Jersey Electricity Plc Annual Report 2016

FY2016 Annual Report · Jersey Electricity Plc

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INVESTMENT TO POWER
A SUSTAINABLE FUTURE
REPORT AND ACCOUNTS 2016

OUR YEAR

KEY ACHIEVEMENTS 2016

ENERGY GROWTH/SOLUTIONS

• 625 million units of electricity sold.
• 49,532 customers on supply.
• Won 98% of new developments.
• Doubled fuel switch conversion rate.
• New E20+ Tariff launched.

RECORD TURNOVER

• Best ever Group performance with
revenues of £103m, generating the
profit to fund on-going investment.
• Group pre-tax profits up 6% at £13m.
• Retail turnover up 8% to £11.9m.

PEAK DEMAND

• 149MW recorded on 19 January 2016 at
9.30pm. Close to last year’s 148MW but
well below our record 161MW set on 2
February 2012.

NORMANDIE 1

• Primary project completed on time

and under budget.

• Feb: EDF1 cable beach recovery starts.
• March: EDF1 offshore recovery.
• April: EDF1 recovery completed.
• July: N1 cable leaves Naples.
• Aug: Marine installation.
• Dec: N1 circuit live.

HEALTH AND SAFETY

• Just one minor Lost Time

Accident (LTA) despite three
major on-going infrastructure
projects involving multi-national
contractors.

SUPPLY SECURITY

• 24 Customer Minutes Lost (CMLs).
• Black start Diesel 5 in position

and expected in service early 2017.

50 YEARS OF LA COLLETTE

• 29 September marked 50 years

of generation at La Collette
Power Station.

ST HELIER WEST

• Good progress made on a difficult site.
• Dec 2015: Civil works contract signed.
• Jan 2016: Civil works start.
• Jun 2016: INEO contract signed.
• Sept 2016: Foundation piling starts.

NORMANDIE 1

• Primary project completed on time

and under budget.

• Feb: EDF1 cable beach recovery starts.

• March: EDF1 offshore recovery.

• April: EDF1 recovery completed.

• July: N1 cable leaves Naples.

• Aug: Marine installation.

• Dec: N1 circuit live.

A YEAR IN FOCUS

SMARTSWITCH

• Over half the Island switched to Smart Meters.
• 25,296 meters installed.
• Post Code Billing launched.

SMART METERS
INSTALLED SO FAR
25,296

AFFORDABILITY

• No tariff increase since April 2014.
• Prices to be frozen throughout 2017.
• Within target of +/-10% of EU15 Average.

ENVIRONMENT

• Delivered power at a carbon intensity

level of 47g CO2e / kWh.
• One ninth of the UK grid.
• One fifth of local fossil fuels.

ELECTRIC TRANSPORT

• 215 electric vehicles registered.
• Jersey Post starts to electrify fleet.

CONTENTS

DIRECTORS, OFFICERS AND
PROFESSIONAL ADVISERS

CHAIRMAN'S STATEMENT

CHIEF EXECUTIVE'S REVIEW

GROUP PURPOSE

ENERGY GROWTH

MAINTAINING AFFORDABLE ELECTRICITY
AND PRICE STABILITY

ENSURING SECURITY AND RELIABILITY
OF SUPPLY

NORMANDIE 1

GENERATION AND TRANSMISSION

DISTRIBUTION

SMART SWITCH

PROTECTING THE ENVIRONMENT
AND CONSERVING RESOURCES

CUSTOMER SERVICE STANDARDS

COMMERCIAL

POWERHOUSE.JE

JENDEV AND PROPERTY

JEBS

JERSEY ENERGY

HEALTH AND SAFETY

SUSTAINABILITY IN THE COMMUNITY

OUR PEOPLE

OUTLOOK

FINANCIAL REVIEW

GOVERNANCE

FINANCIAL STATEMENTS

NON-EXECUTIVE DIRECTORS
Geoffrey Grime FCA (Chairman)
Michael Liston OBE FREng, BSc, CEng, FIEE, CIMgt
Aaron Le Cornu BSc, ACA
Alan Bryce MSc, CEng, FIET
Phil Austin MBE, FCIB, FCMI
Wendy Dorman BA (Hons), ACA

EXECUTIVE DIRECTORS
Christopher Ambler BA, MEng, CDipAF, CEng, MIMechE, MBA (Chief Executive)
Martin Magee CA (Finance)

SECRETARY
Peter Routier BSc, FCIS

REGISTERED OFFICE
Queen’s Road, St. Helier, Jersey

PLACE OF INCORPORATION
Jersey

AUDITORS
Deloitte LLP, PO Box 403, 44 The Esplanade, St. Helier, Jersey

BANKERS
Royal Bank of Scotland International Limited,
71 Bath Street, St. Helier, Jersey

BROKERS
Canaccord Genuity Wealth Management,
PO Box 3, 37 The Esplanade, St. Helier, Jersey

REGISTRAR
Computershare Investor Services (Jersey) Limited,
Queensway House, Hilgrove Street, St. Helier, Jersey

Group revenue for the year to 30 September 2016 at
£103m was 3% higher than in the previous financial year
and profit before tax, before exceptional items, at just
over £13m, reached a level 6% higher than last year –
both supported by stable underlying performance in the
Energy business and increased activity in our non-Energy
businesses, especially our retail business, Powerhouse.je
which continues to show improvement. Unit sales volumes of
electricity held up given the challenges of energy efficiency
and the mild weather this year – only marginally behind last
year at 625 million units, in part reflecting our success at
fuel switching customers to electricity. Profits in our Energy
business rose from £11.5m to £11.6m with higher supply
margins partially offset by a £1.1m rise in pension costs of
which £0.7m was of a non-recurring nature associated with
the granting of an ex-gratia rise in pensions in service.

I am therefore pleased to report a proposed final dividend
for this year of 8.00p payable on 30 March 2017, being a
5% increase on last year.

We have continued our programme of Board renewal that
we announced last year, welcoming two new non-Executive
Directors in Phil Austin MBE and Wendy Dorman. Phil
joined us in May after a long career in banking with HSBC
followed by appointments in the Jersey financial services
sector. Wendy joined us in July from PwC where she led
its Channel Islands Tax Practice. Finally, Mike Liston, our
former Chief Executive, who also served as a non-Executive
director over the last eight years, retired in December 2016.
Mike has served Jersey Electricity from 1986 and has made
an extraordinary contribution to the Company, greatly
influencing its success over the last 30 years, and to whom I
would like to extend our sincere thanks.

CHAIRMAN'S
STATEMENT

I am pleased to report that Jersey Electricity has delivered
another excellent year’s performance in 2015/16.
The Company has continued to make great progress in
implementing its infrastructure strategy, at the centre of
which was the successful delivery of another 100MW
interconnector, Normandie 1(N1), installed between
Jersey and France, and delivered ahead of schedule and
materially below budget. A shared investment with our
partners Guernsey Electricity, N1 is the replacement for
EDF1, Jersey Electricity’s first interconnector, which came
to the end of its life in 2012. This new cable link gives
Jersey and Guernsey the benefit of three submarine cables
between Jersey and France, across two diverse routes.
The primary project was completed in just four years at
a cost of around £30m, representing another notable
achievement.

The Company’s success this year is not limited to delivering
capital projects. It has also produced its best ever Group
financial performance supported by strong improvements
in its non-Energy businesses. In the Energy supply business,
Jersey Electricity has built on the good progress made last
year, maintaining profitability at a level needed to support
on-going investment and commensurate with a rate of return
that we see in regulated entities elsewhere. Importantly,
despite the recent period of sustained investment, we have
been able to maintain prices at current levels for nearly
three years and we remain competitively priced relative to
other islands and even larger EU countries. Furthermore,
we have announced that electricity prices will not increase
until 1 January 2018 at the earliest. Our supply reliability,
health and safety and environmental performance,
including the carbon intensity of supplied electricity, remain
strong relative to peers which is notable given the particular
challenges of operating in an island context.

As sole supplier of over 40% of the Island’s energy
requirements we have a huge responsibility to our
customers and it is gratifying that we maintained our
overall customer service rating at a level assessed as being
‘excellent’ when compared with similar service providers
in the market.

As always, I would like to thank our Executive and all our
non-Executive Directors and colleagues at all levels of the
business. Without their continued commitment, hard work
and loyalty to the Company, we could not have made the
progress we have over these last few years. Thanks to
their efforts, Jersey Electricity is now well positioned for the
future and delivering the performance needed to sustain our
service long into the future.

Geoffrey Grime
Chairman
13 December 2016

CHAIRMAN’S STATEMENT

CHIEF EXECUTIVE'S
REVIEW

As a Group, I am delighted to report that we have delivered
our best ever financial performance, with a 6% increase in
profits, before exceptional items, to £13.1m on a turnover
of £103m. This reflects strong performances in all our
business units and importantly has not been delivered at the
expense of operational performance and customer service.
Though unit sales of electricity at 625 million (kWhs) were
marginally down on last year due to a mild 2015/16 winter
and the impact of increased energy efficiency, our Energy
business delivered profits of £11.6m, £0.1m ahead of last
year. But it was our non-Energy business units that delivered
most of our profit increase. In particular, our retail arm,
Powerhouse.je has gone from strength to strength, turning a
loss of £0.1m in 2014 into a £0.5m profit this year.

The level of profitability in our Energy business is necessary
to finance our long-term investment programme and this has
continued this year with the successful installation of our
third undersea supply cable to France, Normandie 1 (N1).
This was a complex project delivered ahead of schedule
and below budget. At a cost of around £30m, shared
with Guernsey Electricity (GEL) under the oversight of the
Channel Islands Electricity Grid (CIEG), N1 replaces
EDF1, our first cable that was decommissioned in 2012.
It was less costly than N3, laid in 2014, as it follows the
same route as its predecessor from Surville, Normandy,
to Archirondel on Jersey’s east coast and connects to
much existing on-land infrastructure. N1 represents
the next step in our continued subsea cable
investment programme and will enable us to securely
meet Jersey’s full electricity requirements with low
carbon imports.

This year we imported 92% of our energy
requirements from France, generated 3%
on-Island with the remaining 5% from the States of
Jersey-owned Energy from Waste plant. Though
we had two submarine cables to France in
operation throughout 2015/16, Normandie 2
(N2) and Normandie 3 (N3), the higher level
of local generation was due mainly to increased
training at our La Collette Power Station.

CHIEF EXECUTIVE'S

REVIEW

This small rise in on-Island generation has, in turn, slightly
increased the carbon intensity of our distributed power in
Jersey from 33g CO2e / kWh last year to 47g CO2e / kWh.
This is still well within target and at a level that is one ninth
of the carbon intensity of UK’s electricity system and less than
one fifth of that of local fossil fuels. The completion of N1 will
enable us to virtually decarbonise Jersey’s electricity supply
as well as enhance the security of that supply. We measure
supply reliability in Customer Minutes Lost (CMLs) which is
the average duration of interrupted supplies during the year
experienced by each customer. This year our CMLs were 24.
Although higher than last year, due mainly to the all-Island
failure on 9 May, Jersey Electricity’s lost minutes of supply
was still around a third of the normal UK average.

We have also enhanced our emergency on-Island generation
capabilities. The 5MW ‘black start’ Sulzer diesel generator
the Board approved last year is in the process of being
installed at La Collette and is scheduled to be commissioned
in early 2017. The importance of the Power Station to supply
security was recognised when we marked 50 years since the
first units of electricity were generated at La Collette on 29
September 1966.

The year saw progress on our £17m St Helier West primary
substation. Preparations for the actual build are nearing
completion. Our civil contractors have removed 27,000 tons
of material from the old quarry site and began piling for the
foundation and new retaining wall at the end of the financial
year. French specialist contractors INEO are expected to
start work in summer 2017, with the facility in service the
following year.

Our other major investment project, SmartSwitch, has also
moved forward this year with over 25,000 smart-enabled
meters now installed. SmartSwitch has already enabled us to
introduce Post Code Billing for a large number of customers
by providing readings on the same date every quarter so our
customers receive bills that cover four equal periods through
the year. And, of importance to our load growth strategy, this
new metering technology has enabled us to introduce our
first 24-hour uninterrupted heating tariff, Economy 20 Plus
(E20+) by automatically switching over to the higher General
Domestic Rate during four peak hours of the day which were
formerly an interruption to the heating supply.

ENERGY

CHIEF EXECUTIVE’S REVIEW

This is already proving a huge incentive for customers we are
encouraging to switch from fossil fuel-fired heating.

Elsewhere in the Group, both our retail interests,
Powerhouse.je and JEBS, our contracting and building
services business, continued to improve post restructuring and
re-branding. JEBS produced a profit of £0.1m against a near
breakeven position in 2015 and is making great inroads
into building a foundation for the future. Other business units
- Jersey Energy, Jendev and Jersey Deep Freeze all had a
profitable year. Profits in our Property division, excluding the
impact of investment property revaluation, at £1.7m, rose by
£0.1m from last year.

Internally, our new HR team has introduced an extensive
programme of staff training, including a bespoke
Management Development Programme, and IT has
undertaken a major programme of upgrade works, all
essential to meet the future needs of the business. All of our
functions have had their own projects and challenges during
the year in which they have made notable progress.

GROUP PURPOSE

CHIEF EXECUTIVE’S REVIEW

Our purpose is to ‘sustainably serve our community with
affordable, secure, low carbon energy, today and long into
the future, enabling quality of life for residents and economic
prosperity for businesses’. Sustainability is at the centre of
everything we do and we think of this more broadly than
environmental sustainability and low carbon. For Jersey
Electricity, sustainability is also about security and reliability
in our services provision. It is about fair pricing for customers
that ensures the business is economically viable and competes
effectively with other fuels, enabling the business to make a
fair profit, satisfy shareholders and fund new investment. It is
about the safety and health of all the people that touch our
business and it is also reflected in our corporate and social
responsibility activities.

This year we have built further on the Purpose, Vision and
Values work instigated in 2013, to ensure every employee
understands our purpose, the part they play in helping us fulfil
our purpose; the vision of where we are trying to get to as a
business and the values that describe the way we go about
our work.

A major part of this is understanding our customers and
serving them in the fairest and most efficient way. In the
absence of competition in electricity or formal regulation,
it is customers who drive us and they feature heavily in our
strategy:

• To ‘sustainably serve our community … today and long

into the future …’ – Purpose

• ‘Strengthening our relationships with customers by better
understanding their needs and meeting them’ – Vision

• By being customer focused in our behaviours: ‘We listen
to our customers and seek to understand and respond to
their needs, treating them the way we would wish to be
treated, with respect and honesty’ – Values

Our vision
Is to responsibly and sustainably deliver value to customers by:

• Growing unit sales and offsetting pressure from energy
efficiency by fuel switching from fossil fuels as well as
finding new applications for electricity.

• Developing services and solutions that create value for

customers by designing, installing, maintaining, repairing
and financing equipment and any new technologies that
use electricity.

• Developing ‘Smart’ infrastructure that will supply clean
electricity securely in the most cost effective manner.

• Strengthening our relationships with customers by better

understanding their needs and meeting them.

Our priorities

• Grow electricity’s market share using resources in Energy

Solutions, JEBS and Energy in a more efficient way.

• Continue our roll-out of the multi-year SmartSwitch Smart
Metering programme safely and reliably, in a way that
delivers more value to the consumer and the business.

• Keep our major St Helier West primary substation

on track for delivery by winter 2018 and in accordance
with budget.

• Design and develop new Queen’s Road infrastructure,

securing final Board consent for the investment.

• Deliver the Nav2016 enterprise system upgrade on

time and on budget while minimising risk to services over
the transition.

• Optimise La Collette Power Station to robustly protect

supplies in the most efficient way; as part of this, complete
installation of the Diesel 5 ‘black start’ generator.

• Continue our programme of managed change,

succession and people development across the business.

Our values

• Safety: We do everything safely and responsibly or not
at all – nothing is more important than the safety of the
public, our customers and our staff.

• Customer focus: We listen to our customers and seek to
understand and respond to their needs, treating them
the way we would wish to be treated, with respect and
honesty.

• Teamwork: We respect and value our colleagues as

individuals and we believe we are stronger as a team,
leading to better solutions and a more enjoyable and
rewarding work life.

• Responsibility: We accept responsibility for everything we
do, safeguarding the natural environment and the local
community, as well as the interests of all our customers
and staff.

• Excellence: We strive to work in a way that is both

effective and efficient, continuously improving everything
we do – innovating where we can but keeping things
simple.

• Reliability: We are trustworthy, dependable and reliable,
delivering on our commitments and always there when
you need us.

49,532

total customers
212 increase in the year

360

new space/water
heating customers

2,000th
customer
on Economy20

ENERGY GROWTH

We have also made progress in the commercial
sector, with professional kitchens in particular
continuing to switch to all electric solutions using
energy efficient induction cooking technology as
well as commercial scale, ultra-efficient heating
and cooling heat pump technology.

We believe there are enormous opportunities to
reduce both carbon emissions and costs within
the States of Jersey portfolio of properties and we
believe we are well positioned to assist in energy
management. While engaging with the States has
been difficult, we continue our efforts
to persuade it of the significant financial
opportunity across its building stock and its
transportation needs.

New Build
Despite continued low oil prices, electricity
remains the first choice for developers seeking
energy efficient building designs. Indeed, with
building standards that are continually being
enhanced, little energy is needed for heating
so most of the opportunity is in general light
and power and cooling applications. We have
maintained our position with over 98% of new
build choosing electric solutions for heating
and cooling.

While many utilities have witnessed reductions
in unit sales due to energy efficiency and
weaker economic growth, Jersey Electricity
has broadly held volumes stable over recent
years, with unit sales of 625 million being
only marginally below last year’s 627 million,
largely due to a mild 2015/16 winter and,
inevitably, increased energy efficiency. Our
approach is to encourage customers to become
more energy efficient, while developing value
propositions that will help customers switch from
fossil fuels to electricity. Our Energy Solutions
Team is dedicated to this goal and has made
good progress.

Energy Solutions
This small, specialist team is focused on
achieving unit sales growth using traditional
and new technologies in heating, cooling,
cooking, lighting and transportation across
commercial, residential and public sectors.
In only its second full year, the team has
made good progress in the domestic market.
Having developed user-friendly propositions,
streamlined the customer journey and
enhanced the finance packages in support
of fuel switching, the team has increased fuel
switch conversion rate by almost 100%. Going
forward, the team will be strengthening our
relationships with the trade and leveraging a
new Economy 20 Plus (E20+) tariff, our first
24-hour, uninterrupted low price heating tariff,
offering a mix of off-peak rate and normal rate
for approved heating systems.

ENERGY GROWTH

CHIEF EXECUTIVE’S REVIEW

Electric Transportation

While uptake of private electric vehicles remains
slow without the government incentivisation we
have seen in other developed economies, we
are beginning to see growth off the back of
technology development and a broader range
of models from all the major car manufacturers.
There were 215 all electric vehicles, of which
131 were all electric cars registered in Jersey at
30 September.

We are working on an exciting new
development with a car sharing company that is
committed to our all-electric solution having seen
it successfully used elsewhere. We have also
seen encouraging progress in the commercial
and fleet sector. Working in conjunction
with Nissan and its local dealer, we helped
Jersey Post find a financially viable solution to
electrify part of its fleet of delivery vans with
a purchase of 15 Nissan ENV20s in August.
The trial appears to be progressing extremely
well, with good financial savings and excellent
feedback from users. This is just the start of the
de-carbonisation of Jersey Post’s 110-vehicle
fleet as the utility intends to replace other diesel
vehicles as and when they come to the end of
their warranty.

Our assistance included installing a new,
independent and dedicated electricity supply
and metering equipment at Jersey Post’s Head
Office, 270 metres of cable and eight dual
outlet Rolec wall chargers that operate on our
overnight discounted Commercial Economy 7
Tariff. Based on 46 miles (74km) a day, in use
five and a half days a week, the vans will cost
just 2p a mile or 92p a day to run and Jersey
Post has identified a potential cost saving of up
to 40% over four years.

Jersey Post’s move to EVs has been widely
publicised and we hope will encourage other
businesses to electrify their transport. Without
subsidy, the ‘up front’ costs of EVs have been
prohibitive for some small companies and
personal drivers. But the gap between electric
and traditional vehicles is narrowing and we
hope to see continued growth in this important
area which will help us tackle a hitherto
untouched transportation segment comprising
around a third of total Island carbon emissions.
Electric transport supports the States Clean Air
Policy and the Sustainable Transport Plan and
is essential if the Island is to stand any realistic
chance of meeting its Energy Plan target of
5,579 Ultra Low Emission Vehicles registered
with DVS by 2020.

PURE ELECTRIC
VEHICLES REGISTERED
IN JERSEY

131

OTHER

TOTAL

215

PLUS
424
‘HYBRIDS’

Providing

40%

of Jersey’s energy

MAINTAINING
AFFORDABLE ELECTRICITY
AND PRICE STABILITY

Energy price and price stability are still largely considered to be the most
significant factors for customers in their choice of energy supply according to
our independent research. As sole provider of over 40% of the Island’s total
energy needs we have a duty and responsibility to do everything we can to
maintain an electricity supply that is affordable, not just today, but long into
the future. It is one of our core objectives and one on which we dedicate
much resource and effort.

With the considerable uncertainty in power and foreign exchange markets
in recent times, we are particularly pleased to have been able to announce
a price freeze until the end of 2017, meaning our prices will have been
held for at least a three-year period since the last increase of 1.5% in
April 2014. Our tariffs remain competitive despite our heavy on-going
investment in infrastructure, such as the Normandie 1 (N1) project, on
which we expect to earn a fair return to allow us to continue to invest in the
Channel Islands. Although our price differential has reduced slightly against
European comparators due mainly to foreign exchange movements - we are
now marginally more expensive than the EU 15 Average – we continue to
meet our target of keeping our standard domestic tariffs within 10% of the
EU Average. We also maintain a strong position, with our power prices
materially lower than comparable islands, and we remain marginally below
the pricing of market leader British Gas in the UK.

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The UK vote for Brexit in June 2016 has
seen Sterling heavily impacted against most
currencies, including the Euro, the currency in
which we procure power from France. Our
ten-year power purchase agreement with EDF,
which began in January 2013, combines a
fixed price component with the ability to price
fix future purchases over a rolling three-year
period ahead based on a market related
mechanism linked to the European Energy
Exchange (EEX). This ‘hedging’ on power and
foreign exchange enables us to provide our
customers with a degree of near-term certainty
in the volatile worlds of energy and foreign
exchange markets.

While we invest considerable time examining
our main tariffs, we are also developing more
innovative, customer focused heating tariffs
and this year launched Economy 20 Plus
(E20+). This is our first 24-hour, uninterrupted
heating tariff that offers a mix of off-peak rate
and normal rate for approved heating systems
improving comfort levels and equipment
performance. Off-peak heating tariffs encourage
customers to use electricity when imports are
cheaper and also help to flatten peak demand,
which is a significant driver of infrastructure
costs. This year over 360 new domestic
customers joined our discounted space and
water heating tariffs bringing the total number
of customers now on our off-peak tariffs to
around 16,500.

Source: UK Energy Saving Trust

MAINTAINING AFFORDABLE ELECTRICITY AND PRICE STABILITY

CHIEF EXECUTIVE’S REVIEW

ENSURING SECURITY AND
RELIABILITY OF SUPPLY

Supply security is largely taken as a given by
our customers but nevertheless crucial to our
service and our reputation. Ensuring we have
enough supply, whether from generation or
importation assets, to meet demand is the first
step. The installation of Normandie 1 (N1) this
year gives us three links to France and access to
190MW of importation capacity across those
three circuits, far in excess of our record peak
demand of 161MW in February 2012, even
excluding our on-Island generation sources. This
headroom is known as ‘supply margin’ and is
greater than most larger countries that tend to
aim for a margin of around 10% above peak
demand. We also have access to generation
at La Collette Power Station and Queen’s Road
although these are largely maintained to meet
demand during certain ‘stress conditions’ should
imports be disrupted.

