such additional amounts were a payment in respect of the Notes then due. Before the publication of any notice of redemption pursuant to this paragraph, the Issuer shall deliver to the Trustee (i) a certificate signed by two directors of the Issuer stating that the obligation referred to in (i) above cannot be avoided by the Issuer taking reasonable measures available to it and the Trustee shall be entitled to accept such certificate as sufficient evidence of the satisfaction of the condition precedent set out in (ii) above in which event it shall be conclusive and binding on Noteholders and Couponholders and (ii) an opinion in a form satisfactory to the Trustee of independent legal advisers of recognised standing to whom the Trustee shall have no reasonable objection to the effect that such amendment or change has occurred (irrespective of whether such amendment or change is then effective).
(d) Redemption at the Option of the Issuer: If Call Option is specified hereon, the Issuer may, on giving not less than 15 nor more than 30 days' irrevocable notice to the Noteholders (or such other notice period as may be specified hereon) redeem all or, if so provided, some of the Notes on any Optional Redemption Date (that is, if the Issuer Maturity Par Call is specified to be applicable hereon, more than 90 days prior to the Maturity Date). Any such redemption of Notes shall be at the Optional Redemption Amount specified hereon together with interest accrued to the date fixed for redemption, subject in each case to adjustment in accordance with Condition 7 if Indexation is specified hereon. Any such redemption or exercise must relate to Notes of a nominal amount at least equal to the Minimum Redemption Amount to be redeemed specified hereon and no greater than the Maximum Redemption Amount to be redeemed specified hereon.
All Notes in respect of which any such notice is given shall be redeemed on the date specified in such notice in accordance with this Condition.
In the case of a partial redemption the notice to Noteholders shall also contain the certificate numbers of the Bearer Notes, or in the case of Registered Notes shall specify the nominal amount of Registered Notes drawn and the holder(s) of such Registered Notes, to be redeemed, which shall have been drawn in such place as the Trustee may approve and in such manner as it deems appropriate, subject to compliance with any applicable laws and stock exchange or other relevant authority requirements.
If Restructuring Event Put Option is specified hereon and if, at any time while any of the Notes remains outstanding, a Restructuring Event occurs and prior to the commencement of or during the Restructuring Period an Independent Financial Adviser shall have certified in writing to the Trustee that such Restructuring Event will not be or is not, in its opinion, materially prejudicial to the interests of the Noteholders, the following provisions of this Condition 6(e)(ii) shall cease to have any further effect in relation to such Restructuring Event.
If Restructuring Event Put Option is specified hereon and if, at any time while any of the Notes remains outstanding, a Restructuring Event occurs and (subject to the above paragraph):
(A) within the Restructuring Period, either:
then, unless at any time the Issuer shall have given a notice under Condition 6(c), 6(d), 6(f) or 6(g) the holder of each Note will, upon the giving of a Put Event Notice (as defined below), have the option (the "Restructuring Event Put Option") to require the Issuer to redeem or, at the option of the Issuer, purchase (or procure the purchase of) that Note on the date which is seven days after the expiration of the Put Period (as defined below) (or such other date as may be specified hereon, the "Put Date"), at the Restructuring Event Redemption Amount specified hereon together with (or, where purchased, together with an amount equal to) interest (if any) accrued to (but excluding) the Put Date subject in each case to adjustment in accordance with Condition 7 if Indexation is specified hereon.
An event shall be deemed not to be a Restructuring Event if, notwithstanding the occurrence of a Rating Downgrade or a Negative Rating Event, the rating assigned to the Notes by any Rating Agency is subsequently increased to, or, as the case may be, there is assigned to the Notes an investment grade credit rating (BBB-/Baa3 or their respective equivalents for the time being) or better prior to any Negative Certification being issued.
Any certification by an Independent Financial Adviser as aforesaid as to whether or not, in its opinion, any Restructuring Event is materially prejudicial to the interests of the Noteholders shall, in the absence of manifest error, be conclusive and binding on the Trustee, the Issuer and the Noteholders.
(iii) This Condition 6(e)(iii) applies only where SSE is the Issuer:
If Change of Control Put Option is specified hereon and if, at any time while any of the Notes remains outstanding, a Change of Control occurs and:
provided that an event shall be deemed not to be a Change of Control if, notwithstanding the occurrence of a Change of Control Rating Downgrade or a Change of Control Negative Rating Event, the rating assigned to the Notes by any Rating Agency is subsequently increased to, or, as the case may be, there is assigned to the Notes an investment grade credit rating (BBB-/Baa3 or their respective equivalents for the time being) or better within the Change of Control Period; and
(B) in making any decision to downgrade or withdraw a credit rating pursuant to paragraphs (I) and (II) above or not to award a credit rating of at least investment grade as described in paragraph (ii) of the definition of Change of Control Negative Rating Event, the relevant Rating Agency announces publicly or confirms in writing to the Issuer or the Trustee that such decision(s) resulted, in whole or in part, from the occurrence of the Change of Control or the Relevant Potential Change of Control Announcement (the "Confirmation"),
then, unless at any time the Issuer shall have given a notice under Condition 6(c), 6(d), 6(f) or 6(g) the holder of each Note will, upon the giving of a Put Event Notice (as defined below), have the option (the "Change of Control Put Option") to require the Issuer to redeem or, at the option of the Issuer, purchase (or procure the purchase of) that Note on the date which is seven days after the expiration of this Put Period (as defined below) (or such other date as may be specified hereon, the "Put Date"), at the Change of Control Redemption Amount specified hereon together with (or, where purchased, together with an amount equal to) interest (if any) accrued to (but excluding) the Put Date, subject in each case to adjustment in accordance with Condition 7 if Indexation is specified hereon.
(iv) This Condition 6(e)(iv) applies only where SSE is the Issuer:
If SSE Restructuring Event Put Option is specified hereon and as soon as reasonably practicable after the occurrence of a SSE Restructuring Event, the Issuer shall make a Public Announcement and if, within the SSE Restructuring Period, either:
(the SSE Restructuring Event and SSE Rating Downgrade or the SSE Restructuring Event and SSE Negative Rating Event, as the case may be, occurring within the SSE Restructuring Period, together called a "SSE Restructuring Event Put Event"),
then, unless the Issuer shall have previously given a notice under Condition 6(c), 6(d), 6(f) or 6(g) the holder of each Note will have the option (the "SSE Restructuring Event Put Option") upon the giving of Put Event Exercise Notice (as defined below) to require the Issuer to redeem or, at the option of the Issuer, purchase (or procure the purchase of) such Note on the date which is seven days after the expiration of the Put Period (as defined below) (or such other date as may be specified hereon, the "Put Date") at the SSE Restructuring Event Redemption Amount specified hereon together with (or, where purchased, together with an amount equal to) interest (if any) accrued to (but excluding) the Put Date, subject in each case to adjustment in accordance with Condition 7 if Indexation is specified hereon.
The Issuer shall, forthwith upon becoming aware of the occurrence of any event which may (after taking into account all (if any) other relevant events in relation to Disposed Assets for the purpose of this Condition 6(e)(iv)) result in a SSE Restructuring Event (a "Potential SSE Restructuring Event") (a) provide the Trustee with the relevant Directors' Report and (b) to the extent permitted by the terms of the engagement letter between the Issuer and the Reporting Accountants, provide or procure that the Reporting Accountants provide the Trustee with a copy of the Accountants' Report. The Directors' Report and the Accountants' Report shall, in the absence of manifest error, be conclusive and binding on the Issuer, the Trustee and the Noteholders. The Trustee shall be entitled to act, or not act, and rely on without being expected to verify the accuracy of the same (and shall have no liability to Noteholders for doing so) any Directors' Report and/or any Accountants' Report provided to it (whether or not addressed to it).
(v) Promptly upon, and in any event within 14 days after, the Issuer becoming aware that a 3 [Restructuring Event Put Event], 4 [Change of Control Put Event] or 4 [SSE Restructuring Event Put Event] has occurred, the Issuer shall, and at any time upon the Trustee becoming similarly so aware the Trustee may, and if so requested by the holders of at least one-quarter in nominal amount of the Notes then outstanding, the Trustee shall (subject to it being indemnified and/or secured to its satisfaction), give notice (a "Put Event Notice") to the Noteholders in accordance with Condition 17 specifying the nature of the 3 [Restructuring Event Put Event], 4 [Change of Control Put Event] or 4 [SSE Restructuring Event Put Event] and the procedure for exercising the 3 [Restructuring Event Put Option], 4 [Change of Control Put Option] or 4 [SSE Restructuring Event Put Option].
If the rating designations employed by any of Moody's or S&P are changed from those which are described in the definition of 3 [Rating Downgrade], 4 [Change of Control Rating Downgrade] or [SSE Rating Downgrade] below, or if a rating is procured from a Substitute Rating Agency, the Issuer shall determine, with the agreement of the Trustee, the rating designations of Moody's or S&P or such Substitute Rating Agency (as appropriate) as are most equivalent to the prior rating designations of Moody's or S&P and this Condition 6 shall be construed accordingly.
The Trust Deed provides that the Trustee is under no obligation to ascertain whether 3 [a Restructuring Event, a Negative Rating Event or a Potential Restructuring Event (as defined in the Trust Deed)], 4 [a Change of Control Put Event, Change of Control, a Change of Control Negative Rating Event or any event which could lead to the occurrence of or could constitute a Change of Control] or4 [a SSE Restructuring Event, a SSE Negative Rating Event or a Potential SSE Restructuring Event] has occurred and until it shall have actual knowledge or express notice pursuant to the Trust Deed to the contrary the Trustee may assume without liability to any person for so doing that no such event has occurred. The Trust Deed also provides that in determining whether or not a 3 [Restructuring Event] or 4 [SSE Restructuring Event] has occurred, the Trustee shall be entitled, but not bound, to rely solely on an opinion given in a certificate signed by two directors of the Issuer.
To exercise any option specified in this Condition 6(e) the holder must deposit (in the case of Bearer Notes) such Note (together with all unmatured Coupons and unexchanged Talons) with any Paying Agent or (in the case of Registered Notes) the Certificate representing such Note(s) with the Registrar or any Transfer Agent at its specified office, together with a duly completed option exercise notice ("Exercise Notice") in the form obtainable from any Paying Agent, the Registrar or any Transfer Agent (as applicable) within the Notice Period or 30 days after a Put Event Notice is given (or such other put period as may be specified hereon, the "Put Period"), as applicable. No Note or Certificate so deposited and option exercised may be withdrawn (except as provided in the Agency Agreement) without the prior consent of the Issuer.
(f) Redemption for Index Reasons: If Indexation is specified hereon and if the Index (as defined in Condition 7) ceases to be published or any changes are made to it which, in the opinion of the Expert (as defined in Condition 7), constitute a fundamental change in the rules governing the Index and the change would, in the opinion of the Expert, be detrimental to the interests of the Noteholders and if the
3 Only app licable where SHEPD, SHE Transmission or SEPD is the Issuer.
4 Only applicable where SSE is the Issuer.
Expert fails within 30 days after its appointment (or such longer period as the Trustee considers reasonable), or states to the Issuer and the Trustee that it is unable, to recommend for the purposes of the Notes any adjustments to the Index or any substitute index (with or without adjustments) as described in Condition 7(b)(iii), the Issuer shall, within 14 days after the expiry of such period or (as the case may be) after the date of such statement, give notice (which shall be irrevocable and shall state the date fixed for redemption which shall be not more than 15 days after the date on which the notice is given) to redeem the Notes then outstanding, at a price equal to their outstanding nominal amount as adjusted for indexation in accordance with Condition 7 together (where applicable) with accrued interest on the outstanding nominal amount to the date fixed for redemption (as adjusted as aforesaid).
If the Index ceases to be published or any changes are made to it which, in the opinion of the Expert, constitute a fundamental change in the rules governing the Index and the change would, in the opinion of the Expert, be detrimental to the interests of the Issuer and if the Expert fails within 30 days after its appointment (or such longer period as the Trustee considers reasonable), or states to the Issuer and the Trustee that it is unable to recommend for the purposes of the Notes any adjustments to the Index or any substitute index (with or without adjustments) as described in Condition 7(b)(iii), the Issuer may at its option, within 14 days after the expiry of such period or (as the case may be) after the date of such statement, give notice (which shall be irrevocable and shall state the date fixed for redemption which shall be not more than 15 days after the date on which the notice is given) to redeem the Notes then outstanding, at a price equal to their nominal amount as adjusted for indexation in accordance with Condition 7, together (where applicable) with accrued interest on the outstanding nominal amount to the date fixed for redemption (as adjusted as aforesaid).
If Indexation is specified hereon:
be, shall be the Early Redemption Amount, the Optional Redemption Amount, 5 [the Restructuring Event Redemption Amount], 6 [the Change of Control Redemption Amount], 2 [the SSE Restructuring Event Redemption Amount] or the outstanding nominal amount of the Notes, as the case may be, multiplied by the Index Ratio applicable to the date on which such redemption amount or repayment becomes payable.
Interest on the Notes shall be calculated at the Rate of Interest specified hereon multiplied by the Index Ratio applicable to the date on which such payment falls to be made and rounded to six decimal places (0.0000005 being rounded upwards). The amount of interest payable on each Note shall be calculated in accordance with Condition 5(f).
The Calculation Agent will calculate such redemption amount, repayment amount, amount of interest or rate of interest (as the case may be) as soon as practicable after each time such amount or rate is capable of being determined and will notify the Issuing and Paying Agent thereof as soon as practicable after calculating the same. The Issuing and Paying Agent will as soon as practicable thereafter notify the Issuer and any stock exchange on which the Notes are for the time being listed thereof and cause notice thereof to be published in accordance with Condition 17.
(ii) Definitions: For the purposes of these Conditions:
"Base Index Figure" means, subject as provided in Condition 7(b) below, the Base Index Figure specified hereon;
"Calculation Date" means any date when a payment of interest or, as the case may be, principal falls due;
"Expert" means an independent investment bank or other expert in London appointed by the Issuer and approved by the Trustee or (failing such appointment within 10 days after the Trustee shall have requested such appointment) appointed by the Trustee;
"Index" or "Index Figure" means, in relation to any calculation month (as defined in Condition 7(b)(ii)(A)), subject as provided in Conditions 6(f) and 7(b), the United Kingdom General Index of Retail Prices (for all items) as published by the Office for National Statistics (January 1987=100) as published by HM Government (currently contained in the Monthly Digest of Statistics) and applicable to such calculation month or, if that index is not published for any calculation month, any substituted index or index figures published by the Office for National Statistics or the comparable index which replaces the United Kingdom General Index of Retail Prices (for all items) for the purpose of calculating the amount payable on repayment of the Reference Gilt;
Any reference to the "Index Figure applicable" to a particular Calculation Date shall, subject as provided in Condition 7(b) below, and if "3 months lag" is specified hereon, be calculated in accordance with the following formula:
$$
IFA = RPI_{m-3} \frac{(Day of Calculation Date-1)}{(Days in month of Calculation Date)} x (RPI_{m 2} - RPI_{m 3})
$$
and rounded to five decimal places (0.000005 being rounded upwards) and where:
"IFA" means the Index Figure applicable;
5 Only applicable where SHEPD, SHE Transmission, or SEPD is the Issuer
6 Only applicable where SSE is the Issuer
"RPIm-3" means the Index Figure for the first day of the month that is three months prior to the month in which the payment falls due;
"RPIm-2" means the Index Figure for the first day of the month that is two months prior to the month in which the payment falls due;
Any reference to the "Index Figure applicable" to a particular Calculation Date shall, subject as provided in Condition 7(b) below, and if "8 months lag" is specified hereon, be calculated in accordance with the following formula:
$$
IFA = RPI_{m8} \frac{(Day of Calculation Date-1)}{(Days in month of Calculation Date)} x (RPI_{m7} - RPI_{m8})
$$
and rounded to five decimal places (0.000005 being rounded upwards) and where:
"IFA" means the Index Figure applicable;
"RPIm-8" means the Index Figure for the first day of the month that is eight months prior to the month in which the payment falls due;
"RPIm-7" means the Index Figure for the first day of the month that is seven months prior to the month in which the payment falls due;
"Index Ratio" applicable to any Calculation Date means the Index Figure applicable to such date divided by the Base Index Figure and rounded to five decimal places (0.000005 being rounded upwards); and
"Reference Gilt" means the Reference Gilt specified hereon (or, if such stock is not in existence, such other index-linked stock issued by or on behalf of HM Government as the Issuer, on the advice of three leading brokers and/or gilt edged market makers (or such other three persons operating in the gilt edged market as the Issuer subject to the approval of the Trustee, may select), may consider to be the most appropriate reference government stock for the Notes).
shall be the substitute index figure (if any) as is published by the Bank of England or the United Kingdom Debt Management Office (or such other United Kingdom authority as may be appropriate) for the purposes of indexation of payments on the Reference Gilt or, failing such publication, on any one or more of HM Government's index-linked stocks, as determined by the Expert; or
(B) if no such determination is made by the Expert within seven days, the Index Figure last published before the date for payment.
Where the provisions of this Condition 7(b)(ii) apply, the certificate of the Issuer, acting on the advice of an Expert, as to the Index Figure applicable to the date for payment falls shall be conclusive and binding upon the Issuer, the Trustee and the Noteholders. If a substitute index is published as specified in (A) above, a determination made based on that index shall be final and no further payment by way of adjustment shall be made, notwithstanding that the Index Figure applicable to the date for payment may subsequently be published. If no substitute index is so published and the Index relating to the date for payment is subsequently published, then:
If any payment in respect of the Notes is due to be made after the cessation or changes referred to in the preceding paragraph but before any such adjustment to, or replacement of, the Index takes effect, the Issuer shall (if the Index Figure applicable (or deemed applicable) to the date for payment is not available in accordance with the provisions of Condition 7(a)) make a provisional payment on the basis that the Index Figure applicable to the date for payment is the Index last published. In that event or in the event of any payment on the Notes having been made on the basis of an Index deemed applicable under Condition 7(b)(ii)(A) above (also referred to below as a "provisional payment") and of the Trustee on the advice of the Expert (on which it may rely solely without liability to any person for so doing) subsequently determining that the relevant circumstances fall within this Condition 7(b)(iii), then:
(a) Bearer Notes: Payments of principal and interest in respect of Bearer Notes shall, subject as mentioned below, be made against presentation and surrender of the Notes (in the case of all other payments of principal and, in the case of interest, as specified in Condition 8(f)(vi)) or Coupons (in the case of interest, save as specified in Condition 8(f)(ii)), as the case may be, at the specified office of any Paying Agent outside the United States by a cheque payable in the relevant currency drawn on, or, at the option of the holder, by transfer to an account denominated in such currency with, a Bank. "Bank" means a bank in the principal financial centre for such currency or, in the case of euro, in a city in which banks have access to the TARGET System.
Agents would be able to make payment of the amounts on the Notes in the manner provided above when due, (ii) payment in full of such amounts at all such offices is illegal or effectively precluded by exchange controls or other similar restrictions on payment or receipt of such amounts and (iii) such payment is then permitted by United States law, without involving, in the opinion of the Issuer, any adverse tax consequence to the Issuer.
In addition, the Issuer shall forthwith appoint a Paying Agent in New York City in respect of any Bearer Notes denominated in U.S. dollars in the circumstances described in Condition 8(c) above.
Notice of any such change or any change of any specified office shall promptly be given to the Noteholders.
(ii) Upon the due date for redemption of any Bearer Note comprising a Floating Rate Note, or RPI Linked Note, unmatured Coupons relating to such Note (whether or not attached) shall become void and no payment shall be made in respect of them.
