Jersey Electricity: report and accounts 2009.

Sustainability for life, growth and prosperity

Powerful thinking for future generations

Contents

Chairman's Statement  6 CEO's Review  8 Financial Review  46 Board of Directors  50 Directors' Report  52 Corporate Governance  54 Statement of Directors'  57

Responsibilities

Remuneration Report  58 Independent Auditors' Report  61 Consolidated Income Statement  62

Statements of Recognised  62 Income and Expense

Balance Sheets  63 Cash Flow Statements  64 Notes to the Financial Statements  65 Five Year Group Summary  88 Financial Calendar  89

Directors, Officers

and Professional Advisers

Non-Executive Directors

Geoffrey Grime FCA (Chairman)

Jeremy Arnold FCA

Christopher Evans

Clive Chaplin BA

Michael Liston OBE FREng, BSc, CEng, FIEE, CIMgt John Stares BSc, FCA

Executive Directors

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

David Padfield BSc, CEng, FIEE, MCMI, CDir, MIOD (Operations)

Richard Plaster FCIPD, CDir, MIOD (Commercial and Human Resources)

Secretary

Peter Routier BSc, FCIS

Registered Office

Queens Road, St. Helier , Jersey

Place of Incorporation Jersey

Auditors

Deloitte LLP, 66-68 Esplanade, St. Helier , Jersey

Bankers

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

Brokers

Collins Stewart (CI) Limited, 38-39 Esplanade, St. Helier , Jersey

Registrar

Computershare Investor Services (CI) Limited, 31 Pier Road, St. Helier , Jersey

5

Chairman's Statement

Jersey Electricity produced a sound performance in 2009. Group profi t for the year was £9.3m and although 10% down on last year, this reduction was largely due to non-controllable factors such as property gains and revaluations last year, not repeated this year. Return on fi xed assets in the energy business was 6.6%, around the level needed to support our investment programme going forward.

During the fi rst half of 2008, we witnessed volatile and rapidly rising global oil prices. In the second half of that year, the sharp contraction

of the credit markets caused the collapse of worldwide demand and the oil price and electricity markets in Europe followed shortly afterwards. What could not have been foreseen was the volatility and subsequent weakening

of Sterling relative to the Euro. This has been challenging for a business that buys so much of its power from European markets.

As a result of high and volatile wholesale prices, we regrettably had to increase tariffs

by 24% from 1 January 2009, having kept our tariffs frozen for the two years prior to this. This was driven by an increase of 40% in the Euro denominated cost of power in 2009 relative to 2008. We have worked hard this year to try to reverse this tariff increase through our hedging programme and various cost management measures such as arbitraging power generation at La Collette and optimising our supply contract with EDF.

"

Our reliability, environmental performance, standards of service, community awareness, health and safety and staff relationships were all excellent again this year.

"

We are delighted to be able to announce a tariff  Jean Le Maistre, a Non-Executive Director, reduction of 5.1% effective 1 January 2010.  stepped down from the Board at the Annual Although power prices eased signifi cantly during  General Meeting on 5 March 2009. He joined the credit crunch, a further weakening of Sterling  the Board in 1997 and his connections in France has prevented us from offering a greater price  were a real asset during the development of the reduction to customers. second cable to France.

The 2009 tariff rise led to signifi cant external  We welcome John Stares, who joined the Board on scrutiny of our business. A Proposition was  28 May 2009. John is the Managing Director of the lodged in the States of Jersey to attempt to force  Guernsey Enterprise Agency and a Non-Executive the Company to reverse the 24% tariff increase.  Director of four other Channel Island companies. He I am delighted that the independent review  is a Fellow of the Institute of Chartered Accountants that was commissioned as a result justifi ed the  and a former Partner of Accenture with 23 years Company's actions as being fully consistent with  of international consulting experience.

