Regulatory Filings • Aug 25, 2016
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 Corporate Banking
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 9 | |
| RISK FACTORS 10 | |
| OVERVIEW OF THE PROGRAMME20 | |
| TERMS AND CONDITIONS OF THE NOTES 24 | |
| SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM 62 | |
| USE OF PROCEEDS68 | |
| DESCRIPTION OF THE ISSUERS 69 | |
| TAXATION92 | |
| 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 SSE Group is divided into three principal business segments: producing, generating and trading electricity and gas ("Wholesale"), transmitting and distributing electricity ("Networks") and supplying electricity, gas and related services to homes and businesses ("Retail", which includes "Enterprise"). Each business division has a distinct risk profile. For example, Networks is heavily regulated and is characterised by stable, inflation linked cashflows, whereas the Wholesale business is heavily exposed to risks relating to the energy and commodities market. Retail is particularly affected by affordability, transformation and political risks, while Enterprise is exposed to the risks associated with rapid growth in a highly competitive marketplace.
Although SSE has implemented high standards of control and mitigation, the nature of these risks mean that they cannot be eliminated completely. In determining its appetite for specific risks, the Board is guided by three key principles:
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 networks, 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. Since then, the level of financial penalties issued by OFGEM has noticeably increased from levels seen in previous years. For example, in April 2016, ScottishPower was required to pay £18 million in respect of customer service failings. OFGEM typically allows companies to make a redress payment to charity in lieu of a traditional penalty payment. In practice this is agreed through negotiated settlement, though OFGEM has powers to, where it is appropriate, make a customer redress order should redress not be agreed in enforcement cases.
OFGEM's retail market reforms (RMR) 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.
After two years, the CMA has completed its independent investigation. Following the Provisional Decision on Remedies (PDR) published in March 2016, the CMA published its final report on Energy Market Reforms on 24 June 2016 setting out proposals for a substantive package for customers. The findings have been largely endorsed by OFGEM which has published a high level implementation strategy detailing how it intends to take forward those remedies allocated to OFGEM. It will require significant resource and investment to implement the proposed remedies and suppliers will be under a considerable challenge to do so within the necessary timeframes and to customers' satisfaction. The Smart Meter Programme, Midata, Project Nexus and the faster switching programme mean that there is an unprecedented pipeline of technological change placing real constraints on licensed suppliers' IT systems.
The SSE Group has expressed support for the vast majority of remedies proposed by the CMA, believing they will further enhance the market framework for effective competition and help customers to engage in the market. In particular:
improved governance of both Codes and the OFGEM-DECC relationship were also welcomed.
Meanwhile, OFGEM is now looking at introducing a new approach to regulation that will be reliant on principles, rather than prescriptive rules. This piece of work, referred to as the "Future of Retail Regulation" (FRR) project, will examine the current rulebook with a view to introducing additional overarching principles whilst removing areas of unnecessary prescription. OFGEM hopes that this approach will safeguard the interests of customers, whilst at the same time ensuring that regulation does not stand in the way of innovation.
In March 2015 British Gas Trading Limited (BGT) lodged an appeal with the CMA on the RIIO-ED1 final determination that could have affected the five distribution network operator groups, including SSEPD (at the same time, Northern Power Grid (NPg) also lodged an appeal seeking to enhance its own price control settlement). The CMA published its Final Determination on 29 September 2015. Of the six original BGT grounds for appeal, only one was partially upheld. The decision did not materially reduce the forecast RIIO-ED1 return, nor as a consequence did it reduce the return below the target set by SSEPD and on which the price control settlements were accepted. Whilst the impact of the appeal on SSEPD was largely benign, the raising of the appeal has influenced the regulatory landscape and the way that future price controls will be set..
The SSE Group owns and operates a diverse range of complex generating plants, 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.
The SSE Group is exposed to fluctuations in the physical volume and price of certain commodities, through (i) its requirement to match volumes of purchased gas and electricity with customer demand; and (ii) exposures arising due to long-term investment in generation and Exploration and Production ("E&P") assets driven by the cost of fuel and other commodities required for generation, and through revenues realised from these assets.
A significant proportion of the 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, which is itself influenced by a number of complexities including geopolitical events, global economic growth, weather and technology. Global commodity prices make 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.
The SSE Group is involved in a broad range of energy businesses in the UK and Ireland including the production, storage, transmission, distribution, supply of electricity, gas and related services. The decisions taken in operating these contribute to the overall cost of energy to the consumer, which is in turn driven by a number of factors including commodity costs, infrastructure costs and energy sector overheads. Costs can also be impacted by public policies aimed at supporting measures for the reduction of carbon emissions, while increased energy efficiency can lead to reduced consumption of energy. 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.
Although safety is one of the SSE Group's core values, by the nature of its operations, SSE faces a number of significant safety risks, in particular relating to process safety. A major incident at one of SSE's hydro, gas storage or E&P assets could have a material adverse impact on employees, contractors, members of the public, the environment and property.
The SSE Group has crisis management and business continuity plans in place, which are designed for the management of, and recovery from, significant safety or environmental events. For offshore E&P assets where SSE is not the operator, there are a number of assurance measures in place to ensure that the proven and approved operator partners maintain and adopt high standards for their safe management and operation. This includes regular engagement across all aspects of the operation, with an emphasis on safety and technical assurance audits and verification using both internal and third party resources.
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 markets in which the SSE Group operates are subject to a high degree of regulatory and legislative intervention at both domestic and EU level. This legal and compliance framework can change explicitly with the introduction of new or revised legislation, or implicitly due to evolving interpretation and legal precedent, could adversely impact the SSE Group's market position, financial position or competiveness.
In addition, under the European Referendum Act 2015, a referendum on the UK's membership of the EU was held on 23 June 2016. Under the referendum, the UK voted by a majority to withdraw from the EU. Such a withdrawal can however only be formally implemented by a notification to the EU under Article 50 of the Treaty on European Union (previously known as the Treaty of Maastricht). As at the date of this Prospectus, such notification has not been provided. The expectation is that a lengthy period of negotiation (prescribed under EU law to be a maximum of two years) between the UK and the EU on the terms and conditions of such withdrawal is due to commence. The uncertainty surrounding the implementation and effect of such withdrawal, including, the commencement of the exit negotiation period, the terms and conditions of such exit, the uncertainty in relation to the legal and regulatory framework that would apply to the UK and its relationship with the remaining members of the EU (including, in relation to trade) during a withdrawal process and after any such withdrawal is effected, has caused and is likely to cause increased economic volatility and market uncertainty globally. Furthermore, global markets and economic conditions have been negatively impacted in recent years by the banking and sovereign debt crisis in the EU and globally. In particular, concerns have been raised with respect to continuing economic, monetary and political conditions in the region comprised of the Member States of the EU that have adopted the single currency in accordance with the Treaty establishing the European Community (signed in Rome on 25 March 1957) as amended (the Eurozone). The market's anticipation of these (potential) impacts (including the occurrence of the UK's withdrawal from the EU) could adversely affect the business, financial condition and liquidity of the SSE Group.
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.
On 29 July 2016 OFGEM announced that it was investigating whether SSE has complied with a number of requirements of its electricity and gas supply licences following concerns that SSE might not have been treating its customers fairly when switching them to pre-payment meters (PPMs). The investigation does not mean that a company has breached licence conditions or other obligations and SSE is cooperating fully with OFGEM. However, any 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.
The SSE Group's strategic focus is the efficient operation of, and investment in, a balanced range of energy businesses to support annual dividend growth. The SSE Group strives to be a leading provider of energy and related services within an industry where innovation, de-carbonisation and competition are leading to continual technological advancements and changes in customer expectations and options. To continue to achieve this, a number of strategic change programmes are under way. It is vital that the SSE Group successfully delivers these to meet the current and future needs of customers in the most efficient way possible. 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 the SSE Group earnings, whilst supply interruptions could result in adverse publicity, negative customer perception and possible regulatory action.