We work to an adapted ‘N minus 1’ standard.
In essence, we seek to maintain supplies during
the failure of the largest component in the
system (see panel). We strive to minimise the
risk of such an asset failure by also investing

in the maintenance of our transmission and
distribution networks, including undergrounding
cables where cost effective, and we ensure are
well prepared to restore supplies quickly when
a failure does occur.

Like all public network operators we cannot
guarantee security of supplies. We recorded
24 Customer Minutes Lost* (CMLs) this year
due largely to only our fifth Island-wide outage
in 10 years, which occurred on 9 May 2016
and to which 15 CMLs are attributed this
year. Although disrupted supply is always
inconvenient, our restoration procedures worked
well in this instance with all customers back on
supply within 27 minutes.

Following this incident, which also affected
Guernsey supplies, we undertook remedial
works on the Channel Islands Electricity Grid
(CIEG) System Integrity Protection Scheme
(SIPS), which was commissioned in late 2015 to
provide cover and balance to the transmission
network at times of stress. Further work is
scheduled during 2017.

SUPPLY SECURITY STANDARD

Jersey Electricity’s system
is designed to meet an
‘adapted N minus 1 security
standard’ as follows:

• A one-in-eight year winter

peak demand.

• All normal load in the event

of the loss of the single
largest interconnector with
France (N minus 1) plus a
simultaneous failure of the
largest:

o Diesel generator; and

o Gas turbine.

• 75% of peak winter load

for 48 hours from on-Island
generation (no simultaneous
loss of on-Island capacity).

• No coincidence of the

above.

*CUSTOMER MINUTES

LOST (CMLs)
Is the aggregate average
duration of interrupted
supplies during the year
faced by each customer.

AVERAGE CUSTOMER MINUTES LOST
(CMLs) DURING THE YEAR

90m long
28m wide
60 crew

NORMANDIE 1

SPECIAL REPORT

The successful installation of the Normandie 1 (N1)
interconnector represents the next step in our subsea cable
investment programme. Now with three cables on two
different routes, N1 provides another major enhancement
to supply security and when combined with our existing
Normandie 2 (N2) and Normandie 3 (N3) cables, gives
the Channel Islands access to 245MW of import capacity.
At a cost of around £30m, shared with Guernsey Electricity
(GEL) and overseen by the Channel Islands Electricity Grid
(CIEG), N1 was less costly than N3 because it follows the

same route alongside N2 as our first French link, EDF1, laid
in 1984 and decommissioned in 2012, and it connects into
existing on-land infrastructure. Also, unlike N3, which took
almost nine weeks to install over a more southerly route, N1
took just six days because it was laid on the seabed rather
than ploughed in beneath it.

N1 was energised on 1 December ready to be in service
before the onset of winter 2016/17.

ENSURING SECURITY AND RELIABILITY OF SUPPLY

CHIEF EXECUTIVE’S REVIEW

Weight of the N1 cable

2500
tonnes

N1 laid at rate of
10m per
minute

300m

horizontal drill
under French
sand dunes

“The marine

installation took
just six days from
Surville, Normandy,
to Archirondel,
Jersey ”

The project took just four years from initial
Board approval to completion. Laid in parallel
with N2, over the 27km route of EDF1, from
Surville, Normandy, to Archirondel on the
east coast of Jersey, our first task was to safely
recover the old cable from the seabed. This
began in earnest in early March after we
signed contracts with Hughes Sub Surface
Engineering of Merseyside for its recovery
and disposal.

On completion of this section, the Atlantic Carrier
passed along the remainder of the route to hoist
the 55MW cable on board where it was cut
into manageable sections and later taken to the
UK to be responsibly disposed of with as much
material as possible recycled. The substation
at Surville Plage, known as ‘Poste de Surville’
which connected EDF1 to the French grid, will be
dismantled and the land returned to nature in the
spring of 2017.

Beach works on both sides of the Channel
were carried out by GPC of Cumbria.The team
worked in the windows of low tide to excavate
EDF1 from the beach to the low tide mark. They
then relocated to Surville to carry out the same
process on the French beach before Hughes
SSE deployed the multi-cat MC Ailsa to carry
out the recovery in shallow waters.

While the recovery of EDF1 was underway,
N1 was being produced by leading cable
manufacturers Prysmian Powerlink in Naples. It
was ‘loaded out’ of the factory on to the cable
laying vessel Stemat Spirit on 23 July.

ENSURING SECURITY AND RELIABILITY OF SUPPLY

CHIEF EXECUTIVE’S REVIEW

“The team worked
in the windows of

low tide to excavate
EDF1 from the
beach to the low
tide mark ”

“The work

included two
complex landfalls
in difficult tidal
conditions”

ENSURING SECURITY AND RELIABILITY OF SUPPLY

CHIEF EXECUTIVE’S REVIEW

The installation was carried out by Dutch
specialists VBMS with whom the CIEG already
has a Power Cable Maintenance Agreement
and an established relationship. The work
included two complex landfalls in difficult
tidal conditions. In France, VBMS performed
a 300-metre horizontal drill under the dunes
followed by the installation of the cable through
a rocky gulley, close to where the existing N2
cable is routed. At Archirondel, the landfall was
by means of ‘float-out’ and ‘direct pull-in’ into
the onshore substation.

The operation began on 9 August when the
Stemat Spirit set up on anchors on the Surville
Beach. The VBMS team pulled the cable ashore
with the aid of a ‘mid support pontoon’ in a
two-hour tidal window between 9.15pm and
11.20pm. After two more tide cycles operating
on anchors, the Stemat crew were able to
deploy the vessel’s full power and dynamic
positioning system, which manages the thrusters
to ensure the precise route is adhered to and
begin the journey to Jersey at the rate of 10
metres a minute. On land, N1 had already
been pulled through to the RTE joint bay where

it was connected to a new 2km land cable that
runs to St Remy des Landes and connection to
the French Grid.

Operating within a 1,000-metre mobile
exclusion zone, the 90-metre-long Stemat
made excellent progress and eased into St
Catherine’s Bay on the rising tide of Monday
15 August to offload the cable in Jersey. The
cable was marked by 126 buoys ready to
be re-floated later in the week for the beach
landing operation and ‘pull in’ to Archirondel
substation. With around 60 metres to spare, the
cable was cut and positioned for connection to
the existing substation switch gear by jointers
from Prysmian. Norwegian company Seatrench
buried 1km of cable beneath the seabed,
while, higher up, towards the sea wall, the
rocky trench was filled and the sea wall itself
reinstated.

At the start of October the two £750,000
Voltage Regulators built by ABB in Vassa,
Finland arrived at St Remy des Landes for the
final complex connections to be completed.
N1 began importing power to Jersey at
3.17pm on 1 December 2016.

D I E S E L

ENSURING SECURITY AND RELIABILITY OF SUPPLY

CHIEF EXECUTIVE’S REVIEW

Generation
On 29 September 2016 we marked 50 years since
the first units of electricity were generated at La Collette
Power Station and we used the occasion to re-iterate the
importance of our continued investment in the Power Station
and the valuable role it continues to play in the supply
security of the Island.

I reported last year that, after further analysis of our system
resilience, we had decided to acquire a ‘black start’
diesel generator following all-Island supply failures on 25
September 2012 and 27 January 2014. The 5.5MW
Sulzer, Diesel 5 is an eight-cylinder inline version of our four
existing 11MW V16 Sulzers but importantly designed to
start using compressed air.

Since being moved into place in July, the engine has been
completely refurbished by specialist contractors who installed
the two 11MW Sulzers we acquired in 2013.

Although we do not expect to use Diesel 5 heavily, its ‘black
start’ capabilities will enable the Company to restore full
electrical supplies to the Power Station and all its ancillary
controls in the event of a major disruption to imported
supplies, without itself being reliant on electrical power to
start. It also enables us to continue to meet our published
Security of Supply Standard by adding another 5.5MW of
flexible generation. We expect Diesel 5 to be in service in
early 2017.

On-Island supply security will be further enhanced over the
next two years when we intend to replace ageing electrical
plant at our Queen’s Road primary substation. We intend to
submit a Planning Application in 2017, with the installation
of the replacement equipment commencing in 2018.

ELECTRICITY SOURCES
2015/2016 IN %

+1.5%

+0.9%

YEAR

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

2015-16

5.9%

1.8%

2.5%

20.7%

14.9%

1.4%

2.9%

EfW

0.6%

2.6%

5.2%

3.9%

4.9%

4.6%

5.5%

Import

93.5%

95.6%

92.3%

75.4%

80.2%

94.0%

91.6%

-2.4%

Peak demand this year was 149MW recorded at 9.30pm
on 19 January, similar to last year’s 148MW but still well
below our all-time record of 161MW in February 2012.
This year we imported 92% of our energy requirements from
France compared with 94% in 2015 and generated 3%
on-Island. The remaining 5% came from the States of Jersey-
owned Energy from Waste plant.

Transmission
In addition to the successful installation of Normandie 1,
we have also undertaken works on the Channel Islands
Electricity Grid (CIEG) System Integrity Protection System
(SIPS) installed in 2015 across the entire transmission
network. SIPS has been in service throughout winter
2015/16 to provide cover and balance to the transmission
network at times of stress such as after asset failures occur in
the network.

Since the installation, SIPS has been out of service for one
week during summer to have remedial works completed
which could not be fully addressed last year. N1 has
also had to be integrated into SIPS. This required the
replacement of many protection schemes necessitating
different interface signals that need to be catered for,
integrated, tested and verified.

607 GWh
Imported from EDF

Hydro 36% Nuclear 64%

37 GWh
Generated by EfW plant

19 GWh
JE locally generated

Distribution

Maintaining and investing in our distribution
network is vital to ensure supply security
at a local level. This year we installed
around 28km of new cable, 10 new
substations and 910 new services. We also
refurbished 16 substations and maintained
218 substations and almost 10km of
overhead line. Substations on the network
now number 774.

At £17m, our biggest network investment,
however, is the construction of the new
primary substation, known as St Helier
West, on the site of a disused quarry at
Westmount. Although we obtained planning
permission in 2014, identifying the ground
conditions of this old coastal quarry involved
careful clearance and investigation of the
site to ensure the specification for the civil

works was properly scoped so that the old
quarry wall could be safely removed while
retaining the ground stability of the site.
With this work completed, we were able to
award the civils contract to local firm Jayen
Ltd in December 2015 and the team has
made good progress throughout the year.

Around 27,000 tons of material, including
5,000 tons of rock, have been removed and
work on the new retaining wall is underway.
Once this has been fully re-instated in spring
2017, our specialist French contractors
INEO will begin the actual build. The
substation is expected in service in 2018.
The new retaining wall will blend into the
surrounding landscape and provide a
public viewing platform, while granite
cladding and landscaping will further
minimise its impact.

St Helier
West primary
substation
Progress so far

Apr 2014

Nov 2014

Jan 2016

Apr 2016

Aug 2016

Oct 2016

WHEN COMPLETED

ENSURING SECURITY AND RELIABILITY OF SUPPLY

CHIEF EXECUTIVE’S REVIEW

SMARTSWITCH

Our Smart Metering programme,
SmartSwitch, has made significant progess
in 2015/16. Following on from last year’s
pilot deployment we have this year launched
a full scale roll-out by a dedicated team
of installers working over and above our
‘business as usual’ replacement meter work
by our Metering Technicians who have also
made live 632 Local Data Collectors (LDCs)
on the network.

At year end, we had switched over half the
Island to the new meter system, with 25,296
Smart-enabled meters in operation, capable
of automated control and remote reading. As
well as avoiding the cost and inconvenience
of Meter Readers visiting premises, estimated
bills and self reads, the number of Smart
Meters now in operation has enabled us to
introduce Post Code Billing. This means that
customers with Smart Meters will receive four
equal quarterly bills each for a standard
90-day period, reducing the number of
billing queries we receive. Our bespoke Pay
As You Go option has been scoped and we
expect to deploy over 4,700 of these meters
in 2018.

Work on the customer facing online portal,
Smart Account, that will enable us to present
consumption data to customers, continues
involving the Metering team, our in-house
software and data specialists Jendev and our
billing partner Swiss Post Solutions (SPS) as
we work to enhance and upgrade
our offering.

At a cost of £11m SmartSwitch is now
expected to be completed at the end of
2018. It is very much in line with our
strategy to enhance our infrastructure
for a ‘Smart’ future, strengthens our
relationships with customers and
provides opportunities to develop
new products and services.

25,296
SMART METERS
INSTALLED SO FAR

PROTECTING THE ENVIRONMENT
AND CONSERVING RESOURCES

“There is a possibility for
Jersey to harness offshore wind
and export the energy back
into the French grid”

***

Source: Building Bye-Laws (Jersey) Technical Guidance Document 11.1B 2016

Defra Greenhouse Gas Reporting - Conversion Factors 2016

Due to improvements in the underlying calculation, discrepancies in the yearly

averages will be seen when compared to previous ARAs, this is as a result of changes
to the methodology and updating of the base year 2012/2013 calculations.
All updates can be viewed on: www.jec.co.uk/about us/responsibility/environment.

ENVIRONMENT | RENEWABLES

CHIEF EXECUTIVE’S REVIEW

environment from our operations and we believe we need to
continuously lead by example by continuing our own energy
saving measures. The majority of LED lighting in the La Collette
offices has been completed and proven a great success. LED
lighting is now being installed in the main Powerhouse offices.
We are also looking to enhance our existing solar installation
to produce hot water for showers and basins in the wash
rooms among a number of other measures.

The British Safety Council (BSC) Five Star Audit we
undertook last year provided a structured path for continuous
improvement of our already robust environmental management
system. Though we were delighted to be awarded Four Stars
or a ‘very good’ rating, we continue to refine and improve our
systems in preparation for the next BSC audit in 2018.

Renewables
Over the last few years, we have invested significant effort
in exploring the potential for wind and tidal power in Jersey.
We believe economically viable tidal power is still many years
away and carries very high development risk. We consider
onshore wind to be an extremely difficult proposition in a
small island like Jersey but a smaller venture at the La Collette
Reclamation Zone could feasibly be consented albeit the
economics are more difficult. However, there are opportunities
for Jersey Electricity in ‘facilitating’ offshore wind. In the
absence of government subsidies the economic opportunity
of offshore wind remains difficult to unlock but we do believe
there is a possibility for Jersey to harness offshore wind and
export the energy back into the French grid in such a way
where it could attract the subsidy it needs to make it viable.
Such a project could produce a useful source of income for
the States of Jersey and to this end, we have developed a
proposal to work with them to take offshore wind forward,
however it relies on active and significant engagement and
commitment from the States which has thus far proven difficult
to secure.

This year, therefore, we have focused on solar photovoltaic
(PV), building on our knowledge developed from our own
PV test array on the Powerhouse building which we installed
in 2013. Solar PV technology has been widely installed
in Europe, the US and Australia and off the back of this
development we have seen significant reductions in panel
costs leading to almost a complete withdrawal of subsidy in
many locations. As a result of low installation costs, we do
see some potential for solar PV in Jersey in the medium term
albeit the economics are at best marginal without subsidy
either at domestic or commercial scale. We are currently
considering our corporate position on solar PV but we
continue to connect private installations and we continue
to offer a Buy Back Tariff for customers who wish to export
surplus energy back into the grid.

We recognise that we are privileged to live and work on
a beautiful island. And we also appreciate that as a major
business in Jersey we have a significant responsibility in
playing our part in looking after it. Minimising the impact of
our activities on climate change and encouraging others to do
the same is the obvious way in which we can do this and has
been at the centre of our efforts for some time. It also aligns
with the States of Jersey’s Energy Plan - Pathway 2050, which
was approved in the States Chamber in March 2014 and
which commits Jersey to reducing its carbon emissions by 80%
of 1990 levels by 2050.

We have made great progress on our decarbonisation
agenda over the last three decades assisted by our importation
strategy which has enabled us to access low carbon electricity
from France. We are proud of the role we have played in
helping the Island reduce its carbon emissions by around a
third over the last 20 years despite a significant increase in the
consumption of electricity.

Our ten-year supply agreement with EDF that came into
force in January 2013, guarantees that our imports are from
certified low carbon sources. This year low carbon imports, of
which around two thirds came from nuclear sources and one
third from hydro-electric sources, met 92% of our demand.
Our importation levels were slightly down on last year’s 94%
import level, however, the addition of our third submarine
cable, Normandie 1 (N1), will enable us to meet the Island’s
full power requirements, even during the winter peak. Using
the DEFRA Greenhouse Gas (GHG) Reporting Guidelines
in addition to adopting the principles of GHG Protocol for
Electricity Emissions Reporting, this has meant that we have
delivered power to customers for the financial year 2015/16
at 47g CO2e /kWh, around one ninth of the UK Electricity
system. Our four-year average is 105g CO2e /kWh.***

JERSEY ELECTRICITY

47G CO2 /KWH

JERSEY LPG

241G CO2 /KWH*
298G CO2 /KWH*

JERSEY HEATING OIL

UK ELECTRICITY

412G CO2 /KWH**

As well as actively encouraging our domestic and commercial
customers to become more energy efficient through self-help
measures and our free and paid for advisory services, we also
work hard to minimise our direct and indirect impact on the

“ We maintained our
overall customer
service rating in the
domestic market at
7.7 out of 10 which
we are advised is an
excellent result...”

CUSTOMER SERVICE
STANDARDS

As the sole supplier of over a third of the Island’s energy
requirements we have a huge responsibility to our
customers for all the services we provide and in our
interactions dealing with their day-to-day needs and
difficulties. In addition to our published Standards of
Service and Customer Charter, one of our six core Values
is: Customer Focus - ‘We listen to our customers and
seek to understand and respond to their needs, treating
them the way we would wish to be treated, with respect
and honesty.’

Our latest call logging software, Microsoft Dynamics
Customer Relationship Management System (CRM),
designed to log and help us track every customer
interaction against our Charter, right across the business is
now in its second year. A review across the organisation
on the way we use CRM resulted in further improvements in
this system. This progress is now flowing into performance
data, with no reported ‘Charter failures’ on response
and resolution times for eight months. This has led to
both a better overall understanding of the purpose of the
software and tighter overall departmental management and
monitoring of cases. The review also showed that structural
and managerial changes in several departments since the
original CRM design was implemented need to be reflected
in further process changes and design updates which we
are undertaking with our own in-house Microsoft Dynamics
NAV team Jendev.

The CRM system has also enabled our dedicated fuel
switching team, Energy Solutions, supported by Customer
Care, to streamline the customer journey for those
enquiring about and undergoing fuel switching. Further
CRM enhancement will pull together all aspects of our fuel
switch and heating enquiries offering under a single ‘case’
per customer.

Customer Care has also continued to support our Smart
Metering project, SmartSwitch, facilitating the booking of
meter change appointments to minimise inconvenience for
customers. An additional customer benefit arising from this
project has been the introduction of Post Code billing which
provides customers with four equal quarterly billing periods
of 90 days helping to smooth the burden of bills throughout
the year. The project has enabled us to offer customers our
first 24-hour uninterrupted heating tariff, Economy 20 Plus
(E20+). Not only does this tariff provide greater comfort
levels and control for existing heating customers, it is also
proving attractive for fuel switching customers.

2010/2011 6.90Due to changes in the survey methodology,
discrepancies will be seen when compared
to previous Annual Reports.

CUSTOMER SERVICE STANDARDS

CHIEF EXECUTIVE’S REVIEW

Our Energy Solutions team have gained many insights
from customers during the year from a series of customer
focus groups. We have invested in this exercise again this
year to help us further develop our fuel switching strategy
and make our corporate communications more effective.
In response to our customer research we have developed
a more visually engaging Energy Hub as part of our
website platform, featuring a series of ‘self-help’ videos that
advise and inform customers on energy saving and tariffs
- topics on which they say they lacked information - as
well as supporting our commercial growth strategy on fuel
switching and electric transportation. We see the Hub as a
precursor to further online developments to enable greater
customer engagement and satisfaction.

We continue to monitor customer satisfaction and gather
feedback using an external specialist analytics company
to undertake annual market research. This enables us
to compare our performance year-on-year as well as
providing new insights into changing customer needs and
expectations.

Overall Rating
In 2015/16 we maintained our overall customer service
rating in the domestic market at 7.7 out of 10 which we
are advised is an excellent result compared with similar
service providers in the market.

This rating encompasses:

• Technical problem resolution - speed of response

• Clarity of electricity bills

• Helpfulness in dealing with telephone enquiries

• Helpfulness of showroom staff

• Support in electricity bill payments

• Regular advice on energy efficiency

Supply security
Domestic customers this year rated ‘security and quality of
supply’ even more importantly than ‘running costs and price
stability’. Despite the all-Island power failure on 9 May which
accounted for 15 of our total 24 Customer Minutes Lost, our
security rating remained high at 8.2 out of 10, just marginally
down on last year’s 8.4.

Commercial Customers continued to rate ‘running costs and
price stability’ as most important and our overall rating
(five-year average) increased from 6.59 to 6.62.

In addition to surveys and focus groups, since 2014, we have
reviewed our Contact Centre phone response performance
every six months against other providers, using the same
industry benchmarks to measure and compare our relative
performance and we appear to perform well.

2014/2015 7.712015/2016 7.742013/2014 7.702011/2012 7.102012/2013 7.322010/2011 6.90Powerhouse.je
Following a significant re-structuring and re-branding exercise in 2014,
our retail business Powerhouse.je has continued to make good progress
and this year, has delivered an excellent financial result. Turnover
increased by 8% from £11.1m to £11.9m for the year ending 30
September 2016. The business has turned a loss of £0.1m in 2014 to a
profit of £0.3m in 2015 and to almost £0.5m this year.

This is a significant achievement given the intense competition in the
local marketplace and from online UK companies. The restructure has

helped to reduce our cost base which when coupled with better procurement,

has enabled the business to be more price competitive. Investment in training in sales
and customer service skills, coupled with product training with support from brand
manufacturers, has had a positive impact across this business. Better skilled and more
engaged staff are now delivering even higher levels of customer service which is such
an important differentiator in the local market and against the online threat. The positive
feedback we have received from customers on both price and service has been notable
during the year.

Our investment in the store itself has continued with the introduction of the largest display
of built-in kitchen appliances in Jersey. We aim to champion new technologies and lead
the way on smart appliances and products for the mid-market. We have also brought our
Technical Support Services into the shop creating a bright, new easily accessible customer
service point for those seeking technical repairs or general advice. This has enabled us to
further promote our after sales support and service packages.

The rapid advancement of smart appliances and the inter-connected home present
exciting opportunities for the future of electrical retailing and we intend to exploit
these to the full with a dynamic store and online offering and well-trained motivated,
knowledgeable staff.

COMMERCIAL

CHIEF EXECUTIVE’S REVIEW

Property
Our Property portfolio comprises the Jersey Electricity Retail
Park on Queen’s Road and a number of residential properties
as well as income from the leasing of mobile aerial sites and
fibre optics to telecoms operators. The Retail Park comprises
our main office and retail building, Jersey’s B&Q store and
a large medical centre. The ground floor of the main office
building is home to our own retail store, Powerhouse.je,
which occupies approximately half of the available space,
with the other half being occupied by SportsDirect.com.
The middle floor of the building is occupied by the telecoms
operator Sure and their subsidiary, Foreshore, the data centre
operator formerly owned by Jersey Electricity. The Company’s
offices are situated on the top floor of the building.

Profits in our Property Division, excluding the impact
of investment property revaluation, at £1.7m, rose by
£0.1m from last year with a higher rental level and lower
maintenance costs being the main drivers.