the overarching public interest' and we were

pleased to see the Proposition strongly defeated. Chris Ambler's fi rst year as our Chief Executive

has been a successful one and I am confi dent

We continued to make good progress with our  that under Chris' leadership the management investment programme and the £14m Western  team will remain focused on delivering stability Primary substation was successfully commissioned  and growth in Jersey Electricity for the benefi t of on time and budget, and we continue to make  customers, employees and shareholders.

progress with our third submarine cable to

France, Normandie 3.  Our employees remain central to the success of

Jersey Electricity, particularly during these times Our reliability, environmental performance,  of great uncertainty and challenge. I want to standards of service, community awareness,  thank them, the executive team and the Board, health and safety and staff relationships were all  for the dedication, commitment, loyalty and excellent again this year. We were pleased to be  professionalism which they continue to display. able to see meaningful progress with the States

Energy Effi ciency Service in the year, to which our

Company provided £0.5m funding last year.

The Board of Directors is proposing a fi nal net

dividend of £1.18 to be paid on 31 March  Geoffrey Grime

2010, confi rming our policy to maintain real  Chairmain

growth in dividends.  17 December 2009 7

Chief Executive's Review

It is a great privilege to give my first review as chief executive of Jersey Electricity. 2008/9 was a year of transition, challenge and public scrutiny. We witnessed extraordinary and previously unseen turbulence in the commodity and foreign exchange markets. Oil prices in 2008 rose to almost $150 per barrel and then fell back to below $50 as the high levels of global oil demand reversed quite rapidly due the recessionary impact of the global financial crisis. The Sterling/Euro exchange rate has been similarly volatile seeing highs of  1.35 in 2008 and lows of  1.05 in 2009. The combined effect of these markets has been testing for a comparatively small energy business like ours, which has a dependence on imported energy from European markets coupled with a heavy, largely non-Sterling denominated long-term investment programme.

Against this backdrop, Jersey Electricity's overall performance in the year was good and we have worked hard with our hedging programmes and cost reduction activities to deliver a 5.1% price reduction in January 2010. Furthermore, I am pleased to report that we have been able to do

this whilst simultaneously meeting our self-imposed price benchmarking, security of supply and

carbon intensity targets.

"

We remain focused on delivering stability and growth in Jersey Electricity for the benefi t of our customers, employees and shareholders.

"

Energy of the Future

Electricity is essential to the quality of life  La Collette power generation facilities, which and modern living in Jersey and is a key  also provide opportunities for arbitrage enabler of future growth and prosperity. It is  against imported energy. Electricity is a

the life blood of our economy and we realise  unique form of energy that is distinctive from that this places a signifi cant responsibility  fossil fuels; it can be generated in many

on us to preserve continuity of supply and  ways and can be transported cleanly, safely price stability for all sectors not least our  and effi ciently. It is largely future proofed', fi nancial services industry, which is such a  resilient and fl exible. Jersey Electricity's grid signifi cant part of the local economy. We  and submarine cables are a delivery system' are proud of our record in providing one of  which can connect customers to a large

the most effi cient, reliable and safe supply  range of existing low carbon generation systems in the Western World. In 2008,  in France as well as new generation electricity comprised 31%* of the total  technologies such as renewables. In addition, energy consumed on our Island, a share that  there is an almost continuous emergence continues to increase year-on-year.  of innovative application technologies to

provide heat, light, power and mobility in We believe that electricity is well positioned  ever more sustainable and effi cient ways.

as one of the key energy sources of the future

in the Channel Islands. We have a well

invested and well diversifi ed infrastructure

base comprising two subsea interconnectors

importing power from France, with a third

on its way to provide physical diversity and

security. We also have the benefi t of on-island

generation at both our Queens Road and

*Source Jersey Energy Trends 2008,  9 published by States of Jersey Statistics Unit.

Core purpose

Jersey Electricity's purpose is to deliver sustainable energy and energy related services for life,

growth and prosperity in Jersey. We strive to

act in the best long-term interests of our Island whilst simultaneously meeting customers' needs, supporting our local community, protecting owners' investment and providing stimulating employment for our staff.