The SSE Group's electricity networks are part of the UK's critical infrastructure assets and as such are central to the functioning of the economy. Additionally, the SSE Group is reliant on a number of key IT systems to support its ongoing operations. A loss of these systems could be caused by malicious cyber attack, software or hardware issues, inadequate investment in maintenance or by poor operational performance. Any failure in these systems 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 has obligations in respect of three defined benefit pension schemes (including Southern Gas Networks) and currently, in aggregate, there is an actuarial deficit between the current 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. Although the defined benefit pension schemes each have investment advisors in place who have developed road-maps with the intention of the schemes becoming fully funded, within fifteen years, 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 the SSE Group 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 major construction and IT projects nearing completion and its single biggest construction project, the Caithness-Moray high voltage transmission link, is 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 also 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.
With respect to the Clean-up Call Option by the Issuer (Condition 6(h)), there is no obligation on the Issuer to inform investors if and when the 80 per cent. threshold of the initial aggregate principal amount of a particular Series of Notes has been reached or is about to be reached, and the Issuer's right to redeem will exist notwithstanding that immediately prior to the serving of a notice in respect of the exercise of the Clean-up Call Option, the Notes may have been trading significantly above par, thus potentially resulting in a loss of capital invested.
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.
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 |
|---|---|
| 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 Morgan Stanley & Co. International plc MUFG Securities EMEA 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. |
| 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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| 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". |
| English. |
| 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. |
| 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. |
| Bearer Notes will be issued in compliance with U.S. Treas. Reg. §1.163-5(c)(2)(i)(D) (or any successor rules in substantially the same form that are applicable for purposes of Section 4701 of the U.S. Internal Revenue Code of 1986, as amended (the "Code")) (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) (or any successor rules in substantially the same form that are applicable for purposes of Section 4701 of the Code) (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 25 August 2016 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), 6(g) or 6(h) 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), 6(g) or 6(h) 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), 6(g) or 6(h) 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:
(i) The redemption amount payable pursuant to Condition 6(a), 6(b), 6(c), 6(d), 6(e), 6(f), 6(g) or 6(h) and the amount payable pursuant to Condition 11 upon repayment of the Notes, as the case may 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:
5 Only applicable where SHEPD, SHE Transmission, or SEPD is the Issuer
6 Only applicable where SSE is the Issuer
$$
IFA = RPI_{m-3} \frac{(Day of Calculation Date-1)}{(Days in month of Calculation Date)} x (RPI_{m 2} - RPI_{m3})
$$
and rounded to five decimal places (0.000005 being rounded upwards) and where:
"IFA" means the Index Figure applicable;
"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).
Condition 7(b)(iii) or 6(f) (notwithstanding that the Issuer may subsequently be advised that they do not fall within Condition 7(b)(iii) or 6(f)), the Index Figure relating to any month (the "calculation month") which is required to be taken into account for the purposes of the determination of the Index Figure applicable for any date is not published on or before the fourteenth day before the date on which such payment is due (the "date for payment"), the Index Figure relating to the relevant calculation month 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.
the Registrar or any Transfer Agent before the Record Date, such payment of interest may be made by transfer to an account in the relevant currency maintained by the payee with a Bank.
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.
(i) Upon the due date for redemption of Bearer Notes which comprise Fixed Rate Notes (other than RPI Linked Notes), such Bearer Notes should be surrendered for payment together with all unmatured Coupons (if any) relating thereto, failing which an amount equal to the face value of each missing unmatured Coupon (or, in the case of payment not being made in full, that proportion of the amount of such missing unmatured Coupon that the sum of principal so paid bears to the total principal due) shall be deducted from the Final Redemption Amount, Early Redemption Amount or Optional Redemption Amount, as the case may be, due for payment. Any amount so deducted shall be paid in the manner mentioned above against surrender of such missing Coupon within a period of 10 years from the Relevant Date for the payment of such principal (whether or not such Coupon has become void pursuant to Condition 10).
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:
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:
is hereinafter mentioned will be required) such failure continues for the period of 60 days (or such longer period as the Trustee may in its absolute discretion permit) next following the service by the Trustee of notice on the Issuer requiring the same to be remedied; or
7 Only applicable where SHEPD, SHE Transmission or SEPD is the Issuer.
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.
(v) to vary any method of, or basis for, calculating the Final Redemption Amount, the Early Redemption Amount or the Optional Redemption Amount, including the method of calculating the Amortised Face Amount,
(vi) to vary the currency or currencies of payment or denomination of the Notes, or
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.
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
8 Only applicable where SHEPD, SHE Transmission or SEPD is the Issuer.
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:
(i) the amount paid up or credited as paid up on the share capital of the Issuer; and
(ii) the total of the capital, revaluation and revenue reserves of the Group, including any share premium account, capital redemption reserve and credit balance on the profit and loss account, but excluding sums set aside for taxation and amounts attributable to minority interests and deducting any debit balance on the profit and loss account,
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;
a "Clean-Up Call Option" may be exercised by the Issuer in the event that Notes representing an aggregate amount equal to or exceeding 80 per cent. of the initial aggregate nominal amount of the Notes of the same Series have been redeemed or purchased and, in each case, cancelled;
"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:
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
(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. 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. If, in respect of any particular issue, there is a particular identified use of proceeds, this will be stated in the applicable Final Terms.
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 | |
|---|---|---|
| Richard Gillingwater CBE | Chairman | |
| Alistair Phillips-Davies | Chief Executive | |
| Gregor Alexander | Finance Director | |
| Crawford Gillies | Senior Independent Director | |
| Jeremy Beeton CB | Non-Executive Director | |
| Katie Bickerstaffe | Non-Executive Director | |
| Peter Lynas | Non-Executive Director | |
| Susan Bruce | Non-Executive Director | |
| Helen Mahy CBE | Non-Executive Director |
The members of the Board of Directors of SSE have the following significant outside activities:
Katie Bickerstaffe is Chief Executive of UK and Ireland Dixons Carphone plc.
Peter Lynas is Group Finance Director of BAE Systems plc and member of the BAE Systems Inc Board in the US.
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 2015 SSE through its wholly-owned subsidiary SSE E&P UK Limited, entered into an agreement with Total E&P UK Limited to acquire a 20 per cent. interest in the four gas fields and surrounding exploration acreage approximately 125km north west of the Shetland Islands, collectively known as the Greater Laggan Area; and a 20 per cent. interest in the new Shetland Gas Plant.
The acquisition was completed in October 2015. Total E&P UK Limited is the operator of, and will own a 60 per cent. stake in, these assets. The remaining 20 per cent. is owned by DONG Energy.
The transaction completed with cash consideration of £669 million (which reflects the value of the assets including associated UK capital allowances) SSE's share of forecast capital expenditure is expected to be around £190 million in the period to March 2019 to complete the entire development of the four primary fields (Laggan, Tormore, Edradour and Glenlivet) as well as the Shetland Gas Plant, of which £43 million was spent to 31 March 2016.
In January 2016 SSE sold a 10 per cent. stake in the 588MW BOWL project, situated in the outer Moray Firth to joint venture partner Copenhagen Infrastructure Partners (CIP), reducing SSE's holding to 40 per cent. On 20 May 2016 the £2.6 billion BOWL project was given the green light for construction by owners SSE (40 per cent.), CIP (35 per cent.) and SDIC Power (25 per cent.) after the project reached financial close. Work at the operations and maintenance facility in Wick and the transmission works in Moray will commence in 2016, with offshore construction commencing in 2017. The wind farm is expected to become fully operational by 2019.
In March 2016 SSE signed agreements for the sale of 49.9 per cent. of its operational 349.6MW Clyde Wind Farm located in South Lanarkshire to Greencoat UK Wind Plc ("UKW") and GMPF & LPFA Infrastructure LLP ("GLIL") for a headline consideration of £355 million.
When the 172.8MW extension to Clyde is commissioned (currently under construction, expected to be fully operational in 2017) the equity stake jointly owned by UKW and GLIL will be diluted to 30 per cent. with SSE retaining 70 per cent. In addition to completing the construction of the extension, SSE will provide long term management services for the day to day operations of all 522.4MW as well as long term route to market PPA's.