Jendev
Jendev, a Microsoft® partner for Dynamics NAVTM,
specialises in software development and configuration for
the utility industry with a focus on billing. A strategically
important ‘in-house asset’, Jendev continues to play an
important role in the Group’s portfolio.

First established in 1998, Jendev is moving through a
significant programme of renewal and Jersey Electricity has
actively invested in redevelopment of the team, technology
and commercial proposition. The business is now well-placed
to target sustainable growth through its flagship product
‘Jenworks Billing’.

Comprised of a small team of highly experienced utility
industry IT professionals, Jendev continues to support Jersey
Electricity in a number of strategically important activities,
including the Smart Metering project, SmartSwitch. The
business is also leading JE’s enterprise system upgrade to the
latest version of Microsoft Dynamics NAVTM technology, a
major company-wide initiative.

Jendev also serves external utility customers in Guernsey,
the Isle of Man and the UK and generated revenues of over
£1m this financial year. In line with its plans for sustainable
revenue growth, Jendev has identified a number of strategic
technology partners and the business is actively engaged in
commercial opportunities in several export markets.

268,000

UTILITY END-CUSTOMERS BILLED

125

COLLECTIVE YEARS’
EXPERIENCE IN MICROSOFT
DYNAMICS NAV

133

COLLECTIVE YEARS’
EXPERIENCE IN THE
UTILITY INDUSTRY

Building Services (JEBS)
Our continued development of JEBS, our contracting and building services
division, into a more commercial and customer-focused business unit has
this year started to pay dividends. JEBS provides electrical, mechanical
and plumbing installation and maintenance services, including
air-conditioning and refrigeration, to domestic and commercial customers.
The appointment last year of a Contracts and Operations Manager,
working under the Head of Commercial Services, to improve contract
tendering and delivery has helped JEBS win several major contracts in
a highly competitive marketplace. These have included the complete
electrical, mechanical and refrigeration services installation at Pierre
Arrivé House, 22 Colomberie which comprised 19 flats and ground
floor retail units for the Channel Island Co-operative Society (CICS), the
mechanical installation at the CICS new Bath Street Medical Centre and
CICS St Peter new Grande Marche ground floor retail unit refurbishment
and mechanical plant replacement.

JEBS was also awarded a second contract from Ports of Jersey. Having
successfully completed the heat pump chiller installation at the Airport
Departures Hall, JEBS this year undertook the full mechanical and
electrical services installation for the Ports’ refurbished Administration
offices. On the domestic front, JEBS continues to support the Energy
Solutions Team in load growth through heating installations that are
growing year on year.

The Maintenance and Services team has
also seen an increase in calls, with over 100
emergency callouts over three days in August
alone. Staff recruitment remains a challenge
although more active succession management
processes are assisting us. A new team is now
offering a wider range of Amenity Lighting and
External Lighting Services to clients across the
Island, including maintenance and repair of
high-mast installations on car parks and private
amenity spaces.

Operating in a challenging industry with strong
competition for trade staff, JEBS revenue,
including intercompany sales, rose 19% from
levels experienced in 2015 to £5.9m. Although
tough challenges remain in this marketplace, I
am pleased to see the business moving toward
a more commercial and sustainable footing.

COMMERCIAL

CHIEF EXECUTIVE’S REVIEW

Sustainable Engineering

Jersey Energy
Jersey Energy and its Guernsey office,
Channel Design Consultants, provides high
quality environmental and building services
advisory work to end user clients, architects
and developers serving predominantly
the healthcare, retail, commercial and
residential sectors. It has had a very
successful year with revenue and profits
ahead of expectations. As a leading
pan-Channel Islands consultancy, staff are
continually developing the services offered
to meet increasing client expectations. They
have been rewarded with a consistent work
stream of repeat business from satisfied
clients and, significantly, winning high
value, long-term contracts. These have
included Jersey Energy winning the new
States of Jersey Central Administration
building and States of Jersey Grainville
School Music School extension. The
Guernsey office has also had a full
order book.

Their projects have included the
refurbishment of Guernsey Grammar School
and the installation of a new building
management system within Trafalgar
Court office development. The construction
industry is particularly active in Jersey
and we are hopeful of continued strong
performance into next year, reflecting the
business’s respected and elevated position
within the sector. We are continuing to
develop the business by forming more
strategic alliances with UK consultancies
that enable Jersey Energy and Channel
Design Consultants to increase their
capacity as and when required to secure
bigger commissions on a more cost
effective, flexible basis.

“ Nothing is more

important than the
safety of the public,
our customers and
our staff”

HEALTH
AND SAFETY

We identify contractors and third party service providers as
a particular risk that needs close management. With the high
level of operational and construction activity this year our
HSE team has increased the number of on-site visits, closely
monitoring the project teams and then discussing its findings
with contractors. This increased vigilance has resulted in no
Lost Time Accidents (LTAs) in our Energy business or JEBS, our
contracting and Building Services Division. Company-wide, we
have had one minor LTA in retail.

Working with the Health and Safety Inspectorate (HSI), we
have also reintroduced a safety message to the community with
a campaign warning of the dangers of working near electricity
cables and urging building contractors and DIY enthusiasts to
contact us before they start work to enable us to identify cables
around their building sites and properties. This campaign
included a radio campaign and issuing leaflets to all known
contractors and outlets they frequent as well as over 20,000
domestic customers via electronic billing. Since the campaign’s
launch to year end our HSE team has not needed to investigate
one single incident.

We face many hazards in our work and I am proud of the
health and safety culture that we have developed. My thanks
go to everyone for their individual contribution in making
Jersey Electricity, and all the people the Company touches,
safe and healthy.

This year we have had three major on-going infrastructure
projects involving international teams of contractors in
which managing Health, Safety and Environment (HSE) has
presented particular challenges and higher risks. The removal
from the seabed of our 31-year-old EDF1 cable, followed by
the installation of its replacement Normandie 1 (N1) involved
contractors and crews from a range of countries operating in
challenging waters and along a difficult route. The installation
and refurbishment of Diesel 5 at La Collette Power Station has
seen Madeiran, UK and local contractors working alongside
our own production engineers, while local civil contractors
have removed 27,000 tons of material from the difficult site of
our new primary substation St Helier West in an old coastal
quarry. I am delighted to report that all these projects have
progressed without a significant HSE issue. This is testament to
our commitment to HSE and culture throughout a business in
which many staff work in hazardous conditions every day.

We invest considerable resource and senior management
commitment in HSE. Safety is one of our six core values: ‘We
do everything safely and responsibly or not at all – nothing
is more important than the safety of the public, our customers
and our staff’. Our approach is flexible and ‘risk based’.
We seek to address new and revised legislation and adapt
to operational environments. We ensure all our colleagues
are fully competent in the work we ask them to do and they
recognise their own limits of competency. They are also
expected to proactively identify hazards through regular risk
assessments and take action to mitigate the risks associated
with those hazards in their day-to-day work. Various HSE
Committees provide governance. This includes a forum for
direct communication between myself as Chief Executive,
Senior Management and Safety Representatives who help to
create the conditions and culture for safe working among all
colleagues, contractors and the public.

HEALTH AND SAFETY

CHIEF EXECUTIVE’S REVIEW

RIDDOR

LOST TIME ACCIDENTS (RIDDOR)

RIDDOR (Reporting of
Injuries, Diseases and
Dangerous Occurrence
Regulations) is the UK
standard for reporting
Accidents and Near Misses.
In the UK, an LTA is defined
as an accident that results
in the injured person being
away from work or unable
to do their normal work for
more than seven days. Jersey
Electricity applies the more
stringent standard of more
than three days. This enables
us to benchmark against
other peer group entities and
allows us better oversight on
risk trends.

DAYS LOST (RIDDOR)

2012

2016

2015

2014

2013

2012

2013

2014

2015

2016

SUSTAINABILITY
IN THE COMMUNITY

As a company with a 92-year history in the Island,
we consider Jersey Electricity to be very much a
committed, long-term partner in our community,
helping and supporting our staff, volunteer groups,
charities and schools in fund raising and other
activities that benefit worthwhile local causes. In
a new move this year we ‘married’ one of our
corporate environmental sponsorship initiatives
(Durrell Wildlife Conservation Trust) with a staff
CSR activity to launch our first Sustainability in the
Community Event. The event was oversubscribed
with volunteers resulting in 20 being chosen to
spend half a day cleaning and weeding the moat
that surrounds the Orang-utans’ island enclosure at
the world famous wildlife park. The event proved
a huge success with staff and Durrell alike and we
hope this is just the start of such initiatives.

Though we traditionally direct our support to
health, education and environmental causes,
this year we have also ventured into sport with a
trial corporate sponsorship of Jersey Rugby Club
which is seen here as very much a community
based club, catering for children as young as
seven and attracting support from across all social
backgrounds. Our support is therefore welcomed
by a large cross-section of the community while
also raising our profile commercially.

Our continued long-term support for Jersey
Construction Council (JeCC) brought an added
bonus this year that dovetailed perfectly with our
rugby sponsorship. As well as sponsoring the
JeCC Sustainability Award, which recognises
best practice in construction, we enabled Council
to obtain former England Rugby Captain and
2003 World Cup winner Matt Dawson to be
keynote speaker at the awards gala. Matt raised
£3,500 for the Council’s Brick Foundation Charity
by kindly auctioning a signed shirt and the next
morning he gave his time to spend three hours
with junior rugby players.

The Sustainability Award 2016 itself was won by
the National Trust for Jersey, another charitable
organisation with which we have a long
association. This year we extended our regular

corporate sponsorship to fund a film celebrating
10 years of the Trust’s vital Coastline Campaign
and this autumn we have again teamed up
with the Trust in its elm tree and hedge planting
projects to mark its 80th anniversary. In line with
our corporate strategy, we aim to encourage
more customers to switch to ebilling by donating
£5 for every one who does to these worthwhile
environmental projects.

We were also delighted to again sponsor the
Pride of Jersey Environmentalist of the Year award
following the success of last year’s inaugural
event. This award is part of a series of community
awards organised by the Jersey Evening Post
but nominated and voted for by the public to
recognise the unsung heroes who make such a
difference to our community.

It was a more historical environment project that
had our support in summer when we sponsored
Jersey Heritage’s Ice Age Project, in conjunction
with the National Trust and Société Jersiaise, by
funding a portable solar powered rig to enable
a team of international archaeologists to process
work at the Ice Age dig site.

Importantly we have also supported passionate
colleagues in their many and varied fund raising
activities during the year including the Lions
Club Swimarathon, the Dragon Boats Festival for
Jersey Hospice Care, the Silkworth Extreme Team
Challenge, the Jersey Marathon and football for
Sports Relief. The Staff Charity Draw has also itself
raised thousands of pounds for staff-nominated
local charities. This year’s beneficiaries were the
Jersey Association for Youth & Friendship, Jersey
Donkey Home, National Meningitis (Jersey) Trust,
Cancer Research UK Jersey, Jersey Cheshire
Home, Clic Sargent Cancer Care for Children,
Jersey M.S. Therapy Centre, MIND Jersey, Donna
Annand Melanoma Charity, Jersey Epilepsy
Association, Jersey Cancer Trust and Jersey Action
Against Rape.

SUSTAINABILITY IN THE COMMUNITY

CHIEF EXECUTIVE’S REVIEW

“...We consider Jersey
Electricity to be very
much a committed,
long-term partner in our
community.”

The Energy business has recruited seven
new apprentices this year, our largest
intake since 2012. We were met with an
encouraging response at a Jersey Skills Fair
where we had an interactive stand and aired our
new recruitment video in which staff from all areas of
the business play a part.

Staff wellbeing is another area in which we have invested
resource and tried new ideas with the help of colleagues.
The Health, Safety and Environment Team and HR Team
have worked together on various trials to promote wellbeing
in the workplace. To date these have included free fresh
fruit, lunchtime yoga, Dress Down Fridays and Wellbeing
Seminars. Unum our new Permanent Health Insurance
provider supports employees with counselling services and
pro-active wellbeing management.

Whilst we are clearly a capital intensive, asset driven
business, it is our staff that delivers the services and makes
us distinctive. Our objective is to help everyone reach their
full potential and fairly recognise and reward them
for great performance across the business.
Our aim is to make Jersey Electricity the
“employer of choice” in the fight for
talent across the Channel Islands right
across the skills levels.

OUR PEOPLE

The 50th anniversary of the operation of La Collette Power
Station on 29 September 2016 was made even more
poignant by the presence of several pensioners who had
served at the Power Station during its early years, including
- incredibly - one of three shift engineers who completed
the hand written generation ledger on the very first day in
1966. It was a reminder not only of our proud history but of
the dedicated staff that have served the Company and our
community so well over the decades.

That dedication is evident today. We have many long-serving
employees who have acquired the skills and experience
necessary to deliver a first class service over many years.
But as the industry moves forward we must ensure that we
continue to maintain a highly skilled, flexible and dedicated
workforce to meet the demands of the future. In that respect
we are committed to developing the potential of our existing
staff and attracting the best new recruits that in both cases
exemplify our values.

Our new HR team is now fully in place and has delivered year
one of a multi-year HR strategy that aligns with business needs
and builds on the Purpose, Vision and Values work instigated
in 2013 to re-focus everyone on our objectives and chart the
way we work together to achieve them.

A Talent Manager supports the HR Director in our cultural
change programme covering training and development,
succession management, career planning, reward
and progression of our people. We have published a
comprehensive annual training programme, created a brand
new Management Development framework and associated
Management Development training programme and initiated
an Executive Coaching and Mentoring model. This has been
met with enthusiasm from managers and once extended
across our business, promises to significantly transform
our management skills and capabilities at all levels in the
organisation.

OUR PEOPLE

CHIEF EXECUTIVE’S REVIEW

14.5
years

352
EMPLOYEES

AVERAGE LENGTH
OF SERVICE

5
EMPLOYEES AWARDED
FOR 40 YEARS SERVICE

OUTLOOK

CHIEF EXECUTIVE’S REVIEW

“ ...we are well positioned to
manage the risks, challenges
and opportunities of
the future”

In 2012 we declared a medium term objective to deliver
a transmission network comprising three submarine cables
between Jersey and France, across two separate routes,
co-owned with our partners, Guernsey Electricity (GEL).
By the end of 2016 we have achieved this. This puts power
supplies into Jersey in a more resilient configuration than ever
before – at the same time building in headroom for growth
that should cover our interconnection requirements for the
next decade or more.

Albeit at a lower monetary level, our infrastructure investment
continues in 2017 with the completion of Diesel 5, further
progress on our SmartSwitch programme, and the important
St Helier West primary substation that will give relief to three
quarters of St Helier, the economic hub of Jersey. This will
be followed by a significant new investment which we are
planning in our Queen’s Road primary substation towards
the end of the decade.

A significant part of what we do is focused on business risk
and ‘opportunity’ management – of a strategic, financial and
operational/supply nature. We live in an uncertain world.
That has never been clearer with the surprise outcomes of
Brexit and the US Election. Although these events may feel
remote, they have the potential to indirectly impact our
activities in material ways. Jersey Electricity is an importer of
energy and a ‘price taker’. The Brexit vote has immediately
led to a significant weakening of Sterling relative to the
Euro and Dollar, impacting the cost of imported energy
and the cost of infrastructure (in which a material portion is
generally denominated in Euro). Putting aside the impact on
the markets, it is also unclear how Brexit, the US Election or
other European elections (yet to take place), might impact our
customers, the economy and Jersey as a jurisdiction.

As far as strategic risk and opportunity is concerned, we
believe that our product is well positioned for the future.
The Energy Plan promises an important role for electricity
in the energy mix if Jersey is to have hope of meeting
its decarbonisation objectives. We face new disruptive
technologies, some of which will bring new opportunities,
and we face pressures from energy efficiency, which we
believe is right that we encourage, but we are offsetting this
with real progress on fuel switching and we will continue to
invest in this.

From the financial risk perspective, we have put in place
strong risk management and hedging processes that have
sheltered customers from much uncertainty and volatility in
foreign exchange and energy markets over recent years.
Our hedge book is strong over the short to medium term, and
we have already declared a price freeze to customers for
the calendar year 2017. But if Sterling stays weak relative
to the Euro, and it is not clear it will, we can expect this
to eventually flow into our cost of imported electricity and
potentially capital projects. If Sterling stays weak relative to
the Dollar, we could see this increase the price of oil, our
primary feedstock for the power station albeit oil is also a
product with which we compete in the heating market.

We believe our operational and supply risk, although can
never be eliminated completely, has reduced over recent
years. Jersey Electricity’s network is now well invested
and well positioned for the future. Although some of
this investment aims to improve security of supply, as a
commercial business that is self-funding, we are acutely
aware we need to make a return to shareholders on every
pound invested in infrastructure. I am delighted that we have
been able to do so, whilst preserving a very competitively
priced product into the local marketplace that compares
favourably with EU average prices, UK prices and local
Island comparators.

The energy sector and all the exogenous factors described
above continue to present threats and opportunities.
Although we are a capital intensive business, our assets are
managed by people and we achieve nothing without them.
I am confident that with the highly motivated, flexible and
skilled workforce we are developing, we are well positioned
to manage the risks, challenges and opportunities of
the future.

Chris Ambler
Chief Executive
13 December 2016

FINANCIAL REVIEW

Group Financial Results

Key Financial Information

2016

2015

Revenue

£103.4m £100.5m

Profit before tax pre-exceptional items £13.1m

£12.4m

in service. Further details are provided in the section dealing with

pension matters within this report.

In the financial year we imported 92% of our requirements from

France (2015: 94%) and generated 3% of our electricity on-island

at La Collette Power Station (2015: 1%). Additional generation for

Earnings per share pre-exceptional items 33.31p

32.94p

training was the main reason for the lower level of importation in

Dividend paid per share

13.10p

12.45p

Final proposed dividend per share

8.00p

7.60p

Net debt

£29.0m

£17.5m

Group revenue for the year to 30 September 2016 at £103.4m
was 3% higher than in the previous financial year. Unit sales

volumes of electricity were marginally behind last year with Energy

revenues at £81.2m against £80.7m in 2015 slightly higher due

to some non-recurring installation work in the year. Turnover in

Powerhouse.je, our retail business, increased by 8% from £11.1m

to £11.9m. Revenue in the Property business rose by £0.1m to

£2.1m due to a higher level of rental income. Revenue from

JEBS, our contracting and building services business rose £1.0m

from levels experienced in 2015 to £5.1m. Turnover in our Other

Businesses rose £0.5m to £3.0m.

Overall cost of sales rose by £0.6m to £65.2m due mainly
to additional costs in the non-Energy business units associated

with the aforementioned rise in revenue, partially offset by a
fall in the Energy business. Operating expenses, at £23.5m,
rose by £1.6m from their 2015 level with an increase in IAS19

pension costs of £0.4m and a £0.7m ex-gratia award for

current pensioners being the main items.

Profit before tax, pre-exceptional items, for the year to 30
September 2016, at £13.1m, increased by 6% from £12.4m

in 2015. The rise was primarily generated from improved

performance in our non-Energy business units. Profit before tax

post-exceptional items, rose from £13.2m last year to £14.8m in
2016. The exceptional credit of £1.7m in 2016 was in respect
of the release of a rent accrual that had been accumulated over

many years for our La Collette Power Station site. As highlighted

previously in the Related Party Transactions Note to the Accounts

the lease had been subject to a rent review dispute which

was settled by an arbiter (and confirmed by subsequent legal

judgement) in our favour at the existing peppercorn rent, rather

than at a higher level suggested by our landlord.

Our Energy business unit sales saw volumes falling marginally from

627m to 625m kilowatt hours after another relatively mild winter

period with both the last two winters seeing temperatures above the

long-term average. Profits in our Energy business rose from £11.5m

2016 compared to the previous year. The remaining 5% of our

electricity came from the local Energy from Waste plant being at

the same level as in 2015. Continuing with the trend since 2014

there were no tariff changes during 2016 and our prices continue

to remain competitive with other jurisdictions. Our last tariff

movement was an average 1.5% increase in April 2014.

Profits in our Property division, excluding the impact of investment

property revaluation, at £1.7m, rose by £0.1m from last year with

a higher rental level and lower maintenance costs being the main

drivers. Our investment property portfolio was revalued downwards

this year by £0.3m to £20.1m by the external consultants

who review the position annually. The main reason for this 2%

devaluation is that a break clause exercisable in 2023, for one of

the leases, impacts such calculations between now and that date.

Our retailing business, Powerhouse.je, had a strong year post the

restructuring and re-branding of the business with a loss of £0.1m

in 2014 moving to a profit of £0.3m in 2015 and to £0.5m in

2016. JEBS, our contracting and business services unit produced a

profit of £0.1m compared with a near breakeven position in 2015

in a challenging industry with high competition for staff. Our other

business units - Jersey Energy, Jendev and Jersey Deep Freeze all

had profitable years ahead of internal targets.

The interest charge in 2016 was £1.1m against £1.5m in 2015
with capitalisation of interest associated with the new N1 subsea
cable being the primary reason for the reduction. The taxation
charge at £3.2m was £0.8m higher than 2015 due to a higher
level of profitability.

Group earnings per share, pre-exceptional items, rose 1% to
33.31p compared to 32.94p in 2015 due mainly to an increase in

profits. Earnings per share, before adjusting for exceptional items,
increased from 35.00p in 2015 to 37.69p in 2016.

Dividends paid in the year, net of tax, rose by 5%, from 12.45p
in 2015 to 13.10p in 2016. The proposed final dividend for this

year is 8.00p, a 5% rise on the previous year. Dividend cover, pre-

exceptional items, at 2.5 times fell marginally from 2.6 times in

2015. If exceptional items are included, dividend cover rose from

2.8 times last year to 2.9 times in this financial year.

Ordinary Dividends

2016 2015

to £11.6m. A lower cost of sales resulted in a higher margin but this

Dividend paid

- final for previous year

7.60p 7.20p

was offset by higher pension costs. The main factor that contributed

to the increase in such costs was a £0.7m charge of a non-recurring

nature associated with the granting of an ex-gratia rise in pensions

- interim for current year 5.50p 5.25p

Dividend proposed - final for current year

8.00p 7.60p

Net cash inflow from operating activities at £25.2m was
£1.9m higher than in 2015 with an increase in profit, prior to
IAS 19 pension accounting, being the primary driver. Capital
expenditure, at £32.4m rose from £16.8m last year as the N1
project spend dominated this year and resulted in net debt at
the year-end of £29.0m being £11.5m higher than last year.

Cash Flows

Summary cash flow data

2016

2015

Net cash inflow from

operating activities

Capital expenditure

£25.2m

£23.3m

In the last financial year Jersey Electricity imported 92% of the

electricity requirements of Jersey from Europe. The Company

jointly purchased this power, with Guernsey Electricity, through

the Channel Islands Electricity Grid, from EDF in France. The

supply contract allows power prices to be fixed in Euros in

advance of decisions being made on customer tariffs. A ten

year power purchase agreement with EDF, which commenced in

2013, combines a fixed price component with the ability to price

fix future purchases over a rolling three year period based on a

market related mechanism linked to the EEX European Futures

Exchange. The goal is to provide our customers with a market

based price but with a degree of certainty in a volatile energy

marketplace. A Risk Management Committee exists, consisting

and financial investment

£(32.4)m

£(16.8)m

of members from Jersey Electricity, Guernsey Electricity and

Dividends

£(4.1)m

£(3.9)m

Payment for foreign exchange option £(0.2)m

(Increase)/Decrease in net debt

£(11.5)m

£2.7m

Treasury matters and hedging
policies

Operating within policies approved by the Board and overseen

by the Finance Director, the treasury function manages liquidity,

funding, investment and risk from volatility in foreign exchange

and counterparty credit risk.