Delivery of a long-term and sustainable energy supply is underpinned by the triple challenge' of:

• Providing affordable and fairly priced energy

• Ensuring security and reliability of supply

• Protecting the environment and conserving

  resources

We strive to deliver this to high standards of customer service, innovation and effi ciency, within a culture of respect for all our staff and the community we serve.

Our business activities necessitate engagement of various stakeholders and other external groups - customers, consumer groups, shareholders, the environmental lobby, the States of Jersey, our employees and our pensioners.

All of these relationships come with their own expectations and demands and it is incumbent on us to balance our actions fairly. We think

of sustainability as taking responsibility for our actions and building a business that can thrive in the long term.

We realise that, whilst we have competition from other fuels for heating and transport, we have a monopoly in the provision of power for lighting and appliances. This privilege brings with it responsibilities to look beyond short-term fi nancial performance to wider social and strategic energy security imperatives. We are proactive in seeking process, product and service innovation, which although they may sometimes result in reduced short-term energy sales, in the longer term have benefi ts of growth and competitiveness, consistent with our sustainability goals.

The challenge of providing affordable

and reliable energy whilst conserving our environment poses profound questions for the whole of the energy industry. It is quite apparent that there are no easy or cheap answers, although energy effi ciency has a vital role to play. What is clear is that unprecedented levels of investment will be required over the next few decades to meet these challenges.

We strive to deliver high standards of customer service, innovation  and effi ciency, within a culture  of respect for our staff and the  community we serve.

11

"

We captured 85%

of the new build heating and hot water market.

"

Group Financial Performance Energy Growth

Jersey Electricity delivered a solid set of group results this year considering the diffi cult economic environment. Group profi t for the year was

£9.3m down 10% from last year, largely due to uncontrollable factors such as falling interest rates and the property revaluation gains of last year,

not repeated this year. Our core Energy business delivered a profi t that was £0.4m higher than

last year, driven by judicious on-island generation during expensive peak and super-peak periods combined with careful cost optimisation of our EDF contract. The economic environment was also a challenge for our Retail and Building Services businesses, given the reduced confi dence and reduced expenditure in many sectors of the economy. In a climate of reducing investment

and consumption, both these businesses did well to maintain sales at last year's levels, although there was a combined profi t reduction of around £0.3m for the full year. In this environment of tight credit and widespread corporate restructuring, Jersey Electricity is pleased to have maintained

a conservative balance sheet and to have

achieved a return on fi xed assets of 6.6% in

our Energy business in line with our targets. This rate is generally regarded by energy regulators

as necessary and appropriate for the funding

of essential infrastructure investment. Over the coming years, the business will require signifi cant funds for its ongoing investment programme,

and our prudence in our capital structure is early preparation for this.

Unit growth in our core Energy business was

at 1% this year despite a cooler than normal winter. On a temperature corrected basis, this increase in volumes was a little less than we might have expected perhaps due to increasing price sensitivity following our tariff increase and customers taking energy conservation measures. Overall the total number of electricity customers increased by approximately 1% or 485 to 47,072. We continued to win space and water heating load as existing oil and gas customers switch to electric heating. In addition, during the year we captured 85% of the new build heating and hot water market.

We remain encouraged by the positioning of electricity in our marketplace, and enthusiastic about the new technologies and applications which are continuously emerging. Our new E20 and existing E7 and Comfort Heat tariffs proved successful with customers on these popular tariffs increasing by 3.4%.

With our experience in installing commercial heat pumps over the last 20 years or so, we are optimistic that this technology can be applied

in domestic buildings, particularly those with existing hot water radiator systems. Although more costly to install, these systems can be 300- 500% effi cient with very low operating costs. The additional works represent a considerable opportunity for our Building Services business as well as new load for the core Energy business.

Our vast experience in heat pump technology presents a signifi cant opportunity to fuel switch large properties.

     13

"

Our prices have remained lower for a typical consumer than the EU median and other peer jurisdictions.