In May 2016, SSE announced it would be considering options to crystallise value from its long-term shareholding in SGN Ltd, the gas distribution business. The sale process is ongoing and consideration is being given to sell up to one third of the 50 per cent. equity stake, which would return value to shareholders or invested to create more value should there be the right opportunity.
In July 2016, SSE signed a sale and purchase agreement with DIF Infrastructure IV to dispose of the equity interest in its three remaining UK PFI street lighting special purpose entities ("SPEs").
The SPEs in Leeds, Stoke on Trent and Newcastle and North Tyneside are funded through a mix of senior debt and equity. The sale of SSE's equity interest would have reduced SSE's net debt at 31 March 2016 by around £138 million through the removal of project-related senior debt together with the cash consideration, although the exact amounts will not be finalised until completion of the sale of each of the SPEs due to their continued operation and trade.
It is expected that the disposal will be completed later in financial year 2016/17 following agreement with the relevant local authorities, the joint venture partner Royal Bank Leasing Limited and Senior Debt funders.
The street lighting SPE projects have 25 year agreements for the replacement, operation and maintenance of the street lighting assets with their respective local authorities and these operational responsibilities will continue to be carried out by SSE Contracting Limited under a parallel 25 year sub-contract with the SPEs.
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 0.7 million 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 |
| Rachel McEwen | 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 |
| Rachel McEwen | 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 |
| Rachel McEwen | 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 £7,957 million as at 31 March 2016, up £607 million from £7,350 million at 31 March 2015. As at 31 March 2016, the RAV comprised around: (i) £2,287 million for electricity transmission; (ii) £3,157 million for electricity distribution; and (iii) £2,513 million for gas distribution (i.e. 50 per cent. of SGN's total RAV).
Through price controls, OFGEM sets the index-linked revenue the network companies can earn through charges levied on users to cover costs and earn a return on regulated assets. While the RIIO Price Control mechanism is complex, these economically-regulated, lower-risk businesses provide relative predictability and stability for SSE and balance its activities in the competitive Wholesale and Retail markets. They are core to SSE's strategy in the short, medium and long-term and contribute significantly to its ability to deliver annual dividend increases. Under the RIIO price controls all network operators are incentivised to become more responsive to the needs of their customers and stakeholders and to engage effectively with them to help inform how they plan and run their businesses. SSE's Network businesses recognise that this requirement is key to ensuring it is accountable and responsive to the communities it serves.
SSE believes that it is the only energy company in the UK to be involved in electricity transmission, electricity distribution and gas distribution.
SSE's Networks businesses are at the core of the company's strategy both in the short and long term as they contribute significantly to SSE's ability to deliver annual dividend increases.
SHE Transmission is responsible for maintaining and investing in the electricity transmission network in the north of Scotland.
During 2015/16 SHE Transmission completed a number of upgrades and reinforcements to its transmission network in the north of Scotland. The projects, which were all completed on time and within their OFGEM allowances (nominal prices), are:
The replacement Beauly-Denny 400kV overhead line was energised in November 2015 and provides additional flexibility and electricity network resilience. As well as connecting new electricity generation to the transmission network one of the additional benefits of the new overhead line was realised during the big storms of the winter – storms Frank, Gertrude and Henry – when there was no loss of supply to generation customers. The replacement of its section of the Beauly-Denny line has required a total investment to date by SHE Transmission of around £650 million and it is continuing discussions with OFGEM regarding recovery of efficiently incurred costs additional to the original allowance of the project. Total costs are now not expected to exceed £670 million.
SHE Transmission's investment in these and other projects demonstrates its commitment towards supporting the transition to lower carbon forms of electricity generation. In delivering these essential infrastructure projects SHE Transmission has built on its continuing expertise in delivering increased capacity for electricity generation. The investment that SHE Transmission has made in its network has helped connect over 2GW of additional capacity and as a result has made its network more secure and resilient. With the current pipeline of development SHE Transmission is expected to increase its RAV from £2.3 billion as at March 2016 to around £3.0 billion by March 2018.
With an agreed investment of £1.12 million (2013/14 prices), the Caithness-Moray transmission reinforcement is SHE Transmission's flagship project and its largest single capital investment to date. The project, which will enable the connection of up to 1,200MW of additional generation capacity in the north of Scotland and the Northern Isles is progressing well and is scheduled to be operational by the end of 2018. For example, both land and subsea cable manufacture are continuing ahead of programme, with land cable production completed and delivered to site for both Caithness and Moray. The subsea cable manufacture is on course for completion by the end of 2016. Subsea activities will commence in the first quarter of 2017. First revenues were received in 2015/16 under the Strategic Wider Works mechanism.
Developers of generation capacity on the Scottish Islands continue to await clarity from the UK Government on whether EU State Aid clearance is obtained and their projects are eligible for Contracts for Difference ("CfD") in forthcoming auctions. Whilst this uncertainty remains, developers are unable to commit to final funding decisions on their projects. While it continues to engage with stakeholders, SHE Transmission is not therefore in a position to submit 'Needs Cases' to OFGEM for the island links to the Western Isles and Shetland. SHE Transmission continues to engage with OFGEM and developers and will submit Needs Cases for the island links later this year, if circumstances allow.
Following the publication in March 2015 of the final conclusions of its Integrated Transmission Planning and Regulation ("ITPR") project, OFGEM has continued the development of the regime for extending the use of competition in onshore transmission.
While ITPR poses some potential risks, the extension of competition into onshore transmission also presents opportunities for SHE Transmission. The experience it has built up both in-house and with its supply chain means that SHE Transmission is well placed for competitive delivery when it is implemented. Through continued engagement with OFGEM and DECC, SHE Transmission aims to ensure that its development portfolio, and specifically some of its more advanced projects, can be delivered as far as possible under the existing regulatory framework. It is also contributing to discussions on future arrangements that will deliver the transmission infrastructure required in a way that supports the UK Government's policy objectives, delivers value for end consumers and achieves a fair and reasonable return to investors.
OFGEM announced on 12 May 2016 that it would not conduct a mid-period review into SHE Transmission's RIIO T1 price control. SHE Transmission remains committed to delivering against its outputs while ensuring value for money for the remainder of RIIO T1.
The total volume of electricity distributed by SEPD and SHEPD during the financial year to 31 March 2015 was 39.56TWh, compared with 39.6TWh in the previous year. Capital expenditure in electricity distribution networks was £258.3 million in the year to 31 March 2016, compared to £327.6 million in the previous year.
During 2015/16, its first year under the incentives based RIIO ED1 price control, Scottish and Southern Energy Power Distribution Ltd ("SSEPD") has made significant steps in driving real change in its operations, processes and standards. The introduction of a change programme is ensuring that the business is able to meet the demands of the eight year price control. Its new sustainable business model, built on a combination of customer service and innovation, will bring benefits to customers while ensuring financial targets are achieved and a fair return is delivered to investors. The focus of the new price control is the delivery of efficient operations and the best possible experience for customers; and the business has prioritised its efforts on the incentives built into RIIO ED1 that are designed to encourage improvements in customer service.
The most financially significant of these are the two measures of loss of electricity supply: Customer Interruptions ("CIs") and Customer Minutes Lost ("CMLs"). In the first year of the new price control SSEPD's adoption of the "restore first, repair second" method was a driver in bringing down its CIs and CMLs. The continued investment in automation, network reinforcement and tree cutting also delivered improvements to help secure financial incentives. SSEPD's adoption of a regionalised model across its distribution areas has assigned responsibility and decision making to local teams which has helped to improve the response to power supply disruption during extreme weather events.
SSEPD's commitment to minimising the occurrence and duration of customer interruptions saw the Customer Minutes Lost reduced to 55 minutes (SHEPD) and 41 minutes (SEPD) per customer and for Customer Interruptions to reduce to 66 per 100 customers (SHEPD) and 47 per 100 customers (SEPD). This is the best-ever performance for SSE's Networks business.