As a substantial proportion of the cost base relates to the

importation of power from Europe, which is contractually

denominated in Euro, the Company enters into forward

currency contracts to reduce exposure and as a tool to aid

tariff planning. The average Euro/Sterling rate underpinning

our power purchases during the financial year, as a result of
the hedging program, was 1.20 €/£. The average applicable
spot rate during this financial year was 1.28 €/£ but the rate
fell materially in the last quarter of the financial year due to the
UK decision to leave the EU. We were substantially hedged for

an independent energy market adviser and follows guidelines

approved by the Board.

Defined benefit pension scheme
arrangements

As at 30 September 2016 the scheme deficit, under IAS 19

“Employee Benefits” rules, was £9.2m, net of deferred tax,

compared with a deficit of £5.8m at 30 September 2015.

Scheme assets rose 20% from £106.8m to £127.8m since the

last year end. However, liabilities increased 22% from £114.0m to

£139.2m in the same period with the discount rate assumption,

which heavily influences the scheme liabilities, falling from an

assumed 3.6% in 2015 to 2.3% in 2016 to reflect sentiments in

prevailing financial markets after the UK decision in June 2016 to

leave the EU.

Our defined benefits pension scheme is an area of risk that

continues to require careful monitoring as it is driven largely

by movements in financial markets and materially impacted

by relatively small movements in the underlying actuarial
assumptions. If, for example, the discount rate applied to the

the 2017 and 2018 calendar years before the Brexit decision.

liabilities had been 2.8%, rather than the 2.3% advised by our

In addition we also materially hedge any foreign exchange

actuaries under IAS 19 for 2016, the net deficit of £9.2m would

exposure attributable to capital expenditure once planning

have been fully eliminated.

consents and firm pricing is known and the commitment is made

to proceed with the project.

Interest rate exposure is an area of potential risk but is managed

by the £30m of private placement monies received in July

2014 having a fixed coupon and represents the majority of our

borrowings at present.

The last triennial actuarial valuation as at 31 December 2015

was completed during this last financial year and resulted in a

surplus of £6.9m. Unlike most UK schemes, the Jersey Electricity

pension scheme is not funded to pay mandatory annual rises

on retirement. The Pension Scheme Trustees recommended an

ex-gratia award be made to pensioners in light of the surplus

The Group may be exposed to credit-related loss in the event of

and the Board approved this recommendation. The capital cost

non-performance by counterparties in respect of cash and cash

of this 1.5% rise to pensions in service as at 31 December 2015

equivalents and derivative financial instruments. However, such

was £0.7m and was paid by the Scheme but generated a £0.7m

potential non-performance is monitored despite the high credit

charge against the income statement of the Company. The last ex-

ratings (investment grade and above) of the established financial

gratia award was granted in 2011. The contribution rate by

institutions with which we transact.

FINANCIAL REVIEW
FINANCIAL REVIEW

Jersey Electricity was maintained at the previous rate of 20.6%

of pensionable salaries. Employees continue to contribute an

additional 6% to the pension scheme. The final salary scheme was

Ordinary dividend

2016

2015

£2.5m

£2.4m

closed to new members in 2013, with new employees, since that

Goods and Services Tax (GST)

£4.1m

time, being offered defined contribution pension arrangements.

The next triennial actuarial valuation of the defined benefit scheme

has an effective date of 31 December 2018.

Corporation tax

£0.4m

£ -

Social Security - employers contribution

£0.9m

£0.8m

£7.9m

£7.3m

Returns to shareholders

62% of the ordinary share capital of the Company is owned by

the States of Jersey with the remaining 38% held by around 600

shareholders via a full listing on the London Stock Exchange.

Of the holders of listed shares Huntress (CI) Nominees Ltd owns
5.4m (47%) of our ‘A’ Ordinary shares representing 18% of our

overall Ordinary shares and around 5% of Voting Rights. This

nominee company is held within the broker firm Ravenscroft

which has placed our stock with a number of private clients, and

a fund, residing largely in the Channel Islands. During the year

the ordinary dividend paid increased by 5% from 12.45p net of

tax to 13.10p. The proposed final dividend for 2016, at 8.00p,

is a 5% increase on last year and consistent with the underlying

dividend pattern in recent years and with our stated policy to aim

to deliver sustained real growth in the medium-term.

The Company regularly communicates with its largest

shareholders and details of discussions, including any concerns,

are reported to the Board by both the Chief Executive and the

Finance Director.

Group Risk Management

Approach

The Board is ultimately responsible for managing the Group’s

approach to risk and determining a strategy for managing

identified risks within the business. The Board is supported by

the Audit and Risk Committee which has delegated responsibility

for reviewing the effectiveness of the Group’s system of internal

controls and risk management. The Board recognises that any

risk management process cannot eliminate all risk but rather

manages the Group’s exposures, and sets the acceptable level

The share price at 30 September 2016 stood at £4.25 against

of tolerance required to successfully deliver the Group’s strategy

£4.50 at the 2015 year end. Before the decision was made by

and growth.

the UK electorate in June 2016 to exit the EU our share price

was above the level seen at the last year end but like many

small cap plc’s in the UK we have seen a downward trending.

This gives a market capitalisation of £130m as at 30 September

2016 compared with a balance sheet net assets position of

around £160m. However the illiquidity of our shares, due mainly

to having one large majority shareholder, combined with an

overall small number in circulation, constrains the ability of the

management team to influence the share price. At the 2011
Annual General Meeting an all-employee share scheme, to more

closely align the interests of both employees and shareholders

was approved, and during 2016, 275 qualifying staff received

100 shares which will vest in 2019 and this may be repeated

The management team has an established risk management

framework which is designed to identify, assess and help

manage the key risks. This framework also assists in developing

risk mitigation activities and making assessments of their

effectiveness. In its maintenance of the Group’s Risk Register,

each business unit, together with the executive management

team, identify the principal risks together with the mitigation

strategies in place. Following this process the principal risks

and mitigation actions are collated and reviewed by the
management team, Audit & Risk Committee and Board. The

output from this exercise forms the basis of the key principal

risks set out below.

going forward. We also use Edison (an investment research firm)

Other key features of our system of risk management, which

to market our shares to a wider body of potential investors. Such

have been in place throughout the financial year, include:

initiatives seek to improve our longer-term liquidity.

• Regular business and financial reviews by the Executive team

Our largest shareholder, the States of Jersey also owns holdings

and the Board;

in other utilities in Jersey. It holds 100% of Jersey Telecom and

Jersey Post, as well as around 75% of Jersey Water. The total

direct cash return to the States of Jersey from Jersey Electricity in

the last year was £7.9m (2015: £7.3m). Note that no corporation

tax was paid in 2015 and a relatively small amount in 2016 due

• Established and documented risk management policies

including a schedule of matters reserved for the Board;

• Systems and tools to monitor key risks with the aim of

providing regular and succinct information to the Board and

to capital allowances associated with our recent heavy investment

Executive team; and

spend.

• A comprehensive insurance programme.

Principal risks

The Directors have carried out a robust assessment of the

principle risks facing the Company, including those that would

threaten its business model, future performance, solvency or

liquidity. The table below summarises the Group’s principal risks

and how they are managed. The Board considers these to be

the most significant risks that could materially affect the Group’s

financial condition, ongoing performance and future strategy.

The risks listed do not comprise all risks faced by the Group and

are not set out in any order of priority. Additional risks not

presently known to management, or currently deemed to be less

material, may also have an adverse effect on the business.

In our Interim Report, issued in May 2016, we made reference

to the forthcoming UK vote in June on EU membership.

Although Jersey is not in the EU the Brexit decision has created a

level of uncertainty for the Island. It is unclear, at this stage, what

the full repercussions will be to both Jersey Electricity and its

customers. However a watching brief will be maintained on this

particular dynamic over the coming years.

Risk

Description and possible impact

Mitigation activities

Regulatory / Political or Legislative change

Regulatory

Not acting in line with ‘expectations of behaviours’
of a monopoly utility resulting in the introduction of
sector specific regulation with the attendant cost of
compliance and impact on public relations.

Political

Unfavourable political and/or legislative
developments which cause a significant change to
the operation of, or prospects for, the business.

Major capital project management

Ensure we find the correct balance associated with being a key service
provider on an Island but recognising our responsibilities to a wide
number of stakeholders.

Ensure transparency of objectives and regular communication with key
stakeholders.

Benchmark ourselves against comparable Key Performance Indicators with
other jurisdictions (e.g. Tariffs, Customer Minutes Lost, CO2 emissions,
Lost Time Accidents).

Monitor political and legislative developments (e.g. the Government’s
Energy Plan) and analyse the opportunities and threats to enable us
to respond effectively. Develop proposals for approval by the Board to
address any specific risks identified.

Project

Unsuccessful delivery of our major projects resulting
in inability to achieve overall project objectives and/
or additional costs or delays.

Project milestones, costs and risks are recorded and monitored and
regular progress updates issued to both management and the Board,
including plans to address any issues.

Financial - Treasury & Tax / Energy Portfolio Management / Pension Liabilities

Asset failure

Financial implications associated with the loss of
significant plant and/or importation assets.

Financial

Reduction in unit sales of electricity due to, for
example, energy efficiency and the corresponding
impact on the competitiveness of electricity in the
heating marketplace.

Scenario and sensitivity analysis as part of our long-term budgeting
process. Insurance obtained where appropriate and where it can be cost
effective.

Effective monitoring and maintenance of the plant/assets.

In principle the ‘user pays’ model implies that if unit sales of electricity
fell then Jersey Electricity would raise tariffs to retain our target return
on assets. However one of our prime defences to offset an expected
continued focus on energy efficiency is to migrate existing customers
who use gas/oil as their primary heating source to all-electric solutions.
A dedicated team work on initiatives in this area.

Pension Liabilities

Volatility of markets impacting our Defined Benefit
Pension Scheme position e.g. liabilities increase due
to market conditions or demographic changes and/
or investments underperform.

The Board regularly monitors the latest position regarding the Scheme
and the impact that it is having on the Company. The Trustees have
recently implemented an LDI strategy to reduce the exposure to
movements in the value of pension liabilities.

Volatility

A significant proportion of our profitability and price
competitiveness is dependent upon our ability to
manage exposure to increasingly volatile power and
foreign exchange markets.

Security of Supply / Supply Chain / Asset & Plant Management

Business Continuity

Failure and/or unavailability of significant plant and/
or importation assets which cause disruption to our
operations including major emergency, incident or
loss of electricity supplies to customers.

The Defined Benefit scheme was closed to new members in 2013.
A triennial valuation formally reports on performance, allowing any
appropriate action to be taken.

Power and foreign exchange are hedged in accordance with the agreed
strategies which are themselves reviewed and approved by the Board on
a periodic basis.

A Security of Supply standard has been developed and published and
we seek to design the system to meet those standards.

A programme of maintenance exists to optimise the life of assets.

Use of a comprehensive business continuity planning process including
periodic testing under various scenario exercises.

A number of diverse sources of supply have been developed such
as importation cables and on-Island generation (deploying various
technologies) to ensure that we are not over-reliant on any single source,
fuel or technology.

FINANCIAL REVIEWFINANCIAL REVIEW

Asset & Plant
Management

Failure of ageing metering infrastructure.

The SmartSwitch project will result in a smarter more modern metering
solution replacing legacy systems. Contingency plans are under continu-
ous development to enable the Company to mitigate the failure of the
key systems.

Health, Safety & Environment

H,S & E

Non-compliance with relevant legislation, regulations
and accepted codes of practice resulting in
unnecessary exposure to our staff, customer, member
of the general public or our plant and equipment.

A Health, Safety and Environment team has been resourced to put in
place standards and monitor performance against those standards. A
proactive safety culture has been nurtured throughout the organisation
supported by a safety management structure, Safety Representatives,
programmes of site inspections, regular training and induction amongst
other areas.

People / Succession Planning

People

The Group’s strategy is largely dependent on the
skills, experience and knowledge of its employees.
The inability to retain executives and other key
employees, or a failure to adequately plan for
succession, could negatively impact Group
performance.

The HR Director has developed a long range HR Strategy. HR now
have the resource and capability to provide frameworks for developing
succession plans, development plans and attracting new talent to enable
planning for the future and mitigate and reduce the talent drain from
Jersey Electricity. Extensive networks have been built including access to
UK (Utility) skills to enable best practice development.

Around half the current work-force is anticipated to
retire from the business in the next 10-15 years.

We are currently recruiting for a new Operations Director for the Energy
business as the incumbent retires in 2017.

Cyber Security

Catastrophic breach
of our systems

Due to the nature of our business we recognise that
our critical infrastructure systems may be a potential
target for cyber threats. We must protect our business
assets, infrastructure and sensitive customer data and
be prepared for any malicious attack.

We continue to use industry best practices as part of our cyber security
policies, processes and technologies.

Cyber awareness training has been carried out for all staff who have
access to corporate IT systems and there is a programme of follow-up
monitoring and training. Following a review by external cybercrime
security consultants, additional security appliances with enhanced
mitigation technologies are being installed.

An external review has recently been carried out on our operational
systems and a prioritised action plan is now being drawn up. Additional
cyber security hardware was incorporated in a recently replaced SCADA
system and similar hardware will be incorporated in a further SCADA
system replacement scheduled for 2017.

Disaster recovery procedures are incorporated within our business
continuity arrangements and periodic external reviews are undertaken.

Viability Statement
In accordance with provision C.2.2 of the 2014 revision of the

161MW in 2012, even excluding our on-Island generation

sources. This recent increase in supply margin decreases risk to

Code, the Directors have assessed the prospect of the Company

the business. We also have access to generation at La Collette

over a longer period than the 12 months required by the ‘Going

Power Station and Queen’s Road although these are largely

Concern’ provision. As disclosed last year, the Board conducted
this review for a period of five years, selected because annually

maintained to meet demand during certain ‘stress conditions’
should imports be disrupted.

a refreshment of the Five Year Plan is performed with the

The immediate weakening of Sterling against the Euro, after the

latest version approved by the Board on 22 September 2016.

Brexit Referendum, is a concern albeit it does not impact our

This document considers our forecast investment, hedging

cost base in the near-term due to our foreign exchange hedging

policy for electricity procurement and linked foreign exchange

policy. However as we employ a ‘user pays’ model the Board

requirements, debt levels and other anticipated costs, and the

has comfort on the longer term consequences of a permanent

resultant impact on likely customer tariff evolution. In addition,

weakening in Sterling.

material sensitivities to this base case are considered. The

Based on the results of this analysis the Directors have a

installation of Normandie 1 this year gives us three links to

reasonable expectation that the Company will be able to

France and access to 190MW of importation capacity across

continue in operation and meet its liabilities as they fall due over

those three circuits, in excess of our record peak demand of

the five-year period of their assessment.

Board of Directors

Martin Magee
Finance Director

(56)

Martin joined the Board as
Finance Director in May
2002. He moved from
Scottish Power plc, after
nine years in a variety of
senior finance roles. He
previously worked for nine
years with Stakis plc (now
part of the Hilton Hotels
Group). He is Chairman
of Jersey Deep Freeze
Limited and a Director
of the Channel Islands
Electricity Grid Limited.
Externally, he is also the
non-Executive Chairman
of the Standard Life Wealth
Offshore Strategy Fund
Limited. He is a member of
the Institute of Chartered
Accountants of Scotland
having qualified in 1984.

Chris Ambler
Chief Executive

(47) N

Chris was appointed
to the Board as Chief
Executive on 1 October
2008. He previously
held a number of senior
international positions in
the global utility, chemicals
and industrial sectors
for major corporations
including Centrica/British
Gas, The BOC Group
and ICI/Zeneca as well
as corporate finance
and strategic consulting
roles. He is a Director
of Channel Islands
Electricity Grid Limited.
Externally, he is also a
non-Executive Director of
Apax Global Alpha Limited
and Foresight Solar Fund
Limited, both being listed
funds on The London
Stock Exchange. Chris
is a Chartered Engineer
with the Institution of
Mechanical Engineers and
has a First Class Honours
Degree from Queens’
College, Cambridge and a
MBA from INSEAD.

Mike Liston OBE
Non-Executive Director

(65) N/R

Mike joined Jersey Electricity
in 1986 from the UK Power
industry as Chief Engineer
and was Chief Executive
for 15 years before retiring
in 2008 to focus on his
portfolio of directorships
with listed investment funds
and operating companies
in the international energy
infrastructure, wind, solar
and bio-fuels sectors.
His current Board roles
include Chairman of
London-listed, Renewable
Energy Generation Ltd, and
Chairman of the postal
utility, Jersey Post. His
private equity and venture
capital directorships include
the global Fiduciary Services
firm, JTC Group.
Mike is a Fellow of the Royal
Academy of Engineering
and a Fellow of the
Institution of Engineering
and Technology. He was
until 2010, Chairman of
the Jersey Appointments
Commission, established
by government to ensure
probity in public sector
appointments.
Mike was awarded an OBE
in Her Majesty the Queen’s
2007 New Year Honours
List and in 2012 he was
elected Jurat of the Royal
Court of Jersey, where he
sits as a lay judge.

Geoffrey Grime
Chairman

(69) R/N

Geoffrey joined the Board
in 2003. He retired in
1999 as Chairman of
Abacus Financial Services,
a leading offshore trust
company in which he
played an instrumental
role as one of its founders.
A Chartered Accountant,
his career in Jersey
commenced in 1969 with
Cooper Brothers & Co.
and progressed to his
appointment as Channel
Islands Senior Partner of
Coopers & Lybrand in
1990. In 2001, he became
the founding Chairman
of Jersey Finance Limited,
the body set up as a
joint venture between the
Government of Jersey
and its finance industry,
to represent and promote
the industry at home and
abroad. He currently holds
a number of professional
appointments as both
director and trustee. In
November 2002 he was
elected as a Deputy in the
States of Jersey and he
retired from that position in
December 2005.
In September of 2014 he
was elected as a Jurat of
the Royal Court of Jersey
where he sits as a lay
judge.

GOVERNANCEGOVERNANCE

Alan Bryce
Non-Executive Director

(56) A/N

Alan is a non-Executive
Director of Scottish Water,
Chair of the wind-farm
developer Viking Energy
Shetland, and an advisor
in the utilities industry. He
is a former non-Executive
Director of Infinis Energy
plc and at Iberdrola USA.
Prior to 2010, he held a
number of senior positions
at Scottish Power, including
Managing Director of
Energy Networks, and
Managing Director of
Generation. He is a
Chartered Engineer and
Fellow of the Institution
of Engineering and
Technology.

Aaron Le Cornu
Non-Executive Director

(46) A/R

Aaron was appointed to
the Board as non-Executive
Director in January 2011
and is currently the Chief
Financial Officer for Elian,
a Fiduciary Firm with
headquarters in Jersey and
operations in 10 countries.
Prior to that appointment,
Aaron held a number of
senior positions within
HSBC, latterly as the Deputy
CEO of HSBC International.
During his 10 years with
HSBC, he held a number of
Board positions for HSBC
subsidiaries and was also
involved in acquisitions
(such as the purchase of
Marks & Spencer Money)
and setting up Greenfield
retail banking operations in
Central Europe. Aaron is a
Chartered Accountant. He
qualified with and worked
for Andersen for eight
years, including two years
in Australia. He also has a
First Class Honours Degree
in European Management
Science from Swansea
University.

Directors

All non-Executive Directors are viewed as being independent with
the exception of Mike Liston who was formerly the Company’s
Chief Executive. Geoffrey Grime is still regarded as independent
even though he is now in his 14th year as Director.

The Nominations Committee has formulated a plan for a
controlled change in the constitution of non-Executive Directors
going forward.

Philip Austin MBE
Non-Executive Director

(67) R

Philip spent most of his
career in banking with HSBC.
In 1993 he moved to Jersey
where, from 1997 to 2001,
he was Deputy CEO of
the Bank’s business in the
Offshore Islands. In 2001,
he became the founding
CEO of Jersey Finance
Ltd, the body set up as a
joint venture between the
Government of Jersey and its
finance industry, to represent
and promote the industry
at home and aborad. In
2006, Philip joined Equity
Trust as CEO of its Channel
Islands business, a position
he held until 2009 when he
left to take on a portfolio
of non-executive positions
– a portfolio that currently
consists of both publicly
listed and privately owned
businesses. Philip is a Fellow
of the Chartered Institute
of Bankers and a Fellow of
the Chartered Management
Institute. In January 2016,
he was awarded an MBE
in the Queen’s New Year’s
Honours list. Philip is a
non-Executive Director of the
following publically quoted
companies: 3i Infrastructure
plc, City Merchants High
Yield Trust Ltd, Blackstone/
GSO Loan Financing Ltd.

Wendy Dorman
Non-Executive Director

(55) A/N

Wendy is a Chartered
Accountant who began her
career as an auditor and
went on to specialise in
financial services taxation.
In 2001 she moved from
London to Jersey and she
led the Channel Islands tax
practice of PwC until June
2015. Wendy has over
twenty five years’ experience
in taxation gained both in
the UK and the offshore
environment, working both
in practice and in industry.
Wendy was Chairman of
the Jersey branch of the
Institute of Directors from
2014 to 2016 and is a
former President of the
Jersey Society of Chartered
and Certified Accountants.
She is a non-Executive
Director of 3i Infrastructure
plc, Jersey Finance Limited
and CQS New City High
Yield Fund Limited.

Key to membership of

committees

A Audit and Risk Committee

N Nominations Committee

R Remuneration Committee

Directors’ Report
for the year ended 30 September 2016

The Directors present their annual report and the audited financial statements of Jersey Electricity plc for the year ended 30 September 2016.

Principal activities
The Company is the sole supplier of electricity in Jersey. It is involved in the generation and distribution of electricity and jointly operates

the Channel Islands Electricity Grid System with Guernsey Electricity Limited importing power for both islands. It also engages in retailing,

property management, building services and has other business interests, including software development and consulting.

Dividends
The Directors have declared and now recommend the following dividends in respect of the year ended 30 September 2016:

Preference dividends

5% Cumulative Participating Preference Shares at 6.5%

3.5% Cumulative Non-Participating Preference Shares at 3.5%

Ordinary dividends

Ordinary and ‘A’ Ordinary Shares

2016

5,200

3,773

2015

5,200

3,773

Interim paid at 5.50p net of tax for the year ended 30 September 2016 (2015: 5.25p net of tax)

Final proposed at 8.00p net of tax for the year ended 30 September 2016 (2015: 7.60p net of tax)

1,685,200

2,451,200

4,145,373

1,608,600

2,328,640

3,946,213

Re-election of directors
In accordance with the requirements of the UK Corporate Governance Code, Directors should offer themselves for re-election no less

frequently than every three years. Accordingly, Philip Austin and Wendy Dorman will retire and, being eligible, offer themselves for re-

election. Furthermore, Directors with more than 9 years’ service should offer themselves for re-election on an annual basis. Accordingly,

Geoffrey Grime will retire and, being eligible, will offer himself for re-election.

Directors’ and officers’ insurance
During the year the Company maintained liability insurance for its Directors and Officers.

Policy on payment of creditors
It is Group policy, in respect of all of its suppliers, to settle the terms of payment when agreeing each transaction, to ensure that suppliers are

made aware of the terms of payment and to abide by those terms. The number of creditor days in relation to trade creditors outstanding at

the year end was 12 days (2015: 19 days).

GOVERNANCE

Directors’ Report
for the year ended 30 September 2016

Substantial shareholdings
As at 13 December 2016 the Company has been notified of the following holdings of voting rights of 5% or more in its issued share capital:

Equity

Ordinary Shares

The States of Jersey hold all of the Ordinary shares which amounts to 62% of the ordinary share capital and represents 86.4% of the total

voting rights.

‘A’ Ordinary Shares

‘A’ Ordinary shares entitle the holder to 1 vote for every 100 shares held whereas the Ordinary shares carry voting rights of 1 vote for every

20 shares held.

Huntress Nominees (CI) Limited are the largest shareholder of our listed shares and hold 5,410,429 ‘A’ Ordinary shares which represent

4.9% of the total voting rights. It is understood that the underlying owners of these shares are substantially private investors based in the

Channel Islands.