"

Providing affordable and fairly priced energy

Only 5 years ago, the energy environment in which we operated was very different to the one we face today. At that time, the French electricity market from where Jersey Electricity sources all of its imported power was over-supplied with cheap nuclear power. We enjoyed a cost-plus contract with EDF, leading to some of the lowest cost and most stable power pricing in Europe.

The combined effect of the liberalisation of energy markets in Europe, the relentless increasing demand for energy, concerns over the depletion

of global oil and gas reserves and a shift towards wholesale linked contracts, led to huge price increases and volatility for all energy suppliers, ourselves included.

Richard Marriott, Meter  Technician tests the latest  in smart meter technology  prior to their installation  

in a new residential  development

Having cushioned our customers with frozen retail prices from 1 January 2007 to 31 December 2008, an increase in underlying wholesale

power prices coupled with a deteriorating Sterling-Euro exchange rate, regrettably led to a 24% increase in our tariffs in January 2009 - an increase necessary to cover a 40% increase in

our imported energy costs from 2008 to 2009 as well as maintain profitability levels necessary for critical ongoing infrastructure investment.

This tariff increase coincided with the sharp contraction of the credit markets resulting from the banking crisis, which caused a collapse of worldwide energy demand and energy prices. Shortly afterwards, this led to a softening of the power markets in France. Whilst we were able

to benefit from some of this, we had substantially hedged our position for 2009 and much of the benefit of the falling power prices in France were offset by a further deterioration of Sterling against the Euro. Despite the scale of our price increase at the beginning of the year, our level of pricing for electricity in Jersey has remained cheaper for a typical consumer profile than the EU median and other peer jurisdictions. I am therefore pleased that we were able to meet our target of keeping prices within +/-10% of the EU median for most consumers - a target that is demanding given our small scale and heavy infrastructure spend. We continue to offer good value

compared to heating oil and gas, as their prices increased significantly during the time of our price freeze only to ease off during the credit crunch.

Volatile Power Markets

During the current year we worked on a number of cost and risk management initiatives in

order to strive for the lowest possible pricing to customers from 2010 as well as mitigate the

need to increase prices further. We maintained

our policy of hedging against volatility in the cost of imported power, which typically represents 90-95% of the energy we supply in Jersey. The commercial aspects of our supply contract with EDF were due for renewal in the year, and we successfully negotiated a capped deal which limits our unit importation cost over the next three years. In addition, we took advantage of securing low cost power and forward buying at attractive rates.

Apart from retaining a tight control on general  operating costs and headcount, we also sought  

to take advantage of the low cost of oil by  selectively generating power at La Collette, when  it was cheaper to do so - subject to our self- imposed carbon dioxide emission target of 100g  CO2/ kWh. When permitted under our contract  and when financially opportune, we were also  able to purchase power on the spot market in  France to displace local generation, and avoid  carbon dioxide and particulate emissions. The outcome of all this work has helped the Company achieve a reduction in excess of 20% in Euro denominated power costs in 2010.

5.1% reduction in electricity tariffs from January

2010.

Uncertain Foreign Exchange Markets

As a signifi cant importer of Euro denominated power purchased from France, we faced and continue to face uncertainty and volatility in the foreign exchange markets. Given the changing rules and complexity of global markets, we

have maintained a tight hedging programme, supplemented with participative products that would simultaneously defend customers against a risk of further tariff rises and allow participation in a Sterling recovery. The overall effect of the deterioration in Sterling was an increase in costs of around 15% from 2008 to 2009.

With much of the benefi t of lower wholesale power costs being offset by increased foreign exchange costs, we have had to moderate our tariff reduction for next year. However, I am very pleased to report that with our progress in cutting costs, we recently announced a 5.1% reduction in our electricity tariffs, effective from January 2010.