The first awards from SSEPD's £1.3 million Resilient Communities Fund, which was established to support local communities in their preparation and response to emergencies, were made in 2015/16. The second round of nominations for funding has opened. The fund was established using money remaining from an amount agreed with OFGEM following weather-related electricity supply disruption over the Christmas period in 2013/14.
SGN manages the network that distributes natural and green gas to 5.9 million homes and businesses across Scotland and the south of England. In line with its equity holding SSE receives 50 per cent. of the distributable earnings from SGN, while through a managed service agreement, continues to provide some back-office support.
As at 31 March 2016, SGN's total RAV was £5.03 billion (including SSE's share of £2.51 billion). During 2015/16, SGN invested £325.6 million (£339.8 million in 2014/15) 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 2012/13 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.
In SSE's Preliminary Results on 18 May 2016 it was announced options would be considered for crystallising value from SSE's long-term shareholding in SGN, with a potential sale of up to one third of its 50 per cent. equity stake.
SSE's Energy Supply, Energy-Related Services and Enterprise businesses operate in competitive markets and are each focused on the changing energy needs of household, commercial and public sector customers. This means maintaining a clear focus on delivering the propositions and services that customers need. Put simply, the core requirement of these businesses is to put the current and future needs of customers at the heart of everything they do.
Key priorities for Retail in 2016/17 and beyond are (i) moving towards a stabilisation of customer numbers through enhanced sales and retention activities, as well as through realising SSE's customer service ambition; (ii) accelerating diversification through the national expansion of Home Services and continued growth in broadband and telephone; (iii) taking the smart opportunity by optimising deployment of smart meters and developing compelling smart-enabled customer propositions; (iv) continuing to improve the customer experience and deliver operational efficiencies by further digitalising the business; and (v) delivering continuing investment and growth in energy supply to commercial and public sector organisations.
SSE appreciates that its customers rely on its core products of electricity and gas to power and heat their homes in order to live safely and comfortably, and is therefore committed to keeping energy prices as low as possible. On 29 March 2016, SSE implemented its third price cut in Great Britain during the period of its unique two and a half year price freeze, reducing gas prices by a further 5.3 per cent. SSE's household energy customers have not seen a price increase since November 2013 and SSE's new gas prices are now 12 per cent. lower for a typical household customer than they were in 2013. While electricity wholesale prices have also fallen, this has been offset by nonenergy costs and in particular the cumulative impact of programmes to upgrade the country's energy infrastructure, which are levied predominantly against electricity.
In the year to 31 March 2016, SSE's energy customer accounts in Great Britain and Ireland fell from 8.58 million to 8.21 million. SSE is focused on addressing the decline in customer numbers it has experienced in recent years and is aiming to reduce significantly the rate of customer losses during the coming year. The market for energy supply in GB in particular continues to be intensely competitive, with political, regulatory and market factors all contributing to the rapid growth of new market entrants, of which 11 have come to market in the past year alone. Customers are also highly engaged: in March 2016 alone, over 475,000 customers switched supplier, with 43 per cent. switching to a smaller provider, according to Energy UK data. Increasingly, customers are switching via internet comparison sites, which now account for around 50 per cent. of switches compared to 25 per cent. seven years ago, and are driven almost exclusively by price. Similar forces are at work in the competitive markets in Ireland.
SSE firmly believes that its strategy of becoming a market-leading retailer of energy and essential services, by digitalising and diversifying its business, and consistently leading in customer service, is the right response to an increasingly competitive market, and one which will enable it to leverage its strong competencies in customer service and efficient operations.
It now has a number of key initiatives under way, including: (i) a significant upgrade of its customer-facing digital channels and websites to simplify and improve customer service while also minimising its cost to serve; (ii) diversifying though the national expansion of its Home Services business, which provides boiler and electrical services to customers; (iii) offering market-leading deals in the broadband and fixed-line telephony market in order to build scale in this business and further diversify SSE's customer base, seeking to offer additional products and value to existing energy customers; (iv) introducing additional resources, training and telephony services to its call centres to deliver on its ambition to build differentiation through service; and (v) optimising the smart meter rollout and developing new in-home customer experiences linked to smart data to drive digital customer engagement and achieve its service ambition.
At the same time SSE continues to invest in its brand to ensure it not only appeals to customers but is able to offer additional value and rewards linked to its sponsorship of sports, such as the SSE Women's FA Cup, and leading entertainment venues The SSE Hydro, The SSE Arena, Wembley, and The SSE Arena, Belfast. This investment is underpinned by SSE's ongoing efforts to streamline its operations and generate process efficiencies.
SSE's metering business is undergoing a transformation through the smart meter rollout; however, it still undertakes meter reading operations and meter operator work in all parts of Great Britain. SSE believes in the potential for the national roll-out of smart meters to transform the relationship between customers, their energy usage and their supplier in the coming years. It is therefore committed to delivering its roll-out in a way that is both cost-effective and customer-centric, with the primary objective of maximising the net benefits to customers.
SSE has been gradually ramping up its capacity and delivery of smart meters with a view to getting it right for customers first time to maximise engagement. As of 31 March 2016, SSE had installed more than 180,000 smart meters and installed its 200,000th meter in April 2016. 2016/17 is a pivotal year for the smart programme, with the central communications infrastructure provided by the Data Communications Company ("DCC") due to be delivered to a revised timetable which will see phased introduction in August and October 2016. While there remain other constraints to be addressed, getting the DCC up and running is a critical first step towards enabling
suppliers to build up to mass deployment. Any further delays to the DCC's delivery timetable must be reflected in the overall delivery timetable to avoid any negative impacts for customers.
SSE Enterprise incorporates six of SSE's businesses: Contracting, Energy Solutions, Rail, Slough Heat and Power, Telecoms and Utilities, supported by centralised sales and project delivery teams. As a multi-disciplined engineering services partner for businesses, building a sustainable infrastructure for the future, SSE Enterprise provides energy services to meet the needs of businesses and public sector organisations in a reliable and sustainable way.
With a significant self-delivery capability, SSE Enterprise; (i) designs, builds, maintains and operates complex mechanical and electrical engineering infrastructure; (ii) provides sector-leading energy management and data analytic services to help businesses optimise their energy performance, helping to reduce costs and emissions; (iii) provides industry-leading telecoms connectivity and data centre services, meeting the connectivity and communication needs of businesses with bespoke solutions; and (iv) designs builds, maintains and operates electricity, gas, water, heat and cooling networks for commercial and residential developments.
Creating sustainable, long-term value from wholesale markets for investors and customers is the strategic objective of SSE's Wholesale businesses. This should be delivered through the responsible production, storage and delivery of energy and related services; a focus on meeting the needs of its customers; ongoing rigour in optimising its portfolio of existing assets and those in development. SSE's wholesale segment delivers this through Energy Portfolio Management ("EPM") and Electricity Generation.
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.
Wholesale's key priorities in 2016/17 and beyond are: (i) ensuring the safe reliable operation of all wholly-owned assests and those in which SSE has an ownership interest: (ii) securing a stable and predictable supply of energy to meet SSE's needs; (iii) delivering SSE's investment in renewable energy and other electricity generation plant; (iv) driving business change to respond effectively to market change and regulatory developments in Great Britain, Northern Ireland, Republic Of Ireland and EU regulations; and (v) securing value, where appropriate, through the risk-managed trading of energy-related commodities.
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 to customers.
The wholesale price of energy can fluctuate significantly due to a number of factors including the economy, the weather, customer demand, infrastructure availability, and world events. EPM seeks to manage the impact of these variables by maintaining a diverse and well-balanced portfolio of contracts, and trading positions, both long and short term. EPM provides a route-to-market for SSE's Generation assets and helps Energy Supply manage its commodity risk. In doing so, SSE has greater ability to manage the impact from wholesale energy price volatility and more scope to deliver the investment needed in Generation and Gas Production because the risks associated with large-scale and long-term investments are contained by the balanced nature of SSE's energy businesses.