(iii) Upon the due date for redemption of any Bearer Note, any unexchanged Talon relating to such Note (whether or not attached) shall become void and no Coupon shall be delivered in respect of such Talon.
All payments of principal and interest by or on behalf of the Issuer in respect of the Notes and the Coupons shall be made free and clear of, and without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature ("Taxes") imposed, levied, collected, withheld or assessed by or within the United Kingdom or any political subdivision or any authority thereof or therein having power to tax, unless such withholding or deduction is required by law. In that event, the Issuer shall pay such additional amounts as shall result in receipt by the Noteholders and Couponholders of such amounts as would have been received by them had no such withholding or deduction been required, except that no such additional amounts shall be payable with respect to any Note or Coupon:
Relevant Date except to the extent that the holder of it would have been entitled to such additional amounts on presenting it for payment on the thirtieth day or
Notwithstanding anything to the contrary contained herein, the Issuer shall be entitled to withhold and deduct any amounts required to be deducted or withheld in respect of payment of principal and/or interest made by it in respect of the Notes and the Coupons pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986, as amended, (the "Code") or otherwise imposed pursuant to Sections 1471 through 1474 of the Code (or any regulations thereunder or official interpretations thereof) or an intergovernmental agreement between the United States and another jurisdiction facilitating the implementation thereof (or any law implementing such an intergovernmental agreement) (any such withholding or deduction, a "FATCA Withholding"), and neither the Issuer nor any other person shall be required to pay any additional amounts in respect of FATCA Withholding.
As used in these Conditions, "Relevant Date" in respect of any Note or Coupon means the date on which payment in respect of it first becomes due or (if any amount of the money payable is improperly withheld or refused) the date on which payment in full of the amount outstanding is made or (if earlier) the date seven days after that on which notice is duly given to the Noteholders that, upon further presentation of the Note (or relevant Certificate) or Coupon being made in accordance with these Conditions, such payment will be made, provided that payment is in fact made upon such presentation. References in these Conditions to (i) "principal" shall be deemed to include any premium payable in respect of the Notes, all Final Redemption Amounts, Early Redemption Amounts, Optional Redemption Amounts, Amortised Face Amounts and all other amounts in the nature of principal payable pursuant to Condition 6 or any amendment or supplement to it, (ii) "interest" shall be deemed to include all Interest Amounts and all other amounts payable pursuant to Condition 5 or any amendment or supplement to it and (iii) "principal" and/or "interest" shall be deemed to include any additional amounts that may be payable under this Condition or any undertaking given in addition to or in substitution for it under the Trust Deed.
Claims against the Issuer for payment in respect of the Notes and Coupons (which, for this purpose, shall not include Talons) shall be prescribed and become void unless made within 10 years (in the case of principal) or five years (in the case of interest) from the appropriate Relevant Date in respect of them.
If any of the following events ("Events of Default") occurs and is continuing, the Trustee at its discretion may, and if so requested by holders of at least one-quarter in nominal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution shall, subject to it being indemnified and/or secured to its satisfaction, give notice to the Issuer that the Notes are, and they shall thereupon immediately become, due and payable at their Early Redemption Amount together (if applicable) with accrued interest, subject in each case to adjustment in accordance with Condition 7 if Indexation is specified hereon:
Noteholders, 7 [provided that if neither the Issuer nor any Relevant Subsidiary holds the Distribution Licence, the Issuer shall be deemed to have ceased to carry on the whole or substantially the whole of its business (and neither of exceptions (A) and (B) shall apply)]; or
provided that in the case of paragraphs (ii), (iii), (v), (vi), (viii) and (other than in relation to the Issuer) (vii) the Trustee shall have certified that in its opinion such event is materially prejudicial to the interests of the Noteholders.
For the purposes of paragraph (vii) above, Section 123(l)(a) of the Insolvency Act 1986 shall have effect as if for "£750" there was substituted "£250,000". Neither the Issuer nor any Principal Subsidiary shall be deemed to be unable to pay its debts for the purposes of paragraph (vii) above if any such demand as is mentioned in Section 123(1)(a) of the Insolvency Act 1986 is being contested in good faith by the Issuer or the relevant Principal Subsidiary with recourse to all appropriate measures and procedures or if any such demand is satisfied before the expiration of such period as may be stated in any notice given by the Trustee under this Condition.
7 Only applicable where SHEPD, SHE Transmission or SEPD is the Issuer.
in which case the necessary quorum shall be two or more persons holding or representing not less than two-thirds, or at any adjourned meeting not less than one-third, in nominal amount of the Notes for the time being outstanding.
Any Extraordinary Resolution duly passed shall be binding on Noteholders (whether or not they were present at the meeting at which such resolution was passed) and on all Couponholders. The Trust Deed provides that a resolution in writing signed by or on behalf of holders of not less than 90 per cent, of the aggregate nominal amount of Notes outstanding shall for all purposes be as valid and effective as an Extraordinary Resolution passed at a meeting of Noteholders duly convened and held.
8 Only applicable where SHEPD, SHE Transmission or SEPD is the Issuer.
At any time after the Notes become due and payable, the Trustee may, at its discretion and without further notice, institute such proceedings against the Issuer as it may think fit to enforce the terms of the Trust Deed, the Notes and the Coupons, but it need not take any such proceedings unless (a) it shall have been so directed by an Extraordinary Resolution or so requested in writing by Noteholders holding at least one-quarter in nominal amount of the Notes outstanding, and (b) it shall have been indemnified and/or secured to its satisfaction. No Noteholder or Couponholder may proceed directly against the Issuer unless the Trustee, having become bound so to proceed, fails to do so within a reasonable time and such failure is continuing.
The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility. The Trustee is entitled to enter into business transactions with the Issuer and any entity related to the Issuer without accounting for any profit.
If a Note, Certificate, Coupon or Talon is lost, stolen, mutilated, defaced or destroyed, it may be replaced, subject to applicable laws, regulations and stock exchange or other relevant authority regulations, at the specified office of the Issuing and Paying Agent (in the case of Bearer Notes, Coupons or Talons) and of the Registrar (in the case of Certificates) or such other Paying Agent or Transfer Agent, as the case may be, as may from time to time be designated by the Issuer for the purpose and notice of whose designation is given to Noteholders, in each case on payment by the claimant of the fees and costs incurred in connection therewith and on such terms as to evidence, security and indemnity (which may provide, inter alia, that if the allegedly lost, stolen or destroyed Note, Certificate, Coupon or Talon is subsequently presented for payment or, as the case may be, for exchange for further Coupons, there shall be paid to the Issuer on demand the amount payable by the Issuer in respect of such Notes, Certificates, Coupons or further Coupons) and otherwise as the Issuer may require. Mutilated or defaced Notes, Certificates, Coupons or Talons must be surrendered before replacements will be issued.
The Issuer may from time to time without the consent of the Noteholders or Couponholders create and issue further securities either having the same terms and conditions as the Notes in all respects (or in all respects except for the first payment of interest on them) and so that such further issue shall be consolidated and form a single series with the outstanding securities of any series (including the Notes) or upon such terms as the Issuer may determine at the time of their issue. References in these Conditions to the Notes include (unless the context requires otherwise) any other securities issued pursuant to this Condition and forming a single series with the Notes. Any further securities forming a single series with the outstanding securities of any series (including the Notes) constituted by the Trust Deed or any deed supplemental to it shall, and any other securities may (with the consent of the Trustee), be constituted by the Trust Deed. The Trust Deed contains provisions for convening a single meeting of the Noteholders and the holders of securities of other series where the Trustee so decides.
Notices to the holders of Registered Notes shall be mailed to them at their respective addresses in the Register and deemed to have been given on the fourth weekday (being a day other than a Saturday or a Sunday) after the date of mailing. Notices to the holders of Bearer Notes shall be valid if published in a daily newspaper of general circulation in London (which is expected to be the Financial Times). If in the opinion of the Trustee any such publication is not practicable, notice shall be validly given if published in another leading daily English language newspaper with general circulation in Europe. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once or on different dates, on the first date on which publication is made, as provided above.
Couponholders shall be deemed for all purposes to have notice of the contents of any notice given to the holders of Bearer Notes in accordance with this Condition.
No person shall have any right to enforce any term or condition of the Notes under the Contracts (Rights of Third Parties) Act 1999.
For the purposes of these Conditions:
"Accountants' Report" means a report of the Reporting Accountants stating whether the amounts included in the calculation of the Operating Profit and the amount for Consolidated Operating Profit as included in the Directors' Report have been accurately extracted from the accounting records of the Issuer and its consolidated subsidiaries and whether the Disposal Percentage included in the Directors' Report has been correctly calculated which will be prepared pursuant to an engagement letter to be entered into by the Reporting Accountants and the Issuer.
The Issuer shall use reasonable endeavours to procure that there shall at the relevant time be Reporting Accountants who have (a) entered into an engagement letter with the Issuer which shall (i) not limit the liability of the Reporting Accountants by reference to a monetary cap, (ii) permit the Trustee to receive a copy of, and rely upon, any Accountants' Reports produced by them and (iii) be available for inspection by Noteholders at the principal office of the Trustee or (b) agreed to provide Accountants' Reports on such other terms as the Issuer and the Trustee, in its absolute discretion, shall approve.
If the Issuer, having used reasonable endeavours, is unable to procure that there shall at the relevant time be Reporting Accountants who have entered into an engagement letter complying with (i) above, the Trustee may rely on an Accountants' Report (whether or not addressed to it) which contains a limit on the liability of the Reporting Accountants by reference to a monetary cap or otherwise.
If the Issuer, having used reasonable endeavours, is unable to procure that there shall at the relevant time be Reporting Accountants who have entered into an engagement letter complying with (ii) above, the Issuer shall procure that the Directors' Report shall state whether or not the Accountants Report confirms whether or not (x) the amounts referred to in the first paragraph of this definition have been so correctly extracted and (y) the relevant Disposal Percentage has been correctly calculated and, if applicable, shall give details of any respects in which the Accountants' Report reaches a different conclusion from that stated in the Directors' Report. In the event that the Accountants' Report does not confirm that such amounts have been correctly extracted and/or correctly calculated, the Issuer shall, as soon as reasonably practicable, provide the Trustee with a revised Directors' Report which states that the Accountants' Report confirms the details referred to in (x) and (y) above in relation to the contents of such revised Directors Report. The Trustee may rely upon the revised Directors' Report regardless of the contents of any previous Directors' Report delivered as contemplated by this paragraph.
The Issuer shall give notice in writing to the Trustee of the identity of the Reporting Accountants at any relevant time;
"Balancing and Settlement Code" means the document as may be modified from time to time, setting out the balancing and settling arrangements established by National Grid Electricity Transmission plc or any other successor system or operator pursuant to its distribution licence;
"Capital and Reserves" means the aggregate of:
all as shown in the then latest audited consolidated balance sheet and profit and loss account of the Group prepared in accordance with generally accepted accounting principles in the United Kingdom, but adjusted as may be necessary in respect of any variation in the paid up share capital or share premium account of the Issuer since the date of that balance sheet and further adjusted as may be necessary to reflect any change since the date of that balance sheet in the Subsidiary Undertakings comprising the Group and/or as the Auditors (as defined in the Trust Deed) may consider appropriate.
A report by the Auditors as to the amount of the Capital and Reserves at any given time shall, in the absence of manifest error, be conclusive and binding on all parties;
"Change of Control" means the occurrence of an event whereby any person or any persons acting in concert (as defined in the City Code on Takeovers and Mergers), other than a holding company (as defined in Section 1159 of the Companies Act 2006 as amended) whose shareholders are or are to be substantially similar to the pre-existing shareholders of the Issuer, shall become interested (within the meaning of Part 22 of the Companies Act 2006 as amended) in (A) more than 50 per cent, of the issued or allotted ordinary share capital of the Issuer or (B) shares in the capital of the Issuer carrying more than 50 per cent, of the voting rights normally exercisable at a general meeting of the Issuer;
"Change of Control Period" means the period commencing on the Relevant Announcement Date and ending 90 days after the Change of Control (or such longer period for which the Notes are under consideration (such consideration having been announced publicly within the period ending 90 days after the Change of Control) for rating review or, as the case may be, rating by a Rating Agency, such period not to exceed 60 days after the public announcement of such consideration);
a "Change of Control Put Event" occurs on the date of the last to occur of (a) a Change of Control, (b) either a Change of Control Rating Downgrade or, as the case may be, a Change of Control Negative Rating Event and (c) the Confirmation;
a "Change of Control Rating Downgrade" shall be deemed to have occurred in respect of a Change of Control if the then current rating assigned to the Notes by any Rating Agency at the invitation of the Issuer (or where there is no rating from any Rating Agency assigned at the invitation of the Issuer, the then current rating (if any) assigned to the Notes by any Rating Agency of its own volition) is withdrawn or reduced from an investment grade rating (BBB-/Baa3, or their respective equivalents for the time being, or better) to a noninvestment grade rating (BB+/Bal, or their respective equivalents for the time being, or worse) or, if the Rating Agency shall then have already rated the Notes below investment grade (as described above), the rating is lowered one full rating category (from BB+/Bal to BB/Ba2 or such similar lowering);
a "Change of Control Negative Rating Event" shall be deemed to have occurred if at such time as there is no rating assigned to the Notes by a Rating Agency (i) the Issuer does not, either prior to, or not later than 21 days after, the occurrence of the Change of Control seek, and thereafter throughout the Change of Control Period use all reasonable endeavours to obtain, a rating of the Notes, or any other unsecured and unsubordinated debt of the Issuer or (ii) if the Issuer does so seek and use such endeavours, it is unable to obtain such a rating of at least investment grade (BBB-/Baa3, or their respective equivalents for the time being) by the end of the Change of Control Period, provided that in either case, there is at least one Rating Agency in operation at such time from whom to obtain such a rating. If there is no Rating Agency so in operation no Change of Control Negative Rating Event shall be deemed to occur;
"Consolidated Operating Profit" means the consolidated operating profit on ordinary activities before tax and interest and before taking account of depreciation and amortisation of goodwill and regulatory assets (and, for the avoidance of doubt, excluding the impact of IAS 39 and exceptional items, as reflected in the Relevant Accounts) of the Issuer (including any share of operating profit of associates and joint ventures) determined in accordance with International Financial Reporting Standards ("IFRS") by reference to the Relevant Accounts;
"Directors' Report" means a report prepared and signed by two directors of the Issuer addressed to the Trustee setting out the Operating Profit, the Consolidated Operating Profit and the Disposal Percentage (in each case in relation to the relevant Disposed Assets), stating any assumptions which the directors have employed in determining, in each case, the Operating Profit, confirming whether or not a SSE Restructuring Event has occurred and, where applicable, containing the relevant confirmation referred to in the definition of "Accountants Report" above (and includes any revision made to any previous report);
"Disposal Percentage" means, in relation to a sale, transfer, lease or other disposal or dispossession of any Disposed Assets, the ratio of (a) the aggregate Operating Profit to (b) the Consolidated Operating Profit, expressed as a percentage;
"Disposed Assets" means, where the Issuer and/or any of its subsidiaries sells, transfers, leases or otherwise disposes of or is dispossessed by any means (but excluding sales, transfers, leases, disposals or dispossessions which, when taken together with any related lease back or similar arrangements entered into in the ordinary course of business, have the result that Operating Profit directly attributable to any such undertaking, property or assets continues to accrue to the Issuer or, as the case may be, such subsidiary), otherwise than to a whollyowned subsidiary of the Issuer or to the Issuer, of the whole or any part (whether by a single transaction or by a number of transactions whether related or not) of its undertaking or (except in the ordinary course of business of the Issuer or any such subsidiary) property or assets, the undertaking, property or assets sold, transferred, leased or otherwise disposed of or of which it is so dispossessed;
"Distribution Licence" means the distribution licence granted to the Issuer under Section 6(l)(c) of the Electricity Act, as amended by Section 30 of the Utilities Act, and from time to time, any other replacement licence or licences or exemptions granted or issued by any relevant authority or person in the United Kingdom to the Issuer which entitles the Issuer to distribute electricity in the United Kingdom or any part thereof;
"Electricity Act" means the Electricity Act 1989 as amended or re-enacted from time to time and all subordinate legislation made pursuant thereto;
"Excluded Subsidiary" means any Subsidiary of the Issuer:
provided that the Issuer may give written notice to the Trustee at any time that any Excluded Subsidiary is no longer an Excluded Subsidiary, whereupon it shall cease to be an Excluded Subsidiary;
"Gas and Electricity Markets Authority" means the authority so named and established under Section 1 of the Utilities Act or, as the case may be, any other competent authority;
"Group" means the Issuer and its Subsidiary Undertakings and "member of the Group" shall be construed accordingly;
"Indebtedness For Borrowed Money" means any present or future indebtedness (whether being principal, premium, interest or other amounts) for or in respect of (i) money borrowed, (ii) liabilities under or in respect of any acceptance or acceptance credit or (iii) any notes, bonds, debentures, debenture stock, loan stock or other securities offered, issued or distributed whether by way of public offer, private placing, acquisition consideration or otherwise and whether issued for cash or in whole or in part for a consideration other than cash;
"Independent Financial Adviser" means a financial adviser appointed by the Issuer and approved by the Trustee (such approval not to be unreasonably withheld or delayed having regard to the interests of Noteholders) or, if the Issuer shall not have appointed such an adviser within 21 days after becoming aware of the occurrence of a Restructuring Event and the Trustee is indemnified and/or secured to its satisfaction against the costs of such adviser, appointed by the Trustee following consultation with the Issuer;
a "Negative Rating Event" shall be deemed to have occurred if (A) the Issuer does not, either prior to or not later than 14 days after the date of a Negative Certification in respect of the relevant Restructuring Event, seek, and thereupon use all reasonable endeavours to obtain, a rating of the Notes or (B) if it does so seek and use such endeavours, it is unable, as a result of such Restructuring Event, to obtain such a rating of at least investment grade (BBB-/Baa3, or their respective equivalents for the time being);
"Operating Profit", in relation to any Disposed Assets, means the operating profits on ordinary activities before tax and interest and before taking account of depreciation and amortisation of goodwill and regulatory assets (and, for the avoidance of doubt, excluding the impact of IAS 39 and exceptional items, as reflected in the Relevant Accounts) of the Issuer and its consolidated subsidiaries directly attributable to such Disposed Assets as determined in accordance with IFRS by reference to the Relevant Accounts and, if Relevant Accounts do not yet exist, determined in a manner consistent with the assumptions upon which the Directors' Report is to be based. Where the Directors of the Issuer have employed assumptions in determining the Operating Profit, those assumptions should be clearly stated in the Directors' Report;
"Principal Subsidiary" at any time shall mean:
to be a reference to such first-mentioned financial statements as if such Subsidiary had been shown in such financial statements by reference to its then latest relevant audited financial statements (consolidated in the case of a Subsidiary which itself has subsidiaries), adjusted as deemed appropriate by the Auditors after consultation with the Issuer; or
(B) to which is transferred all or substantially all of the business, undertaking and assets of a Subsidiary of the Issuer which immediately prior to such transfer is a Principal Subsidiary, whereupon the transferor Subsidiary shall immediately cease to be a Principal Subsidiary and the transferee Subsidiary shall become a Principal Subsidiary under the provisions of this subparagraph (B) upon publication of its next audited financial statements but so that such transferor Subsidiary or such transferee Subsidiary may be a Principal Subsidiary of the Issuer on or at any time after the date on which such audited financial statements have been published by virtue of the provisions of sub-paragraph (A) above or before, on or at any time after such date by virtue of the provisions of this sub-paragraph (B).