Law, the States have powers to determine tariffs should it be in the public interest to do so,

subject to a number of conditions. The Company welcomed the independent review that ensued

as an opportunity to explain further the rationale for the tariff increase. We were delighted with

the conclusions of the review which, in essence, were that the tariff increase was fully consistent with the overarching public interest' and that Jersey Electricity has acted prudently and has put the focus of its cash fl ow/investment policy into securing the necessary funds to guarantee the integrity of the existing network and to provide for future capital investment'. Following a debate in the States, I am pleased to advise that the Proposition was resoundingly defeated.

The tariff rise in January 2009 understandably led to an increased attention on our business this year by the general public and politicians. This led to the lodging of a Proposition in the States of Jersey in an attempt to force the Company to reverse the 24% tariff increase. Under the 1937 Electricity

 /£ Sterling/Euro Currency Exchange French Wholesale Power Price

1.5 1.4 1.3 1.2 1.1

1.0 Oct 2007 Oct 2008 Oct 2009 Oct 2007 Oct 2008 Oct 2009

Ensuring security and mmasourbisrneitTvmeoeue npypee a-nnuttecvossctuie-rhdordoenan n totommeolo uieimndgrnieyamtl,onrhuittchniam afe e y s l  reliability of supply

the most suitable cable

route for the third

interconnector

Providing a reliable and secure supply of power is essential to the Island community we serve. As an island, we don't have the same breadth of network connectivity to the mainland or the same generation backup that a typical city might enjoy in the UK or Continental Europe. In addition, Jersey depends enormously on a technologically sophisticated offshore fi nance industry - an industry highly dependent on secure and reliable electricity supplies. The challenge is always the same; to make our energy generation and networks as resilient and reliable as practical, and to respond as quickly as possible when they fail.

This year we achieved another excellent reliability record, with an average of just 8.6 minutes lost per customer in the fi nancial year. Although this has increased slightly on last year's performance of 4.8 minutes, we have had to contend with some complex network maintenance and commissioning of new plant, and it remains comfortably inside our target of 25 minutes.

Our performance in the year also compares very favourably to networks in other islands and the UK which typically averages 80 to 100 minutes per year.

Transmission

We have two submarine cable links to France  with a combined capacity of 145 MW, through  which we satisfy around 90-95% of the Island's demand with low carbon power sourced from our partner, EDF in France. We have also invested in joining together the electricity supply systems of both Jersey and Guernsey through the Channel Islands Electricity Grid (CIEG). CIEG is a successful joint venture between Jersey Electricity and Guernsey Electricity, established ten years ago, through which the two companies procure power from EDF, invest in infrastructure and share backup generation assets in the case of a failure

of importation facilities. We believe this partnership has enabled both companies to

reduce operating costs, increase security of

supply and reduce capital investment. At a time when cooperation is more important than ever in the Channel Islands, this partnership exemplifi es what is achievable and is refl ected in strong relationships at all levels in the two organisations.

Jason Baines, Network Services Engineer supervises the ongoing reinforcement of our underground HV

transmission network

Customer Minutes Lost

per annum

Jersey

9 minutes

Guernsey

19 minutes

United Kingdom

82 minutes* Isle of Man

24 minutes

The latest submarine cable laying vessel will be used

in the installation of the third interconnector to France

19

*2008 fi gure as 2009 is unavailable at time of going to press

A new 200MW gr will be completed 6 to 7 years to se increasing demand

Third Submarine Cable

We continue to make progress with the third  interconnector between Jersey and France, which  we aim to bring into service in 2013. This cable  

is necessary for three reasons. Firstly, the fi rst  interconnector is now 25 years old and our  specialist advisors suggest it is approaching the  end of its life. Secondly, there are widely  predicted shortages in the availability of heavy  fuel oil and the specialist ships needed for safe  docking in the Channel Islands, which could  reduce the dependability of almost half our standby  generation facilities that use this fuel. Thirdly, we  are currently unable to supply the Island's full  requirements with low carbon, imported electricity  from the competitive European markets during the  winter peak. To maximise security, we plan to ensure  physical separation from the existing submarine  cables and ensure connections are made into  different land-based circuits in Jersey and France.