Auditor
A resolution to re-appoint Deloitte LLP as auditor will be proposed at the next Annual General Meeting.

BY ORDER OF THE BOARD

P.J. ROUTIER

Secretary

13 December 2016

Corporate Governance

Corporate Governance
The Directors are committed to maintaining a high standard of Corporate Governance in accordance with The UK Corporate Governance

Code September 2014 (“the Code”), as incorporated within The Listing Rules, issued by the Financial Conduct Authority. The Listing Rules

require the Company to set out how it has applied the main principles of the Code and to explain any instances of non-compliance.

In accordance with Listing Rule (“LR”) 9.8.4 R, the agreement related to ‘Independent business’ required by LR 9.2.2A (2) (a) R has been

entered into with the States of Jersey, the controlling shareholder, with effect from 17 November 2014. The company has complied with the

independence provisions included in the agreement during this financial year and believes the controlling shareholder is also compliant. The

other applicable information required by LR 9.8.4 R (5)/(6) is disclosed in external appointments and in note 11e.

Statement of Compliance
The Board considers that the Company is a “smaller company” for the purposes of the Code as it is not a member of the FTSE350. Throughout

the financial year ended 30 September 2016 the Board considers that it has complied with the Code, with the following exceptions:

The Code (Provision B.2.1) recommends that a majority of members of the Nominations Committee should be independent non-Executive

Directors. For a portion of the year, until the composition of the Nominations Committee was altered with the arrival of new independent non-

Executive directors, this Committee comprised Mike Liston, Geoffrey Grime, Chris Ambler and Clive Chaplin. Whilst the Board acknowledges

that Mike Liston cannot be considered independent as he was formally the Company’s Chief Executive and due to his membership of the

Company’s pension scheme, he has served a number of years as Chairman of the Jersey Appointments Commission, established by the

government of Jersey to ensure probity in all public appointments, and was considered eminently qualified to Chair the company’s Nominations

Committee until Alan Bryce assumed this role in July 2016.

The Main Principle B.7 states that all directors should be submitted for re-election at regular intervals, subject to satisfactory performance.

Executive Directors are not subject to retirement by rotation but they are subject to the same periods of notice of termination of employment as

other members of the Company’s senior management. This is deemed appropriate by the Board because it is felt that our largest shareholders

have sufficient powers to remove Executive Directors if they saw fit.

The Code (Provision D.2.1.) states that the Board should establish a Remuneration Committee of independent non-executive directors. During

the year the Company’s Remuneration Committee has comprised Mike Liston, Geoffrey Grime, Aaron Le Cornu, Alan Bryce, Clive Chaplin and

Phil Austin. The Board acknowledges that Mike Liston cannot be considered independent.

The Board
The Board provides effective leadership and currently comprises six non-Executive and two Executive Directors. They are collectively

responsible for the long-term success of the Company and bring together a balance of skills, experience, independence and knowledge. The

Chairman and the Chief Executive roles are divided with the former being appointed by the Directors from amongst their number. Aaron Le

Cornu succeeded Clive Chaplin, who retired at the AGM, as the Senior Independent Director.

Independence
All the non-Executive Directors are viewed as being independent with the exception of Mike Liston who was formerly the Company’s Chief

Executive and is in receipt of a company pension. The Board have determined that Geoffrey Grime and Clive Chaplin until his retirement

remained independent notwithstanding that they have served on the Board for more than fourteen years. In making this determination, the

Board took into account their breadth of experience, their financial independence and their other business interests.

Alan Bryce, Phil Austin and Wendy Dorman were appointed during the financial year and Clive Chaplin retired at the AGM. On appointment

to the Board the required time commitment is established and any significant changes to their time commitments are notified to the Board.

An induction process is in place for all newly appointed Directors. Mike Liston will retire from the Board on 31 December 2016.

The Board is responsible to the Company’s shareholders for the proper management of the Company. It meets regularly to set and monitor

strategy, review trading performance and risk management, examine business plans and capital and revenue budgets, formulate policy on

key issues and reporting to shareholders. Board papers are circulated, with reasonable notice, prior to each meeting in order to facilitate

informed discussion of the matters at hand.

Members of the Board hold meetings with major shareholders to develop an understanding of the views they have about the Company.

GOVERNANCEGOVERNANCE

Corporate Governance

The following table sets out the number of meetings (including Committee meetings) held during the year under review and the number of

meetings attended by each Director.

Board Audit and Risk Remuneration Nominations

No of meetings

G.J. Grime

A.D. Le Cornu

M.J. Liston

P.J. Austin1

A.A. Bryce2

W.J. Dorman3

C.J. Ambler

M.P. Magee

C.A.C. Chaplin4

attendees by invitation

Appointed 12 May 2016

Appointed 17 December 2015

Appointed 1 July 2016

Retired 3 March 2016

Performance Evaluation
The effectiveness of the Board is vital to the success of the Company. An external evaluation took place during the course of the previous

financial year and an internal evaluation was undertaken by the Chairman in 2016.

Nominations Committee
The Nominations Committee members are currently Alan Bryce (Chairman), Mike Liston, Geoffrey Grime, Wendy Dorman and Chris Ambler.

They:

• consider and make recommendations to the Board on all new appointments of Directors having regard to the overall balance and

composition of the Board;

• consider succession planning; and

• make recommendations to the Board concerning the reappointment of any non-Executive Director following conclusion of his or her

specified term of office.

A Company-wide policy exists on diversity. The Board recognises the benefits of diversity and will continue to appoint Executive and non-

Executive Directors to ensure diversity of background and on the basis of their skills and experience.

Board diversity

Gender

Male

Female

Tenure

<1 year

1-3 years

4-9 years

>9 years

Age

46-50

51-56

64+

Sector

Utilities

Financial Services

Taxation

The Terms of Reference for the Nominations Committee and the Terms and Conditions of the Appointment of non-Executive Directors are

available on request from the Company Secretary.

During 2015 a plan was formulated for a controlled change in the constitution of non-Executive Directors going forward in light of corporate

governance requirements on independence and this began to be implemented during 2016.

Corporate Governance

Audit and Risk Committee
The Audit and Risk Committee’s members are Aaron Le Cornu (Chairman), Alan Bryce and Wendy Dorman. The meetings provide a forum

for discussions with the external auditor. Meetings are also attended, by invitation, by the Chief Executive, the Finance Director, the Financial

Controller, the Company Secretary, and members of both the external audit and internal audit teams.

The Audit and Risk Committee is responsible for reviewing the Annual and Interim Management Statements and accompanying reports

before their submission to the Board for approval and for the reporting of its findings to the Board. As part of the review process the Audit

and Risk Committee reviews the likely significant issues in advance of the publication of both the Half and Full Year Results and in particular

any critical accounting judgements identified by both the Company and the external auditor most of which are disclosed in Note 2 to the

Financial Statements (Critical Accounting Judgements). Comprehensive position papers on each key area are produced by the Finance

Director at both the half and full year. Some of the areas are recurring items such as revenue recognition, impairment of assets, retirement

benefit obligations and hedge accounting. The Committee reviews any year-on-year changes in methodology for reasonableness. In addition

there may be ‘one-off’ issues that surface. The Committee also takes comfort that the Finance Director liaises with our external auditor during

the course of the year to establish a consensus opinion where possible.

The Committee generally meets four times a year and is also responsible for monitoring the controls which are in force (including

financial, operational and compliance controls and risk management procedures) to ensure the integrity of the financial information

reported to the shareholders. It also considers reports from the internal and external auditors and from management. It reports and

makes recommendations to the Board. In addition, the Audit and Risk Committee regularly reviews the scope and results of the work

undertaken by both the internal and external auditors. The Terms of Reference for the Audit and Risk Committee are available on request

from the Company Secretary.

The Committee has approved the external auditor’s remuneration and terms of engagement and is fully satisfied with the performance,

objectivity, quality of challenge and independence of the external auditor. Non-audit services are reviewed on a case by case basis and also

in terms of materiality of the fee by the Audit and Risk Committee. Note 6 to the Financial Statements details the quantum and split of auditor

fees.

The Board requested that the Committee advise them on whether they believe the Annual Report and Financial Statements, taken as a whole,

is fair, balanced and understandable and provides the information necessary for the shareholders to assess the Company’s performance,

business model and strategy. The Audit and Risk Committee has concluded that this is the case and has reported this to the Board.

Internal Control
The Board is responsible for establishing and maintaining the Company’s system of internal control and for the management of risk. Internal

control systems are designed to meet the particular needs of the business and the risks to which it is exposed, and by their nature can provide

reasonable but not absolute assurance against material misstatement or loss. This process has been in place throughout the year up to the

date of approval of the financial statements and is in accordance with The UK Corporate Governance Code. Whistleblowing arrangements

are reviewed annually by the Audit and Risk Committee.

The key procedures which the Board has established to provide effective controls are:

Board Reports
Key strategic decisions are taken at Board meetings following due debate and with the benefit of Board papers circulated

beforehand. The risks associated with such decisions are a primary consideration in the information presented and discussed by the

Board who are responsible for determining the nature and extent of the risk it is willing to take to achieve the strategic objectives.

Prior to significant investment decisions being taken, due diligence investigations include the review of business plans by the Board.

Management Structure
Responsibility for operating the systems of internal control is delegated to management. There are also specific matters reserved for

decision by the Board; and these have been formally documented and a summary of the key types of decision made by the Board is

as follows:

• Strategy and Management including:

Approval of the Company’s long-term objectives and commercial strategy.

Approval of the annual operating and capital expenditure budgets and any subsequent material changes to them.

• Changes in structure and capital of the Company

GOVERNANCEGOVERNANCE

Corporate Governance

• Financial reporting and controls including:

Approval of the Annual Report and Financial Statements.

Declaration of the interim dividend and recommendation of the final dividend.

• Internal controls/Risk Management

Reviewing the effectiveness of the Company’s internal control and risk management systems. An external review of the risk

management process is conducted every three years.

• Contracts approval of

Major capital projects.

Major contracts.

Major investments.

• Board membership and other appointments

Approval of changes to the structure, size and composition of the Board and key committees, following recommendations from the

Nominations Committee.

• Remuneration

Determining the remuneration policy for the directors and other senior management, following recommendations from the

Remuneration Committee.

• Corporate governance matters

Undertaking a formal and rigorous review every two years of its own performance, that of its committees and individual Directors.

Review of the Company’s overall corporate governance arrangements.

• Approval of key Company policies

Internal Audit/Risk Management
There is a permanent team of internal audit staff involved in a continuous structured review of the Company’s systems and processes,

both financial and non-financial. Internal Audit manage the process of strategic and operational risk reviews and facilitate risk review

workshops with departmental managers. The Head of Internal Audit routinely reports to the Company Secretary with direct access

to the Audit and Risk Committee Chairman and also attends Audit and Risk Committee meetings, at which internal audit’s plans are

discussed and approved. During this financial year an independent review was performed of the risk management processes within

the organisation. This was largely positive with some recommendations for improvement which have, or will be, implemented.

Personnel
The Company ensures that personnel are able to execute their duties in a competent and professional manner through its

commitment to staff training, regular staff appraisals and organisational structure.

Budgetary Control
Detailed phased budgets are prepared at profit centre level. These budgets are approved by the Board, which receives sufficiently

detailed financial data to monitor the performance of the Company with explanations of any material variances.

Audit and Risk Committee

The Audit and Risk Committee reviews the effectiveness of the internal control and risk management processes throughout the

accounting period as outlined above. In addition it regularly conducts “deep dive” reviews on specific identified risks to test

assumptions on the substance of such risks and their mitigation. More detail on the Group’s principal risks, and how they are

managed, is provided in the Financial Review within this Annual Report.

Statement of Directors’ Responsibilities

Directors’ Responsibilities for the Financial Statements
The Directors are responsible for preparing the Annual Report, Directors’ Remuneration Report and the financial statements in accordance

with applicable law and regulations.

Company Law requires the Directors to prepare Financial Statements for each financial year. The Directors are required by the IAS Regulation

to prepare the Group Financial Statements under IFRS as adopted by the European Union. The Financial Statements are also required by

Company Law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

International Accounting Standard 1 requires that Financial Statements present fairly for each financial year the Company’s financial position,

financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in

accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting

Standards Board’s ‘Framework for the preparation and presentation of financial statements’. In virtually all circumstances, a fair presentation

will be achieved by compliance with all applicable IFRS. However, Directors are also required to:

• properly select and apply accounting policies;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable

information;

• provide additional disclosures when compliance with the specific requirements in IFRS are insufficient to enable users to understand the

impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and

• make an assessment of the Company’s ability to continue as a going concern.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position

of the Company and enable them to ensure that the financial statements comply with the Companies (Jersey) Law 1991. They are also

responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and

other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s

website. Legislation in Jersey and in the United Kingdom governing the preparation and dissemination of Financial Statements may differ

from legislation in other jurisdictions.

The Directors consider that the Group has adequate resources to continue in operational existance for the foreseeable future. The Financial

Statements are therefore prepared on a going concern basis. Further details of the Group’s going concern review are provided in note 1 of

the financial statements on page 64.

Having taken advice from the Audit and Risk Committee, the Board considers the annual report and financial statements, taken as a

whole, to be fair, balanced and understandable and that it provides the information necessary for shareholders to assess the Company’s

performance, business model and strategy.

Responsibility Statement
We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the European Union,

give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the

consolidation taken as a whole; and

• the management report includes a fair review of the development and performance of the business and the position of the Company and

the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that

they face.

By order of the Board

C.J. AMBLER

Chief Executive Officer

13 December 2016

M.P. MAGEE

Finance Director

13 December 2016

GOVERNANCEGOVERNANCE

Remuneration Report

Remuneration Committee
The Remuneration Committee (the Committee) is now chaired by Phil Austin, following the retirement of Clive Chaplin at the last AGM, and

its membership includes three of the other non-executive directors. The Committee operates within terms of reference agreed by the Board

and such terms are regularly reviewed and are available on request.

Remuneration Policy
The policy of the Committee is to ensure the provision of remuneration packages for the Executive Directors that fairly reward them for

their contribution to the overall performance of the Group. Remuneration packages comprise basic salary and benefits together with a

performance related annual bonus. Benefits for Executive Directors principally comprise a car or car allowance, private health care and

housing subsidy.

The salary and benefits of the executive team are reviewed by the Committee annually and any adjustments take effect on 1 April. The

Committee make use of a locally focussed benchmarking report as well as assessing the remuneration of the executive team by reference

to comparable companies within the UK/EU, as this defines the relevant labour market for the skills required. The Committee seeks to

ensure that, excluding any share based remuneration (of which there is none other than the all-employee share scheme disclosed later in

the report), the overall value of the remuneration package of the executive team members including bonus and other benefits matches,

in broadest terms, relevant comparative benchmarks for Executive Director remuneration. The bonus payable to the Executive Directors

is performance related taking account of their individual responsibilities within the Company and is dependent on the results of the group

against expectations across a wide range of performance criteria.

The remuneration of individual Directors for the year ended 30 September 2016 was as follows:

EXECUTIVE DIRECTORS

C.J. Ambler

M.P. Magee

NON-EXECUTIVE DIRECTORS

G.J. Grime

M.J. Liston

A.D. Le Cornu

A.A. Bryce (appointed 17 December 2015)

P.J. Austin (appointed 12 May 2016)

W. Dorman (appointed 1 July 2016)

C.A.C. Chaplin (retired 3 March 2016)

J.B. Stares (retired 5 March 2015)

Total

Basic

salary/fees

Bonus

Benefits

in kind

Total

2016

Total

2015

212,310

176,007

80,402

51,632

14,474

12,242

307,186

239,881

406,654

308,448

36,500

20,000

23,000

18,187

6,973

4,500

9,350

3,412

1,712

1,706

1,350

663

428

720

39,912

21,712

24,706

19,537

7,636

4,928

34,904

19,552

21,231

10,070

21,552

9,749

506,827

132,034

36,707

675,568

822,090

Remuneration Report

Service Contracts
The Executive Directors’ service contracts provide for a notice period of six months. Non-Executive Directors’ service contracts have no

unexpired term at the time of election, or re-election, at the Annual General Meeting.

Pension Benefits
Set out below are details of the pension benefits to which each of the Directors is entitled. These pensions are restricted to the scheme in

which the Director has earned benefits during service as a Director, but include benefits under the scheme for service both before and after

becoming a Director, including any service transferred into the scheme from a previous employment.

Increase
in accrued

pension
during the year1

Accrued
pension at
30.9.20162

Transfer
value at
30.9.20163

Transfer
value at
30.9.20153

Directors’
contributions

during year

C.J. Ambler
M.P. Magee5

£4,122
£4,490

£38,657
£77,515

£694,350
£1,670,530

£471,932
£1,294,971

-
£10,555

Increase in

transfer value

less Directors
contributions4

£222,418
£365,004

Notes
1. The increase in accrued pension during the year represents the additional accrued pension entitlement at the year end compared to the

previous year end.

2. The pension entitlement shown is that which would be paid annually on retirement at age 60, based on service at the year end.

3. The transfer values have been calculated using the basis and method appropriate at each accounting date. It is assumed that the deferred

pension commences from the earliest age at which the member can receive an unreduced pension. The transfer values include any

accrued Additional Voluntary Contributions (AVC) pensions.

4. The increase in transfer value over the year is after deduction of contributions made by the Director during the year.

5. Along with all other Scheme members, Directors have the option to pay AVC’s to the Scheme to purchase additional final salary benefits.

AVC’s paid by the Directors during the year were nil.

All-Employee Share Scheme
At the 2011 Annual General Meeting approval was granted to launch an all-employee share scheme. During the 2015 and 2016 financial

years 100 ‘A’ Ordinary Shares were issued to all staff (subject to Scheme Rules) including the Executive Directors and these shares vest in

February 2018 and February 2019 respectively.

There are no other share-based incentives such as option schemes or long-term incentive plans operated by the Company.

Non-Executive Directors’ Remuneration
The remuneration of the non-Executive Directors is determined by the Board with the assistance of independent advice concerning

comparable organisations and appointments and also taking into account the particular Committees in which they are involved. A small
premium is paid to those who chair Committees (Audit and Risk: £5,000; Nominations/Remuneration: £2,000) for additional responsibility,

and to Directors based off-Island (£5,000) for travelling time.

External Appointments
The Company encourages Executive Directors to diversify their experience by accepting non-executive appointments to companies or other

organisations outside the Group. Such appointments are subject to approval by the Board, which also determines the extent to which any

fees may be retained by the Director. At the balance sheet date the external appointments held by Executive Directors, excluding those directly

connected with their employment by the Company, were as follows:

C.J. Ambler

Foresight Solar Fund Limited and Apax Global Alpha Limited. The total non-Executive Director fees for such appointments were £97,100

of which £77,680 was retained, and the remainder paid to the Company, by the individual. The fees received also include those from a

previous directorship with Abbey National International Limited (which ceased on 15 September 2015).

M.P. Magee

Standard Life Wealth Offshore Strategy Fund Limited and Stanley Gibbons Group plc (retired 27 October 2016). The total non-Executive

Director fees for such appointments were £50,000 of which £40,000 was retained, and the remainder paid to the Company, by the
individual.

GOVERNANCE

Remuneration Report

Directors’ Loans
The Company provides secured loans to the Executive Directors which bear interest at base rate. The balances on such loans were:

C. J. Ambler

M. P. Magee

Directors’ Share Interests
The Directors’ beneficial interests in the shares of the Company at 30 September 2016 are:

30.9.2016

£407,997

£239,571

30.9.2015

£440,157

£290,571

5% and 3.5%

‘A’ Ordinary Shares

Preference Shares

2016

2015

2016

2015

C.J. Ambler*

M.P. Magee*

G.J. Grime

M.J. Liston

C.A.C. Chaplin

(retired from the

Board on

3 March 2016)

A.A. Bryce

5,005

10,500

10,000

2,000

5,005

8,984

10,000

2,000

-**

4,500

6,000

960

32,005

31,989

960

*Both C.J. Ambler and M.P. Magee have a beneficial interest in a further 200 ‘A’ Ordinary Shares that are due to vest in equal quantities on

February 2018 and February 2019.

**C.A.C. Chaplin still holds 6,000 ‘A’ Ordinary Shares as at 30 September 2016 but was no longer a Director at that date.

During the financial year Martin Magee and Alan Bryce purchased 1,516 and 4,500 ‘A’ Ordinary shares respectively. There have been no

other changes in the interests set out above between 30 September 2016 and 13 December 2016.

On behalf of the Board

P. AUSTIN

Chairman

13 December 2016

Independent Auditor’s Report
to the Shareholders of Jersey Electricity plc

Opinion on financial statements of Jersey Electricity plc
In our opinion the financial statements:

• give a true and fair view of the state of the group’s affairs as at 30 September 2016 and of the group’s profit for the year then ended;

• have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union;

and

• have been properly prepared in accordance with the Companies (Jersey) Law, 1991.

The financial statements comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the

Consolidated Balance Sheet, the Consolidated Statement of Changes in Equity, the Consolidated Cash Flow Statement and the related

notes 1 to 23. The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the

European Union.

Going concern and the Directors’ assessment of the principal risks that would threaten the solvency or liquidity of the group
We have reviewed the Directors’ statement regarding the appropriateness of the going concern basis of accounting contained within note 1

to the financial statements and the directors’ statement on the longer-term viability of the group contained within the Financial Review.

We have nothing material to add or draw attention to in relation to:

• the Directors’ confirmation on page 42 that they have carried out a robust assessment of the principal risks facing the group, including

those that would threaten its business model, future performance, solvency or liquidity;

• the disclosures on pages 42-43 that describe those risks and explain how they are being managed or mitigated;

• the Directors’ statement in note 1 to the financial statements about whether they considered it appropriate to adopt the going concern

basis of accounting in preparing them and their identification of any material uncertainties to the group’s ability to continue to do so over

a period of at least twelve months from the date of approval of the financial statements;

• the Directors’ explanation on page 43 as to how they have assessed the prospects of the group, over what period they have done so and

why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the group

will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related

disclosures drawing attention to any necessary qualifications or assumptions.

We agreed with the Directors’ adoption of the going concern basis of accounting and we did not identify any such material uncertainties.

However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s ability to continue

as a going concern.

Independence
We are required to comply with the Financial Reporting Council’s Ethical Standards for Auditors and we confirm that we are independent of

the Group and we have fulfilled our other ethical responsibilities in accordance with those standards. We also confirm we have not provided

any of the prohibited non-audit services referred to in those standards.

Our assessment of risks of material misstatement
The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, the allocation of
resources in the audit and directing the efforts of the engagement team.

Risk

How the scope of our audit responded to the risk

Accrual for unbilled units of electricity

There is a significant risk associated with the determination
of the value of unbilled units of electricity of £5.9m
(2015: £5.1m) which is included within revenue and trade
receivables. This is because of the level of assumptions and
judgement used in determining the number of units used by
customers between their last billing date and the year-end
date. The entity’s considerations around this judgement are
set out in the critical accounting judgements in note 2i.

We used an internal team of Information Technology specialists to reconstruct
the model used by management to determine the level and value of unbilled
units at the year-end (“the Model”). We challenged the assumptions and
judgements used in the Model and performed substantive procedures on
the inputs into the Model, which includes historical data and billing rates.
We compared the output from the reconstructed model to management’s
calculation and investigated any material differences. We also tested the
reconciliation of total units imported and generated, adjusted for units used
internally by the Company and units lost through the network for technical
and other reasons (“distribution loss”) to the total units recorded as sold. We
challenged the distribution loss percentage used by management through
observing the external data they had used in determining the percentage.
In addition, we assessed whether the revenue recognition policies adopted
comply with IFRS.