A report by the Auditors that, in their opinion, a Subsidiary of the Issuer is or is not or was or was not at any particular time or throughout any specified period a Principal Subsidiary shall, in the absence of manifest error, be conclusive and binding on the Issuer, the Trustee and the Noteholders;
"Project Finance Indebtedness" means any present or future indebtedness incurred to finance the ownership, acquisition, development and/or operation of an asset, whether or not an asset of a member of the Group:
References to the Notes being "rated" are to the Notes having a rating from a Rating Agency;
"Public Announcement" means an announcement made by the Issuer of the occurrence of an SSE Restructuring Event in accordance with Condition 17;
"Rated Securities" means the Notes, if and for so long as they shall have an effective rating from a Rating Agency and otherwise any Rateable Debt which is rated by a Rating Agency; provided that if there shall be no such Rateable Debt outstanding prior to the maturity of the Notes, the holders of not less than one-quarter in principal amount of outstanding Notes may require the Issuer to obtain and thereafter update on an annual basis a rating of the Notes from a Rating Agency. In addition, the Issuer may at any time obtain, and thereafter update, on an annual basis a rating of the Notes from a Rating Agency, provided that, except as provided above, the Issuer shall not have any obligation to obtain such a rating of the Notes;
"Rating Agency" means Standard & Poor's Rating Services, a division of The McGraw-Hill Companies, Inc. or any of its Subsidiaries and their successors ("S&P") or Moody's Investors Service, Inc. or any of its Subsidiaries and their successors ("Moody's") or any rating agency (a "Substitute Rating Agency") substituted for any of them (or any permitted substitute of them) by the Issuer from time to time with the prior written approval of the Trustee (such approval not to be unreasonably withheld or delayed having regard to the interests of Noteholders);
"Relevant Accounts" means the most recent annual audited consolidated financial accounts of the Issuer preceding the relevant sale, transfer, lease or other disposal or dispossession of any Disposed Asset;
"Relevant Potential Change of Control Announcement" means any public announcement or statement by the Issuer, any actual or potential bidder or any adviser acting on behalf of any actual or potential bidder relating to any potential Change of Control where within 180 days following the date of such announcement or statement, a Change of Control occurs;
a "Rating Downgrade" shall be deemed to have occurred in respect of a Restructuring Event if the then current rating assigned to the Notes by any Rating Agency (whether provided by a Rating Agency at the invitation of the Issuer or by its own volition) is withdrawn or reduced from an investment grade rating (BBB- /Baa3, or their respective equivalents for the time being, or better) to a non-investment grade rating (BB+/Bal, or their respective equivalents for the time being, or worse) or, if the Rating Agency shall then have already rated the Notes below investment grade (as described above), the rating is lowered one full rating category (from BB+/Bal to BB/Ba2 or such similar lowering);
"Relevant Indebtedness" means any present or future indebtedness (whether being principal, premium, interest or other amounts) in the form of or represented by notes, bonds, debentures, debenture stock, loan stock or other securities, whether issued for cash or in whole or in part for a consideration other than cash, and which, with the agreement of the person issuing the same, are quoted, listed or ordinarily dealt in on any stock exchange or recognised over-the-counter or other securities market, but shall in any event not include Project Finance Indebtedness;
"Relevant Subsidiary" means a wholly-owned Subsidiary of the Issuer or of another Relevant Subsidiary which is a guarantor in respect of, or is a primary obligor under, the Notes as contemplated in Condition 12(c) or paragraph (i)(c) of the definition of Restructuring Event;
"Reporting Accountants" means the auditors for the time being of the Issuer (but not acting in their capacity as auditors) or such other firm of accountants as may be nominated by the Issuer and approved in writing by the Trustee for the purpose (such approval not to be unreasonably withheld or delayed having regard to the interests of the Noteholders) or, failing which, as may be selected by the Trustee for the purpose;
"Restructuring Event" means the occurrence of any one or more of the following events:
(i) (a) the Balancing and Settlement Code is terminated and not replaced by one or more agreements, commercial arrangements the Gas and Electricity Markets Authority (or any successor) gives the Issuer or, as the case may be, a Relevant Subsidiary, written notice of revocation of the Distribution Licence, provided that the giving of notice pursuant to paragraph 3 of Part I of the Distribution Licence as in effect on the date on which agreement is reached to issue the first Tranche of the Notes, shall not be deemed to constitute the revocation of the Distribution Licence; or
entitled to rely absolutely without liability) to be not materially less favourable to the business of the Group; or
(e) any modification is made to the Balancing and Settlement Code in accordance with its terms or any legislation (whether primary or subordinate) is enacted terminating or modifying the Balancing and Settlement Code, provided that any such modification is material in the context of the rights and obligations of the Issuer or, as the case may be, a Relevant Subsidiary under the Balancing and Settlement Code; and provided further that any modification shall to the extent it grants or confers powers or discretions on the Gas and Electricity Markets Authority (or any successor) under or in respect of the Balancing and Settlement Code be deemed not to be material as aforesaid, but for the avoidance of doubt, any modification to the Balancing and Settlement Code made by the Gas and Electricity Markets Authority (or any successor) by virtue of or pursuant to any such powers or discretions and which otherwise would be a material modification as provided above shall not, by virtue of this provision be deemed not to be material;
A "Restructuring Event Put Event" occurs on the date of the last to occur of (a) a Restructuring Event, (b) either a Rating Downgrade or, as the case may be, a Negative Rating Event, (c) the Confirmation and (d) the relevant Negative Certification;
(or, in each case, such longer period in which the Rated Securities are under consideration (such consideration having been announced publicly within the first mentioned 90 day period) for rating review or, as the case may be, rating by a Rating Agency);
"Secretary of State" means the Secretary of State for Business, Enterprise and Regulatory Reforms (or any successor);
"SSE Negative Rating Event" shall be deemed to have occurred if at the time of the SSE Restructuring Event there are no Rated Securities and either:
provided that in either case there is at least one Rating Agency in operation at such time from whom to obtain such a rating, and if there is no Rating Agency in operation no SSE Negative Rating Event will be deemed to occur. The Issuer shall promptly notify the Trustee in writing of the date on which it first seeks to obtain the rating referred to in paragraph (a) above;
"SSE Rating Downgrade" shall be deemed to have occurred in respect of the SSE Restructuring Event if the then current rating assigned to the Rated Securities by any Rating Agency at the invitation of the Issuer (or where there is no rating from any Rating Agency assigned at the invitation of the Issuer, the then current rating (if any) assigned to the Rated Securities by any Rating Agency of its own volition) is: (i) withdrawn or reduced from a rating of at least BBB or Baa2 (or their respective equivalents for the time being) to a rating below BBB or Baa2 (or their respective equivalents for the time being) or, (ii) if a Rating Agency shall already have rated the Rated Securities below BBB or Baa2 (or their respective equivalents for the time being), the rating is lowered at least one full rating notch (for example, BBB/ Baa2 to BBB-/Baa3 (or, in each case, their respective equivalents for the time being); provided that a SSE Rating Downgrade otherwise arising by virtue of a particular reduction in rating shall not be deemed to have occurred in respect of a particular SSE Restructuring Event if the Rating Agency making the reduction in rating to which this definition would otherwise apply does not announce publicly or confirm in writing to the Issuer or the Trustee that its decision resulted, in whole or in part, from the occurrence of, or any event or circumstance comprised in or arising as a result of, or in respect of, the applicable SSE Restructuring Event (whether or not the SSE Restructuring Event shall have occurred at the time of the SSE Rating Downgrade);
"SSE Restructuring Event" shall be deemed to have occurred at any time (whether or not approved by the board of directors of the Issuer) if the sum of all (if any) Disposal Percentages arising within any period of 36 consecutive months commencing on or after the date on which agreement is reached to issue the first Tranche of the Notes is greater than 30 per cent.; and
following the later of (a) the date on which the Issuer shall seek to obtain a rating as contemplated in the definition of SSE Negative Rating Event prior to the expiry of the 21 days referred to in that definition and (b) the date of the relevant Public Announcement,
(or, in each case, such longer period in which the Rated Securities are under consideration (such consideration having been announced publicly within the first mentioned 90 day period) for rating review or, as the case may be, rating by a Rating Agency);
"Subsidiary" means a subsidiary within the meaning of Section 1159 of the Companies Act 2006;
"Subsidiary Undertaking" shall have the meaning given to it by Section 1162 of the Companies Act 2006 (but, in relation to the Issuer, shall exclude any undertaking (as defined in Section 1161 of the Companies Act 2006) whose accounts are not included in the then latest published audited consolidated accounts of the Issuer, or (in the case of an undertaking which has first become a subsidiary undertaking of a member of the Group since the date as at which any such audited accounts were prepared) would not have been so included or consolidated if it had become so on or before that date);
"Utilities Act" means the Utilities Act 2000 as amended or re-enacted from time to time and all subordinate legislation made pursuant thereto; and
"wholly-owned Subsidiary" means a 100 per cent. owned Subsidiary of the Issuer.
Any reference to an obligation being guaranteed shall include a reference to an indemnity being given in respect of such obligation.
The Trust Deed, the Notes, the Coupons and the Talons and any non-contractual obligations arising out of or in connection with them are governed by, and shall be construed in accordance with, English law.
If the Global Notes are stated in the applicable Final Terms to be issued in NGN form, (i) they will be delivered on or prior to the original issue date of the Tranche to a Common Safekeeper and (ii) the relevant clearing systems will be notified whether or not such Global Notes are intended to be held in a manner which would allow Eurosystem eligibility. Depositing the Global Notes with the Common Safekeeper does not necessarily mean that the Notes will be recognised as eligible collateral for Eurosystem monetary policy and intra-day credit operations by the Eurosystem either upon issue, or at any or all times during their life. Such recognition will depend upon satisfaction of the Eurosystem eligibility criteria.
Global Notes which are issued in CGN form and Certificates may be delivered on or prior to the original issue date of the Tranche to a Common Depositary.
If the Global Note is a CGN, upon the initial deposit of the Global Note with a common depositary for Euroclear and Clearstream, Luxembourg (the "Common Depositary") or registration of Registered Notes in the name of any nominee for Euroclear and Clearstream, Luxembourg and delivery of the relative Global Certificate to the Common Depositary, Euroclear or Clearstream, Luxembourg will credit each subscriber with a nominal amount of Notes equal to the nominal amount thereof for which it has subscribed and paid. If the Global Note is an NGN, the nominal amount of the relevant Notes shall be the aggregate amount from time to time entered in the records of Euroclear or Clearstream, Luxembourg. The records of such clearing system shall be conclusive evidence of the nominal amount of Notes represented by the Global Note and a statement issued by such clearing system at any time shall be conclusive evidence of the records of the relevant clearing system at that time.
Notes that are initially deposited with the Common Depositary may also be credited (if indicated in the relevant Final Terms) to the accounts of subscribers with other clearing systems through direct or indirect accounts with Euroclear and Clearstream, Luxembourg held by such other clearing systems. Conversely, Notes that are initially deposited with any other clearing system may similarly be credited to the accounts of subscribers with Euroclear, Clearstream, Luxembourg or other clearing systems.
Each of the persons shown in the records of Euroclear, Clearstream, Luxembourg or any other permitted clearing system ("Alternative Clearing System") as the holder of a Note represented by a Global Note or a Global Certificate must look solely to Euroclear, Clearstream, Luxembourg or any such Alternative Clearing System (as the case may be) for his share of each payment made by the Issuer to the bearer of such Global Note or the holder of the underlying Registered Notes, as the case may be, and in relation to all other rights arising under the Global Notes or Global Certificates, subject to and in accordance with the respective rules and procedures of Euroclear, Clearstream, Luxembourg, or such Alternative Clearing System (as the case may be). Such persons shall have no claim directly against the Issuer in respect of payments due on the Notes for so long as the Notes are represented by such Global Note or Global Certificate and such obligations of the Issuer will be discharged by payment to the bearer of such Global Note or the holder of the underlying Registered Notes, as the case may be, in respect of each amount so paid.
Each temporary Global Note will be exchangeable, free of charge to the holder, on or after its Exchange Date:
In relation to any issue of Notes which is represented by a Temporary Global Note which is expressed to be exchangeable for definitive Bearer Notes at the option of Noteholders, such Notes shall be tradeable only in principal amounts of at least the Specified Denomination (or if more than one Specified Denomination, the lowest Specified Denomination and multiples thereof).
Each permanent Global Note will be exchangeable, free of charge to the holder, on or after its Exchange Date in whole but not, except as provided under paragraph 3.4 below, in part for Definitive Notes:
In the event that a Global Note is exchanged for Definitive Notes, such Definitive Notes shall be issued in Specified Denomination(s) only. A Noteholder who holds a principal amount of less than the minimum Specified Denomination will not receive a definitive Note in respect of such holding and would need to purchase a principal amount of Notes such that it holds an amount equal to one or more Specified Denominations.
If the Final Terms state that the Notes are to be represented by a permanent Global Certificate on issue, the following will apply in respect of transfers of Notes held in Euroclear or Clearstream, Luxembourg or an Alternative Clearing System. These provisions will not prevent the trading of interests in the Notes within a clearing system whilst they are held on behalf of such clearing system, but will limit the circumstances in which the Notes may be withdrawn from the relevant clearing system.
Transfers of the holding of Notes represented by any Global Certificate pursuant to Condition 2(b) may only be made in part:
provided that, in the case of the first transfer of part of a holding pursuant to paragraph 3.3(i) or 3.3(ii) above, the Registered Holder has given the Registrar not less than 30 days' notice at its specified office of the Registered Holder's intention to effect such transfer.
For so long as a permanent Global Note is held on behalf of a clearing system and the rules of that clearing system permit, such permanent Global Note will be exchangeable in part on one or more occasions for Definitive Notes if principal in respect of any Notes is not paid when due.
If the Global Note is a CGN, on or after any due date for exchange, the holder of a Global Note may surrender such Global Note or, in the case of a partial exchange, present it for endorsement to or to the order of the Issuing and Paying Agent. In exchange for any Global Note, or the part thereof to be exchanged, the Issuer will (i) in the case of a temporary Global Note exchangeable for a permanent Global Note, deliver, or procure the delivery of, a permanent Global Note in an aggregate nominal amount equal to that of the whole or that part of a temporary Global Note that is being exchanged or, in the case of a subsequent exchange, endorse, or procure the endorsement of, a permanent Global Note to reflect such exchange or (ii) in the case of a Global Note exchangeable for Definitive Notes, deliver, or procure the delivery of, an equal aggregate nominal amount of duly executed and authenticated Definitive Notes or if the Global Note is a NGN, the Issuer will procure that details of such exchange be entered pro rata in the records of the relevant clearing system. In this Prospectus, "Definitive Notes" means, in relation to any Global Note, the definitive Bearer Notes for which such Global Note may be exchanged (if appropriate, having attached to them all Coupons in respect of interest that has not already been paid on the Global Note and a Talon). Definitive Notes will be security printed in accordance with any applicable legal and stock exchange requirements in or substantially in the form set out in the Schedules to the Trust Deed. On exchange in full of each permanent Global Note, the Issuer will, if the holder so requests, procure that it is cancelled and returned to the holder together with the relevant Definitive Notes.
"Exchange Date" means, in relation to a temporary Global Note, the day falling after the expiry of 40 days after its issue date and, in relation to a permanent Global Note, a day falling not less than 60 days, or in the case of failure to pay principal in respect of any Notes when due 30 days, after that on which the notice requiring exchange is given and on which banks are open for business in the city in which the specified office of the Issuing and Paying Agent is located and in the city in which the relevant clearing system is located.
The temporary Global Notes, permanent Global Notes and Global Certificates contain provisions that apply to the Notes that they represent, some of which modify the effect of the terms and conditions of the Notes set out in this Prospectus. The following is a summary of certain of those provisions:
No payment falling due after the Exchange Date will be made on any Global Note unless exchange for an interest in a permanent Global Note or for Definitive Notes is improperly withheld or refused. Payments on any temporary Global Note issued in compliance with the D Rules before the Exchange Date will only be made against presentation of certification as to non-U.S. beneficial ownership in the form set out in the Agency Agreement. All payments in respect of Notes represented by a Global Note in CGN form will be made against presentation for endorsement and, if no further payment falls to be made in respect of the Notes, surrender of that Global Note to or to the order of the Issuing and Paying Agent or such other Paying Agent as shall have been notified to the Noteholders for such purpose. If the Global Note is a CGN, a record of each payment so made will be endorsed on each Global Note, which endorsement will be prima facie evidence that such payment has been made in respect of the Notes. Condition 8(e)(vii) and Condition 9(d) will apply to the Definitive Notes only. If the Global Note is a NGN, the Issuer shall procure that details of each such payment shall be entered pro rata in the records of the relevant clearing system and in the case of payments of principal, the nominal amount of the Notes recorded in the records of the relevant clearing system and represented by the Global Note will be reduced accordingly. Payments under the NGN will be made to its holder. Each payment so made will discharge the Issuer's obligations in respect thereof. Any failure to make the entries in the records of the relevant clearing system shall not affect such discharge. For the purpose of any payments made in respect of a Global Note, the relevant place of presentation shall be disregarded in the definition of "business day" set out in Condition 8(h).
All payments in respect of Notes represented by a Global Certificate will be made to, or to the order of, the person whose name is entered on the Register at the close of business on the record date which shall be the Clearing System Business Day immediately prior to the date for payment, where Clearing System Business Day means each Monday, Tuesday, Wednesday, Thursday and Friday except 25 December and 1 January.
Claims against the Issuer in respect of Notes that are represented by a permanent Global Note will become void unless it is presented for payment within a period of 10 years (in the case of principal) and five years (in the case of interest) from the appropriate Relevant Date (as defined in Condition 9).
The holder of a permanent Global Note or of the Notes represented by a Global Certificate shall (unless such permanent Global Note or Global Certificate represents only one Note) be treated as being two persons for the purposes of any quorum requirements of a meeting of Noteholders and, at any such meeting, the holder of a permanent Global Note shall be treated as having one vote in respect of each integral currency unit of the Specified Currency of the Notes. (All holders of Registered Notes are entitled to one vote in respect of each integral currency unit of the Specified Currency of the Notes comprising such Noteholder's holding, whether or not represented by a Global Certificate.)
Cancellation of any Note represented by a permanent Global Note that is required by the Conditions to be cancelled (other than upon its redemption) will be effected by reduction in the nominal amount of the relevant permanent Global Note.
Notes represented by a permanent Global Note may only be purchased by the Issuer or any of its subsidiaries provided that they are purchased together with the rights to receive all future payments of interest thereon.
Any option of the Issuer provided for in the Conditions of any Notes while such Notes are represented by a permanent Global Note shall be exercised by the Issuer giving notice to the Noteholders within the time limits set out in and containing the information required by the Conditions, except that the notice shall not be required to contain the serial numbers of Notes drawn in the case of a partial exercise of an option and accordingly no drawing of Notes shall be required. In the event that any option of the Issuer is exercised in respect of some but not all of the Notes of any Series, the rights of accountholders with a clearing system in respect of the Notes will be governed by the standard procedures of Euroclear and/or Clearstream, Luxembourg (to be reflected in the records of Euroclear and Clearstream, Luxembourg as either a pool factor or a reduction in nominal amount, at their discretion) or any other Alternative Clearing System (as the case may be).