In recent years, SSE has typically required around 7 million therms of gas per day to supply its gas customers and to fuel its power stations, and around 130GWh of electricity per day to supply all its electricity customers. EPM has three primary routes to competitively and sustainably procure the energy and fuels it needs to meet demand: (i) SSE-owned 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.
Managing risks associated with energy procurement across these three routes is a key requirement for EPM. In establishing the separated legal entity to manage these risks and requirements on behalf of the Group's Energy Supply, Generation and Gas Production businesses, SSE has enhanced the reporting transparency and accountability of this activity. By optimising energy procurement through a diverse portfolio, SSE aims to shelter its portfolio from the inevitable volatility that exists in global markets.
SSE's primary objective for its Generation division is to safely, efficiently and reliably maintain and operate a diverse generation portfolio, which includes substantial amounts of capacity for renewable energy, across the UK and Ireland. 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 – that is well maintained to meet 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 managed; and (vi) sustainability – to support progressive reduction in the CO2 intensity of electricity generated through the cost efficient decarbonisation of its generation fleet. By moving towards a lower carbon generation mix, SSE is transitioning its Generation assets from a portfolio weighted towards gas and coal, to one weighted towards gas and renewables.
SSE currently owns or has an ownership interest in 10,557MW of capacity, which comprised at 31 March 2016: (i) 3,961MW of gas-fired generation capacity (Great Britain); (ii) 1,292MW of gas and oil fired generation capacity (Ireland); (iii) 2,029MW of coal fired generation capacity (Great Britain) (including waste to energy capacity); and (iv) 3,275MW of renewable generation capacity (Great Britain and Ireland) (including pumped storage).
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 16.3TWh in the year to 31 March 2016, compared with 18.7TWh during the previous year.
In 2015/16 the UK Government announced a number of policies and regulatory changes affecting SSE's thermal generation portfolio. These included:
OFGEM has consistently maintained that during the period to 2018/19 it expects electricity generation capacity margins will be lower than they were in recent years due to weak market economics and the closure of 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 the longer term through the implementation of the Capacity Market. SSE supports the UK Government's plans to incrementally improve the Capacity Market, including the planned supplementary capacity auction for winter 2017/18; and
in the intervening period, through the Supplemental Balancing Reserve ("SBR") which will close after winter 2016/17.
The design and operation of both the Capacity Market and SBR mechanisms is set by the UK's Department of Energy and Climate Change ("DECC") and National Grid. They determine how much capacity is required to ensure security of supply under each mechanism. Once this volume has been determined they procure the necessary capacity through a competitive auction/tender process. SSE will play its part by ensuring all plant eligible to participate in both the SBR and the Capacity Market will be made available when required. It will also continue to work openly and constructively with all stakeholders on the issue of security of supply.
Market conditions for thermal generation continued to be challenging during 2015/16. The continued expansion of sources of renewable electricity and reducing customer demand has impacted the profitability of all thermal assets. In addition, the 18 months to March 2016 saw a significant weakening of the market prices for oil and gas. Together with the closure of older coal-fired power stations this has led to an increase in gas-fired generation output relative to coal. This has been reflected in SSE's own portfolio as well as the wider market. This trend looks set to continue and it is therefore anticipated that gas-fired power stations will play an increasingly important role in GB electricity generation in the coming years.
In December 2015 the second Capacity Market auction was held in GB. A total of 3.2GW (de-rated) of SSE's 6.1GW (de-rated) pre-qualified capacity was successful in the auction, and will receive a total payment of £57 million on the basis it delivers this capacity in 2019/20. The balance of the pre-qualified capacity remains eligible to participate in the 'T-1' 2019/20 capacity auction. In the summer of 2016 SSE plans to pre-qualify capacity for the next 'T-4' auction scheduled for December 2016, as well as for the additional planned auction that will procure capacity for 2017/18.
SSE has an ownership interest in five gas-fired power stations that participate in the GB electricity market:
In 2015/16, the UK Government also decided that the capital budget for a Carbon Capture and Storage ("CCS") competition would no longer be available and that the competition would not proceed on the planned basis. SSE had been working with Shell on a CCS project at its Peterhead power station. In response, SSE acknowledged that being in government involves taking difficult decisions, but also stated that the decision represented a significant missed opportunity for the UK.
SSE acquired two wholly-owned coal-fired power stations in 2004: Ferrybridge (Yorkshire; now closed) and Fiddler's Ferry (Cheshire, 1,995MW).
In March 2016 SSE ceased coal-fired electricity generation at Ferrybridge in line with the announcement of plans to do so in May 2015. SSE acknowledges the immense contribution of all who have worked at Ferrybridge during its proud 50 years of service. The site has now entered a period of decommissioning.
The future commercial operation at three of the four units at Fiddler's Ferry (1,455MW) was the subject of a consultation with employees and other stakeholders, announced by SSE in February 2016. In March 2016 Fiddler's Ferry successfully secured a contract to provide ancillary services to National Grid. The one year contract, which started on 1 April 2016, covers one of the three available units at the site. It was secured following a competitive procurement process.
Following its success in securing this contract and in view of the UK Government's planned reforms to the Capacity Market, SSE also:
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 2016, it had 2,731MW 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 and 300MW of pumped storage; (ii) 900MW of onshore wind; (iii) 344MW of offshore wind; and (iv) 37MW dedicated biomass. Total electricity output from all of SSE's renewable resources in Great Britain and Ireland (including pumped storage) was 9.7TWh in the year to 31 March 2016.
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 Contracts for Difference ("CfD") mechanism.
The policy framework for renewable generation was subject to a number of interventions by the UK Government after it took office in May 2015. These include: (i) the early closure of the RO to new onshore wind; (ii) a delay until late 2016 of the second CfD auction for "less established" technologies, including offshore wind; (iii) the clear signal that CfDs in their current form are unlikely to be generally available to new onshore wind; and (iv) the removal of levy-exemption certificates ("LECs") for renewable electricity.
In order to support future investment in a balanced range of energy assets SSE has, as first outlined in March 2014 recycled capital by delivering a programme of selective disposals of non-core assets and operational and indevelopment onshore wind projects. In March 2016 agreements were signed for the sale of 49.9 per cent. of the operational 349.6MW Clyde Wind Farm located in South Lanarkshire to Greencoat UK Wind Plc (UKW) and GMPF & LPFA Infrastructure LLP ("GLIL") for a headline consideration of £355 million. When the 172.8MW extension to Clyde is commissioned the equity stake jointly owned by UKW and GLIL will be diluted to 30 per cent. with SSE retaining 70 per cent. and providing long term management services for the day to day operations of all 522.4MW.
For SSE's onshore wind portfolio, clarity regarding which projects remain eligible for RO support was provided through the definition of 'grace periods'. Future development options for later onshore wind projects are being explored in light of the policy changes referenced above.
SSE has three onshore wind projects under construction which will qualify for the GB RO: (i) Dunmaglass (94MW) – scheduled for completion by the end of 2016/17; (ii) Clyde Extension (172.8MW) – expected to be fully operational in 2017; and (iii) Bhlaraidh (108MW) – expected to be fully operational in 2017.
SSE also has onshore wind projects in development that will not qualify for the RO: (i) Stronelairg (with consent) (up to 240MW) SSE, alongside the Scottish Government, is appealing the judicial review judgement which rejected the consent decision and will be heard in court in May 2016; (ii) Viking (with consent) (up to 457MW –
SSE share 50 per cent.) SSE, with its Joint Venture partner, has continued to develop this project which requires State Aid clearance from the European Commission and confirmation it will be eligible to participate in forthcoming CfD auctions; (iii) Strathy South (in planning) (up to 133MW), objections were examined fully at a Public Local Inquiry in 2015 and it is now awaiting a consent decision from Scottish Ministers; (iv) and Gordonbush Extension (in planning) (up to 32MW) – Highland Council did not object to the application at a planning committee meeting in February 2016 and it is now awaiting a consent decision from Scottish Ministers.