GOVERNANCEGOVERNANCE

Independent Auditor’s Report
to the Shareholders of Jersey Electricity plc

Risk

How the scope of our audit responded to the risk

Hedge accounting, valuation of contracts and related disclosures

The fair value of derivative financial instruments held at
the year-end is an asset of £8.7m (2015: a liability of
£5.1m). The accounting for the hedging of forward foreign
exchange contracts entered into by the group is considered
a significant risk due to the complexity of the accounting
treatment required for such transactions, the level of
complexity involved in the valuation of such contracts
and the detailed disclosure requirements in the financial
statements. Further details about this risk are given in note
22.

We engaged internal financial instrument specialists to challenge the
accounting and hedging treatment applied to the forward foreign exchange
contracts which included a review of the hedge effectiveness testing and
the hedging documentation for a sample of contracts. The specialists also
independently challenged the valuation of contracts through using data from
an independent source. We obtained and agreed external confirmations for
contracts at the year end to the accounting records.
We performed a review of the hedging and financial instrument related
disclosures in the financial statements to assess whether the disclosures
presented comply with IFRS.

Defined benefit pension scheme assumptions

The group has a retirement benefit deficit at the year-end
of £11.5m (2015: £7.3m). The defined benefit pension
scheme assumptions are considered a significant risk
due to the level of judgement required in determining the
assumptions most appropriate to the circumstances of the
entity.
IFRIC 14, which addresses the interaction between
minimum funding requirements and the measurement of
the defined benefit liability, is also considered a significant
risk due to the scheme being in deficit and the complexity in
assessing whether or not the arrangements of the pension
scheme include a minimum funding requirement.

We considered the appropriateness of management’s assumptions used in
the determination of the defined pension scheme balances and disclosures,
detailed in note 17 to the financial statements. We did this through
comparison of the key assumptions to third party data for reasonableness and
assessment of the competence and independence of management’s actuarial
expert who derived the balances and disclosures. We also assessed the basis
for concluding that no additional liability was required in respect of IFRIC
14 through reviewing the minutes of meetings of the Trustees of the pension
scheme and method by which it is intended to manage any existing deficit and
corroborating with management’s actuarial expert.

Last year our report included two other risks which are not included in our report this year: the Normandie 1 contract and the La Collette site

rental provision. The first matter was concluded in the prior year and the La Collette matter was concluded prior to year-end so there was little

judgement or complexity involved in testing this. Therefore these two risks did not have a significant effect on our current year audit strategy,

the allocation of resources in the audit and directing the efforts of the engagement team and are not included in our report in the current

year.

The description of risks above should be read in conjunction with the significant issues considered by the Audit & Risk Committee discussed

on page 51.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we

do not provide a separate opinion on these matters.

Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a

reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in

evaluating the results of our work.

We determined materiality for the Group to be £900,000 (2015: £915,000), which is below 7.5% (2015: 7.5%) of adjusted pre-tax profit, and

below 1% (2015: 1%) of equity. Pre-tax profit has been adjusted by removing the exceptional credit of £1.7m in relation to the La Collette site

rental. In the prior year an adjustment was also made to the pre-tax profits in order to determine materiality through removing the £789,000

exceptional credits recognised in relation to compensation received from RTE and the reversal of the remaining EDF 1 provision as these were

considered to be one-off events.

Independent Auditor’s Report
to the Shareholders of Jersey Electricity plc

We agreed with the Audit & Risk Committee that we would report to the Committee all audit differences in excess of £18,000 (2015: £18,300),

as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit & Risk

Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the group and its environment, including internal control, and assessing the

risks of material misstatement at the group level. Audit work to respond to the risks of material misstatement was performed directly by the audit

engagement team.

Consistent with the prior year, our Group audit scope focused primarily on the audit of the parent company as the balances of the subsidiary were

not considered to be significant except for the revenue balance. The parent company represents the principal business unit within the Group and

accounts for 100% (2015: 100%) of the Group’s net assets, 99% (2015: 99%) of the group’s revenue and 99% (2015: 99%) of the Group’s profit

before tax. We have only tested revenue of the other component as other balances were not considered to be significant. Our audit work on the

Group was executed at the levels of materiality detailed above.

At the parent entity level we also tested the consolidation process and carried out analytical procedures to confirm our conclusion that there
were no significant risks of material misstatement of the financial information of the subsidiary not subject to audit or audit of specified account

balances.

Matters on which we are required to report by exception
Adequacy of explanations received and accounting records

Under the Companies (Jersey) Law, 1991 we are required to report to you if, in our opinion:

• we have not received all the information and explanations we require for our audit; or

• proper accounting records have not been kept by the parent company, or proper returns adequate for our audit have not been received from

branches not visited by us; or

• the financial statements are not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

Corporate Governance Statement

Under the Listing Rules we are also required to review part of the Corporate Governance Statement relating to the company’s compliance with

certain provisions of the UK Corporate Governance Code. We have nothing to report arising from our review.

Our duty to read other information in the Annual Report

Under International Standards on Auditing (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is:

• materially inconsistent with the information in the audited financial statements; or

• apparently materially incorrect based on, or materially inconsistent with, our knowledge of the group acquired in the course of performing our

audit; or

• otherwise misleading

In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and

the directors’ statement that they consider the annual report is fair, balanced and understandable and whether the annual report appropriately

discloses those matters that we communicated to the Audit & Risk Committee which we consider should have been disclosed. We confirm that we

have not identified any such inconsistencies or misleading statements.

Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the preparation of the financial statements

and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in

accordance with applicable law and International Standards on Auditing (UK and Ireland). We also comply with International Standard on Quality

Control 1 (UK and Ireland). Our audit methodology and tools aim to ensure that our quality control procedures are effective, understood and

applied. Our quality controls and systems include our dedicated professional standards review team and independent partner reviews.

This report is made solely to the company’s members, as a body, in accordance with Article 113A of the Companies (Jersey) Law, 1991. Our

audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s

report and/or those further matters we have expressly agreed to report to them on in our engagement letter and for no other purpose. To the

fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a

body, for our audit work, for this report, or for the opinions we have formed.

GOVERNANCEGOVERNANCE

Independent Auditor’s Report
to the Shareholders of Jersey Electricity plc

Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that

the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the

accounting policies are appropriate to the group’s circumstances and have been consistently applied and adequately disclosed; the reasonableness

of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the

financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify

any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of

performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

ANDREW ISHAM

for and on behalf of

Deloitte LLP
Chartered Accountants and Recognized Auditor

Jersey, Channel Islands

13 December 2016

Consolidated Income Statement
for the year ended 30 September 2016

Consolidated Statement of Comprehensive Income
for the year ended 30 September 2016

All results in the year have been derived from continuing operations.
The notes on pages 64 to 87 form an integral part of these accounts. The independent auditor’s report is on pages 56 to 59.

Note 2016 2015 £000 £000Revenue 3 103,361 100,479Cost of sales (65,249) (64,604)Gross profit 38,112 35,875Revaluation of investment properties 11 (350) (45)Operating expenses 4 (23,498) (21,931)Group operating profit before exceptional items 6 14,264 13,899Exceptional items - La Collette rent accrual reversal 1,676 - - RTE outage compensation - 479 - impact of reversal of EDF1 related accrual - 310Group operating profit 3 15,940 14,688Finance income 22 36Finance costs (1,154) (1,555)Profit from operations before taxation 14,808 13,169Taxation 7 (3,166) (2,397)Profit from operations after taxation 11,642 10,772Attributable to: Owners of the Company 11,547 10,725Non-controlling interests 19 95 47 11,642 10,772Earnings per share - basic and diluted 9 37.69 35.00p Note 2016 2015 £000 £000Profit for the year 11,642 10,772Items that will not be reclassified subsequently to profit or loss: Actuarial loss on defined benefit scheme 17 (2,829) (5,706)Income tax relating to items not reclassified 7 566 1,141 (2,263) (4,565)Items that may be reclassified subsequently to profit or loss: Fair value gain/(loss) on cash flow hedges 22 13,865 (874)Income tax relating to items that may be reclassified 7 (2,773) 175 11,092 (699)Total comprehensive income for the year 20,471 5,508Attributable to: Owners of the Company 20,376 5,461Non-controlling interests 95 47 20,471 5,508FINANCIAL STATEMENTSFINANCIAL STATEMENTS

Consolidated Balance Sheet
as at 30 September 2016

Approved by the Board on 13 December 2016

G.J. GRIME

Director

M.P. MAGEE

Director

The notes on pages 64 to 87 form an integral part of these accounts. The independent auditor’s report is on pages 56 to 59.

Note 2016 2015 £000 £000Non-current assets Intangible assets 10 162 227Property, plant and equipment 11 209,168 187,845Investment properties 11 20,110 20,460Trade and other receivables 14 683 731Derivative financial instruments 22 5,957 414Other investments 12 5 5Total non-current assets 236,085 209,682Current assets Inventories 13 5,962 6,239Trade and other receivables 14 16,583 14,777Derivative financial instruments 22 2,788 780Cash and cash equivalents 1,925 12,503Total current assets 27,258 34,299Total assets 263,343 243,981Current liabilitiesTrade and other payables 15 16,084 17,597Bank overdraft 943 -Current tax liabilities 7 420 404Derivative financial instruments 22 - 3,892Total current liabilities 17,447 21,893Net current assets 9,811 12,406Non-current liabilities Trade and other payables 15 19,600 18,884Retirement benefit deficit 17 11,471 7,291Derivative financial instruments 22 - 2,422Financial liabilities - preference shares 18 235 235Long-term borrowings 16 30,000 30,000Deferred tax liabilities 7 20,482 15,529Total non-current liabilities 81,788 74,361Total liabilities 99,235 96,254Net assets 164,108 147,727EquityShare capital 18 1,532 1,532Revaluation reserve 5,270 5,270ESOP reserve (155) (97)Other reserves 6,878 (4,214)Retained earnings 150,523 145,223Equity attributable to the owners of the Company 164,048 147,714Non-controlling interests 19 60 13Total equity 164,108 147,727

Consolidated Statement of Changes in Equity
for the year ended 30 September 2016

Note

Share Revaluation
reserve
capital

ESOP
reserve

Other
reserves

Retained
earnings

Total

£000

At 1 October 2015

1,532

5,270

(97)

(4,214)

145,223

147,714

Total recognised income and expense for the year

Funding of employee share option scheme

Amortisation of employee share scheme

Unrealised gain on hedges (net of tax)

Actuarial loss on defined benefit scheme (net of tax)

Adjustment arising from change in non-controlling interest

Equity dividends

At 30 September 2016

(114)

11,092

11,547

(2,263)

(114)

11,092

(2,263)

(4,015)

1,532

5,270

(155)

6,878

150,523

164,048

At 1 October 2014
Total recognised income and expense for the year

1,532
-

5,270
-

Funding of employee share option scheme

Amortisation of employee share scheme

Unrealised loss on hedges (net of tax)

Actuarial loss on defined benefit scheme (net of tax)
Equity dividends

-
-

(36)
-

(112)

-
-

(3,515)
-

142,878
10,725

146,129
10,725

(699)

-
-

(4,565)
(3,815)

(112)

(699)

(4,565)
(3,815)

At 30 September 2015

1,532

5,270

(97)

(4,214)

145,223

147,714

The notes on pages 64 to 87 form an integral part of these accounts. The independent auditor’s report is on pages 56 to 59.

FINANCIAL STATEMENTS

Consolidated Statement of Cash Flows
for the year ended 30 September 2016

The notes on pages 64 to 87 form an integral part of these accounts. The independent auditor’s report is on pages 56 to 59.

2016 2015 £000 £000Cash flows from operating activitiesOperating profit before exceptional items 14,264 13,899Depreciation and amortisation charges 10,295 9,926Loss on revaluation of investment property 350 45Pension operating charge less contributions paid 1,351 213(Profit)/loss on sale of fixed assets (6) 7Operating cash flows before movement in working capital 26,254 24,090Decrease in inventories 277 1,095(Increase)/decrease in trade and other receivables (1,758) 1,884Increase/(decrease) in trade and other payables 2,359 (2,640)Interest paid (1,148) (1,548)Capitalised interest paid (374) (4)Preference dividends paid (9) (9)Cash amounts relating to exceptional item - 479Income taxes paid (396) -Net cash flows from operating activities 25,205 23,347Cash flows from investing activitiesPurchase of property, plant and equipment (32,391) (16,629)Investment in intangible assets (4) (207)Proceeds from part disposal of subsidiary 10 -Net proceeds from disposal of fixed assets 9 3Net cash flows used in investing activities (32,376) (16,833)Cash flows from financing activitiesEquity dividends paid (4,067) (3,859)Deposit interest received 22 36Payment for foreign exchange option (250) -Repayment of borrowings 5,500 -Proceeds from borrowings (5,500) -Net cash flows used in financing activities (4,295) (3,823)Net (decrease)/increase in cash and cash equivalents (11,466) 2,691Cash and cash equivalents at beginning of year 12,503 9,776Effect of foreign exchange rate changes (55) 36Overdraft 943 -Cash and cash equivalents at end of year 1,925 12,503Notes to the Financial Statements
for the year ended 30 September 2016

1 Accounting policies
Basis of preparation

The Group’s accounting policies as applied for the year ended 30 September 2016 are based on all International Financial Reporting

Standards (IFRS) issued by the International Accounting Standards Board (IASB) and which have been adopted by the EU, including

International Accounting Standards (IAS) and interpretations issued by the International Financial Reporting Interpretations Committee

(IFRIC). The principal accounting policies which have been applied consistently are:

Basis of accounting

The consolidated financial statements have been prepared under the historic cost convention as modified by the revaluation of investment

properties and derivative financial instruments.

Basis of consolidation

The Group’s consolidated financial information for the year ended 30 September 2016 comprises the Company and its subsidiary.

Subsidiaries are those entities over which the Group has the power to govern the financial and operating policies, accompanying a

shareholding that confers more than half of the voting rights.

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein.

Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling

interest’s share of changes in equity since the date of the combination.

The consolidated financial information includes the Group’s share of the post-tax results and net assets under IFRS of the jointly controlled

entity using the equity method of accounting. Equity accounting is a method of accounting by which an equity investment is initially

recorded at cost and subsequently adjusted to reflect the investor’s share of the net profit or loss of the investee. Jointly controlled entities

are those entities over which the Group has joint control with one or more other parties and over which there has to be unanimous

consent by all parties to the strategic, financial and operating decisions.

Under Article 101 (11) of the Companies (Jersey) Law 1991 (“the Law”), the Directors of a holding company need not prepare separate

financial statements if consolidated accounts for the company are prepared, unless required to do so by the members of the Company

by ordinary resolution. The members of the Company had not passed a resolution requiring separate financial statements and, in the

opinion of the Directors, the Company meets the definition of a holding company as set out in the Law. As permitted by the Law, the

Directors have elected not to prepare separate financial statements.

Going Concern

The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the

Chairman’s Statement (see pages 2 to 3). The financial position of the Group, its cash flow and its liquidity position are described in the

Financial Review (see pages 39 to 43). In addition, note 22 to the financial statements include the Group’s objectives, policies and processes

for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures

to risks. The Group has considerable financial resources together with a large number of customers both corporate and individual. As a

consequence, the Directors believe that the Group is well placed to manage its business risks successfully. The Directors have a reasonable

expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they
continue to adopt the going concern basis in preparing the financial statements and in making the viability statement on page 43.

Foreign currencies

The functional and presentation currency of the Group is Sterling. Transactions in currencies other than Sterling are recorded at the rates

of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated

in foreign currencies are translated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are

denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary

items that are measured in terms of historical cost in a foreign currency are not retranslated. Gains and losses arising on translation are

included in net profit or loss for the year.

Revenue

Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and revenue can be reliably

measured. Revenue is measured at the fair value of consideration received or receivable and represents amounts for goods and services

provided in the normal course of business. Revenues exclude the goods and services tax levied on our customers.

The following specific criteria must also be met before revenue is recognised:

Energy supply

Revenue is recognised on the basis of energy supplied during the period. Revenue for energy supply includes an estimated assessment of

energy supplied to customers between the date of the last meter reading and the balance sheet date, using historical consumption patterns.

FINANCIAL STATEMENTS

Notes to the Financial Statements
for the year ended 30 September 2016

Revenue continued

Indefeasible rights of use (IRU) sales

With the connection of the Channel Islands Electricity Grid Ltd (CIEG) telecom network between Jersey, France and Guernsey,

the Group has the ability to sell dark fibre to other telecom network operators seeking to extend their own networks through IRU

agreements. Income from IRUs where an IRU agreement does not transfer substantially all the risks and benefits of ownership to the

buyer or is deemed not to extend for substantially all of the assets’ expected useful lives, is recognised on a straight-line basis over the

life of the agreement, even when the payments are not received on such a basis. Where agreements extend for substantially all of the

assets’ expected useful lives and transfer substantially all the risks and benefits of ownership to the buyer, the resulting profit/(loss) is

recognised in the income statement as a gain/(loss) on disposal of fixed assets.

Taxation

The tax expense represents the sum of tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the

year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are

taxable or deductible in other years and it further excludes items that are never taxable or deductible.

Deferred tax is the tax expected to be payable or recoverable on the difference between the carrying amounts of assets and liabilities in

the balance sheet and the corresponding tax bases used in the computation of taxable profits, and is accounted for using the balance

sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised

to the extent that it is probable that future taxable profit will be available against which deductible temporary differences can be utilised.

Deferred tax is calculated at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised,

on a non-discounted basis, and is recorded in the income statement, except where it relates to items recorded to equity via other

comprehensive income, in which case the deferred tax is also dealt with in that statement.

Exceptional items

As permitted by IAS 1 “Presentation of financial statements”, the Group has disclosed additional information in respect of exceptional

items in the consolidated financial statements to aid understanding of the Group’s financial performance.

An item is exceptional if it is considered unusual by nature and scale and of such significance that separate disclosure is required for the

financial statements to be properly understood.

Intangible assets

The costs of acquired computer software are capitalised on the basis of the costs incurred to acquire and bring to use the specific software

and are amortised over their useful lives. Costs directly associated with the development of computer software programmes that will

generate economic benefits over a period in excess of one year are capitalised and amortised over their estimated useful lives. Costs

include employee costs relating to software development and an appropriate proportion of directly attributable overheads. Amortisation is

charged on a straight-line basis over its expected useful life which is estimated to be up to 4 years.

Property, plant and equipment

In accordance with IAS 16 costs are capitalised where it is probable that future economic benefits associated with the asset being
purchased or constructed will flow to the entity; and the cost of the asset can be measured reliably.

For assets under construction, all costs incurred which are directly attributable to bringing the asset to a point of commissionable

use, including direct materials and direct labour costs are capitalised once an executive decision has been taken to proceed with the

construction of the asset.

Property, plant and equipment excludes investment property and is stated at cost less accumulated depreciation and impairment losses,

if any. Assets are depreciated on the straight-line method to their expected residual values over their estimated useful lives from the year

following acquisition. Property, plant and equipment include capitalised employee, interest and other costs that are directly attributable to

construction of these assets. Property, plant and equipment under the course of construction is not depreciated and is carried at cost less

impairment.

Depreciation is charged as follows:

Buildings

Interlinks

up to 50 years

up to 30 years

Plant, mains cables and services

up to 40 years

Fixtures and fittings

Computer equipment

Vehicles

up to 10 years

up to 4 years

up to 10 years

Notes to the Financial Statements
for the year ended 30 September 2016

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the

carrying amount of the asset and is recognised in the income statement.

Capital grants and customer contributions in respect of additions to plant are treated as deferred income within non-current liabilities and

released to the income statement over the estimated operational lives of the related assets.

Impairment of tangible and intangible assets

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether

there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the

asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable

amount of an individual asset, the Group estimes the recoverable amount of the cash-generating unit to which the asset belongs. When a

reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or

otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be

identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and

whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash

flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of

money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of

the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the income

statement, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation

decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised

estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been

determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment

loss is recognised immediately in the income statement, unless the relevant asset is carried at a revalued amount, in which case the

reversal of the impairment loss is rated as a revaluation increase.

Investment properties

Investment property is stated at its fair value at the balance sheet date. Gains or losses arising from changes in the fair value of investment

property are included in the income statement for the period in which they arise. The Group’s policy on freehold properties is to classify

it as an investment property both when the property is held for capital appreciation or rental purposes and when it is fully occupied by

external tenants.

Investment in joint venture

The results and assets and liabilities of the joint venture are incorporated using the equity method. Investment in the joint venture is

therefore carried in the Group balance sheet at cost as adjusted by changes in the Group’s share of net assets, less any impairment.

Operating leases

Lessee

Rentals payable under operating leases, where a significant portion of the risks and rewards of ownership are retained by the lessors,

are charged to the income statement on a straight-line basis over the period of the leases.

Lessor

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial indirect costs

incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and received on a

straight-line basis over the lease term.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour

and overheads that have been incurred in bringing the inventories to their location and condition at year end. Cost is calculated using

the weighted average method with the exception of fuel oil which is calculated using the first-in first-out method. Net realisable value

represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

FINANCIAL STATEMENTS

Notes to the Financial Statements
for the year ended 30 September 2016

Financial instruments

Cash and cash equivalents

Cash and cash equivalents comprise cash and short-term deposits with a maturity of three months or less.

Short-term investments

Short-term investments comprise cash deposits which have a maturity greater than three months at the time of inception.

Trade and other receivables

Trade receivables are initially recognised at invoice value and do not carry any interest and are subsequently stated at their amortised

cost using the effective interest method as reduced by appropriate allowances for estimated irrecoverable amounts.

Trade payables

Trade payables are initially recognised at invoice value and are not interest bearing and are subsequently stated at their amortised

cost. Amortised cost is considered by the Directors to be equivalent to invoiced value.

Borrowings

Loans that have fixed or determinable payments that are not quoted in an active market are classified as ‘Borrowings’. Loans are

measured at amortised cost using the effective interest method. Interest expense is recognised by applying the effective interest rate.

Derivative financial instruments

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently re-measured to

their fair value at each balance sheet date. Changes in the fair value of derivative financial instruments which are designated as highly

effective hedges of future cash flows are recognised directly in other comprehensive income and any ineffective portion is recognised

immediately in the income statement. When hedges mature that do not result in the recognition of an asset or a liability, amounts

deferred in other comprehensive income are recognised in the income statement in the same period in which the hedged item affects

net profit or loss.

Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the income

statement as they arise.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for

hedge accounting. Until that time, any cumulative gain or loss on the hedging instrument recognised in other comprehensive income is

kept in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or

loss that has been recognised in other comprehensive income is transferred to the income statement.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily

take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the

assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings

pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are

recognised in the income statement in the period in which they occured.

Dividends
Dividends are recorded in the Group’s financial statements in the period in which they are approved by the Company’s shareholders.

Interim dividends are recorded in the period in which they are paid.

Share capital

Ordinary shares are classified as equity. Mandatorily redeemable preference shares are classified as liabilities. Incremental costs directly

attributable to the issue of new shares or options are shown as a deduction, net of tax, from the proceeds.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and where it is

probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can

be made of the amount of the obligation. Provisions are reviewed at each balance sheet date and are adjusted to reflect the current best

estimate.

Notes to the Financial Statements
for the year ended 30 September 2016

Retirement benefits

The Group provides pensions through both a defined contributions scheme and a defined benefit scheme. In the latter the cost of providing

benefits is determined using the projected unit credit method, with full actuarial valuations being carried out at a minimum every three

years. Actuarial gains and losses are recognised in full, directly in retained earnings in the period in which they occur and are shown in the

statement of comprehensive income. The net figure derived from the current service cost element of the pension charge, the expected return

on pension scheme assets and interest on pension scheme liabilities, including past service cost, is deducted in arriving at operating profit.

Retirement benefits recorded in the balance sheet represent the net financial position of the Group’s defined benefit pension scheme.