Any option of the Noteholders provided for in the Conditions of any Notes while such Notes are represented by a permanent Global Note may be exercised by the holder of the permanent Global Note giving notice to the Issuing and Paying Agent within the time limits relating to the deposit of Notes with a Paying Agent set out in the Conditions substantially in the form of the notice available from any Paying Agent, except that the notice shall not be required to contain the serial numbers of the Notes in respect of which the option has been exercised, and stating the nominal amount of Notes in respect of which the option is exercised and at the same time, where the permanent Global Note is a CGN, presenting the permanent Global Note to the Issuing and Paying Agent for notation. Where the Global Note is a NGN, the Issuer shall procure that details of such exercise shall be entered pro rata in the records of the relevant clearing system and the nominal amount of the Notes recorded in those records will be reduced accordingly.
Where the Global Note is a NGN, the Issuer shall procure that any exchange, payment, cancellation, exercise of any option or any right under the Notes, as the case may be, in addition to the circumstances set out above shall be entered in the records of the relevant clearing systems and upon any such entry being made, in respect of payments of principal, the nominal amount of the Notes represented by such Global Note shall be adjusted accordingly.
In considering the interests of Noteholders while any Global Note is held on behalf of, or Registered Notes are registered in the name of any nominee for, a clearing system, the Trustee may have regard to any information provided to it by such clearing system or its operator as to the identity (either individually or by category) of its accountholders with entitlements to such Global Note or Registered Notes and may consider such interests as if such accountholders were the holders of the Notes represented by such Global Note or Global Certificate.
So long as any Notes are represented by a Global Note and such Global Note is held on behalf of a clearing system, notices to the holders of Notes of that Series may be given by delivery of the relevant notice to that clearing system for communication by it to entitled accountholders in substitution for publication as required by the Conditions or by delivery of the relevant notice to the holder of the Global Note.
While any Global Note is held on behalf of, or any Global Certificate is registered in the name of any nominee for, a clearing system, then:
entitled to rely on consent or instructions given in writing directly to the Issuer and/or the Trustee, as the case may be, by (a) accountholders in the clearing systems with entitlements to such Global Note or Global Certificate and/or, where (b) the accountholders hold any such entitlement on behalf of another person, on written consent from or written instruction by the person identified by that accountholder as the person for whom such entitlement is held. For the purpose of establishing the entitlement to give any such consent or instruction, the Issuer and the Trustee shall be entitled to rely on any certificate or other document issued by, in the case of (a) above, Euroclear, Clearstream, Luxembourg or any other relevant alternative clearing system (the "relevant clearing system") and, in the case of (b) above, the relevant clearing system and the accountholder identified by the relevant clearing system for the purposes of (b) above. Any resolution passed in such manner shall be binding on all Noteholders and Couponholders, even if the relevant consent or instruction proves to be defective. Any such certificate or other document shall, in the absence of manifest error, be conclusive and binding for all purposes. Any such certificate or other document may comprise any form of statement or print out of electronic records provided by the relevant clearing system (including Euroclear's EUCLID or Clearstream, Luxembourg's CreationOnline system) in accordance with its usual procedures and in which the accountholder of a particular principal or nominal amount of the Notes is clearly identified together with the amount of such holding. Neither the Issuer nor the Trustee shall be liable to any person by reason of having accepted as valid or not having rejected any certificate or other document to such effect purporting to be issued by any such person and subsequently found to be forged or not authentic.
The net proceeds from the issue of each Tranche of Notes will be applied by the Issuer for general corporate purposes.
SSE plc ("SSE") was incorporated with limited liability in Scotland under the Companies Act 1985 with registration number SC117119 on 1 April 1989 for an unlimited term. SSE was originally incorporated as North of Scotland Electricity plc., and on 1 August 1989 it changed its name to Scottish Hydro-Electric plc. In December 1998, Scottish Hydro-Electric plc merged with Southern Electric plc, whereby Scottish Hydro-Electric plc acquired Southern Electric plc and subsequently changed its name on 14 December 1998 to Scottish and Southern Energy plc, with a further name change to SSE plc on 30 September 2011 (SSE and its subsidiaries being the "SSE Group").
SSE is a holding company and depends on the dividends, distributions and other payments from its subsidiaries to fund its operations.
As at the date of this Prospectus, the members of the Board of Directors of SSE, all of Inveralmond House, 200 Dunkeld Road, Perth PH1 3AQ, United Kingdom are as follows:
| Name | Title |
|---|---|
| Lord Smith of Kelvin | Chairman |
| Alistair Phillips-Davies | Chief Executive |
| Gregor Alexander | Finance Director |
| Richard Gillingwater CBE | Deputy Chairman and Senior Independent Director |
| Jeremy Beeton CB | Non-Executive Director |
| Katie Bickerstaffe | Non-Executive Director |
| Peter Lynas | Non-Executive Director |
| Susan Bruce | Non-Executive Director |
The members of the Board of Directors of SSE have the following significant outside activities:
Dame Susan Bruce DBE is Chief Executive of The City of Edinburgh Council, non-Executive Director of The Scottish Council for Development and Industry, Chair of Young Scot and Visiting Professor of The International Institute of Public Policy, University of Strathclyde.
There are no potential conflicts of interest between the duties of any of the members of the Board of Directors of SSE and his/her private interests and/or other duties.
In July 2014, SSE completed the acquisition of The Energy Solutions Group Topco Limited ("ESG"), a Manchester-based designer and provider of energy management solutions, from Bridgepoint Development Capital, for an enterprise value and total cash consideration of £66 million, with the potential for a further £6 million purchase price increase if agreed targets are achieved.
ESG has traded for almost 20 years and employs around 340 people. It works with private and public sector customers to help improve their management of energy consumption. ESG also installs, maintains and supports building management systems and solutions used in connection with its primary activities. ESG can typically save its customers around 20 per cent. to 30 per cent. of their energy consumption.
The acquisition of ESG complements and enhances SSE's services in competitive markets for industrial and commercial customers. The existing management team at ESG will lead this business, which will continue to trade as The Energy Solutions Group. SSE believes that it will benefit from the commitment of the ESG management team and other employees to delivering effective energy management solutions for the benefit of customers and the environment.
In September 2014, SSE completed the sale of SSE Pipelines Ltd, one of the UK's largest licensed independent gas transporters, to a new fund, the Environmental Capital Fund ("ECF") for a total consideration of £52.6 million. ECF is managed by Scottish Equity Partners LLP ("SEP"). No employees were transferred as part of the disposal. The sale is part of SSE's value programme of planned asset and business disposals announced in its Notification of Close Period Statement on 26 March 2014.
SSE Pipelines Ltd provides gas connection service to new residential and commercial developments throughout the UK. To date, it has set up over 130,000 connections.
SEP has raised a commitment of £135 million for the infrastructure fund to invest in UK-based clean energy projects, which SSE Pipelines Ltd will anchor. SSE has invested £13.8 million for a significant minority stake in the fund.
In October 2014, SSE agreed the sale of its Hampshire data centre to Specialist Computer Centres plc, for a total consideration in the region of £12 million, subject to capital adjustment and provision of transition services for a period of three months.
The facility was operated by SSE Enterprise Telecoms, an owner and operator of a UK-wide high performance, high availability fibre optic network. SSE Enterprise Telecoms provides leading edge carrier ethernet, internet and optical networking services to organisations whose businesses are critically dependent on digital communication. The disposal allows SSE Enterprise Telecoms to focus on this fast growing networking business.
In November 2014, SSE completed the sale of its 100 per cent. equity interest in the special purpose entities ("SPEs") to Equitix Infrastructure 3 Limited ("Equitix") for a total cash consideration of £97.5 million. The SPEs were established in England under the Private Finance Initiative ("PFI"). The SPEs have a 25 year agreement with the respective local authorities, under which the SPEs are responsible for the replacement, operation and maintenance of the street lighting assets operated by the respective authority. These operational responsibilities are being, and will continue to be, carried out by SSE Contracting Limited under a parallel 25-year sub-contract with the SPEs currently owned by Equitix.
The SPEs are funded through a mix of senior debt and equity. SSE believes that removal of this project-related senior debt, along with the payment of cash consideration by the purchaser, had the immediate effect of reducing SSE's net debt by £326.4 million.
Scottish Hydro Electric Power Distribution plc ("SHEPD") was incorporated with limited liability in Scotland under the Companies Act 1985 with registration number SC213460 on 4 December 2000 for an unlimited term, and is a 100 per cent. indirectly owned subsidiary of SSE. SHEPD was originally incorporated as Dunwilco (847) Limited, and on 8 January 2001 it changed its name to SSE Distribution (North) Limited. On 8 March 2001 it changed its name to Scottish Hydro-Electric Power Distribution Limited and on 25 August 2006 it changed again to become Scottish Hydro-Electric Power Distribution plc. On 2 February 2007 the hyphen was dropped and it became Scottish Hydro Electric Power Distribution plc.
The north of Scotland electricity distribution business of SSE was transferred to SHEPD on 1 October 2001 through a statutory transfer scheme under the Utilities Act 2000. SHEPD's principal activity is the distribution of electricity in the Scottish Hydro Electric region, owning, maintaining and operating the electricity network of over 49,000 kilometres of overhead lines and underground cables. SHEPD serves around 755,000 customers in a region which covers 54,900 square kilometres and includes northern mainland Scotland including the Highland and Grampian regions, parts of the Tayside, Central and Fife regions and rural parts of Strathclyde, together with all the Scottish islands including the Orkney and Shetland Islands and the Western Isles. The region has a population of approximately 1.2 million and a diversified customer base including domestic, commercial and industrial sectors.
As at the date of this Prospectus, the members of the Board of Directors of SHEPD, all of Inveralmond House, 200 Dunkeld Road, Perth PH1 3AQ, United Kingdom are as follows:
| Name | Title | Significant Outside Activities |
|---|---|---|
| Gregor Alexander | Director | (See "— Board of Directors of SSE" above) |
| Steven Kennedy | Director | No significant outside activities |
| Colin Nicol | Director | No significant outside activities |
| Rob McDonald | Director | No significant outside activities |
| Stuart Hogarth | Director | No significant outside activities |
| David Gardner | Director | No significant outside activities |
| David Rutherford | Non-Executive Director | No significant outside activities |
| Gary Steel | Non-Executive Director | No significant outside activities |
There are no potential conflicts of interest between the duties of any of the members of the Board of Directors of SHEPD and his/her private interests and/or other duties.
Scottish Hydro Electric Transmission plc ("SHE Transmission") was incorporated with limited liability in Scotland under the Companies Act 1985 with registration number SC213461 on 4 December 2000 for an unlimited term, and is a 100 per cent. indirectly owned subsidiary of SSE. SHE Transmission was originally incorporated as Dunwilco (848) Limited and on 8 January 2001 changed its name to SSE Transmission Limited. On 8 March 2001 it changed its name to Scottish Hydro-Electric Transmission Limited and on 2 February 2007 the hyphen was dropped and it became Scottish Hydro Electric Transmission Limited with a further name change to Scottish Hydro Electric Transmission plc on 25 October 2012.
SHE Transmission is responsible for maintaining and investing in the transmission network in its area, which comprises around 5,000km of high voltage overhead lines and underground cables covering around 70 per cent. of the land mass of Scotland, serving remote and in some cases island communities. As the licensed transmission company for an area with a significant amount of generation from renewable resources seeking to connect to the electricity network, SHE Transmission is required to ensure that there is sufficient capacity for projects committed to generating electricity.
As at the date of this Prospectus, the members of the Board of Directors of SHE Transmission, all of Inveralmond House, 200 Dunkeld Road, Perth PH1 3AQ, United Kingdom are as follows:
| Name | Title | Significant Outside Activities |
|---|---|---|
| Gregor Alexander | Director | (See "— Board of Directors of SSE" above) |
| Steven Kennedy | Director | No significant outside activities |
| Colin Nicol | Director | No significant outside activities |
| Rob McDonald | Director | No significant outside activities |
| Stuart Hogarth | Director | No significant outside activities |
| David Gardner | Director | No significant outside activities |
| David Rutherford | Non-Executive Director | No significant outside activities |
| Gary Steel | Non-Executive Director | No significant outside activities |
There are no potential conflicts of interest between the duties of any of the members of the Board of Directors of SHE Transmission and his/her private interests and/or other duties.
Southern Electric Power Distribution plc ("SEPD") was incorporated with limited liability in England and Wales under the Companies Act 1985 with registration number 04094290 on 23 October 2000 for an unlimited term and is a 100 per cent. indirectly owned subsidiary of SSE. SEPD was originally incorporated as Dunwilco (828) Limited, and on 10 January 2001 changed its name to SSE Distribution (South) Limited with a further name change to Southern Electric Power Distribution plc on 6 March 2001.
The south of England electricity distribution business of SSE was transferred to SEPD on 1 October 2001 through a statutory transfer scheme under the Utilities Act 2000. SEPD's principal activity is the distribution of electricity in the Southern Electric region, owning, maintaining and operating the electricity network of around 77,000 kilometres of overhead lines and underground cables. SEPD serves around 3.0 million customers in a region which covers 16,900 square kilometres and includes the counties of Berkshire, Wiltshire, Dorset, Oxfordshire and Buckinghamshire. The region has a population of approximately 6 million and a diversified customer base including domestic, commercial and industrial sectors.
As at the date of this Prospectus, the members of the Board of Directors of SEPD, all of 55 Vastern Road, Reading RG1 8BU, United Kingdom are as follows:
| Name | Title | Significant Outside Activities |
|---|---|---|
| Gregor Alexander | Director | (See "— Board of Directors of SSE" above) |
| Steven Kennedy | Director | No significant outside activities |
| Colin Nicol | Director | No significant outside activities |
| Rob McDonald | Director | No significant outside activities |
| Stuart Hogarth | Director | No significant outside activities |
| David Gardner | Director | No significant outside activities |
| David Rutherford | Non-Executive Director | No significant outside activities |
| Gary Steel | Non-Executive Director | No significant outside activities |
There are no potential conflicts of interest between the duties of any of the members of the Board of Directors of SEPD and his/her private interests and/or other duties.
SSE believes that it is the only company listed on the London Stock Exchange which owns, operates and invests in a balanced group of economically-regulated energy businesses, such as electricity networks, and market-based energy businesses, such as energy supply and electricity generation. SSE's core business is to supply energy in a reliable and sustainable way. Its strategy is to deliver the efficient operation of, and investment in, a balanced range of economically-regulated and market-based businesses in energy production, storage, transmission, distribution, supply and related services in the energy markets in Great Britain and Ireland. This means: (i) operating and investing efficiently in order to meet the long term needs of its customers whilst maximising returns to investors; (ii) maintaining a balanced range of economically-regulated businesses allowing SSE to avoid over-exposure to any one part of the energy sector whilst enabling it to pursue opportunities where appropriate; (iii) having production, storage, transmission, distribution, supply and related services, which create both diversity of SSE's business activity and a focus on a single sector: energy; and (iv) Great Britain and Ireland give SSE a clear geographical focus, allowing it to maintain and deploy its significant experience and an understanding of the markets in which it operates and to focus on the needs of the customers which it serves.
SSE has an ownership interest in five economically-regulated energy network companies: (i) Scottish Hydro Electric Transmission plc (100 per cent.); (ii) Scottish Hydro Electric Power Distribution plc (100 per cent.); (iii) Southern Electric Power Distribution plc (100 per cent.); (iv) Scotland Gas Networks plc (50 per cent.); and (v) Southern Gas Networks plc (50 per cent.). In this Prospectus, this business segment is referred to as "Networks".
SSE estimates that the total Regulated Asset Value ("RAV") of its economically-regulated 'natural monopoly' business was £7,350 million as at 31 March 2015, up £530 million from £6,820 million at 31 March 2014. As at 31 March 2015, the RAV comprised around: (i) £1,732 million for electricity transmission; (ii) £3,159 million for electricity distribution; and (iii) £2,459 million for gas distribution (i.e. 50 per cent. of SGN's total RAV).
SSE believes that it is the only energy company in the UK to be involved in electricity transmission, electricity distribution and gas distribution. Through price controls, OFGEM sets the index-linked revenue the network companies can earn through charges levied on users to cover their costs and earn a return on their regulated assets. Although the price control mechanism is complex and demanding, these lower-risk economically-regulated, geographically-defined businesses provide a financial backbone and operational focus for SSE and balance its activities in the competitive Wholesale and Retail markets.
The Networks are core to SSE and its strategy in the short, medium, and long term, but they face challenges of increasing scale and complexity in the years ahead. To ensure they get the level of senior management input they need to address those challenges, the leadership of these businesses was re-shaped in December 2014, including the appointment of a new Managing Director.
Since the current RIIO T1 Price Control started in April 2013, SHE Transmission's capital investment has totalled £816.4 million. For 2015/16 as a whole, SHE Transmission expects to invest over £600 million, including the first full year of construction on the Caithness to Moray transmission link.
SHE Transmission is currently going through a period of rapid growth as a result of the requirement to connect large volumes of dispersed renewable energy generation. SSE has committed to a major programme of investment in electricity transmission infrastructure in its area to support the transition to lower carbon electricity generation, increase security of supply and promote economic growth.
Transmission investment for renewable generation ("TIRG") is a funding mechanism that preceded strategic wider works (see below) to provide a framework for funding for large transmission projects. SHE Transmission has one project in construction under this mechanism – the replacement of the Beauly-Denny line between Beauly and Wharry Burn, near Dunblane. It is on programme to complete the majority of its outstanding works associated with the Beauley-Denny network reinforcement in the summer of 2015. Based on expenditure to date (approximately £616.3 million) and known issues, including the interface with SP Transmission's section of the line, the forecast cost is now not expected to exceed £680 million.
SHE Transmission is now two years into the RIIO T1 Price Control. Under this framework, OFGEM recognises the requirement for SHE Transmission to expand its network significantly over the period of the price control to facilitate the growth of renewable generation in the north of Scotland in order to meet national renewable energy targets. The exact timing and scale of growth can be fluid and dependent on the changing requirements of developers.
To allow these projects to be delivered in this dynamic environment, OFGEM developed the strategic wider works mechanism whereby it considers on a case-by-case basis the evidence presented by SHE Transmission to decide whether a project is needed. It then considers SHE Transmission's proposed solution in detail, scrutinises the costs and approves funding. SHE Transmission is currently delivering three major projects under the strategic wider works mechanism:
Beauly to Mossford: All substation and underground cable works are now complete. The replacement overhead line is on schedule to be completed in late 2015. OFGEM has given capital funding approval of £68 million (nominal prices) for the works.
Kintyre to Hunterston: Construction of the new substation building at Crossaig is complete and transformer deliveries took place in March and April 2015. All 50 steel towers between Crossaig and Carradale have been constructed and onshore cable installation in Kintyre was completed in April 2015. Marine cable installation and remaining onshore works at Hunterston, in conjunction with SP Transmission, are scheduled to allow energisation by the end of 2015. OFGEM has given capital funding approval of £207 million (nominal prices).
Caithness to Moray: In December 2014, OFGEM announced its approval of capital funding of £1,118 million (2013/14 prices) for the upgrade of SHE Transmission's network between Caithness and Moray, including a High Voltage Direct Current ("HVDC") subsea cable beneath the Moray Firth. The project will enable the connection of up to 1,200ME of additional generation capacity in the north of Scotland and the islands. It is scheduled to be operational by the end of 2018. Contracts have now been awarded for all main elements of the work. Enabling works are under way at converter station sites in Caithness and Moray; and at substation sites in Caithness, Sutherland and Ross-shire. Early exploratory drilling at the Noss Head landfall of the subsea cable in Caithness has helped to identify the optimal location to minimise risk during the installation process. Manufacture of the specialised subsea and onshore cables required is under way. Enabling works for onshore cable installation in Caithness are due to begin later in 2015. The first revenues are expected to be received in 2015/16.