In December 2008, we signed a contract with the  

French grid operator, RTE to connect the new circuit  

to the French grid. Environmental Impact Studies  

have also been completed prior to the planning  

process in France and Jersey and we are close to  

fi nalising a preferred land and sea-route. We are  

presently consulting with all the various government  

bodies and environmental agencies in Jersey and  

France, and we hope to secure permissions by mid  

2011. Such delays are not without risk to the overall  

cost of the project, given cable manufacture  

capacity constraints, rising metals prices and  

weakening Sterling. Our best forecasts for the  Oinfurra sIstrlaunctdu-rwe idcuer rneentwtlyo rsk upplies 20 cost of this project are £60m and we continue to  electricity securely to over

explore all avenues to mitigate price and timing risk. 47,000 customers

grid system

d in the next  ecurely meet  

nd.

A technical drawing  of the proposed new  primary substation  at South Hill

Distribution

The highest load in Jersey this year was  153.1MW in January 2009, just slightly less  than our largest ever peak of 156.8MW, which  occurred in December 2007. At the time, 29%  of the Island's needs were being satisfi ed by  local generation. During the year we supplied  0.64TWh of power safely and securely to  

our customers, of which 92% was low carbon  imported power, substantially generated from  EDF's nuclear and hydro-electric fl eet.  

We continued our investment in distribution  facilities and were pleased to complete on time  and on budget the installation of the £14m  Western Primary substation in November 2008.  This is the second of three key substations that  will form a resilient 90kV ring around the Island.  This removed our dependence on the 45 year old

facility in the West of the Island at Les Quennevais

which started to fail within weeks of the successful  We continued with network reinforcement and commissioning of the Western Primary facility.  essential maintenance across many areas of

the network so that increased load could be

The design of the third of these substations, the  accommodated without compromising security. 90kV switching station at South Hill, has recently  During the last year, we installed 8MW of

been fi nalised and this will become the critical  capacity of new network transformers and 50 km network hub for import facilities from France  of cable to ensure we meet the requirements of and local generation in Jersey. This will feed  new and existing customers. 18 new substations into a new 200MW grid system which will be  were installed and 2 substations refurbished. completed in the next 6 to 7 years, and will meet  We also took the opportunity to remove 4 km

the increasing demand from our customers for  of overhead lines which simultaneously has reliable, low carbon electricity. Planning consent  enhanced the local environment and will improve has recently been granted for this installation and  network reliability.

works on the project will commence in 2010.

• £14m project taking 3 years from planning to completion

• 16,000 metres of high voltage power cable

• 1,600 tonnes of sand

• Two 50 tonne transformers

Report and Accounts 2009

The Rolls Royce Olympus  quick start generator at  

La Collette Power Station  forms part of our backup  

generation fl eet

Andy Barker, Jointer carries out the final

connections on the LV supply frame at the

new Liberty Wharf development prior to it

being energised

Generation

Our on-island generation plant provides a

valuable backup facility which can be used in the event of failure or maintenance of our importation and distribution facilities, as well as by providing some opportunity for arbitrage when importation or European spot prices are high and oil prices relatively low. In the light of continuing uncertainty over future suffi ciency of energy supplies in Europe as well as closure of certain peak generation facilities there, we propose to retain

our indigenous power plant over the medium term for strategic security. Generation is deployed with careful reference to our self-imposed limits for carbon intensity and particulate emissions. We continue to minimise any adverse impact on the local environment and local community.

Our commitment to delivering a fi rst class network, whilst managing capital investment at affordable levels is fundamental to our success. During the year, we invested a total of £13m

in capital expenditure, a level similar to last

year but less than forecast due to the delays

in securing planning permission for the third interconnector and the South Hill switching station and associated cabling. In order to meet long-

term demand and secure supply, we expect to increase our investment in infrastructure to around £100-150m over the next 10 years. We expect

to fi nance this from reserves, with borrowings needed for the middle of that period.