Share-based payments

Equity-settled share-based payments to employees and others providing similar services are measured at fair value of the equity

instruments at the grant date. The fair value excludes the effect of non-market-based vesting conditions. Details regarding the

determination of the fair value of equity-settled share-based transactions are not separately disclosed due to their immaterial value.

The fair value determined at the grant date of the equity-settled share-based payments is expensed over the vesting period, based on the

Group’s estimate of equity instruments that will eventually vest. At each balance sheet date, the Group revises its estimate of the number

of equity instruments expected to vest as a result of the effect of non market-based vesting conditions. The impact of the revision of the

original estimates, if any, is recognised in the income statement such that the cumulative expense reflects the revised estimate, with a

corresponding adjustment to equity reserves.

Accounting developments

In preparing these Financial Statements, the Group has applied all relevant IFRS, IAS and Interpretations issued by the IFRIC which have

been adopted by the EU as of the date of approval of these Financial Statements. The following new accounting standards, amendments

to existing accounting standards and/or interpretations of existing accounting standards are mandatory for the current period and have

been adopted by the Group. All other new standards, amendments to existing standards and new interpretations that are mandatory for

the current year have no bearing on the operating activities and disclosure’s of the Group and consequently have not been listed. The

Group has not adopted any new standards or interpretations that are not mandatory.

At the date of authorisation of these financial statements, the following Standards and Interpretations, which have not been applied in

these financial statements, were in issue but not yet effective and in some cases, not adopted by the EU:

Standards effective in current period:

Annual Improvements to IFRSs 2011-2013 Cycle, which was effective for annual periods beginning on or after 1 July 2014

Annual Improvements to IFRSs: 2010-12 Cycle, which was effective for annual periods beginning on or after 1 July 2014

IAS 19 (amendment) Defined Benefit Plans: Employee Contributions, which was effective for annual periods beginning on or after

1 July 2014

Standards in issue not yet effective:

IFRS 2 (amendment) Classification and Measurement of Share-based Payment Transactions, which is effective for annual periods beginning

on or after 1 January 2018

IFRS 15 (clarification) Revenue from Contracts with Customers, which is effective for annual periods beginning on or after 1 January 2018

IAS 7 (amendment) Disclosure Initiative, which is effective for annual periods beginning on or after 1 January 2017

IAS 12 (amendment) Recognition of Deferred Tax Assets for Unrealised Losses, which is effective for annual periods beginning on or after

1 January 2017

IFRS 16 Leases, which is effective for annual periods beginning on or after 1 January 2019

IAS 1 (amendment) Disclosure Initiative, which is effective for annual periods beginning on or after 1 January 2016

Annual Improvements to IFRSs: 2012-2014 Cycle, which is effective for annual periods beginning on or after 1 January 2016

IAS 27 (amendment) Equity Method in Separate Financial Statements, which is effective for annual periods beginning on or after 1 January 2016

IFRS 9 Financial Instruments, which is effective for annual periods beginning on or after 1 January 2018

IFRS 15 Revenue from Contracts with Customers, which is effective for annual periods beginning on or after 1 January 2018

IAS 16 and IAS 38 (amendment) Clarification of Acceptable Methods of Depreciation and Amortisation, which is effective for annual periods

beginning on or after 1 January 2016

IFRS 11 (amendment) Accounting for Acquisitions of Interests in Joint Operations, which is effective for annual periods beginning on or after

1 January 2016

Jersey Electricity plc is not permitted to adopt a standard until it has been adopted by the EU.

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the

financial statements of the Group except for IFRS 9 which will introduce fair value hierarchy disclosure for non-financial assets and

liabilities recognised at fair value.

FINANCIAL STATEMENTS

Notes to the Financial Statements
for the year ended 30 September 2016

2 Critical Accounting Judgements

In preparing the financial statements in conformity with IFRS, the Directors are required to make estimates and assumptions that impact on

the reported amounts of revenues, expenses, assets and liabilities. Actual results may differ from these estimates. Certain of the Group’s

accounting policies have been identified as requiring critical accounting judgements or involving particularly complex or subjective

decisions or assessments. These are discussed below and have been determined by the Group’s senior management and approved by the

Audit and Risk Committee and should be read in conjunction with ‘Accounting Policies’.

i Revenue

The assessment of energy sales to customers is based on meter readings, which are carried out on a systematic basis throughout the

year. At the end of each accounting period, amounts of energy delivered to customers since the last billing date are estimated taking

into account energy acquired and estimating distribution losses and the corresponding unbilled revenue is estimated and recorded as

sales. Unbilled revenues included within trade and other receivables in the balance sheet relating to such customers at 30 September

2016 amounted to £5.9m (2015: £5.1m).

ii Impairment of property, plant, equipment and investments
On at least an annual basis and when indicators of impairment are present, accounting standards require property, plant, equipment

and investments to be reviewed for impairment. When a review for impairment is conducted, the recoverable amount is assessed by

reference to the net present value of the future cash flows of the relevant Cash Generating Unit (CGU), or disposal value if higher. The

discount rate applied is based on the Group’s weighted average cost of capital with appropriate adjustments for the risks associated

with the CGU. Estimates of cash flows involve a significant degree of judgement and are consistent with management’s plans and

forecasts.

iii Retirement benefit obligations

The Group provides pensions through a defined benefits scheme for its employees which is accounted for in accordance with IAS 19

‘Employee Benefits’. The expense and balance sheet items relating to the Group’s accounting for pension schemes under IAS 19 are

based on actuarial valuations. Inherent in these valuations are key assumptions, including discount rates, earnings’ increases, mortality

rates and inflation. These actuarial assumptions are reviewed annually in line with the requirements of IAS 19 and are based on prior

experience, market conditions and the advice of the scheme actuaries. The Group chooses a discount rate which reflects yields on high

quality, fixed-income investments. The discount rate used in 2016 was 2.3% and in 2015 was 3.6%. If, for example, the discount rate

applied to the liabilities had been 2.8%, rather than the 2.3% advised by our actuaries under IAS 19 for 2016, the IAS 19 net deficit of

£9.2m would have been a net surplus of £0.1m.

iv Hedge accounting

The Group utilises currency derivatives to hedge its future purchases of power from France which currently extend to the next three

calendar years as well as for any foreign currency denominated capital contracts. All such currency derivatives are fair valued, based

on market values of equivalent instruments at balance sheet date.

v Decommissioning

The Company still believes that it does not have any set obligation to de-commission any of our material assets but a risk exists that

costs may be incurred in the future. The assets concerned are our power station at La Collette, which is leasehold with a current

end date of 2056, and our subsea interconnectors to France and Guernsey. None of the assets have a definitive planning or legal

obligation to decommission at the end of life but obligations could develop over time, for example, for environmental reasons. There

are varying external opinions as to whether subsea cables should be left in place, or removed, at the end of their useful life as over

time the interconnector asset becomes part of the marine infrastructure. We had looked at this topic in some depth and reached the

conclusion that this is an area where a watching brief will be maintained going forward.

Notes to the Financial Statements
for the year ended 30 September 2016

3 Business segments

The business segments below are these reported to the Group’s Chief Executive for the purposes of resource allocation and performance

assessment:

2016 2016 2016 2015 2015 2015 External Internal Total External Internal Total £000 £000 £000 £000 £000 £000RevenueEnergy 81,215 144 81,359 80,698 129 80,827Building Services 5,120 786 5,906 4,148 808 4,956Retail 11,933 45 11,978 11,087 40 11,127Property 2,143 599 2,742 2,084 599 2,683Other* 2,950 876 3,826 2,462 777 3,239 103,361 2,450 105,811 100,479 2,353 102,832Intergroup elimination (2,450) (2,353)Revenue 103,361 100,479 Operating profit Energy 11,650 11,514 Building Services 134 (58) Retail 452 334Property 1,683 1,562 Other 695 592 14,614 13,944Revaluation of investment properties (350) (45)Exceptional items - La Collette rent accrual reversal 1,676 - - RTE outage compensation - 479 - Reversal of over accrual - 310 Operating profit 15,940 14,688 Finance income 22 36Finance costs (1,154) (1,555)Profit from operations before taxation 14,808 13,169Taxation (3,166) (2,397)Profit from operations after taxation 11,642 10,772Attributable to: Owners of the Company 11,547 10,725Non-controlling interests 95 47 11,642 10,772Materially, all the Group’s operations are conducted within the Channel Islands. All transfers between divisions are on an arms-length basis.FINANCIAL STATEMENTS
FINANCIAL STATEMENTS

Notes to the Financial Statements
for the year ended 30 September 2016

3 Business segments (continued)
Operating assets, liabilities, net capital additions and depreciation/amortisation are analysed as follows:

4 Operating expenses

5 Directors and employees
Detailed information in respect of Directors’ shareholdings and emoluments, pensions and benefits is given in the Remuneration Report

on pages 53 to 55. The number of persons (full time equivalents) employed by the Group (including non-executive directors) at

30 September was as follows:

The aggregate payroll costs of these persons were as follows:

2016 2016 2015 2015 2016 2016 2015 2015 Assets Liabilities Assets Liabilities Net capital Depreciation/ Net capital Depreciation/ additions amortisation additions amortisation £000 £000 £000 £000 £000 £000 £000 £000Energy 213,851 (70,017) 190,652 (69,284) 31,203 (9,739) 13,025 (9,340) Building Services 967 (384) 547 (233) 108 (35) 14 (56)Retail 4,241 (777) 3,551 (459) 229 (50) 33 (73)Property 32,979 (445) 34,136 (495) (350) (415) (46) (415)Other* 944 (715) 1,073 (864) 20 (56) 87 (42)Unallocated 10,361 (26,897) 14,022 (24,919) - - - - 263,343 (99,235) 243,981 (96,254) 31,210 (10,295) 13,113 (9,926)Unallocated assets includes cash deposits, investments and the retirement benefit obligation surplus. Unallocated liabilities includes deferred taxation, current taxation, and the retirement benefit obligation deficit. Capital additions for the ‘Property’ segment includes a £350k downward adjustment (2015: £45k downward adjustment) for revaluation of investment properties.*Other segment includes Jersey Energy, Jendev and Jersey Deep Freeze. 2016 2015 £000 £000Distribution costs 11,173 11,306Administration expenses 12,325 10,625 23,498 21,931 2016 2015 Number NumberEnergy 203 201Other businesses 114 106Trainees 10 12 327 319 2016 2015 £000 £000Wages and salaries 15,824 15,569Social security costs 881 834Pension (note 17) 3,286 2,165 19,991 18,568Capitalised manpower costs* (1,865) (1,799) 18,126 16,769* Capitalised manpower costs are included in note 11 under categories ‘Mains cables and services’, ‘Fixtures, fittings, computer equipment and vehicles’ and ‘Interlinks’Notes to the Financial Statements
for the year ended 30 September 2016

6 Group operating profit before exceptional items
Operating profit is after charging/(crediting):

Fees payable to Group auditors

Auditor’s remuneration for audit services

Auditor’s remuneration for non-audit services

Other operating charges

Operating lease charges

Depreciation of property, plant and equipment

Amortisation of intangible assets

Maintenance and repairs

Legal and professional
Bad debt (write back)/write-offs

Bad debt provisions

7 Taxation

Current tax:

Jersey Income Tax - ordinary activities

- adjustments in respect of prior periods

Total current tax

Deferred tax:

Adjustments in respect of prior periods

Current year

2016

£000

247

10,226

2,777

206
(49)

2016

£000

420

2,746

2015

£000

470

9,911

2,927

357
80

(19)

2015

£000

404

(414)

2,407

Total tax on profit on ordinary activities

3,166

2,397

The differences between the total tax charge shown above and the amount calculated by applying the standard rate of Jersey Income Tax

to the profit before tax is as follows:

Profit from ordinary activities before tax

Tax on profit on ordinary activities at standard income tax rate of 20% (2015: 20%)

Effects of:

Adjustments in respect of prior periods

Expenses not deductible for tax purposes

Income not taxable for tax purposes

Non-qualifying depreciation

Group current tax charge for year

2016

£000

14,808

2,962

(122)

272

3,166

2015

£000

13,169

2,634

(414)

(114)

265

2,397

FINANCIAL STATEMENTS

Notes to the Financial Statements
for the year ended 30 September 2016

7 Taxation (continued)
Deferred Tax

The following is the major deferred tax assets/liabilities recognised by the Group.

Deferred tax movements in the year

The deferred tax asset arising on losses carried forward has been recognised as it is considered likely that future profits will be available

for set off.

8 Dividends paid and proposed

Equity:

The proposed dividend is subject to approval at the forthcoming AGM and has not been included as liabilities in these financial

statements. These dividends are shown net of 20% tax.

Dividends paid out to non controlling interests in relation to Jersey Deep Freeze are disclosed in note 19.

Per Share In Total 2016 2015 2016 2015 pence pence £000 £000Ordinary and ‘A’ Ordinary:Dividend paid final for previous year 7.60 7.20 2,330 2,206 interim for current year 5.50 5.25 1,685 1,609 13.10 12.45 4,015 3,815Dividend proposed final for current year 8.00 7.60 2,451 2,330 2016 2015 £000 £000Accelerated capital allowances 21,433 19,112Derivative financial instruments 1,749 (1,024)Pensions (2,294) (1,458)Losses carried forward (406) (1,101)Provisions for deferred tax 20,482 15,529 2016 2015 £000 £000At 1 October 15,529 14,852Charged to income statement 2,746 1,993Charged/(credited) to statement of comprehensive income 2,207 (1,316)At 30 September 20,482 15,529
Notes to the Financial Statements
for the year ended 30 September 2016

9 Earnings per Ordinary share

Earnings per Ordinary and ‘A’ Ordinary share (basic and diluted) of 37.69p (2015: 35.00p) are calculated on the Group profit, after taxation,

of £11,547,000 (2015: £10,725,000), and on the 30,640,000 (2015: 30,640,000) Ordinary and ‘A’ Ordinary shares in issue throughout the

financial year and at 30 September 2016. There are no share options in issue and therefore there is no difference between basic and diluted

Computer Software

£000

398

(5)

397

171

(5)

235

162

219

222

(43)

398

199

(43)

171

227

earnings per share.

10 Intangible assets

Cost as at 1 October 2015

Additions

Disposals

At 30 September 2016

Amortisation

At 1 October 2015

Charge for year

Disposals

At 30 September 2016

Net book value

At 30 September 2016

Cost as at 1 October 2014

Additions

Disposals

At 30 September 2015

Amortisation

At 1 October 2014

Charge for year

Disposals

At 30 September 2015

Net book value

At 30 September 2015

The above amortisation charges are included within operating expenses in the consolidated income statement.

FINANCIAL STATEMENTS

Notes to the Financial Statements
for the year ended 30 September 2016

11 Property, plant, equipment and investment properties

Fixtures, fittings,

computer

Freehold land

Leasehold

Main cables equipment and

Investment

and buildings

buildings

Plant

and services

£000

vehicles

£000

Interlinks

£000

Total

properties*

£000

24,677
239
-
(12)
24,904

8,010
524
(12)
8,522

17,002
-
-
(50)
16,952

133,520
9,079
-
(41,155)
101,444

6,020
369
(50)
6,339

96,400
2,501
(41,155)
57,746

79,154
2,773
-
-
81,927

26,115
1,794
-
27,909

18,828
3,019
-
(1,564)
20,283

11,131
1,442
(1,557)
11,016

80,664
16,446
-
(789)
96,321

353,845
31,556
-
(43,570)
341,831

20,460
-
(350)

20,110

18,324
3,596
(789)
21,131

166,000
10,226
(43,563)
132,663

-
-
-
-

16,382

10,613

43,698

54,018

9,267

75,190

209,168

20,110

Fixtures, fittings,

computer

Freehold land

Leasehold

Main cables equipment and

Investment

and buildings

buildings

Plant

and services

£000

vehicles

£000

Interlinks

£000

Total

properties*

£000

24,547
130
-
-
-
24,677

7,491
519
-
-
8,010

17,036
-
-
-
(34)
17,002

5,685
369
-
(34)
6,020

129,204
5,363
(337)
-
(710)
133,520

94,282
2,836
(8)
(710)
96,400

76,514
2,303
337
-
-
79,154

24,379
1,728
8
-
26,115

16,882
2,986
-
-
(1,040)
18,828

10,729
1,416
-
(1,014)
11,131

78,510
2,154
-
-
-
80,664

15,281
3,043
-
-
18,324

342,693
12,936
-
-
(1,784)
353,845

157,847
9,911
-
(1,758)
166,000

20,505

-
-
(45)

20,460

-
-
-
-
-

16,667

10,982

37,120

53,039

7,697

62,340

187,845

20,460

Cost or valuation
At 1 October 2015
Expenditure
Revaluation
Disposals/write offs
At 30 September 2016

Depreciation
At 1 October 2015
Charge for the year
Disposals/write offs
At 30 September 2016

Net book value at
30 September 2016

Cost or valuation
At 1 October 2014
Expenditure
Reclassification
Revaluation
Disposals/write offs
At 30 September 2015

Depreciation
At 1 October 2014
Charge for the year
Reclassification
Disposals/write offs
At 30 September 2015

Net book value at
30 September 2015

*Investment properties

The B&Q lease is a fully-repairing lease with a 48-year term from May 2000 and a tenant-only break option on the 23rd anniversary.

The Medical Centre lease is an internal repairing lease with a 30-year term from May 2005 and break options at 15, 20 and 25 year

anniversaries.

Commercial properties have been valued on the basis of a yield between 7.5% and 8.75% before deductions for acquisition costs.

The residential properties comprise 29 units which are let out on licences or leases with terms no greater than one year.

The minimum lease payments are detailed in note 21.

Notes to the Financial Statements
for the year ended 30 September 2016

11 Property, plant, equipment and investment properties (continued)

a No depreciation is charged on freehold land. Depreciation is included in operating costs in the income statement.

b Investment properties, which are all freehold, were valued on an open market existing use basis at 30 September 2016 by qualified

independent valuers Sarre and Company who have extensive experience in Jersey property market valuation.

Such properties are not depreciated. The rental income arising from the properties during the year was £1,392k (2015: £1,285k), with

maintenance and repair costs of £37k (2015: £39k).

c The Group figures are tabled together with fixtures, fittings and vehicles for our subsidiary of £36k (2015: £43k) at cost and a

depreciated value of £33k (2015: £34k).

d The gross carrying amount of tangible assets at net book value of zero at 30 September 2016 was £52.2m (2015: £92.7m). Following

a review of fully depreciated items in the balance sheet, assets with an original cost of £41.6m were removed from the asset register

during this financial year.

e £19,953k (2015: £4,000k) for Normandie 1 and £5,036k (2015: £1,602k) for St Helier Primary is classified in interlinks and plant,

respectively, and are assets under construction. During this financial year £374k of interest was capitalised using an average rate on

borrowing of 4.37%.

12 Other investments
Principal group investments

The Company has investments in the following subsidiary undertaking and joint arrangement which principally affected the profits or net

assets of the Group.

Joint venture:

Country of
incorporation or
principal business
address

Principal
activity

Shareholdings

%
Holding

Financial
year end

Channel Islands Electricity Grid Limited

Jersey

Association with

5,000 Ordinary

30 November

Guernsey Electricity

Limited

Subsidiary undertaking:

Jersey Deep Freeze Limited

Jersey

Sale and

51 Ordinary

31 January

maintenance

of refrigeration and

catering equipment

2016 2015 £000 £000Joint arrangement 5 5FINANCIAL STATEMENTS

FINANCIAL STATEMENTS

Notes to the Financial Statements
for the year ended 30 September 2016

12 Other investments (continued)

Channel Islands Electricity Grid Limited (CIEG)

The joint arrangement between the Company and Guernsey Electricity Limited for the installation of a second interconnector system

between France, Jersey and Guernsey required a control point through which the interconnector project manager could communicate

and also, to be the customer which Électricité de France would invoice for their energy sales. CIEG, a company jointly owned and

managed on a 50/50 basis by the Company and Guernsey Electricity Limited, was established in July 1998 to deal with these aspects and

also to manage the way in which the second interconnector would be operated. In May 2013, Jersey Electricity and Guernsey Electricity

signed an agreement to share the cost and capacity of the Normandie 3 project. It also provided for cost and capacity sharing of the

Normandie 1 project as a replacement of the original EDF1 interconnector between Jersey and France that failed in June 2012.

The Company’s interest in CIEG is accounted for as a joint arrangement under IFRS 11 ‘Joint arrangements’.

Jersey Deep Freeze Limited

The Company owns 51% (2015: 60%) having sold 9% in March 2016 of the issued ordinary share capital of Jersey Deep Freeze Limited, a

Jersey company whose principal business is the sale and maintenance of refrigeration equipment to commercial businesses. The results are

consolidated into these Group financial statements.

13 Inventories

The amounts attributed to the different categories are as follows:

14 Trade and other receivables

The secured loan accounts include loans to Directors and to a shareholder in the subsidiary Jersey Deep Freeze Limited. See the

Remuneration Report on page 55 in the Report of the Directors for disclosure of the Directors’ loans.

The fair value of trade and other receivables is considered by the Directors to be equivalent to its carrying value.

2016 2015 £000 £000Fuel oil 3,724 4,134Commercial stocks and work in progress 1,622 1,428Generation, distribution spares and sundry 616 677 5,962 6,239During the year £11.3m (2015: £9.7m) was recognised directly in cost of sales in respect of inventories sold or used in operations or production. 2016 2015 £000 £000Amounts receivable within one year:Trade receivables (includes unbilled units) 14,020 12,739Prepayments 1,561 1,277Other receivables 1,002 761 16,583 14,777Amounts receivable after more than one year:Secured loan accounts 683 731
Notes to the Financial Statements
for the year ended 30 September 2016

15 Trade and other payables

Provisions held:

16 Borrowings

The long-term funding via a private placement is in place with Pricoa Capital Group (an affiliate of Prudential Financial, Inc) and £30m of

finance drawn on 17 July 2014. This consists of:

a £15m for 20 years at a fixed rate coupon of 4.41%

b £15m for 25 years at a fixed rate coupon of 4.52%

2016 2015 £000 £000Amounts falling due within one year:Trade payables 2,271 1,129Other payables including other taxation and social security 6,275 5,921Accruals and deferred income 7,538 10,547 16,084 17,597Amounts falling due after more than one year:Accruals 1,123 369Deferred income 18,477 18,515 19,600 18,884The fair value of trade and other payables is considered by the directors to be equivalent to its carrying value. 2016 2015 £000 £000Unsecured borrowing at amortised costLoan obtained from private placement 30,000 30,000In addition the above borrowings are supplemented by a 5 year revolving credit facility from the Royal Bank of Scotland International Limited (RBSI) which provides flexibility as the timing of further planned capital expenditure is variable. Following a review of future cash requirements this facility was reduced from £40m to £25m in October 2015. A one year £2m overdraft facility also exists with RBSI. 2016 2015 £000 £000At 1 October - 2,060Utilisation of subsea cable repair - (1,800)Release of subsea cable decommission - (260)At 30 September - -FINANCIAL STATEMENTS
FINANCIAL STATEMENTS

Notes to the Financial Statements
for the year ended 30 September 2016

17 Pensions

The Company sponsors a funded defined benefit pension plan for qualifying Jersey Electricity employees. The plan is administered by

a separate board of Trustees which is legally separate from the Company. The Trustees are composed of representatives of both the

employer and employees, plus an independent trustee. The Trustees are required by law to act in the interest of all relevant beneficiaries

and are responsible for the investment policy with regard to the assets plus the day-to-day administration of the benefits.

Under the plan, employees are entitled to annual pensions on retirement at age 65 of one-sixtieth or one-eightieth (depending on category

of membership) of final pensionable salary for each year of service. Pensionable salary is broadly defined as the best successive 12 months’

salary in the past three years. Benefits are also payable on death and following other events such as withdrawing from active service.