The total volume of electricity distributed by SEPD and SHEPD during the financial year to 31 March 2014 was 39.6TWh, compared with 40.4TWh in the previous year. Capital expenditure in electricity distribution networks was £327.6 million in the year to 31 March 2015, compared to £308.3 million in the previous year, taking the total for the 2010-15 Price Control to £1,441.0 million so far.
In a year of relatively mild weather which included several periods of high winds affecting in particular the north of Scotland, SSE's electricity distribution networks achieved a reduction in both the number of supply interruptions and the average time each customer was without power.
SSE recognises the particular importance of its performance when exceptional weather events cause widespread disruption to customer supplies. Following extensive consultation in the first half of 2014 and via constructive engagement with the Department for Energy and Climate Change ("DECC") and OFGEM storm reviews, SEPD's and SHEPD's 'Reconnecting with Customers' initiative has resulted in faster electricity supply restoration, enhanced customer welfare support and clearer communications during storm events.
These improvements were recognised by stakeholders following exceptional weather events which affected the north of Scotland during 2014/15. The most recent of these events occurred in early March 2015 and resulted in the fastest ever restoration of supplies following a 'Category 2' event in the north of Scotland, with over 110 high voltage faults tackled and all customers' supplies restored within 24 hours. SEPD and SHEPD have also heavily promoted its Priority Services for vulnerable customers and worked with other agencies to identify customers with medical or other needs that require special attention during a power outage.
The DPCR5 price control period came to an end on 31 March 2015 and SEPD and SHEPD are starting to tackle the challenges and earn the potential rewards of the new RIIO-ED1 regime which began on 1 April 2015 and will run until 31 March 2023. SSE has long supported the incentive-based RIIO framework for networks' price controls given the clear benefits to customers of increased transparency and greater focus on outputs and innovation. It is clear from the reduction in network allowed revenue under the RIIO-ED1 settlement, the subsequent fall in underlying 2015/16 charges and the service improvements required that customers will benefit from this process.
SSE receives 50 per cent. of the distributable earnings from SGN, in line with its equity holding, and also provides some, but reducing, levels of support through a managed service agreement.
As at 31 March 2015, SGN's total RAV was £4.9 billion (including SSE's share of £2.46 billion). During 2015/14 , SGN invested £339.8 million (£321.7 million in 2013/14) in capital expenditure on mains and services replacement projects. SGN is focused on ensuring its outputs under the new RIIO framework are met, incentives are maximised
and innovation is delivered effectively while running an efficient, safe and reliable network. SGN's investment programme is key to this and, within overall cost allowances of over £4.6 billion (at 2012/2013 prices), OFGEM has allowed over £2.8 billion over the eight year price which runs until 2021 to cover new investment and to manage the risks to SGN's existing assets.
SSE's Retail segment comprises three business areas: energy supply, energy-related services and enterprise. SSE is one of the largest energy suppliers in the competitive markets in Great Britain and in Ireland. As at 31 March, it supplied electricity and gas to 8.58 million households and business accounts. It also provides other energy related services to 350,000 household and business customers. In the six months to 30 September 2014, SSE's energy customer accounts in Great Britain and Ireland fell from 9.10 to 8.89 million. This comprised 4.56 million household electricity accounts in Great Britain, 3.12 million household gas accounts in Great Britain, 0.43 million business electricity and gas accounts; and 0.78 million electricity and gas accounts in Northern Ireland and Republic of Ireland. SSE's total customer base is now the same size as it was in 2008, having peaked at 9.65 million in March 2011. The decline in customer account numbers reflects the challenging and highly competitive market conditions in Great Britain, in which there are 10 suppliers of scale (with over 250,000 customers) competing to retain and gain customers. This is in addition to a growing number of smaller suppliers, who are exempt from the cost of implementing certain government social and environmental policies, and therefore have a competitive advantage. There is also a strong focus by other suppliers on internet comparison sites. At the same time, the dynamics of the energy market are undergoing a fundamental transformation with the rise of digital technologies and smart metering.
SSE appreciates that its customers rely on its core products of electricity and gas to power and heat their homes in order to live comfortably. It takes this responsibility very seriously and has therefore sought first and foremost to offer all its customers peace of mind about their future energy costs at a time when energy affordability remains a serious concern.
In March 2014, SSE became the only energy supplier in Great Britain to offer an unconditional commitment not to increase standard household energy prices until 2016, and in January 2015 extended this promise further still, until at least July 2016. This is the longest price commitment of its nature the UK energy market has ever seen. As a result of the extension of this commitment, by July 2016, SSE's standard household prices will not have gone up for more than two and a half years.
Guaranteeing not to increase prices for such a long period of time requires a responsible, long-term approach to managing all of the costs of supplying energy; SSE therefore continues to believe that its commitment should also be judged over the long term. In the meantime, SSE will continue to pass on savings where possible and make the most competitive offers it can, whilst providing absolute peace of mind for those customers who prefer the flexibility of a standard variable tariff.
SSE would like to extend its price freeze again, or even cut prices if further costs can be taken out of energy supply, and will work with the new UK government or indeed any stakeholder to find such solutions. It believes further savings for consumers worth around £100 – forecast to rise to around £200 by 2020 – could be made with political action to end the practice of levying policy costs on energy bills. Recouping the cost through energy bills takes no account of an individual's ability to pay and is therefore socially regressive, with the impact likely to worsen as policy costs on energy bills increase into the latter part of this decade. SSE has therefore continued to call for more of these levies to be moved into general taxation, making bills cheaper and fairer for those less able to pay.
The rollout of smart meters to every home in Great Britain represents a unique opportunity to transform the relationship between customers and the energy they use. Empowering customers with real-time data about their energy usage, providing them with more accurate bills and unlocking innovation in tariffs and propositions, smart meters have the potential to drive ever greater consumer engagement with energy. In preparation for the introduction of the critical infrastructure that will enable mass rollout to begin, SSE has been focused primarily on building and testing systems and gradually ramping up delivery, in line with its strategy of 'doing it once and doing it right'. At 31 March 2015, SSE had installed over 40,000 smart meters in customers' homes. In the coming year ending 31 March 2016, it expects to install a further 210,000 smart meters to bring the cumulative total to 250,000. A smart meter will be installed in every home in Great Britain, as part of UK and European law. Around 53 million smart meters are due to be installed in around 30 million homes and businesses by the end of 2020. Of these, SSE is overall set to install around nine million meters.
In addition to electricity and gas, SSE offers energy-related products and services including boiler, central heating and wiring maintenance and installation as well as supplying and maintaining meters for household and commercial customers. These areas represent a natural fit with SSE's existing strengths and propositions and are an important part of SSE's strategy to become a diversified retailer of energy and essential services.
In line with the plan to expand its business in 'Home and Essential Services', SSE sees opportunities for growth in its home telephone and broadband business. SSE's ongoing investment into customer relationship management to understand and communicate more effectively with its customer base will also enable it to unlock the significant opportunity to sell a broader range of services to its existing customer base.
SSE's enterprise division provides services principally in mechanical and electrical contracting, energy solutions, lighting, utilities and telecoms. It helps businesses achieve energy savings and provides knowledge and expertise which enables businesses to become more sustainable. SSE's enterprise division has a significant self-delivery capability enabling it to provide engineering excellence in sensitive environments including hospitals, data centres, refineries and core utilities. Its solutions are designed, engineered and delivered to the particular needs of the customer.
To enable SSE's enterprise division to focus on opportunities which are core to its future plans, during 2014/15 SSE sold its gas transportation business, a data centre in Hampshire and its equity interest in special purpose entities for the delivery of seven street lighting projects for a total of around £390 million, including proceeds received and debt reduced. SSE is progressing the sale of equity in its two remaining streetlighting PFI projects. Building a new division focused on business customers, SSE's enterprise division brings together the services SSE offers to compete in competitive markets for industrial, commercial and public sector customers. SSE's enterprise division seeks to provide 'essential services for business, delivered with energy'. As a nationwide business, SSE's enterprise division employs 3,500 skilled engineers and technicians, serving more than 250,000 customers, across more than 50 locations.
SSE's enterprise division has an established track record of delivering solutions for customers in energy and related services for the retail, financial, public and utilities sectors. The acquisition of the energy management company ESG, since re-named SSE Enterprise Energy Solutions Limited, in July 2014, added new capabilities to the business. Creating a 'shared value' philosophy with customers is a driving force within SSE's enterprise division. It focuses on creating a long-term relationship through key account managers for its larger and more complex customers.
SSE's long-term objective for its wholesale segment is for it to make a sustainable contribution to the implementation of SSE's core purpose and financial goals, through excellence in the provision, storage and delivery of energy and related services for customers in wholesale energy markets in Great Britain and Ireland.
SSE's wholesale segment delivers this through Energy Portfolio Management ("EPM") and electricity generation. EPM is responsible for ensuring SSE has the energy supplies it requires to meet the needs of customers; procuring the fuel required by the generation plants that SSE owns or has a contractual interest in; selling the power output from this plant; where appropriate, securing value and managing volatility in volume and price through the riskmanaged trading of energy-related commodities; and providing energy solutions and services. Electricity generation is responsible for: the operation and management of SSE's generation assets, their maintenance and ensuring these assets are available when required and able to meet contractual obligations; and developing future opportunities.
In addition, also within wholesale, Gas Production is responsible for the efficient delivery of gas from the physical gas fields that SSE has a shared ownership in and developing future opportunities; and Gas Storage is responsible for the operation and management of SSE's gas storage facilities, their maintenance and ensuring they are available for use by SSE and third parties.
In recent years, SSE has typically required around 7 million therms of gas per day to supply all its customers and to fuel its power stations, and around 130GWh of electricity per day to supply all its customers. EPM has three primary routes to procure competitively and sustainably the energy and fuels it needs to meet demand: (i) SSEowned assets including upstream gas exploration and production and thermal and renewable electricity generation; (ii) long term gas producer contracts, power purchase agreements (with SSE –owned plant and third parties) and solid fuel contracts; and (iii) trading energy contracts transparently on international exchanges or through 'over the counter' markets.
EPM priorities include: (i) securing a stable and predictable supply of energy to meet SSE's customers' needs; (ii) driving business change to respond effectively to new UK, Republic of Ireland and EU regulations; (iii) responding to market evolution and change; (iv) identifying and agreeing new long term energy opportunities; and (v) continuing to support improved market transparency and liquidity initiatives.
SSE's primary objective for its Generation division is to maintain a diverse generation portfolio, that helps keep the lights on by being available, reliable and flexible. This objective is underpinned by six principles that direct the operation of, and investment in, its generation portfolio: (i) compliance – with all safety standards and environmental and regulatory requirements; (ii) diversity – to avoid over-dependency on particular fuels or technologies; (iii) capacity – to contribute to the requirements of the UK and Irish electricity systems; (iv) availability – to respond to system demand and market conditions; (v) flexibility – to ensure that changes in demand for electricity and the variability of generation from wind farms can be addressed; and (vi) sustainability – to support progressive reduction in the CO2 intensity of electricity generated through the cost efficient decarbonisation of its generation fleet.
SSE is maintaining and investing in a diverse and sustainable portfolio of thermal and renewable generation plant. In moving to a lower carbon generation mix SSE will, by the end of the decade, transition its generation assets from a portfolio weighted towards gas and coal, towards a portfolio more weighted towards gas and renewables.
SSE currently owns or has an ownership interest in 11,733MW of capacity, which comprised at 31 March 2015: (i) 4,262MW of gas- fired generation capacity (Great Britain); (ii) 1,068MW of gas and oil fired generation capacity (Ireland); (iii) 3,009MW of coal fired generation capacity (Great Britain) (including biomass co-firing); and (iv) 3,394MW of renewable generation capacity (Great Britain and Ireland) (including pumped storage).
With this portfolio, SSE continues to have significant fuel diversity for producing electricity and retains a very flexible assets fleet. It also makes SSE the largest generator of electricity from renewable sources across Great Britain and Ireland.
The amount of electricity generated by gas-fired, oil-fired and coal-fired power stations in which SSE has an ownership or contractual interest, including combined heat and power and biomass co-firing, was 18.7TWh in the year to 31 March 2015, compared with 26.7TWh during the previous year.
Uncertainty around market conditions and the public policy framework affecting electricity generation in Great Britain have continued to create challenging conditions for SSE's thermal and renewables businesses.
The first half of 2014/15 saw an uplift in 'spark spreads' – the difference between the cost of gas and emissions allowances used by a combined cycle gas turbine ("CCGT") and the value of the power produced - compared to the historically low levels of 2013/14 which resulted in greater use of coal fired plant. This uplift in 'spark spreads' combined with the April 2014 increase in Carbon Price Support Rate (see below), resulted in greater use of gasfired generation relative to coal. The long-term trend points to gas continuing to enjoy this comparative advantage. There have been a number of public policy interventions in recent years that significantly affect both the development and operation of thermal plant. These include:
Carbon Price Support: On 1 April 2013, the UK government increased the Carbon Price Support ("CPS") rate in line with the level confirmed in the 2013 budget. This added a cost of £9.55/tonne of CO2 emissions in 2014/15 for fossil-fuelled generation in Great Britain, on top of the cost of complying with the EU ETS. The CPS rate has risen to c.£18/tonne in 2015/16, but the 2014 Budget announced that it would then be frozen until 2018/19, instead of increasing as previously proposed.
Capacity Market: In December 2014 the first auction for generation capacity in the UK ("Capacity Auction") was held. This competitively determined the volume of plant (49.3GW) which would take on a capacity payment (£19.40/kW) these will receive for successfully providing capacity. A total of 4.4GW of SSE's 7.2GW pre-qualified plant were successful in the Capacity Auction, and will receive a total of £85m if they deliver this capacity in 2018/19.OFGEM has consistently maintained that over the coming years electricity generation capacity margins will be lower than they have been in recent years due to weak market economics and EU regulations closing down older plant.
The UK Government, together with National Grid (as the system operator) and OFGEM, has decided to address this issue in two ways:
In addition to these mechanisms, National Grid already has the ability to manage moments when demand outstrips supply through a range of different balancing and optimisation tools.
The design, implementation and operation of these mechanisms is ultimately determined by DECC and National Grid. They will determine how much capacity is required to ensure security of supply under each of these mechanisms. Once this volume has been determined they will signal this to the market, and then procure the necessary capacity through a competitive auction/tender process.
Responsibility for determining the volume of capacity required to ensure a secure electricity supply, and for the timely signalling of this to the market, therefore, lies with National Grid and DECC. Both organisations are confident that they will fulfil this responsibility. SSE will play its part by working with DECC and National Grid and by focusing on ensuring that its plant, where practicable, is available to generate at times when demand is highest. It will also continue to assist the UK government and National Grid with their policy development and will engage constructively with all parties on this issue.
SSE has two wholly-owned coal-fired power stations: Ferrybridge (Yorkshire; 1,014MW) and Fiddler's Ferry (Lancashire, 1,995MW):
all of the above capacity at Fiddler's Ferry and Ferrybridge is compliant with the Large Combustion Plant Directive and able to continue to generate electricity beyond 2015;
None of Ferrybridge's capacity was successful in the Capacity Auction, whilst 1,294MW (de-rated) of Fiddler's Ferry (3 out of its 4 units) did take on capacity obligations for 2018/19. SSE has consistently said that the cost of the Carbon Price Support, along with the constraints imposed by the IED, the introduction of full auctioning of EU emissions allowances, and the age of the stations, have been weighing heavily on the long-term viability of coal assets.
As a result SSE announced, in March 2015, that it would carry out a comprehensive and detailed review of its coal generation assets. SSE's review examined a number of factors including current and future economic viability; compliance with emissions regulations; the existing and likely future policy framework; SSE's own long-term decarbonisation and business objectives; and the impact on SSE's employees and the local communities within which the assets are based. Based on the conclusions of this review SSE has, regrettably, made the difficult decision to cease coal-fired electricity generation at Ferrybridge by 31 March 2016. The emissions abatement equipment on one of the two units at the station, Unit 4, was badly damaged during a serious fire at the site in 2014. SSE has been pursuing options to reinstate this equipment, but this activity will now stop, although the work to demolish the damaged equipment will continue. As a result, Unit 4 will be removed from service with immediate effect. Unit 3 will return to service in August 2015 following successful completion of the planned outage which began in April 2015.
SSE has three wholly-owned gas-fired power stations: Keadby (Lincolnshire; 735MW); Medway (Kent; 700MW) and Peterhead (Aberdeenshire; 1,180MW). In addition, SSE has a 50 per cent. stake in gas-fired power stations at Marchwood (840MW total capacity) and Seabank (1,164MW). All of the stations' output is contracted to SSE and in 2014/15 these stations generated a total of 7.5GWh of electricity. Each of SSE's three wholly-owned gas-fired power stations has recently undergone, or is undergoing, an investment programme:
Despite experiencing challenges in recent years, and despite expected longer-term changes in the way electricity is generated and used, it is still anticipated that gas-fired power stations will eventually play an increasingly important role in electricity generation. As a result, SSE will continue to maintain an option for CCGT, in Great Britain, at Keadby 2 (Lincolnshire). It will not, however, make any significant additional commitments to the project unless it is entered into and is successful in the Capacity Auction process. This means SSE will be reviewing its options for Abernedd (South Wales), and is putting all development work at Seabank 3 (Bristol) on hold.
Based on renewable energy capacity in operation, SSE continues to be the UK's leading generator of electricity from renewable sources and the largest generator of electricity from wind across the UK and Ireland. As at 31 March 2015, it had 2,551MW of renewable energy capacity in operation in Great Britain (as well as 544MW in Ireland), including its share of joint ventures. The Great Britain portfolio comprised (net): (i) 1,150MW of conventional hydro; (ii) 1008MW of onshore wind; (iii) 355MW of offshore wind; and (iv) 38MW dedicated biomass. Total electricity output from all of SSE's renewable resources in Great Britain (including pumped storage) was 7.2TWh in the year to 31 March 2015.
SSE continues to operate under the policy support regime for renewable generation capacity in the UK, currently delivered through the Renewables Obligation ("RO") (the RO applies also in Northern Ireland); and the recently introduced Contracts for Difference ("CfD") mechanism.
SSE believes the CfD to be a viable, long-term support mechanism for low carbon generation However, the mechanism's design changes the way that investments in renewables are evaluated by both developers and providers of finance, including SSE. Absolute support for low carbon technologies is limited by the Levy Control Framework budget which has the reasonable objective of controlling costs to customers from government energy policies. This also means that there is competition for support contracts. In addition, the contract terms will impact the way in which renewable projects are developed and constructed. SSE chose not to participate in the first CfD auction round, but will continue to analyse its portfolio with a view to participating in future.
Since April 2007, SSE has invested nearly £4.0 billion in renewable generation. As it moves forward to the next phase of its renewable energy development pipeline, SSE is focusing on projects that best allow the efficient allocation of resources and economies of scale.
In order to support future investment in onshore wind assets SSE will, as outlined in March 2014, recycle capital by adding to its established programme of selective disposals of operational onshore wind assets and those in development. Recent activity includes the agreement to sell Langhope Rig, a 16MW construction project, to GE Financial Service in March 2015.
The following projects are in construction as at the date of this Prospectus and are key components of SSE's portfolio of strategic onshore wind projects in Great Britain: (i) Strathy North (67MW) – located in Sutherland, main site construction is under way and the site is due for completion in 2015; and (ii) Dunmaglass (94MW) – main construction at this site south of Inverness is progressing well and the site is scheduled for completion in 2016.