In the last 12 months SSE's offshore efforts and resources have been focused on the Beatrice project (588MW – SSE share 40 per cent.) planned for the outer Moray Firth. The project is progressing in accordance with the terms of the Investment Contract awarded by the UK government in 2014. Beatrice is project financed with non-recourse debt and reached financial close on 20 May 2016. SSE's Joint Venture partners on the project are Copenhagen Infrastructure Partners (CIP) who increased their interest from 25 per cent. to 35 per cent. in February 2016 and SDIC Power who have a 25 per cent. stake. Onshore construction activities will begin in 2016 with offshore construction planned for 2017. The project is expected to be fully operational by 2019.
In addition to Beatrice, SSE has an interest in two further offshore wind farm developments: (i) Seagreen (up to 3,500MW – a 50:50 partnership with Fluor Limited); and (ii) and Forewind (up to 4,800MW – a four-way partnership with RWE Innogy, Statoil and Statkraft). The first phase of Seagreen (up to 1,050MW) is consented although this decision is subject to a judicial review in the Court of Session heard in 2015. Forewind has consent for four separate 1,200MW projects in the Dogger Bank Zone and the four Joint Venture partner organisations will agree the best route forward for each.
In October 2015 SSE announced that it had agreed exit terms from the Galloper project (340MW, 50:50 partnership with RWE Innogy), following RWE Innogy's announcement that it had reached financial close on the project.
The UK Government confirmed in the Budget 2016 that it intends to auction £730 million of CfD contracts in this parliament for offshore wind and other less established technologies connecting in 2021-26. The first auction is expected to be later this year with £290 million available. This announcement provides welcome clarity about the future for offshore wind.
SSE is the third largest generator by capacity in the all-island Single Electricity Market ("SEM"). It owns and operates 1,836MW of generation capacity of which 544MW is from renewable sources. This makes SSE the largest single generator of wind power in the SEM. The company also trades across the interconnectors between the UK and Ireland. SSE's new 464MW Great Island CCGT unit (grid connection capacity set at 431MW) commenced commercial operation in April 2015. Coinciding with the retirement of the old 240MW heavy fuel oil unit at the same site, the transition to gas has improved the carbon intensity of SSE's fleet and significantly decarbonises energy generation in the all-island market.
SSE continues to invest in renewable electricity generation in Ireland. Over the two years to March 2018, SSE will add 174MW of new Irish wind power generation capacity to its existing fleet. In the Republic of Ireland, construction of the two-phase 174MW (SSE share 120MW) Galway Wind Park project is ongoing. Phase 1 of the project (66MW), which entered construction in February 2015, is owned and financed by SSE. Phase 2 (108MW) is a 50:50 joint venture between SSE and Coillte. Galway Wind Park is expected to be commissioned in 2017, qualifying the wind farm for the REFIT II support scheme.
In Northern Ireland, SSE is currently constructing the 35MW Tievenameenta Wind Farm in Co. Tyrone. In the same county construction is due to commence shortly on the 19MW Slieve Divena II Wind Farm. Both projects are expected to be fully operational in 2017 and meet the criteria for Northern Ireland's RO grace period.
SSE also has plans for a wind farm development at Doraville (up to 115MW), a planning application for which is currently before Northern Ireland's Department of the Environment. This project will not qualify for the RO.
Reform of the Republic of Ireland's and Northern Ireland's SEM to comply with the EU Electricity Target Model continues with regulators in each jurisdiction progressing the Integrated SEM (I-SEM) project. SSE remains fully involved in all stages of the ongoing design and implementation process for the new market which is due for introduction by the end of 2017.
In July 2015 Multifuel Energy Ltd (MEL) (the SSE and Wheelabrator Technologies Inc. 50:50 joint venture) fully commissioned a £300 million (68MW) multi-fuel generation facility adjacent to SSE's existing Ferrybridge coal power station, known as Ferrybridge Multifuel 1 (FM1). The station has taken on a capacity obligation for 2018/19 and 2019/20. Whilst SSE reports its 34MW share of capacity, it excludes generation output at Ferrybridge multifuel as this is contracted to a third party. In its first full financial year of operation to March 2016 the station processed 413,000 tonnes of fuel in commercial operation and exported 385GWh of electricity, with the station running at near baseload. In October 2015, planning consent for a second multi-fuel facility at the Ferrybridge site, Ferrybridge Multifuel 2 (FM2), was granted, and a final investment decision on it is expected to be taken later in 2016.
In 2015/16, the UK Government also decided that the capital budget for a CCS competition would no longer be available and that the competition would not proceed on the planned basis. SSE had been working with Shell on a CCS project at its Peterhead power station. In response, SSE acknowledged that being in government involves taking difficult decisions, but also stated that the decision represented a significant missed opportunity for the UK.
Gas Production is responsible for the efficient delivery of gas from the offshore gas fields in which SSE has a shared ownership. Total output in the year to 31 March 2016 was 403 million therms (6.55mn boe) of gas and 0.13mn boe of liquids, compared with 398 million therms of gas (6.47mn boe) and 0.08mn boe in the previous year. This slight rise in production in 2015/16 was due to the start up of the Laggan field in February 2016 although there was a natural decline in output from existing fields. The Greater Laggan Area acquisition is expected to mean SSE's average annual volumes of gas and liquids produced will be at a higher level than those it reported in previous years with a forecast average production of around 500 million therms (8.1mn boe) of gas and 0.85mn boe of liquids per year in the five years to March 2021.
SSE had regularly set out its intention to seek new opportunities to increase its asset base to help meet gas demand requirements, with the UK and north-west Europe the focus for this activity due to the relatively stable tax and fiscal regime and proximity to SSE's domestic energy supply markets. In line with this long-term strategy SSE announced in July 2015, that it had entered into an agreement with Total E&P UK Limited to acquire: a 20 per cent. interest in the four gas fields and surrounding exploration acreage approximately 125km north west of the Shetland Islands, collectively known as the Greater Laggan Area; and a 20 per cent. interest in the new Shetland Gas Plant. The acquisition was completed in October 2015. Total E&P UK Limited is the operator of, and owns a 60 per cent. stake in these assets. The remaining 20 per cent. is owned by DONG Energy.
The transaction completed with cash consideration of £669 million (which reflects the value of the assets including associated UK capital allowances). SSE's share of forecast capex in the period to March 2019 is expected to be c. £190 million to complete the entire development of the four primary fields (Laggan, Tormore, Edradour and Glenlivet) as well as the Shetland Gas Plant, of which £43 million was spent to 31 March 2016.
The new Shetland Gas Plant is located close to Sullom Voe and will process and export produced gas and condensate from developments in the west of Shetland for onward delivery to the St Fergus Gas Terminal for gas; and via the Sullom Voe Oil Terminal for liquids. This makes it one of the most important infrastructure developments in the UK. Production started in February 2016 and it is expected to process and export gas and condensate for producers West of Shetland well into the 2030s.
Gas production started in February 2016 from the Laggan fields which have the ability to produce up to 90,000 boe a day at peak production (SSE share 20 per cent.) and will help to secure energy for SSE's customers and help meet the needs of SSE's gas-fired power stations contributing to security of electricity supply. The nearby Tormore, Edradour and Glenlivet fields are expected to start production towards the end of 2016, 2017 and 2018 respectively and should keep production at peak rates through to 2020.
In addition to helping meet SSE's gas demand requirements, the acquisition is expected to create value over the long term, despite the current impact of lower gas prices, and represents SSE's focus on maintaining a balanced range of energy businesses across its portfolio.
SSE's UK Continental Shelf upstream portfolio is predominantly gas weighted with only associated liquids and as per the independent Reserves Audit, at 31 March 2016, SSE's total economically recoverable net proven plus probable (2P) reserves, taking into account all technical and economic variables was estimated to be 3.6 billion therms (58.8 mn boe) in all of the fields in which SSE has an ownership interest.