No other post-retirement benefits are provided by the Scheme to these employees.

Profile of the Scheme

The defined benefit obligation includes benefits for current employees, former employees and current pensioners.

Broadly, about 53% of the liabilities are attributable to current employees, 12% to former employees and 35% to current pensioners.

The Scheme duration is an indicator of the weighted-average time until benefit payments are made. For the Scheme as a whole, the

duration is around 17 years reflecting the approximate split of the defined benefit obligation.

Funding requirements

The last funding valuation of the Scheme was carried out by a qualified actuary as at 31 December 2015 and showed a surplus of £6.9m. In

Jersey there are no legal or regulatory requirements governing pension schemes and therefore no imposed minimum funding requirement. The

next funding valuation is due no later than 31 December 2018 at which the funding level of the Scheme will be reviewed. The Company pays

contributions of 20.6% (26.6% for non-contributory members) of pensionable salaries (including 1% in respect of expenses) with contributory

members paying a further 6% of pensionable salaries.

Risks associated with the Scheme

The Scheme exposes the Company to a number of risks, the most significant of which are:

Asset volatility

The liabilities are calculated using a discount rate set with reference to corporate bond yields; if assets underperform this yield, this will

create a deficit. The Scheme holds a significant proportion of growth assets (equities) which, though expected to outperform corporate

bonds in the long-term, create volatility and risk in the short-term. The allocation to growth assets is monitored to ensure it remains

appropriate given the Scheme’s long term objectives.

Changes in bond yields

A decrease in corporate bond yields will increase the value placed on the Scheme’s liabilities for accounting purposes, although this will be

partially offset by an increase in the value of the Scheme’s bond holdings.

Inflation risk

A proportion of the Scheme’s benefit obligations are linked to inflation, and higher inflation will lead to higher liabilities. The majority of the

assets are either unaffected by or only loosely correlated with inflation, meaning that an increase in inflation will also increase the deficit.

Life expectancy

The majority of the Scheme’s obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an

increase in the liabilities.

Reporting at 30 September 2016

The results of the latest funding valuation at 31 December 2015 have been adjusted to the balance sheet date taking account of

experience over the period since 31 December 2015, changes in the market conditions, and differences in the financial and demographic

assumptions. The present value of the defined benefit obligation and the related current service cost, were measured using the Projected

Unit Credit Method.

Notes to the Financial Statements
for the year ended 30 September 2016

17 Pensions (continued)

The principal assumptions used by the independent qualified actuaries to calculate the liabilities under IAS19 are set out below:

The Scheme assets are invested in the following asset classes, each of which have a quoted market:

Main financial assumptions: 2016 2015 % pa % paInflation 3.3 3.2Rate of general increase in salaries - short term (year 1) 2.5 3.0 - long term (year 2 onwards) 4.3 4.2Pension increases in payment - -Pension increases in payment for pensions purchased with AVCs 3.3 3.2Discount rate for scheme liabilities 2.3 3.6The financial assumptions reflect the nature and term of the Scheme’s liabilities. Value at 30 Value at 30 September September 2016 2015 £000 £000UK Fixed Interest 24,227 24,933UK Index Linked Gilts 12,787 -UK Equities 38,355 21,398Overseas Equities - 38,519Property Unit Trusts - 1,597Diversified Growth Funds 51,873 -Other - 8,811Cash Instruments - 1,668Cash and Commitments 511 9,825 127,753 106,751 30 September 2016 30 September 2015Post-retirement mortality assumption - base tableSAPS ‘S2’ tables with CMI 2015 improvements to the calculation date with suitable scaling actors appliedSAPS ‘S1’ tables with CMI 2011 improvements to the calculation date with suitable scaling factors appliedPost-retirement mortality assumption - future improvementsCMI 2015 core projections with long-term improvement rate of 1.25% p.a. for men and womenCMI 2011 core projections with long-term improvement rate of 1.25% p.a. for men and womenLife expectancy for male currently aged 6027.828.3Life expectancy for female currently aged 6029.930.8Life expectancy at 60 for male currently aged 4029.730.4Life expectancy at 60 for female currently aged 4031.932.9Cash commutationMembers assumed to exchange 15% of their pension for a cash lump sum at retirementMembers assumed to exchange 15% of their pension for a cash lump sum at retirement.FINANCIAL STATEMENTS

FINANCIAL STATEMENTS

Notes to the Financial Statements
for the year ended 30 September 2016

17 Pensions (continued)

The amounts recognised in the balance sheet and comprehensive income are set out below:

Reconciliation of funded status to balance sheet:

Breakdown of amounts recognised in profit and loss
and other comprehensive income

2016

£000

2015

£000

Operating cost
Service costs:

Current service cost

Administration expenses

Past service cost (including curtailments)

Financing cost

Interest on net defined benefit liability

Total pension expense recognised in profit and loss

Remeasurements in OCI:

Return on plan assets (in excess of)/below that recognised in net interest

Actuarial losses due to changes in financial assumptions

Acturial gains due to changes in demographic assumptions

Actuarial (gains)/losses due to liability experience

Total amount recognised in OCI

Total amount recognised in profit and loss and OCI

Changes to the present value of the defined
benefit obligation during the year

Opening defined benefit obligation

Current service cost

Interest expense on scheme liabilities
Contributions by scheme participants

Acturial gains due to changes in demographic assumptions

Actuarial losses on scheme liabilities arising from changes in financial assumptions

Actuarial (gains)/losses on scheme liabilities arising from experience

Net benefits paid out

Past service cost (including curtailments)

Closing defined benefit obligation

Changes to the fair value of Scheme assets during the year

Opening fair value of Scheme assets

Interest income on Scheme assets

Remeasurement gains/(losses) on scheme assets

Contributions by the employer

Contributions by scheme participants

Net benefits paid out

Administration costs incurred

Closing fair value of scheme assets

2,142

215

700

229

3,286

(19,326)

27,980

(2,541)

(3,284)

2,829

2,023

125

2,165

724

4,790

192

5,706

6,115

7,871

2016

£000

2015

£000

114,042

106,138

2,142

4,049
569

(2,541)

27,980

(3,284)

(4,433)

700

2,023

4,079
542

4,790

192

(3,722)

139,224

114,042

2016

£000

2015

£000

106,751

104,766

3,820

19,326

1,935

569

(4,433)

(215)

4,062

(724)

1,952

542

(3,722)

(125)

127,753

106,751

2016 2015 £000 £000Fair value of Scheme assets 127,753 106,751Present value of funded defined benefit obligations (139,224) (114,042)Funded Status and liability recognised on the balance sheet (11,471) (7,291)Related deferred tax asset 2,294 1,458Net pension liability (9,177) (5,833)

Notes to the Financial Statements
for the year ended 30 September 2016

17 Pensions (continued)

Actual return on scheme assets

Interest income on scheme assets

Remeasurement gain/(loss) on scheme assets

Actual return on scheme assets

Analysis of amounts recognised in other comprehensive income (SoCI)

2016

£000

3,820

19,326

23,146

2016

£000

2015

£000

4,062

(724)

3,338

2015

£000

Total remeasurement losses in other comprehensive income

(2,829)

(5,706)

Estimated profit and loss change for next year
We estimate the charge to the profit and loss account for the next financial year as shown in the table below. This is based on an

estimated pensionable payroll of £9.5 million for next year.

The actual amount to be charged to the income statement for the next financial year might be different to that estimated above. This may

be due to pensionable salaries or contributions differing from expected, changes to scheme benefits or settlement/curtailment events that

are not yet known. The estimated income statement charge shown above is subject to change.

Discount rate sensitivity

To show sensitivity of the results to the discount rate, we have set out below the balance sheet and income statement impact of adopting a

discount rate of 2.8% p.a. as at 30 September 2016.

Main financial assumptions 30 September 2016 % p.a.Inflation 3.3Rate of general increase in salaries - short term (year 1) 2.5- long term (year 2 onwards) 4.3Pension increases in payment -Pension increases in payment for pensions purchased with AVCs 3.3Discount rate for scheme liabilities 2.8 Analysis of amount charged to income statement For year ending 30 September 2017 £000Current service cost 3,200Administration expenses 220Net interest on net defined benefit liability 241Total estimated pension expense 3,661 Reconciliation of funded status to balance sheet Value at 30 September 2016 £000Fair value of scheme assets 127,753Present value of funded defined benefit obligation (127,625)Funded status and asset/(liability) recognised on the balance sheet 128 FINANCIAL STATEMENTS

FINANCIAL STATEMENTS

Notes to the Financial Statements
for the year ended 30 September 2016

17 Pensions (continued)

18 Called up share capital

‘A’ Ordinary shares 5p each (2015: 5p each)

Ordinary shares 5p each (2015: 5p each)

5% Cumulative participating preference shares £1 each

3.5% Cumulative non-participating preference shares £1 each

Authorised
2016

Issued and fully paid
2016

£000

1,250

1,500

2,750

100

150

250

£000

582

950

1,532

100

135

235

Authorised
2015

£000

1,250

1,500

2,750

100

150

250

Issued and fully paid
2015

£000

582

950

1,532

100

135

235

Equity shares

‘A’ Ordinary shares entitle the holder to 1 vote for every 100 shares held whereas the Ordinary shares carry voting rights of 1 vote for

every 20 shares held. At 30 September 2016 there were 11,640,000 ‘A’ Ordinary and 19,000,000 Ordinary shares in issue.

Preference shares

Preference shares are classified as financial liabilities under IFRS. Dividends paid to preference shareholders in the year were £9,000

(2015: £9,000) and are recorded in finance costs in the income statement. 5% preference shares carry voting rights of 1 vote per 5 shares

and 3.5% preference shares carry voting rights of 1 vote per 10 shares.

ESOP reserve

The Jersey Electricity Employee Benefit Trust was established on 24 May 2012 when the Company introduced a new employee share

scheme for eligible employees of the Group based on a three year vesting period. Over the course of the scheme 26,800 shares were

awarded to employees who met the three year vesting period requirements. Subsequent schemes were set up in February 2015 and

February 2016 with the same three year vesting requirement. The Trust currently holds 52,100 shares for both remaining active schemes.

The shares have been purchased in instalments since the inception of the Trust at an average of £4.19 per share. The Trust was funded by

way of an interest free loan and for accounting purposes is seen as an extension of the Group.

19 Non-controlling interests

Equity

2016 2015 £000 £000At 1 October 13 10Share of profit on ordinary activities after taxation 95 47Dividends paid (48) (44)At 30 September 60 13 Expected charge to income statement 30 September 2016 £000Service cost 2,830Total administration expenses 220Interest on the net defined benefit liability (31)Expense recognised in income statement 3,019In presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the balance sheet.Regular employer contributions to the Scheme in 2017 are estimated to be £2.0m.The actual amount to be charged to the income statement for the next financial year might be different to that estimated. This may be due to pensionable salaries or contributions differing from expected, changes to scheme benefits or settlement/curtailment events that are not yet known.

Notes to the Financial Statements
for the year ended 30 September 2016

20 Financial commitments

21 Leasing
Operating leases with tenants

The Group leases out all its investment properties and certain other freehold properties under operating leases. The future aggregate

minimum rentals receivable under non-cancellable operating leases are as follows:

22 Derivatives and financial instruments and their risk management

The primary financial risk faced by the Group is foreign exchange exposure as the largest single cost in the Income Statement is the importation

of electricity from Europe that is denominated in Euros.

The Group’s currency exposure at 30 September 2016, taking into account the effect of forward contracts placed to manage such exposures,

was £2.1m (2015: £2.5m) being the translated Euro liability due for imports made in September but payable in October.

All financial instruments for which fair value is recognised or disclosed are categorised within the fair value hierarchy. This hierarchy is based on

the underlying assumptions used to determine the fair value measurement as a whole and is categorised as follows:

Level 1 financial instruments are those with values that are immediately comparable to quoted (unadjusted) market prices in active markets for

identical assets or liabilities;

Level 2 financial instruments are those with values that are determined using valuation techniques for which the basic assumptions used to

calculate fair value are directly or indirectly observable (such as to readily available market prices);

Level 3 financial instruments are shown at values that are determined by assumptions that are not based on observable market data

(unobservable inputs).

The derivative contracts for foreign currency shown above are classified as level 2 financial instruments and are valued using a discounted cash

flow valuation technique. Future cash flows are estimated based on forward exchange rates (from observable forward exchange rates at the end

of the reporting period) and contracted forward rates, discounted at a rate that reflects the credit risk of various counterparties.

2016 2015 £000 £000Less than one year 1,675 2,033Greater than one year and less than five years 5,352 6,360More than five years 2,326 3,853 9,353 12,246 2016 2015 £000 £000a Five year capital expenditure approved by the directors:Contracted 12,635 13,799Not contracted 49,087 68,351 61,722 82,150b Current rental commitments under operating leases are as follows:Lease payments under operating leases recognised as an expense in the year 246 470Payable within one year 245 452After one year but within five years 892 1,740 After five years 12,962 20,713 14,099 22,905 FINANCIAL STATEMENTS
FINANCIAL STATEMENTS

Notes to the Financial Statements
for the year ended 30 September 2016

22 Derivatives and financial instruments and their risk management (continued)
Foreign exchange risk

The Group utilises currency derivatives to hedge the payment of its future purchases of power from France which currently extend to the next three

calendar years, as well as to reduce exposure to currency movements for material capital projects.

Currency derivatives

At the balance sheet date, the total notional amount of outstanding forward foreign exchange contracts that the Group has committed are

as below:

Forward foreign exchange contracts

At 30 September 2016, the fair value of the Group’s currency derivatives is estimated to be a net asset of approximately £8.7m over the next

three years (2015: £5.1m liability). The fair value of currency derivatives that are designated and effective as cash flow hedges amount to an

asset of £8.7m (2015: £5.1m liability) and has been deferred in equity. Given the limited exposure to foreign exchange rate risk at the year

end no sensitivity analysis has been presented.

The fair value of currency derivatives that are designated and ineffective as cash flow hedges amount to £nil (2015: £nil). In the current period

amounts of £13.9m were debited (2015: £0.9m) to equity and £2.6m (2015: £3.6m) recycled to the income statement. Gains and losses on

the derivatives are recycled through the income statement at the time the purchase of power is recognised in the income statement.

Fair value of currency hedges

These amounts are based on market values of equivalent instruments at the balance sheet date.

Commodity risk

Power purchases
The Group has power purchase agreements with EDF in France. As at 30 September 2016, the import prices, but not volumes, have
been substantially fixed for 2017. The Group entered into a 10 year framework agreement with EDF on 1 January 2013 which has a
commitment to procure around 30% of volume requirements at known prices. The remainder of the requirement will be decided by a
market pricing mechanism, but with no volume commitment, with a goal to deliver a degree of stability in tariff pricing to our customers.

The Company has the ability to generate power as an alternative to importation if this was viewed to be commercially and
environmentally acceptable.

2016 2015 £000 £000Derivative assetsLess than one year 2,788 780Greater than one year 5,957 414Derivative liabilitiesLess than one year - (3,892)Greater than one year - (2,422)Total net asset/(liability) 8,745 (5,120) 2016 2015 £000 £000Less than one year - operational expenditure 38,375 31,393Less than one year - capital expenditure - 15,216Greater than one year and less than three years 45,851 49,860 84,226 96,469Notes to the Financial Statements
for the year ended 30 September 2016

22 Derivatives and financial instruments and their risk management (continued)

Credit risk
The Group’s principal financial assets are cash and cash equivalents, short-term investments, trade and other receivables. The Group’s credit
risk is primarily attributable to its trade and other receivables. The amounts presented in the balance sheet are net of allowances for doubtful
receivables. Allowances are made where there is an identified loss event which, based on previous experience, is evidence of a reduction in
the recoverability of cash flows. The trade receivables at 30 September 2016 outside the standard 30 day credit terms are as follows:

The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings
assigned by international credit-rating agencies. The Group monitors its credit exposure to its counterparties via their credit ratings and
through its treasury policy, thereby limiting its exposure to any one party to ensure that they are within Board approved limits and that there
are no significant concentrations of credit risk.

For trading related receivables, the credit worthiness and financial strength of customers is assessed at inception and on an ongoing basis.
Payment terms are set in accordance with industry standards. The Group will enhance credit protection, when appropriate, taking into
consideration the Group’s exposure to the customer, by requesting securities such as deposits, changing customers to prepayment meters to
manage credit risk and implementing payment plans for customers in arrears.

The Group has no other significant concentration of credit risk. Exposure is spread over a large number of counterparties and customers with
a maximum credit exposure of £17.3m (2015: £15.5m).

Capital management
Strong capital management is an integral part of the directors’ strategy to achieve the Group’s stated objectives. The Directors review
financial capital KPI’s on a monthly basis. The £30m private placement drawn down in July 2014 provides long-term funding to the
Group supplemented by a 5 year £25m revolving credit facility. Liquid funds are managed on a daily basis and placed on short-term
deposits maturing to meet liabilities when they fall due. The Group is subject to externally imposed capital requirements in respect of the
borrowing facilities detailed in note 16. The Group has complied with these requirements throughout the year.

Liquidity risk
The Group maintains a strong liquidity position and manages the liquidity profile of its assets, liabilities and commitments so that cashflows are
appropriately balanced and all financial obligations are met when due.

Maturity of financial liabilities at 30 September

Borrowing facilities
The Group had undrawn borrowing facilities at 30 September 2016 of £26.1m (2015: £42.0m) in respect of which all conditions
precedent had been met. The overdraft facility of £2.0m is annually renewable, and the Revolving Credit Facility which expires on 30 May
2019, is expected to be renewable.

Maturity of financial assets and liabilities
The financial assets of the Group comprise deposits placed on the money market with banks which all expire in less than one year.
The maturity profile of the Group’s financial assets and liabilities at 30 September was as follows:

Maturity of financial assets at 30 September

Interest rate risk
Interest rate exposure is managed by the £30m of private placements borrowing having fixed coupons.

2016 2015 £000 £000Less than 3 months: cash and cash equivalents and short-term investments 1,925 12,503Greater than 3 months: short-term investments - - 2016 2015 £000 £000Greater than 30 days 124 385Greater than 60 days 98 69Greater than 90 days 409 313 631 767 2016 2015 £000 £000Less than one year 17,447 24,315More than one year and less than five years 31,306 26,410More than five years 30,000 30,000 78,753 80,725FINANCIAL STATEMENTS
FINANCIAL STATEMENTS

Notes to the Financial Statements
for the year ended 30 September 2016

23 Related party transactions

a Trading transactions and balances arising in the normal course of business

Counterparty

Value of electricity
services supplied
by Jersey Electricity

Value of goods &
other services supplied
by Jersey Electricity

Value of goods &
services purchased
by Jersey Electricity

Amounts due to
Jersey Electricity

Amounts due by
Jersey Electricity

2016

£000

2015

£000

2016

£000

2015

£000

2016

£000

2015

£000

2016

2015

£000

2016

£000

2015

£000

The States of Jersey

JT Group Limited

7,092

7,223

1,789

2,059

Jersey Post International Limited

Jersey New Waterworks Limited

1,132

100

930

867

415

392

100

118

1,549

1,822

1,211

455

178

121

141

108

568

558

138

The States of Jersey is the Company’s majority and controlling shareholder. Jersey New Waterworks is majority owned and controlled by
the States of Jersey. JT Group Limited and Jersey Post International Limited are both wholly owned by the States of Jersey. All transactions
are undertaken on an arm’s length basis.

b Energy from Waste Plant

An Energy from Waste plant was commissioned in Jersey during 2011. Jersey Electricity signed a 25 year agreement in 2008 to purchase
electricity produced at the plant by the States of Jersey and to share existing facilities with the Energy from Waste plant. The value of
electricity purchased from the facility during the year was £1.1m (2015: £1.1m) and the value of services provided to the plant was
£0.4m (2015: £0.4m).

c Remuneration of key management personnel

The remuneration of key management personnel of the Group (which is defined as the Executive Directors) is set out below. Further
information about the remuneration of individual Directors is provided in the Remuneration Report on pages 53 to 55.

2016 2015 £000 £000Short-term employee benefits 547 715Post-employment benefits 154 105 701 820

Five Year Group Summary (unaudited)

Financial Statements

2016

2015

2014

2013

2012

103.4

100.5

15.9

14.8

13.1

11.6

4.0

209.2

9.8

(81.8)

164.1

37.69

33.31

16.38

13.10

2.9

2.5

(29.0)

31.6

625

(0.3%)

91.6%

2.9%

5.5%

149

14.7

13.2

12.4

10.8

3.8

187.8

12.4

(74.4)

147.7

35.00

32.94

15.56

12.45

2.8

2.6

(17.5)

13.2

627

0.9%

94.0%

1.4%

4.6%

148

(restated)*

102.3

97.2

5.3

5.4

5.9

4.1

3.4

155.2

16.7

(43.5)

148.8

13.27

15.23

14.06

11.25

1.2

1.4

(5.2)

25.7

663

4.1%

75.4%

20.7%

3.9%

155

5.5

5.7

6.9

3.9

3.4

138.1

17.7

(35.0)

136.2

12.55

16.26

13.70

11.00

1.1

1.5

14.2

18.5

637

(2.1%)

92.1%

2.4%

5.5%

161

98.4

6.5

10.0

5.0

3.6

184.8

4.7

(64.7)

146.1

16.10

24.26

14.75

11.80

1.4

2.1

(20.2)

39.9

621

(6.3%)

80.2%

14.9%

4.9%

139

49,532

49,320

48,941

48,623

48,452

12.8p

203

114

327

3,079

244

12.8p

201

106

319

3,118

245

110

12.7p

204

308

3,044

240

12.3p

201

117

329

3,297

242

293

11.4p

203

126

341

3,136

239

Income Statement (£m)

Turnover
Operating profit
Profit before tax

Profit before tax (pre-exceptional items)

Profit after tax

Dividends

Balance Sheets (£m)

Property, plant and equipment

Net current assets

Non-current liabilities

Net assets

Financial Ratios and Statistics

Earnings per ordinary share (pence)

Earnings per ordinary share (pre-exceptional costs) (pence)

Gross dividend paid per ordinary share (pence)

Net dividend paid per ordinary share (pence)

Dividend cover (times)

Dividend cover (pre-exceptional costs) (times)

(Net debt)/Cash at bank (£m)

Capital expenditure (£m)

Electricity Statistics

Units sold (m)

% movement

% of units imported

% of units generated

% of units from Energy from Waste plant

Maximum demand (megawatts)

Number of customers

Customer minutes lost

Average price per kilowatt hour sold (pence)

Manpower Statistics (full time equivalents)

Energy

Other

Trainees

Total

Units sold per energy employee (000’s)

Number of customers per energy employee

* restated in the 2014 accounts following changes to IAS 19.

FINANCIAL STATEMENTS

Financial Calendar

3 January 2017

Preference share dividend

24 February 2017

Record date for final dividend

2 March 2017

Annual General Meeting

30 March 2017

Final dividend for year ended 30 September 2016

19 May 2017

Interim Management Statement – six months to 31 March 2017

2 June 2017

Record date for Interim Ordinary dividend

30 June 2017

Interim dividend for year ending 30 September 2017

3 July 2017

Preference share dividend

14 December 2017

Preliminary announcement of full year results

Annual General Meeting
The Annual General Meeting will be held at the Powerhouse, Queens Road, St. Helier, Jersey on Thursday 2 March 2017 at 2:30pm.

Details of the resolutions to be proposed are contained in the Notice convening the Meeting.

Press releases and up-to-date information on the Company can be found on the Company’s website (www.jec.co.uk).

The Powerhouse, PO Box 45
Queens Road, St Helier JE4 8NY
Tel 01534 505460
Fax 01534 505565
email jec@jec.co.uk
www.jec.co.uk

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a sustainable source.