In addition to these projects under construction, SSE has a number of projects at different stages in the development cycle. These include: (i) Clyde Extension (pre-construction) (up to 172MW) – this project, an extension of SSE's operational Clyde wind farm, was consented by Scottish Ministers in July 2014. In May 2015 a final investment decision was taken to proceed with the project. It is expected to be fully operational by the end of 2016; (ii) Bhlaraidh (pre-construction) (up to 108MW) – located in the Great Glen in the Highlands, this project was consented by Scottish Ministers in January 2014. SSE is progressing towards a final investment decision expected in 2015; (iii) Stronelairg (with consent) (up to 240MW) – located in the Great Glen, the project was consented by Scottish Ministers in June 2014. In August 2014 the John Muir Trust announced it had lodged a petition to the Court of Session asking for this decision to be judicially reviewed. SSE will participate fully in the legal process; (iv) Strathy South (in planning) (up to 133MW) – in July 2014, the Highland Council's Northern Planning Committee raised an objection to the project, which is located in Sutherland adjacent to SSE's Strathy North site. This objection will now be examined further at a public local inquiry, and SSE is participating fully in this process; and (v) Viking (with consent) (up to 457MW – SSE share 50 per cent.) – located in Shetland, the project has been involved in a prolonged legal dispute since it was consented by Scottish Ministers in April 2012. In February 2015 the Scottish Supreme Court dismissed the legal challenge. SSE, along with its joint venture partner, will now continue to develop the project in 2015.
Whilst current policy and market signals do not favour investment in new pumped storage, SSE continues to explore the conditions for investment to allow progress with its 600MW consented pumped storage scheme at Coire Glas in the Scottish Highlands.
In line with its wider focus on streamlining and simplifying its business, SSE decided in March 2014 to narrow significantly the focus of its near term development plans for its offshore wind development portfolio. In particular, it decided to focus its efforts and resources on progressing the Beatrice project ("Beatrice") (up to 664MW, at that time a 75/25 per cent. partnership between SSE and Repsol Nuevas Energias UK) planned for the outer Moray Firth.
In April 2014, the UK government announced that Beatrice had been successful in securing an investment contract (or early CfD). Securing this contract has enabled SSE and its partners to continue to invest in the engineering and procurement work required to maintain progress towards a final investment decision ("FID") in early 2016.
In November 2014, SSE agreed to sell a portion of its shareholding in the Beatrice Offshore Wind Farm ("BOWL") to fund management company Copenhagen Infrastructure Partners ("CIP"). The sale was consistent with SSE's strategic approach to the project announced in March 2014 and secured a strong additional partner to take the project forward. After the divestment, SSE owns a 50 per cent. share of the BOWL project; CIP owns 25 per cent. with Repsol maintaining its ownership of the remaining 25 per cent. The FID will only be made if the project provides the return on capital investment required to be compatible with the risks involved.
In addition to Beatrice, SSE has an interest in three further offshore wind farm developments. In the near-term, SSE will undertake minimal development work on these projects now that relevant planning consents have been secured: (i) Galloper (50:50 partnership between SSE and RWE Innogy). In September 2014 SSE announced it would exit the project on pre-agreed terms once RWE Innogy has made a final investment decision. SSE is working with RWE Innogy to explore alternative opportunities for the project; (ii) Seagreen (3,500MW - a 50:50 partnership between SSE Renewables and Fluor Limited). Consent for Phase 1 in the zone (totalling 1,050MW) was granted by Scottish Ministers in October 2014; and (iii) Forewind (7,200MW - a four-way partnership with RWE Innogy, Statoil and Statkraft). Consent for the first two projects within the development – Creyke Beck A & B (2,400MW) – was granted in February 2015, with a decision on the next two projects expected in August 2015.
Through the last months of 2014/15 SSE carried out final commissioning tests on the new 464MW Great Island CCGT unit (grid connection capacity set at 431MW), with the station being handed over for commercial operation on 17 April 2015. The commissioning of the new unit coincided with the retirement of the old 240MW HFO unit. The new CCGT station, which is now among the cleanest and most efficient natural gas power plants on Ireland's national grid, will generate enough electricity to power the equivalent of half a million Irish homes and the transition from heavy fuel oil to gas improves the carbon intensity of SSE's fleet.
SSE is the third largest generator by capacity on the island and also trades across the interconnectors between the UK and Ireland. SSE has an interest in delivering and developing new capacity for electricity generation in Ireland: (i) Galway Wind Park (in construction) (174MW) – a project with joint venture partners Coilte, which has started construction and, once completed in 2016, will be Ireland's largest wind farm. This completion date will qualify the project to be supported under the REFIT II support scheme; (ii) Tievenameenta (in construction) (32MW) - located in County Tyrone, this 32MW project is due to be commissioned in 2017, thereby qualifying for NIRO support; and (iii) Slieve Kirk Extension (consented) (9MW) - SSE recently received planning for the extension, which will bring the total installed capacity at the site to 83MW in 2017.
Reform of the Republic of Ireland's and Northern Ireland's Single Electricity Market ("SEM") is required in order to comply with the EU Electricity Target Model. The regulators in each jurisdiction have progressed the Integrated SEM (I-SEM) project over the course of 2014/15, with the new market due to be introduced by the end of 2017. SSE has been heavily involved in all stages of the consultation process and will remain engaged throughout the project, advocating an optimum design for customers and industry stakeholders. Separately to reform of the market arrangements, the regulators and system operators are involved in a project to review the ancillary services necessary to achieve Ireland's 2020 target.
Multi-fuel plants use waste derived fuels to generate electricity and therefore benefit from an additional revenue opportunity in the form of a 'gate fee' for taking the waste. They offer a sustainable energy solution that is less carbon-intensive than other solid fuels and which further diversifies the range of fuels that SSE can deploy in its generation fleet.
The SSE and Wheelabrator Technologies Inc. 50:50 joint venture – Multifuel Energy Lyd ("MEL") - is currently commissioning a £300 million multi-fuel generation facility adjacent to SSE's existing Ferrybridge coal power station. Construction of the facility is complete, the commissioning programme is well under way and the plant is expected to be fully operational in autumn 2015. The station has taken on a capacity obligation for 2018/19. A development consent order application for a second multi-fuel facility at the Ferrybridge site has been submitted to the Planning Inspectorate with a final decision expected by autumn 2015.
SSE is continuing to work with Shell UK as a strategic partner in the proposed CCS project at SSE's gas-fired power station in Peterhead. The project aims to create the first commercial scale application of CCS technology at a gas-fired power station anywhere in the world by capturing up to one million tonnes of CO2 annually. Shell is leading the development of the project, and will take responsibility for the construction of the CO2 capture plant and thereafter the operation, transport and storage elements of the project.
Front End Engineering Design work has been ongoing throughout the 2014/15, and the project team is in discussions with the UK Government about securing the next stage of support through its CCS commercialisation programme.
SSE's upstream portfolio is 100 per cent. gas weighted, and at 31 March 2015, it is estimated to hold in excess of 2.2 billion therms of reserves. Total output in the year to 31 March 2015 was 397.9 million therms, compared with 414.1 million therms in the previous year. SSE continues to seek new opportunities to increase its reserve base to meet portfolio demand requirements. The UK and North-Western Europe remains the focus for this activity, as it provides a relatively stable tax and fiscal regime and is near to SSE's domestic energy supply markets. SSE has not set a target scale for its upstream business and will continue to evaluate opportunities in line with its investment criteria and financial discipline.
SSE, through its wholly-owned subsidiary SSE Hornsea Ltd, has an ownership interest in two major gas storage facilities in East Yorkshire, both sites have continued to operate to meet the needs of customers through 2014/15: (i) Hornsea (Atwick) again met 100 per cent. of customer nominations with the site 98 per cent. available during the winter period except in instances of planned maintenance and 87 per cent. available over the full year; and (ii) Aldbrough met 100 per cent. of customer nominations and was 87 per cent. available overall except in instances of planned maintenance. Following temporary removal of two of the site caverns during the previous year, these were both in commercial operation by the end of the year.
However, the economic environment for gas storage facilities has continued to be challenging during the year – as illustrated by the significant reductions in operating profit reported by SSE's gas storage business. Operators have been faced with low operating returns due to unfavourable market conditions, combined with an increasing cost base as a result of ageing asset investment requirements and the decision by the Valuation Office Agency during the period to effectively double business rates for most gas storage facilities in the UK.
In the light of these challenges, alongside the requirements to continue to invest to ensure the highest standards of asset management are maintained, SSE has been reviewing its gas storage business on an ongoing basis to ensure that it continues to provide valuable flexibility and hedging services to its customers and hence the wider UK gas market, while being as well positioned as possible to take advantage of future market developments.
SSE has, as a result, identified that the costs of operating, maintaining and upgrading the older withdrawal plant at its Hornsea (Atwick) facility are not currently supported by market returns and, as such, announced in March 2015 its decision to mothball 33 per cent. of the withdrawal capacity of the site (6mcm/d) with effect from 1 May 2015. This change to the site's capability will alter the shape of the storage service it can offer, creating a greater value product for SSE's gas storage customers.
SSE's objective is to maintain a balance between continuity of funding and flexibility, with debt maturities staggered across a broad range of dates. Its average debt maturity as at 31 March 2015 was 9.9 years, compared with 10.7 years at 31 March 2014.
SSE's debt structure remains strong, adjusted net debt and hybrid capital is £7.6 billion, with around £5.0 billion of medium-to-long-term borrowings as at 31 March 2015 in the form of issued bonds, European Investment Bank debt and long-term project finance and other loans. The balance of SSE's adjusted net debt is financed with shortterm bank debt. SSE's adjusted net includes cash and cash equivalents totalling £1.5 billion. Around £1.2 billion of medium-to-long-term borrowings will mature in the year to 31 March 2016. The facilities, external debt and internal loan stocks for the SSE Group as at 30 June 2015 (with sterling equivalents (where applicable) as at that date) were as follows:
SHEPD £129.0 million 1.429 per cent. index linked bonds due 2056
| | £300 million intercompany loan stock due to SSE | |
|---|---|---|
| SEPD | | £350 million 5.5 per cent. bonds due 2032 |
| | £325 million 4.625 per cent. bonds due 2037 | |
| | £119.0 million 4.454 per cent. index linked loan maturing 2044 | |
| | £400 million intercompany loan stock due to SSE | |
| SHE Transmission | | £613.1 million intercompany loan stock due to SSE |
| | £150 million European Investment Bank loan due 2021 | |
| | £150 million European Investment Bank loan due 2022 | |
| SSE Energy Supply Limited | | £250 million intercompany loan stock due to SSE |
| SSE Services plc | | £30 million intercompany loan stock due to SSE |
| SSE Hornsea Limited | | £240 million intercompany loan stock due to SSE |
| SSE E&P UK Limited | | £130 million intercompany loan stock due to SSE |
| Keadby Generation Limited | | £120 million intercompany loan stock due to SSE |
| SSE Generation Ireland Limited | | £53.1 million intercompany loan stock due to SSE |
On 10 March 2015, SSE issued £750 million and €600 million hybrid capital bonds ("2015 Hybrid Bonds"). SSE previously issued €500 million and £750 million bonds (hybrid capital) on 20 September 2010 ("2010 Hybrid Bonds") and €750 million and \$700 million bonds (hybrid capital) on 18 September 2012 ("2012 Hybrid Bonds"). The hybrid capital bonds have no fixed redemption date but SSE may, at its sole discretion, redeem all (but not part) of these bonds at their principal amount on: (i) 1 October 2015 or 1 October 2020 or any subsequent coupon payment date after this for the 2010 Hybrid Bonds; (ii) 1 October 2017 or every five years thereafter for the 2012 Hybrid Bonds; and (iii) for the 2015 Hybrid Bonds first redemption date for the £750 million hybrid capital bond is 10 September 2020 and then every five years thereafter and for the €600 million hybrid capital bond is 1 April 2021 and then every 5 years thereafter. SSE has the option to defer coupon payments on the bonds on any relevant payment date subject to the compliance of certain conditions including no dividend having been declared on SSE's ordinary shares. The hybrid capital for the SSE Group as at 31 March 2015 (with sterling equivalents (where applicable) as at that date) are as follows:
SSE's investment priorities are to deliver additional assets in renewable energy, electricity networks and gas storage which contribute to secure and lower-carbon supplies of energy, to meet other key milestones in its investment programme in generation, electricity networks and gas storage and to pursue the additional options that it has identified for investment.
In March 2014, SSE said that it expected its investment and capital expenditure will total around £5.5 billion (net of disposal proceeds) over the four years to 2017/18, although the phasing of capital expenditure and value of disposals may vary.
Central to SSE's strategy is 'efficient' investment in a balanced range of economically-regulated and market-based energy businesses. This means that investment should be: (i) in line with SSE's commitment to strong financial management, including securing returns which are clearly greater than the cost of capital, enhance earnings and support the delivery to shareholders of a return on their investment; (ii) complementary to SSE's existing portfolio of assets and consistent with the maintenance of a balanced range of assets within SSE's businesses; (iii) consistent with developments in public policy and regulation including the introduction of competition for support for low carbon electricity through CfDs; and (iv) governed, developed, approved, and executed in an efficient and effective manner, consistent with SSE's Major Projects Governance Framework and with the skills and resources available within SSE.
Looking across its networks, retail and wholesale businesses, SSE expects that its capital and investment expenditure will total around £1.75 billion (gross) in 2015/16, with the principal reason for the increase being in Electricity Transmission, where construction work on the link between Caithness and Moray is getting under way, and total around £5.5 billion (net) over the four years to 31 March 2018. This includes: (i) economically-regulated expenditure on electricity transmission networks, such as Caithness-Moray, and on electricity distribution networks; (ii) essential maintenance of other assets such as power stations; and (iii) expenditure that is already committed to development of new assets (including around 600MW (construction and pre-construction) of onshore wind farm capacity) and the enhancement and deployment of systems to improve customer service in energy supply and energy-related services.
SSE's commitment to financial discipline means that it will monetise value from existing investments and assets in order to support future investment in any other assets to which it decides to commit over the next few years, where that will enhance adjusted earnings per share over the long term.
SSE believes that a capital and investment programme on this scale, financed in part by recycling of capital through appropriate asset disposals, and a flexible approach to value-creation, should position it well for the future and will deliver: (i) well maintained existing and new modern capacity for generating electricity; (ii) renewable sources of energy, supporting a reduction in the CO2 intensity of electricity generated; (iii) a hedge against prices for fossil fuels; (iv) additions to the asset base in key businesses, including economically-regulated electricity networks; (v) and additional cashflows and profits to support continuing dividend growth.
SSE's programme of disposal of assets which are not core to its future plans, or which result in a disproportionate burden, or which could release capital for future investment, is well under way. Agreements with a total value of over £475 million have already been reached or concluded to dispose of assets such as SSE Pipelines Ltd and equity in PFI street lighting contracts. The disposal of such assets is taken into account in the total expected net capex referred to above of £5.5 billion across the four years to March 2018. Proceeds and debt reduction from all of these planned disposals are expected to total around £500 million.
In addition, there are other assets such as onshore wind farms which present, through disposal, opportunities to release capital to support future investment. SSE currently envisages securing proceeds of around £500 million through disposals of such assets. In total, therefore, the disposal programme is expected to result in a financial benefit of around £1 billion including proceeds received and balance sheet debt reduced. The disposal programme is also intended to enable SSE to ensure its resources are fully focused on what is important and relevant to its core purpose of providing the energy people need in a reliable and sustainable way.
The electricity industry in Great Britain is regulated by the Gas and Electricity Markets Authority (the "Authority"). The principal objective of the Authority, as set out under the Electricity Act 1989, is to protect the interests of existing and future consumers in relation to electricity conveyed by distribution or transmission systems; wherever appropriate by promoting effective competition. OFGEM provides the staff who support the role of the Authority and carry out the day to day activities of the statutory body. The Authority's duties include ensuring that licence holders are able to finance their statutory and licence obligations, and that they operate their business with regard to the effect on the environment.
SSE's generation businesses generate electricity under licences issued under the Electricity Act 1989. The electricity generation licences oblige parties to accede to and/or comply with the sets of rules or "codes" ("Codes") that govern the operation of the electricity generation market. The main Codes are the Balancing and Settlement Code, the Connection and Use of System Code, the Distribution Connection and Use of System Agreement, the Grid Code and the Distribution Code. The current structure of the competitive Great Britain market was put in place in 2005 when the England and Wales market rules were applied to Scotland, thereby creating the British Electricity Trading and Transmission Arrangements ("BETTA"). Significant modifications to the BETTA market operating rules require approval by the Authority.
While SSE's generation businesses operate under such licences, electricity generation in the Great Britain is a competitive activity and is not subject to price controls.
Following the passing of the Energy Act 2013, a number of reforms to the Great Britain electricity market have now been implemented, including the introduction of new long term contracts to support low carbon generation as well as a capacity mechanism to ensure resource adequacy. In December 2014, SSE provisionally secured agreements to provide a total of 4,409MW of de-rated electricity generation capacity from October 2018 to September 2019 at a price of £19.40/kW as a result of the first Capacity Market Auction process. This outcome was ratified by the Secretary of State for Energy and Climate Change on 2 January 2015.
The environmental impact of the operation of large generating stations in Great Britain is regulated by the Environment Agency in England and Wales ("EA"), Natural Resources Wales in Wales ("NRW") and the Scottish Environmental Protection Agency in Scotland ("SEPA"). EA and SEPA were both established under the Environment Act 1995. While NRW only became operational from 1 April 2013 when it took over the management of natural resources of Wales. The operation of SSE's generating plant in England and Wales and Scotland is carried out under permits issued by the relevant regulator. These permits impose limits on all activities that could impact the environment, including emissions to air and water and the production and disposal of wastes. Formal statutory notices may be issued by EA, NRW and SEPA in relation to any environmental incidents. The EA also issues permits under the EU emissions trading scheme for carbon dioxide emissions and ensures industry compliance with such scheme. SSE's carbon emissions data is externally verified by a UK accreditation service.
SSE's electricity and gas supply businesses operate under licences issued under the Electricity Act 1989 and the Gas Act 1986. The provisions of such licences are regulated by the Authority. The principle objective and duties of the Authority are described above (see "—Regulatory Environment—Electricity Generation"). While SSE's supply businesses operate under licence, the supply of electricity and gas in Great Britain is a competitive activity and is not subject to price controls.
OFGEM's retail market reforms are now fully in force with new rules in place to improve supplier communications such as bills and annual summaries. There remains some regulatory uncertainty around white label providers, a facility which SSE currently utilises with Marks and Spencer. OFGEM is consulting on its position to continue to allow white label providers beyond the year end. However there is some uncertainty around the details of this and whether some restrictions will be introduced.
On 27 March 2014, OFGEM published its state of the market assessment report setting out its findings in relation to competition in the energy market. The report concluded that despite the reforms introduced by OFGEM, there continues to be significant consumer and public concern regarding the energy market. The report specifically highlights concerns around: weak customer response; evidence of incumbency advantages; evidence of possible tactic coordination; vertical integrations and barriers to entry; and increased supplier profits. As a result, OFGEM made a reference to the CMA to investigate the supply and acquisition of energy in Great Britain.