Gas Storage is responsible for the operation and maintenance of SSE's gas storage facilities, and for ensuring they are available for use by its customers. The economic environment for gas storage facilities continued to be extremely challenging during 2015/16 – as illustrated the £150.9 million of exceptional charges recognised in the year. As previously announced, SSE took the difficult decision at the end of 2014/15 to mothball its older withdrawal plant at the Hornsea (Atwick) facility, which it completed for the start of the 2015/16 storage year.
Both of SSE's storage sites have continued to operate to meet the needs of their customers through 2015/16, albeit with some revision to Hornsea service provision during the last quarter:
Alongside the requirement to continue to ensure the highest standards of asset management are maintained, SSE continues to review its gas storage business on an ongoing basis. Its overall aim is to continue to provide valuable flexibility and hedging services to its customers and hence the wider UK gas market, while managing its profitability and being as well positioned as possible to take advantage of future market developments.
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 2016 was 9.9 years, compared with 10.7 years at 31 March 2015.
SSE's debt structure remains strong, adjusted net debt and hybrid capital is £8.4 billion, with around £5.9 billion of medium-to-long-term borrowings as at 31 March 2016 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 £360.2 million. Around £0.7 million of medium-to-long-term borrowings will mature in the year to 31 March 2017. The facilities, external debt and internal loan stocks for the SSE Group as at 31 July 2016 (with sterling equivalents (where applicable) as at that date) were as follows:
SSE \$700 million (£446.6 million) U.S. private placement due between
| 2017 and 2024 | |
|---|---|
| £99 million U.S. private placement due between 2023 and 2026 |
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| £500 million 5.0 per cent. bonds due 2018 |
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| ¥15 billion (£126.6 million) 3.52 per cent. fixed rate notes due 2018 |
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| £300 million 4.25 per cent. bonds due 2021 |
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| £300 million 5.875 per cent. bonds due 2022 |
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| £500 million 8.375 per cent. bonds due 2028 |
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| £350 million 6.25 per cent. bonds due 2038 |
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| €600 million 2.00 per cent. bonds due 2020 (£506.0 million of principal outstanding) |
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| €500 million 2.375 per cent. bonds due 2022 (£415.0 million of principal outstanding) |
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| £1.3 billion revolving credit facility maturing 2021 (undrawn) |
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| £1.5 billion Euro Commercial Paper programme (undrawn) |
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| £200 million revolving credit facility maturing 2020 (undrawn) |
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| €700 million 1.75 per cent. bonds due 2023 (£514.6 million of principal outstanding) |
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| £500 million Bank Term loan maturing September 2015 |
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| £100 million European Investment Bank loan due 2020 |
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| £300 million European Investment Bank loan due 2021 |
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| SSE Generation Limited | £1,550 billion intercompany loan stock due to SSE |
| SHEPD | £130.5 million 1.429 per cent. index linked bonds due 2056 |
| £300 million intercompany loan stock due to SSE |
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| SEPD | £350 million 5.5 per cent. bonds due 2032 |
| £325 million 4.625 per cent. bonds due 2037 |
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| £120.3 million 4.454 per cent. index linked loan maturing 2044 |
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| £400 million intercompany loan stock due to SSE |
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| SHE Transmission | £1,063.1 million intercompany loan stock due to SSE |
| £150 million European Investment Bank loan due 2021 |
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| £150 million European Investment Bank loan due 2022 |
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| £50 million European Investment Bank loan due 2023 |
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| £300 million European Investment Bank Loan due 2026 |
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| 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 | £63.1 million intercompany loan stock due to SSE |
On 10 March 2015, SSE issued £750 million and €600 million hybrid capital bonds ("2015 Hybrid Bonds"). €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 2017 or every five years thereafter for the 2012 Hybrid Bonds; and (ii) 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 2016 (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 and balance sheet reduction) or £6.5 billion over the four years to 2017/18. In 2015/16, SSE's investment totalled £1.62 billion before proceeds and disposals across its businesses. The Wholesale businesses accounted for around 30 per cent. of the total, the Networks businesses for around 50 per cent. and Retail, including Enterprise, plus Corporate for the remaining 20 per cent. Key strategic investments in 2015/16 included: (i) progressing the Caithness-Moray electricity transmission line, the largest capital project undertaken by SSE, and investing to improve service quality for customers in Electricity Distribution – this further increased the total RAV of SSE's existing Networks business, which is well placed to reach around £10 billion by 2020; and (ii) expanding SSE's renewables portfolio with 67 MW of new onshore wind commissioned and a further 548 MW in construction, including the Galway Wind Park, Ireland's largest wind farm. These developments in governmentmandated renewables reinforce SSE's position as an industry leader and are expected to take SSE's total renewable energy capacity to over 3.7GW by 2019. Including SSE 300MW Foyers pumped storage scheme, the total will be over 4GW.
In addition to the investment and capital expenditure outlined above, SSE has also purchased a 20 per cent. interest in the four gas fields and surrounding exploration acreage approximately 125km north west of the Shetland Islands, collectively known as the Greater Laggan Area, along with a 20 per cent. interest in the new Shetland Gas Plant, from Total E&P UK Limited. These long-term assets are a natural complement to SSE's existing gas production assets and provide further diversity to SSE's portfolio.
In March 2014 SSE set out its investment and capital expenditure programme for the four years to March 2018. It is now half way through that period and is still expecting gross investment and capital expenditure to total £6.5 billion, with around £1.75 billion expected in 2016/17 and around £1.65 billion expected in 2017/18, although this is subject to change.
Beyond that SSE has a wide range of options to support earnings and dividend growth post-2018 and now expects total investment and capital expenditure to be in the range of £5.5-£6.0 billion in the four years to March 2020. Around 50 per cent. of this is expected to be in economically-regulated Networks and around 20 per cent. in government-mandated renewables. At all times SSE will continue to allocate capital in a way consistent with its focus on strong financial management, operational efficiency and maintaining a balanced range of businesses.
As part of its long-standing strategic commitment to efficiency and disciplined investment, in 2014 SSE commenced what was called a value programme to dispose of assets which are not core to its future plans, which result in a disproportionate burden, or which could release capital for future investment. Agreements with total disposal proceeds and debt reduction of over £1.0 billion have so far been secured or concluded to dispose of assets such as equity shares in the Clyde of onshore wind farm projects and other wind developments, SSE Pipelines Ltd and equity in PFI street lighting contracts. A gain on sale of £138.6 million resulting from the sale of the 49.9 per cent. equity stake in Clyde windfarm (49.9 per cent. of 350MW) in the year is a clear example of the value created through this disposal programme. With a small amount still to complete, this programme has already achieved its objectives and will support future operations, investment and capital expenditure.
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 (Contracts for Difference) to support low carbon generation as well as a capacity mechanism to ensure resource adequacy. In December 2014, SSE 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. In the second auction (for capacity delivery from October 2019 to September 2020), SSE secured agreements to provide a total of 3,150MW (megawatts) of de-rated electricity generation capacity at a price of £18/kW. A further auction will take place in December 2016.
In addition to the capacity mechanism, National Grid was permitted by OFGEM to procure additional balancing reserves through Supplementary Balancing Reserve (SBR) contracts. SBR is designed to provide additional reserves to support National Grid in balancing the transmission system if there is insufficient generating plant available in the market. SSE has three units with SBR contracts (Peterhead, Fiddler's Ferry and Keadby). In March 2016, SSE also secured an additional ancillary services contract with National Grid for Fiddler's Ferry, to provide Black Start capability.
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, whereas 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 principal 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 is now looking at introducing a new approach to regulation that will be reliant on principles, rather than prescriptive rules. This piece of work, referred to as the "Future of Retail Regulation" (FRR) project, will examine the current rulebook with a view to introducing additional overarching principles whilst removing areas of unnecessary prescription. OFGEM hopes that this approach will safeguard the interests of customers, whilst at the same time ensuring that regulation does not stand in the way of innovation.