On 24 July 2014, the CMA published its statement of issues setting out the scope of its investigation and inviting submissions on the issues identified. SSE responded formally to that statement of issues in August 2014, pointing out that the Great Britain energy market is generally well-functioning and benefiting customers, while highlighting a number of areas where there may be potential for reforms that produce additional benefits for customers. In February 2015, the CMA published its working papers and annotated Issues Statement which provided an indication of the CMA's emerging thinking in light of the evidence that has been submitted by the parties. On 7 July 2015 the CMA published its initial verdict on the state of competition in the GB energy market. These findings are provisional and are still subject to change. SSE will now submit a comprehensive written response in advance of publication of the CMA's final report which is required by 25 December 2015 and the implementation of any remedies by mid-2016.
In the north of Scotland, the licensed transmission network owner is SHE Transmission plc. SHE Transmission holds a licence for the transmission of electricity.
SHE Transmission has a duty under the Electricity Act 1989 to develop and maintain an efficient, co-ordinated and economical system of electricity transmission that facilitates competition in the supply and generation of electricity. SHE Transmission is regulated by the Authority. Under the licence, where it is reasonable to do so, SHE Transmission is under a statutory duty to offer terms to connect any customer that requests a connection within its area and to maintain that connection. SHE Transmission's licence may be terminated on 25 years' notice given by the Secretary of State for Energy and Climate Change (or any successor) (the "Secretary of State") and may be revoked immediately in certain circumstances including insolvency or failure to comply with an enforcement order made by OFGEM.
SHE Transmission is subject to a control on the prices it can charge and the quality of supply it must provide. Its activities are regulated under the transmission licence pursuant to which income generated is subject to a price cap regulatory framework that provides economic incentives to minimise operating, capital and financing costs. The current electricity transmission price control commenced on 1 April 2013. This covers the eight year period until 31 March 2021. The price control is called RIIO-T1. A mid-period review of RIIO-T1 is expected to be conducted during 2016. OFGEM is expected to consult on the scope of this review in late 2015.
Under the RIIO-T1 price control model, OFGEM can approve large capital investments proposed by SHE Transmission. During 2014, OFGEM approved all three projects submitted by SHE Transmission: Caithness Moray, Kintyre Hunterston and Beauly Mossford overhead line.
OFGEM is currently undertaking a review of the Great Britain regulated transmission framework: the Integrated Transmission Planning and Regulation project. One option under consideration is this project is the introduction of competition in the construction and ownership of onshore transmission.
SHEPD and SEPD hold licences to distribute electricity.
The electricity industry is subject to extensive legal and regulatory obligations and controls with which both SHEPD and SEPD must comply. SHEPD and SEPD are regulated by the Authority. The principal objective and duties of the Authority are described above. The general duties of an electricity distribution licence holder under the Electricity Act 1989 are to develop and maintain an efficient, co-ordinated and economical system of electricity distribution, and to facilitate competition in the supply and generation of electricity. Under the licence, where it is reasonable to do so, each of SHEPD and SEPD is under a statutory duty to connect any customer requiring electricity within its area and to maintain that connection. In each case, its licence may be terminated on 25 years' notice given by the Secretary of State and may be revoked immediately in certain circumstances including insolvency or failure to comply with an enforcement order made by OFGEM.
Each of SHEPD and SEPD is subject to control on the prices it can charge and the quality of supply it must provide. Their operations are regulated under their distribution licences pursuant to which income generated is subject to a price cap regulatory framework that provides economic incentives to minimise operating, capital and financing costs. OFGEM published its final determinations on the current RIIO-ED1 price control period on 28 November 2014, and SHEPD and SEPD confirmed their intention to accept this determination on 19 December 2014. The final determinations set the base revenue for SHEPD and SEPD for the 8 years from 1 April 2015. A mid-period review of RIIO-T1 is expected to be conducted during 2018. OFGEM is expected to consult on the scope of this review in late-2017.
On 3 March 2015 British Gas lodged an appeal with the CMA on the RIIO-ED1 final determination affecting five Distribution Network Operator groups, including SSEPD. Whilst the outcome of the appeal will not be known until September 2015, the CMA's determination of the appeal will not have an impact on distribution companies' base revenues in 2015/16.
Scotland Gas Networks plc and Southern Gas Networks plc (each a "network", together the "networks") are regulated by the Authority. The principal objective of the Authority, as set out under the Gas Act 1989, as amended by the Utilities Act 2000 and the Energy Acts 2004, 2008 and 2010 (the "Gas Act"), is to protect the interests of existing and future consumers in relation to gas conveyed through pipes; wherever appropriate by promoting effective competition. OFGEM provides the staff who support the role of the Authority and carry out the day to day activities of the statutory body. The duties of the Authority are described above.
The general duties of a gas transportation licence holder under the Gas Act are to develop and maintain an efficient and economical pipeline system for the conveyance of gas; so far as it is economical to do so, comply with any reasonable request for a connection to the system; facilitate competition in the supply of gas; and avoid any undue preference or undue discrimination in the provision of connections and in the conveyance of gas. The licence of each network may be terminated on 10 years' notice given by the Secretary of State and may be revoked immediately in certain circumstances including insolvency or failure to comply with an enforcement order made by OFGEM.
Each network is subject to control on the prices it can charge and the quality of service it must provide. The operations of each network are regulated under its gas transportation licences pursuant to which income generated is subject to a price cap regulatory framework that provides economic incentives to minimise operating, capital and financing costs. The current gas distribution price control commenced on 1 April 2013 and covers the eight year period until 31 March 2021. A mid-period review of RIIO-GD1 is expected to be conducted during 2016. OFGEM is expected to consult on the scope of this review in late 2015.
The comments below, which apply only to persons who are beneficial owners of the Notes, concern only certain withholding obligations and reporting requirements with respect to the Notes and are of a general nature based on current United Kingdom tax law as applied in England and Wales, and HM Revenue & Customs practice (which may not be binding on HM Revenue & Customs), and are not intended to be exhaustive. The comments below do not deal with any other transaction implications of acquiring, holding or disposing of the Notes. They assume that there will be no substitution of an entity not resident in the UK for tax purposes in place of the Issuer and do not address the consequences of any such substitution (notwithstanding that such substitution is permitted by the terms and conditions of the Notes). References in this part to "interest" shall mean amounts that are treated as interest for the purposes of United Kingdom taxation. Any Noteholders or Couponholders who are in doubt as to their own tax position should consult their professional advisers.
The Notes issued will constitute "quoted Eurobonds" within the meaning of section 987 of the Income Tax Act 2007 provided they are and continue to be listed on a recognised stock exchange, within the meaning of section 1005 Income Tax Act 2007. The London Stock Exchange is a recognised stock exchange for these purposes. Notes will be treated as listed on the London Stock Exchange if they are included in the Official List by the UK Listing Authority and are admitted to trading on the London Stock Exchange.
Whilst the Notes are and continue to be quoted Eurobonds, payments of interest by the relevant Issuer on the Notes may be made without withholding or deduction for or on account of UK income tax.
In all other cases, interest will generally be paid by the relevant Issuer under deduction of UK income tax at the basic rate (currently 20 per cent.), subject to the availability of other reliefs or exceptions or to any direction to the contrary from HM Revenue & Customs in respect of such relief as may be available pursuant to the provisions of any applicable double taxation treaty. However, there should be no withholding or deduction for or on account of UK income tax if the relevant interest is paid on Notes with a maturity date of less than one year from the date of issue and which are not issued under arrangements the intention or effect of which is to render such Notes part of a borrowing with a total term of a year or more. If any amount must be withheld by the relevant Issuer on account of UK tax from payments of interest on the Notes then such Issuer will, subject to the provisions of Condition 9 of the Terms and Conditions of the Notes, pay such additional amounts as will result in the Noteholders or Couponholders receiving an amount equal to that which they would have received had no such withholding been required.
Interest on the Notes constitutes UK source income for UK tax purposes and, as such, may be subject to UK tax by direct assessment even where paid without withholding. However, interest with a UK source received without deduction or withholding on account of UK tax will not be chargeable to UK tax in the hands of a Noteholder who is not resident for tax purposes in the UK unless that Noteholder carries on a trade, profession or vocation in the UK through a UK branch or agency or, in the case of a corporate Noteholder, carries on a trade through a UK permanent establishment, in connection with which the interest is received or to which the Notes are attributable, in which case tax may be levied on the UK branch or agency, or permanent establishment. There are exemptions for interest received by certain categories of agent (such as some brokers and investment managers).
The provisions relating to additional amounts referred to in Condition 9 of the Terms and Conditions of the Notes would not apply if HM Revenue and Customs sought to assess the person entitled to the relevant interest or (where applicable) profit on any Note directly to UK income tax. However, exemption from or reduction of such UK tax liability might be available under an applicable double taxation treaty.
Information relating to securities and accounts may be required to be provided to HM Revenue & Customs in certain circumstances. This may include the value of the Notes, amounts paid or credited with respect to the Notes, details of the holders or beneficial owners of the Notes (or the persons for whom the Notes are held), details of the persons who exercise control over entities that are, or are treated as, holders of the Notes, details of the persons to whom payments derived from the Notes are or may be paid and information and documents in connection with transactions relating to the Notes. Information may be required to be provided by, amongst others, the Issuer, the holders of the Notes, persons by (or via) whom payments derived from the Notes are made or who receive (or would be entitled to receive) such payments, persons who effect or are a party to transactions relating to the Notes on behalf of others and certain registrars or administrators. In certain circumstances, the information obtained by HM Revenue & Customs may be provided to tax authorities in other countries.
Notes may be issued at an issue price of less than 100 per cent. of their principal amount. Any discount element (for UK tax purposes) on any such Notes will not generally be subject to any withholding or deduction for or on account of United Kingdom income tax pursuant to the provisions mentioned above, but may be subject to the reporting requirements outlined above.
Where Notes are to be, or may fall to be, redeemed at a premium, as opposed to being issued at a discount, then any such element of premium may constitute a payment of interest. Payments of interest are subject to withholding or deduction for or on account of United Kingdom income tax and reporting requirements as outlined above.
The EU has adopted a Directive regarding the taxation of savings income. The Directive requires EU Member States to provide to the tax authorities of other EU Member States details of payments of interest and other similar income paid by a person established within its jurisdiction to (or secured by such a person for the benefit of) an individual resident or to (or secured for) certain limited types of entities established in that other Member State. However, for a transitional period Austria is instead required (unless during that period it elects otherwise) to operate a withholding system in relation to such payments (subject to a procedure whereby, on meeting certain conditions, the beneficial owner of the interest or other income may request that no tax be withheld). Luxembourg, which before 1 January 2015 also operated a withholding tax under transitional rules, has now replaced such withholding tax with the information reporting regime described above. The ending of such transitional period is dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries.
A number of non-EU countries and territories have adopted similar measures.
The Council of the European Union has adopted the Amending Directive which would, when implemented, amend and broaden the scope of the requirements of the Savings Directive described above. The Amending Directive would expand the range of payments covered by the Savings Directive, in particular to include additional types of income payable on securities, and the circumstances in which payments must be reported or paid subject to withholding. For example, payments made to (or secured for) (i) an entity or legal arrangement effectively managed in an EU Member State that is not subject to effective taxation, or (ii) a person, entity or legal arrangement established or effectively managed outside of the EU (and outside any third country or territory that has adopted similar measures to the Savings Directive) which indirectly benefit an individual resident in an EU Member State, may fall within the scope of the Savings Directive, as amended. The Amending Directive requires EU Member States to adopt national legislation necessary to comply with it by 1 January 2016, which legislation must apply from 1 January 2017.
The Council of the European Union has also adopted a Directive (the "Amending Cooperation Directive") amending Council Directive 2011/16/EU on administrative cooperation in the field of taxation so as to introduce an extended automatic exchange of information regime in accordance with the Global Standard released by the OECD Council in July 2014. The Amending Cooperation Directive requires EU Member States to adopt national legislation necessary to comply with it by 31 December 2015, which legislation must apply from 1 January 2016 (1 January 2017 in the case of Austria). The Amending Cooperation Directive is generally broader in scope than the Savings Directive, although it does not impose withholding taxes, and provides that to the extent there is overlap of scope, the Amending Cooperation Directive prevails. The European Commission has therefore published a proposal for a Council Directive repealing the Savings Directive from 1 January 2016 (1 January 2017 in the case of Austria) (in each case subject to transitional arrangements). The proposal also provides that, if it is adopted, EU Member States will not be required to implement the Amending Directive. Information reporting and exchange will however still be required under Council Directive 2011/16/EU (as amended).
The attention of Noteholders is drawn to Condition 9 of the Terms and Conditions of the Notes.
On 14 February 2013, the European Commission published a proposal (the "European Commission's Proposal") for a Directive for a common FTT in Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia (the "participating Member States"). The European Commission's Proposal has very broad scope and could, if introduced, apply to certain dealings in Notes (including secondary market transactions) in certain circumstances. The issuance and subscription of Notes should, however, be exempt.
Under the European Commission's Proposal the FTT could apply in certain circumstances to persons both within and outside of the participating Member States. Generally, it would apply to certain dealings in Notes where at least one party is a financial institution, and at least one party is established or deemed to be established in a participating Member State.
A financial institution may be, or be deemed to be, "established" in a participating Member State in a broad range of circumstances, including (a) by transacting with a person established in a participating Member State or (b) where the financial instrument which is subject to the dealings is issued in a participating Member State.
Joint statements issued by participating Member States indicate an intention to implement the FTT by 1 January 2016. The proposed FTT remains subject to negotiation between the participating Member States and the timing remains unclear. Additional EU Member States may decide to participate. Prospective holders of Notes are advised to seek their own professional advice in relation to the FTT.
Pursuant to the foreign account tax compliance provisions of the Hiring Incentives to Restore Employment Act of 2010 ("FATCA"), non-U.S. financial institutions that enter into agreements with the IRS ("IRS Agreements") or become subject to provisions of local law intended to implement an inter-governmental agreement ("IGA legislation") entered into pursuant to FATCA, may be required to identify "financial accounts" held by U.S. persons or entities with substantial U.S. ownership, as well as accounts of other financial institutions that are not themselves participating in (or otherwise exempt from) the FATCA reporting regime. In order (a) to obtain an exemption from FATCA withholding on payments it receives and/or (b) to comply with any applicable IGA legislation, a financial institution that enters into an IRS Agreement or is subject to IGA legislation may be required to (i) report certain information on its U.S. account holders to the government of the United States or another relevant jurisdiction and (ii) withhold 30 per cent. from all, or a portion of, certain payments made to persons that fail to provide the financial institution information, consents and forms or other documentation that may be necessary for such financial institution to determine whether such person is compliant with FATCA or otherwise exempt from FATCA withholding. Non-U.S. financial institutions in a jurisdiction that has entered into an inter-governmental agreement ("IGA") are generally not expected to be required to withhold under FATCA or an IGA (or any IGA legislation) from payments that they make on securities such as the Notes.
Under FATCA, withholding is required with respect to payments to persons that are not compliant with FATCA or that do not provide the necessary information or documentation made on or after 1 January 2017 (at the earliest) in respect of "foreign passthru payments" and then only on "obligations" that are not treated as equity for U.S. federal income tax purposes and that are issued or materially modified on or after the date that is six months after the date on which the final regulations applicable to "foreign passthru payments" are filed in the Federal Register.
On 12 September 2012, the U.K. and the U.S. entered into the Intergovernmental Agreement to Improve International Tax Compliance and to Implement FATCA which was amended by an Exchange of Notes between the U.K. and U.S. governments dated 3 June 2013 and 7 June 2013 (the "U.K. IGA"). Section 222 of the Finance Act 2013 empowers Her Majesty's Treasury to make regulations giving effect to the U.K. IGA; the latest such regulations came into force on 30 June 2014. The U.K. IGA provides, inter alia, that the governments of the United States and the United Kingdom are committed to work together to develop a practical and effective alternative approach to achieve the policy objectives of foreign passthru payment and gross proceeds withholding. It is not yet certain how the U.S. and U.K. will address withholding on foreign passthru payments or whether such withholding will be required at all.
Whilst the Notes are in global form and held within the ICSDs, it is not expected that FATCA will affect the amount of any payment made under, or in respect of, the Notes by the relevant Issuer, any Paying Agent or the Common Depositary or Common Safekeeper for the ICSDs. However, FATCA may affect payments made to custodians or intermediaries in the subsequent payment chain leading to the ultimate investor if any such custodian or intermediary generally is unable to receive payments free of FATCA withholding. The Issuer's obligations under the Notes are discharged once it has paid the Common Depositary or Common Safekeeper for the ICSDs (as bearer, or registered holder, of the Notes) and the Issuers have therefore no responsibility for any amount thereafter transmitted through hands of the ICSDs and custodians or intermediaries. Investors should choose the custodians or intermediaries with care (to ensure each is compliant with FATCA or other laws or agreements related to FATCA) and provide each custodian or intermediary with any information, forms, other documentation or consents that may be necessary for such custodian or intermediary to make a payment free of FATCA withholding. In addition, the Agency Agreement expressly contemplates the possibility that the Notes may be exchanged for Definitive Notes in remote circumstances and therefore that they may be taken out of the ICSDs. If this were to happen, then a non-FATCA compliant holder could become subject to withholding. If any amount were to be deducted or withheld from interest, principal or other payments on the Notes as a result of FATCA, none of the Issuers, any Paying Agent or any other person would, pursuant to the Terms and Conditions of the Notes, be required to pay additional amounts as a result of the deduction or withholding.
The application of FATCA to Notes issued more than six months after the date on which the final regulations defining "foreign passthru payments" are filed with the U.S. Federal Register, (or whenever issued, in the case of Notes treated as equity for U.S. federal income tax purposes) may be addressed in a supplementary prospectus to this Prospectus, as applicable.
FATCA IS PARTICULARLY COMPLEX AND ITS APPLICATION TO THE ISSUER, THE NOTES AND THE HOLDERS IS SUBJECT TO CHANGE. EACH HOLDER OF NOTES SHOULD CONSULT ITS OWN TAX ADVISER TO OBTAIN A MORE DETAILED EXPLANATION OF FATCA AND TO LEARN HOW FATCA MIGHT AFFECT EACH HOLDER IN ITS PARTICULAR CIRCUMSTANCE.
Subject to the terms and on the conditions contained in an Amended and Restated Dealer Agreement dated 31 July 2014 (as amended or supplemented as at the Issue Date in respect of the relevant Notes, the "Dealer Agreement") between the Issuers, the Permanent Dealers and the Arranger, the Notes will be offered on a continuous basis by the Issuers to the Permanent Dealers. However, each Issuer has reserved the right to sell Notes directly on its own behalf to Dealers that are not Permanent Dealers. The Notes may also be sold by the relevant Issuer through the Dealers, acting as agents of such Issuer. The Dealer Agreement also provides for Notes to be issued in syndicated Tranches that are jointly and severally underwritten by two or more Dealers.
Each Issuer will pay each relevant Dealer a commission as agreed between them in respect of Notes subscribed by it. The Issuers have agreed to reimburse the Arranger for certain of its expenses incurred in connection with the establishment of the Programme and the Dealers for certain of their activities in connection with the Programme.
Each Issuer has agreed to indemnify the Dealers against certain liabilities in connection with the offer and sale of the Notes. The Dealer Agreement entitles the Dealers to terminate any agreement that they make to subscribe Notes in certain circumstances prior to payment for such Notes being made to the relevant Issuer.
The Notes have not been and will not be registered under the Securities Act, and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions exempt from the registration requirements of the Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S under the Securities Act.
Bearer Notes having a maturity of more than one year are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to a United States person, except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code of 1986, as amended, and regulations thereunder.
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that except as permitted by the Dealer Agreement, it has not offered, sold or delivered and will not offer, sell or deliver the Notes of any identifiable Tranche (i) as part of their distribution at any time or (ii) otherwise until 40 days after completion of the distribution of such Tranche as determined, and certified to the relevant Issuer, by the Issuing and Paying Agent, or in the case of Notes issued on a syndicated basis, the Lead Manager, within the United States or to, or for the account or benefit of, U.S. persons, and it will have sent to each dealer to which it sells Notes during the distribution compliance period a confirmation or other notice setting forth the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons.
The Notes are being offered and sold outside the United States to non-U.S. persons in reliance on Regulation S.
In addition, until 40 days after the commencement of the offering, an offer or sale of Notes within the United States by any dealer that is not participating in the offering may violate the registration requirements of the Securities Act.
This Prospectus has been prepared by the Issuer for use in connection with the offer and sale of the Notes outside the United States. The Issuer and the Dealers reserve the right to reject any offer to purchase the Notes, in whole or in part, for any reason. This Prospectus does not constitute an offer to any person in the United States. Distribution of this Prospectus by any non-U.S. person outside the United States to any U.S. person or to any other person within the United States, is unauthorised and any disclosure without the prior written consent of the Issuer of any of its contents to any such U.S. person or other person within the United States is prohibited.
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that:
The Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended, the "Financial Instruments and Exchange Act"). Accordingly, each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent and agree, that it has not, directly or indirectly, offered or sold and will not, directly or indirectly, offer or sell any Notes in Japan or to, or for the benefit of, any resident of Japan (which term used herein means any person resident in Japan, including any corporation or other entity organised under the laws of Japan) or to others for re-offering or re-sale, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and other relevant laws and regulations of Japan.
These selling restrictions may be modified by the agreement of the relevant Issuer (or, if applicable, all the Issuers) and the Dealers following a change in a relevant law, regulation or directive. Any such modification will be set out in the Final Terms issued in respect of the issue of Notes to which it relates or in a supplement to this Prospectus.
No representation is made that any action has been taken in any jurisdiction that would permit a public offering of any of the Notes, or possession or distribution of this Prospectus or any other offering material or any Final Terms, in any country or jurisdiction where action for that purpose is required.
Each Dealer has agreed, and each further Dealer appointed under the Programme will be required to agree, that it will, to the best of its knowledge, comply with all relevant laws, regulations and directives in each jurisdiction in which it purchases, offers, sells or delivers Notes or has in its possession or distributes this Prospectus, any other offering material or any Final Terms, in all cases at its own expense, and neither the relevant Issuer nor any other Dealer shall have responsibility therefor.
The form of Final Terms that will be issued in respect of each Tranche, subject only to the deletion of non-applicable provisions, is set out below:
Final Terms dated [●] [SSE plc]/ [Scottish Hydro Electric Power Distribution plc]/ [Scottish Hydro Electric Transmission plc]/ [Southern Electric Power Distribution plc] Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes] under the €10,000,000,000 Euro Medium Term Note Programme
Terms used herein shall be deemed to be defined as such for the purposes of the Conditions set forth in the Prospectus dated 23 July 2015 [and the supplemental Prospectus dated [●]] which [together] constitute[s] a base prospectus for the purposes of Article 5.4 of Directive 2003/71/EC, as amended (the "Prospectus Directive"). This document constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directive and must be read in conjunction with such Prospectus [as so supplemented]. Full information on the Issuer and the offer of the Notes is only available on the basis of the combination of these Final Terms and the Prospectus [as so supplemented]. The Prospectus [and the supplemental Prospectus] [is] [are] available for viewing at the website of the London Stock Exchange http://londonstockexchange.com/exchange/news/marketnews/market-news-home.html and during normal business hours copies may be obtained from [●].
[Terms used herein shall be deemed to be defined as such for the purposes of the Conditions (the "Conditions") set forth in the Prospectus dated [original date] [and the supplemental Prospectus dated [●]] and incorporated by reference into the Prospectus dated 23 July 2015. This document constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of Directive 2003/71/EC, as amended (the "Prospectus Directive") and must be read in conjunction with the Prospectus dated 23 July 2015 [and the supplemental Prospectus dated [●]], which [together] constitute[s] a base prospectus for the purposes of the Prospectus Directive, save in respect of the Conditions which are extracted from the Prospectus dated [original date] [and the supplemental Prospectus(es) to it dated [●]]. Full information on the Issuer and the offer of the Notes is only available on the basis of the combination of these Final Terms and the Prospectus [as so supplemented]. The Prospectuses [and the supplemental Prospectuses] are available for viewing at the website of the London Stock Exchange http://londonstockexchange.com/exchange/news/market-news/market-news-home.html and during normal business hours copies may be obtained from [●]].
| 1 | Issuer: | [SSE plc]/ |
|---|---|---|
| [Scottish Hydro Electric Power Distribution plc]/ | ||
| [Scottish Hydro Electric Transmission plc]/ | ||
| [Southern Electric Power Distribution plc] | ||
| 2 | (i) [Series Number:] |
[●] |
| (ii) [Tranche Number:] |
[●] | |
| 3 | Specified Currency or Currencies: | [●] |
| 4 | Aggregate Nominal Amount of Notes: | [●] |
| (i) [Series:] |
[●] | |
| (ii) [Tranche: |
[●]] | |
| (iii) | [Date on which the Notes become fungible: |
Not Applicable/The Notes shall be consolidated, form a single series and be interchangeable for trading purposes with [●] on [●]/the Issue Date/ exchange of the Temporary Global Note for interests in the Permanent Global Note, as referred to in paragraph [27] below [which is expected to occur on or about [●]].] |
|
|---|---|---|---|
| 5 | Issue Price: | [●] per cent, of the Aggregate Nominal Amount [plus accrued interest from [●]] |
|
| 6 | (i) | Specified Denominations: | [●] [and integral multiples of [●] in excess thereof up to and including [●]. No notes in definitive form will be issued with a denomination above [●] |
| (ii) | Calculation Amount: | [●] | |
| 7 | (i) | Issue Date: | [●] |
| (ii) | Interest Commencement Date: | [[●]/Issue Date/Not Applicable] | |
| 8 | Maturity Date: | [●] | |
| 9 | Interest Basis: | [[●] per cent. Fixed Rate] [[LIBOR/EURIBOR] +/- [●] per cent. Floating Rate] [Zero Coupon] [RPI Linked] (further particulars specified below) |
|
| 10 | Redemption/Payment Basis: | [Redemption at par] [RPI Linked Redemption] |
|
| 11 | Change | of Interest or Redemption/Payment Basis: |
[●]/Not Applicable |
| 12 | Put/Call Options: | [General Put] [Restructuring Event Put] [Change of Control Put] [SSE Restructuring Event Put] [Issuer Call] [Issuer Maturity Par Call] |
|
| 13 | [[Date [Board] approval for issuance of Notes obtained:] |
[●] [and [●], respectively]] | |
| PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE | |||
| 14 | Fixed Rate Note Provisions: | [Applicable/Not Applicable] | |
| (i) | Rate[(s)] of Interest: | [●] per cent, per annum [payable [annually/semi annually/quarterly/monthly] in arrear] |
|
| (ii) | Interest Payment Date(s): | [●] in each year | |
| (iii) | Fixed Coupon Amount[(s)]: | [●] per Calculation Amount | |
| (iv) | Broken Amount(s): | [●] per Calculation Amount payable on the Interest Payment Date falling [in/on] [●] |
|
| (v) | Day Count Fraction: | [Actual/Actual][Actual/Actual (ISDA)] [Actual/365 (Fixed)] [Actual/360] [30/360/360/360/Bond Basis] |
| [30E/360/Eurobond Basis] [30E/360 (ISDA)] |
||
|---|---|---|
| [Actual/Actual (ICMA)] | ||
| (vi) [Determination Dates: |
[[●] in each year/[Not Applicable]] | |
| 15 | Floating Rate Note Provisions: | [Applicable/Not Applicable] |
| (i) Interest Period(s): |
[●] | |
| (ii) Specified Interest Payment Dates: |
[●] | |
| (iii) First Interest Payment Date: |
[●] | |
| (iv) Interest Period Date: |
[●] | |
| (v) Business Day Convention: |
[Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention] |
|
| (vi) Business Centre(s): |
[●] | |
| (vii) Manner in which the Rate(s) of Interest is/are to be determined: |
[Screen Rate Determination/ISDA Determination] | |
| (viii)Party responsible for calculating the Rate(s) of Interest and/or Interest Amount(s) (if not the [Agent]): |
[●] | |
| (ix) Screen Rate Determination: |
||
| – Reference Rate: |
[LIBOR/EURIBOR] | |
| – Interest Determination Date(s): |
[●] | |
| – Relevant Screen Page: |
[●] | |
| (x) ISDA Determination: |
||
| – Floating Rate Option: |
[●] | |
| – Designated Maturity: |
[●] | |
| – Reset Date: |
[●] | |
| – [ISDA Definitions: |
2006] | |
| (xi) Linear Interpolation: |
[Not Applicable]/[Applicable – the Rate of Interest for the [long/short] [first/last] Interest Period shall be calculated using Linear Interpolation] |
|
| (xii) Margin (s): | [+/-][●] per cent. per annum | |
| (xiii)Minimum Rate of Interest: | [●] per cent. per annum | |
| (xiv) Maximum Rate of Interest: | [●] per cent. per annum | |
| (xv) Day Count Fraction: | [Actual/Actual][Actual/Actual (ISDA)] [Actual/365 (Fixed)] [Actual/360] [30/360/360/360/Bond Basis] [30E/360/Eurobond Basis] [30E/360 (ISDA)] [Actual/Actual (ICMA)] |
|
| 16 | Zero Coupon Note Provisions: | [Applicable/Not Applicable] |
| (i) Amortisation Yield: |
[●] per cent. per annum |
| (ii) | Day Count Fraction in relation to Early Redemption Amount: |
[Actual/Actual] [Actual/Actual (ISDA)] [Actual/365 (Fixed)] [Actual/360] [30/360/360/360/Bond Basis] [30E/360/Eurobond Basis] |
|
|---|---|---|---|
| [30E/360 (ISDA)] | |||
| [Actual/Actual (ICMA)] | |||
| 17 | RPI Linked Note Provisions: | [Applicable/Not Applicable] | |
| (i) | Rate of Interest: | [●]/[Not Applicable] | |
| (ii) | Base Index Figure: | [●]/[Not Applicable] | |
| (iii) | Reference Gilt: | [●]/[Not Applicable] | |
| (iv) | Index Figure applicable: | [3 months lag/8 months lag] | |
| (v) | Party responsible for calculating the Rate(s) of Interest and/or Interest Amount(s) (if not the [Agent]): |
[●]/[Not Applicable] | |
| (vi) | Interest Determination Date(s): | [●] | |
| (vii) Interest Period(s): | [●] | ||
| (viii)Specified Interest Payment Dates: | [●] | ||
| (ix) | Business Day Convention: | [Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention] |
|
| (x) | Business Centre (s): | [●] | |
| (xi) | Minimum Rate of Interest: | [●] per cent. per annum | |
| (xii) Maximum Rate of Interest: | [●] per cent. per annum | ||
| (xiii)Day Count Fraction: | [Actual/Actual] [Actual/Actual (ISDA)] [Actual/365 (Fixed)] [Actual/360] [30/360/360/360/Bond Basis] [30E/360/Eurobond Basis] [30E/360 (ISDA)] [Actual/Actual (ICMA)] |
||
| PROVISIONS RELATING TO REDEMPTION | |||
| 18 | Call Option: | [Applicable/Not Applicable] | |
| (i) | Optional Redemption Date(s): | [●] | |
| (ii) | Optional Redemption Amount(s): | [●] per Calculation Amount | |
| (iii) | If redeemable in part: | ||
| (a) Minimum Redemption Amount: |
[●] per Calculation Amount | ||
| (b) Maximum Redemption Amount: |
[●] per Calculation Amount | ||
| (iv) | Notice period: | [●] | |
| 19 | Issuer Maturity Par Call: | [Applicable/Not Applicable] | |
| Notice period: | [●] | ||
| 20 | General Put Option: | [Applicable/Not Applicable] |
| (i) Optional Redemption Date(s): |
[●] | |
|---|---|---|
| (ii) Optional Redemption Amount(s): |
[●] per Calculation Amount | |
| (iii) Notice period: |
[●] | |
| 21 | Restructuring Event Put Option: | [Applicable/Not Applicable] |
| (i) Restructuring Event Redemption Amount: |
[●] | |
| (ii) Put Period: |
[●] | |
| (iii) Put Date: |
[●] | |
| 22 | Change of Control Put Option: | [Applicable/Not Applicable] |
| (i) Change of Control Redemption Amount: |
[●] | |
| (ii) Put Period: |
[●] | |
| (iii) Put Date: |
[●] | |
| 23 | SSE Restructuring Event Put Option: | [Applicable/Not Applicable] |
| (i) SSE Restructuring Event Redemption Amount: |
[●] | |
| (ii) Put Period: |
[●] | |
| (iii) Put Date: |
[●] | |
| 24 | Final Redemption Amount of each Note: | [[●] per Calculation Amount] |
| [In cases where the Final Redemption Amount is RPI Linked: |
||
| (i) Party responsible for calculating the Final Redemption Amount (if not the Calculation Agent): |
[●]/[Not Applicable] | |
| (ii) Determination Date(s): |
[●] | |
| (iii) Payment Date: |
[●] | |
| (iv) Minimum Final Redemption Amount: |
[●] per Calculation Amount | |
| (v) Maximum Final Redemption Amount: |
[●] per Calculation Amount] | |
| 25 | Early Redemption Amount: | |
| Early Redemption Amount(s) per Calculation Amount payable on redemption for taxation reasons or on event of default or other early redemption |
[●] | |
| 26 | Indexation: | [Applicable/Not Applicable] |
| (i) Base Index Figure: |
[●] | |
| (ii) Reference Gilt: |
[●] | |
| (iii) Index Figure applicable: |
[3 month lag]/[8 month lag] | |
| GENERAL PROVISIONS APPLICABLE TO THE NOTES | ||
| 27 | Form of Notes: | Bearer Notes |
[Temporary Global Note exchangeable for a Permanent
| Global Note which is exchangeable for Definitive Notes in the limited circumstances specified in the Permanent Global Note] |
||
|---|---|---|
| [Temporary Global Note exchangeable for Definitive Notes on [●] days' notice] |
||
| [Permanent Global Note exchangeable for Definitive Notes in the limited circumstances specified in the Permanent Global Note] |
||
| [Registered Note] | ||
| 28 | New Global Note: | [Yes] [No] |
| 29 | Financial Centre(s): | [Not Applicable/[●]] |
| 30 | Talons for future Coupons to be attached to Definitive Notes: |
[No/Yes. As the Notes have more than 27 coupon payments, talons may be required if, on exchange into definitive form, more than 27 coupon payments are still to be made.] |
| 31 | U.S. Selling Restrictions: | [Reg. S Compliance Category 2; TEFRA C/TEFRA D/ TEFRA not applicable] |
[[●] has been extracted from [●]. The Issuer confirms that such information has been accurately reproduced and that, so far as it is aware, and is able to ascertain from information published by [●], no facts have been omitted which would render the reproduced information inaccurate or misleading.]
Signed on behalf of the Issuer:
By: ...............................................................................
Duly authorised
Ratings: The Notes to be issued have been rated:
[[Standard & Poor's Credit Market Services Europe Limited: [●]]
[Moody's Investors Service Ltd.: [●]]
["Save as discussed in ["Subscription and Sale"], so far as the Issuer is aware, no person involved in the offer of the Notes has an interest material to the offer."]
4 [Fixed Rate Notes only — YIELD
Indication of yield: [●]
The yield is calculated at the Issue Date on the basis of the Issue Price. It is not an indication of future yield.]
Information relating to the UK Retail Price Index (all items) published by the Office of National Statistics can be found at www.statistics.gov.uk.]
| 6 | OPERATIONAL INFORMATION | ||
|---|---|---|---|
| ISIN: | [●] | ||
| Common Code: | [●] | ||
| Any clearing system(s) other than Euroclear Bank S.A./N.V. and Clearstream Banking, société anonyme and the relevant identification number(s): |
[Not Applicable/[●]] | ||
| Delivery: | Delivery [against/free of] payment | ||
| Names and addresses of additional Paying Agent(s) (if any): |
[●] |
The address of Euroclear is 1 Boulevard du Roi Albert II, B-1210 Brussels, Belgium and the address of Clearstream, Luxembourg is 42 Avenue JF Kennedy, L-1855 Luxembourg. The address of any alternative clearing system will be specified in the applicable Final Terms.
(iii) the Memorandum and Articles of Association of each Issuer;
(iv) the published annual report and audited consolidated financial statements of SSE for the financial years ended 31 March 2014 and 31 March 2015, respectively, and the audited financial statements of SHEPD, SHE Transmission and SEPD for the financial years ended 31 March 2013 and 31 March 2014, respectively;
The Prospectus and the Final Terms for Notes that are listed on the Official List and admitted to trading on the Market will be published on the website of the Regulatory News Service operated by the London Stock Exchange at www.londonstockexchange.com/en-gb/pricesnews/marketnews.
In addition, in the ordinary course of their business activities, the Dealers and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of any the Issuers or the Issuers' affiliates. Certain of the Dealers or their affiliates that have a lending relationship with any of the Issuers routinely hedge their credit exposure to that Issuer consistent with their customary risk management policies. Typically, such Dealers and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in securities, including potentially the Notes issued under the Programme. Any such positions could adversely affect future trading prices of Notes issued under the Programme. The Dealers and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
Inveralmond House 200 Dunkeld Road Perth PH1 3AQ
Inveralmond House 200 Dunkeld Road Perth PH1 3AQ
Scottish Hydro Electric Transmission plc
Inveralmond House 200 Dunkeld Road Perth PH1 3AQ
55 Vastern Road Reading Berkshire RG1 8BU
The Royal Bank of Scotland plc 135 Bishopsgate London EC2M 3UR
One Canada Square 44th Floor London E14 5AA
5 The North Colonnade Canary Wharf London El 4 4BB
10 Gresham Street London EC2V 7AE
25 Cabot Square Canary Wharf London E14 4QA
Riverbank House 2 Swan Lane London EC4R 3BF
Banco Santander, S.A. Ciudad Grupo Santander Edificio Encinar Avenida de Cantabria s/n 28660 Boadilla de Monte Madrid
BNP Paribas 10 Harewood Avenue London NW1 6AA
Ropemaker Place 25 Ropemaker Street London EC2Y 9AJ
National Australia Bank Limited ABN 12 004 044 937 88 Wood Street London EC2V 7QQ
The Royal Bank of Scotland plc 135 Bishopsgate London EC2M 3UR
The Bank of New York Mellon, London Branch
One Canada Square London E14 5AL
The Bank of New York Mellon (Luxembourg) S.A. Vertigo Building – Polaris 2-4 rue Eugene Ruppert L-2453 Luxembourg
KPMG Audit Plc Saltire Court 20 Castle Terrace Edinburgh EH1 2EG
To each Issuer as to English law To SHEPD, SHE Transmission and SSE as to Scottish law
Freshfields Bruckhaus Deringer LLP
65 Fleet Street London EC4Y 1HS CMS Cameron McKenna LLP
Saltire Court 20 Castle Terrace Edinburgh EH1 2EN
To the Dealers and the Trustee as to English law
Linklaters LLP One Silk Street London EC2Y 8HQ
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