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 Provisional Findings and its initial verdict on the state of competition in the GB energy market. It consulted on possible remedies to address the issues identified. SSE submitted a comprehensive written response to the CMA in August 2015. The Provisional Decision on Remedies (PDR) was published in March 2016 setting out proposals for a substantive package for customers which will require significant resource and investment to implement. SSE submitted a comprehensive response which fed into CMA's deliberations leading up to the Final Report which was published on 24 June 2016.
The final Report recommends a package of remedies broadly on the same lines as set out at the PDR stage aside from some detailed fine tuning. These remedies will be further refined and fully defined through a CMA-led consultation process leading to the publication of the CMA's Final Orders by 23 December 2016.
The Final Report also reinforces the CMA's earlier verdict on the original Theories of Harm, establishing that:
The Final Report and the remedies therefore mainly seek to address a perceived problem of weak customer response and the CMA's conclusion that the customer detriment due to shortcomings in competition in retail energy is a headline figure of £1.4 billion/year. Technically, this is a measure of the gains from switching and SSE argued strongly in its submissions that the CMA is wrong to consider this a measure of detriment.
Key remedies proposed in the Final Report representing risks to SSE are:
The next stage of the process is underway with the initial consultations on the Draft Orders (on locational transmission losses and the PPM cap) launched in August and consultations on other matters presaged for September. OFGEM has also published a high level implementation strategy detailing how it intends to take forward those remedies allocated to OFGEM (a more detailed implementation plan will be available 'in the autumn') and has already initiated consultations on some of the CMA's recommendations.
The main overarching risks to be managed in the final stages of this process are:
On 29 July 2016 OFGEM announced that it was investigating whether SSE has complied with a number of requirements of its electricity and gas supply licences following concerns that SSE might not have been treating its customers fairly when switching them to pre-payment meters (PPMs). The investigation does not mean that a company has breached licence conditions or other obligations and SSE is cooperating fully with OFGEM.
In the north of Scotland, the licensed transmission network owner is SHE Transmission plc.
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 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 consultation on the need to initiate a mid-period review of RIIO-T1 was conducted from November 2015 to January 2016. OFGEM issued its final decision in May 2016 that a midperiod review of RIIO-T1 for SHE Transmission was not required.
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. This was initiated as the Integrated Transmission Planning and Regulation project (ITPR), now being run as Extending Competition in Transmission (ECIT). One option under consideration in this project is the introduction of competition in the construction and ownership of onshore transmission. OFGEM's intention is to be able to run competitive tenders for new, high value and separable, transmission infrastructure build from mid to late 2017. The introduction of competition will bring with it the possibility of competition in the SHE Transmission area, but also the opportunity for SHE Transmission to compete for projects outside of its own network area.
In the north of Scotland, SHEPD is the licensed distribution network owner and in southern and central England SEPD is the licensed distribution network owner. Collectively known as Scottish and Southern Energy Power Distribution (SSEPD).
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 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-ED1 is expected to be conducted during 2018. OFGEM is expected to consult on the scope of this review in late-2017.
In March 2015 British Gas Trading Limited (BGT) lodged an appeal with the CMA on the RIIO-ED1 final determination that could have affected the five distribution network operator groups, including SSEPD (at the same time, Northern Power Grid (NPg) also lodged an appeal seeking to enhance their own price control settlement). The CMA published its Final Determination on 29 September 2015. Of the six original BGT grounds for appeal only one was partially upheld. The decision did not materially reduce the forecast RIIO-ED1 return, nor as a consequence did it reduce the return below the target set by SSEPD and on which the price control settlements were accepted. Whilst the impact of the appeal on SSEPD was largely benign, the raising of the appeal has influenced the regulatory landscape and the way that future price controls will be set.
On 22 June 2016 the Authority issued a notice under paragraph 2 of schedule 6A of the Competition Act 1998 outlining proposals to accept commitments made by SSE in relation to its network connections business. Acceptance of these commitments would close the 16 month investigation into allegations that SSE's processes and practices in the provision of connection information and quotations impeded competition in the SEPD licensed area. The notice does not make any finding on alleged infringement of competition law. If accepted the commitments offered would be legally binding. The Authority's proposals went out for consultation, and closed on 3 August 2016. The Authority will consider any representations made before making its final decision on whether to accept the commitments.
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 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 consultation on the need to initiate a mid-period review of RIIO-GD1 was conducted from November 2015 to January 2016. OFGEM issued its final decision in May 2016 and confirmed its initial view that a mid-period review of RIIO-GD1 was not required.
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.
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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.
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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"). However, Estonia has since stated that it will not participate. 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.
However, the FTT proposal remains subject to negotiation between participating Member States. It may therefor be altered prior to any implementation, the timing of which 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 certain provisions of the U.S. Internal Revenue Code of 1986, commonly known as FATCA, a "foreign financial institution" may be required to withhold on certain payments it makes ("foreign passthru payments") to persons that fail to meet certain certification, reporting, or related requirements. A number of jurisdictions (including the U.K.) have entered into, or have agreed in substance to, intergovernmental agreements with the United States to implement FATCA ("IGAs"), which modify the way in which FATCA applies in their jurisdictions. Certain aspects of the application of the FATCA provisions and IGAs to instruments such as the Notes, including whether withholding would ever be required pursuant to FATCA or an IGA with respect to payments on instruments such as the Notes, are uncertain and may be subject to change. Even if withholding would be required pursuant to FATCA or an IGA with respect to payments on instruments such as the Notes, such withholding would not apply prior to 1 January 2019. Holders should consult their own tax advisors regarding how these rules may apply to their investment in the Notes. In the event any withholding would be required pursuant to FATCA or an IGA with respect to payments on the Notes, no person will be required to pay additional amounts as a result of the withholding.
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. Treasury Regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code of 1986, as amended, and U.S. Treasury 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 25 August 2016 [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 25 August 2016. 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 25 August 2016 [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] [Clean-Up 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)]
| [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 | [Actual/Actual] [Actual/Actual (ISDA)] | |
| Early Redemption Amount: | [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 | Clean-Up Call Option: | [Applicable/Not Applicable] |
|---|---|---|
| (i) Clean-Up Redemption Amount: |
[●] per Note of [●] Specified Denomination | |
| 21 | General Put Option: | [Applicable/Not Applicable] |
| (i) Optional Redemption Date(s): |
[●] | |
| (ii) Optional Redemption Amount(s): |
[●] per Calculation Amount | |
| (iii) Notice period: |
[●] | |
| 22 | Restructuring Event Put Option: | [Applicable/Not Applicable] |
| (i) Restructuring Event Redemption Amount: |
[●] | |
| (ii) Put Period: |
[●] | |
| (iii) Put Date: |
[●] | |
| 23 | Change of Control Put Option: | [Applicable/Not Applicable] |
| (i) Change of Control Redemption Amount: |
[●] | |
| (ii) Put Period: |
[●] | |
| (iii) Put Date: |
[●] | |
| 24 | SSE Restructuring Event Put Option: | [Applicable/Not Applicable] |
| (i) SSE Restructuring Event Redemption Amount: |
[●] | |
| (ii) Put Period: |
[●] | |
| (iii) Put Date: |
[●] | |
| 25 | 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] | |
| 26 | 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 |
[●] | |
| 27 | Indexation: | [Applicable/Not Applicable] |
| (i) Base Index Figure: |
[●] | |
| (ii) Reference Gilt: |
[●] | |
| (iii) Index Figure applicable: |
[3 month lag]/[8 month lag] | |
| 28 | 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] | ||
| 29 | New Global Note: | [Yes] [No] |
| 30 | Financial Centre(s): | [Not Applicable/[●]] |
| 31 | 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.] |
| 32 | U.S. Selling Restrictions: | [Reg. S Compliance Category 2; C RULES/ D RULES/ 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
101
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."]
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.]
Use of Proceeds: [●]]
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.]
| 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 2015 and 31 March 2016, respectively, and the audited financial statements of SHEPD, SHE Transmission and SEPD for the financial years ended 31 March 2015 and 31 March 2016, 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
Ropemaker Place 25 Ropemaker Street London EC2Y 9AJ
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
25 Cabot Square Canary Wharf London E14 4QA
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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