Local Generation 52MWh

Protecting the environment and conserving resources

Phil Gordon, Health, Safety & Environmental Engineer is responsible

for all our environmental

initiatives, including achievement of our

level two ECO-ACTIVE business accreditation

We believe that climate change is one of the greatest long term challenges facing the World today. There is now overwhelming evidence of the link between carbon dioxide emissions, climate change and increasing global temperatures. As

the major energy supplier in Jersey, we take our environmental performance extremely seriously - where progress is a joint responsibility of not just consumers of energy but suppliers as well. I am pleased we have been successful in keeping

inside our carbon intensity limit of 100g CO2/ KWh, a self-imposed cap based on a five year rolling average of carbon emissions.

In October 2008, the UK Industry Task Force on Peak Oil published a report, The Oil Crunch, which stated that a peak in cheap, easily

available oil production is likely to be reached as early as 2013. It said that the key to addressing all three threats facing the UK and other countries

- energy security, climate change and peak oil - is the immediate and rapid acceleration in our use of non-fossil fuel sources of energy, and reduction in the overall demand for energy'. In the UK and Europe, these requirements have been put on

a statutory footing with the Renewable Energy Directive and the UK Climate Change Act. This means it is no longer sustainable for energy companies to develop their business on the

basis of ever-increasing consumption; indeed the reverse is the case.

We have long recognised our role in minimising our impact on climate change, and are proud of the action we have taken over the last 15 years

to deliberately displace local oil-fired generation with cleaner, low carbon imported electricity - significantly reducing our dependence on fossil fuels. As a result our Company now imports in excess of 90% of its power compared to just 45% in 1990, the Kyoto baseline year. This has led

to Jersey Electricity being virtually the sole driver of the Island's reduction in carbon emissions - a reduction of a third since 1992 despite a 40% increase in overall electricity consumption.

At the end of last year, we donated £0.5m of

seed funding to the Energy Efficiency Service (EES), a States run body whose remit is to oversee and provide grant-aid support, with the expectation that the States will continue to fund the scheme in future years. The EES provides a range of services to the neediest members of

the community for insulation, draught-proofing, lighting and heating controls, with the objectives of reducing bills and carbon emissions. Although these are basic technologies, it is our experience that there is a significant opportunity in the community to reduce consumption by 10-15% by using such simple measures. It is pleasing that the service has made a real impact during the year, having contacted over 1,500 eligible households and having progressed work on over 400 of

these homes.

Jersey's energy-related carbon emissions have fallen by more than 35% since

1992. This is almost entirely due to Jersey Electricity's success in displacing oil used for on-island electricity generation with low carbon electricity imported from France, and has been achieved despite a 40% increase in consumption over this period.

Less is more:

Jersey's Carbon Emissions by Source

17% 29%

Energy from Total Road Waste Plant Transport

4%

Electricity

50% Generation

Domestic and 27            Commercial

In February 2009,  we commenced our four  year trial of electric Smart  vehicles on the Island

"

States Energy Policy needs progressing.

Unfortunately we report a continued lack of  Road transport represents about a third o "f total progress with the Energy Policy, which has still  energy related carbon emissions and a similar

not been debated in the States, having been  proportion of total fi nal energy consumption in drafted two years ago. The Energy Policy  the island*. In order to address this opportunity proposes a range of measures to improve security  and simultaneously seed an additional source of of supply, increase affordability of energy as well  off-peak electricity growth, we secured access

as reduce carbon emissions. Much more needs to  to six all-electric Smart Car vehicles for a four

be done, and the States of Jersey need to take a  year trial. In the ten months we have been using leadership role.  the vehicles, we have worked to help establish

a sustainable transport policy. Usability of the Domestic and commercial segments represent  vehicles is excellent, however purchase prices are about half of total energy related carbon  currently high for these pre-production vehicles emissions in Jersey. Our efforts to assist domestic  and there is a clear need for States' incentives to energy users to reduce their consumption will be  encourage take-up. We are also exploring similar supported by the proposed Building Bye-laws  trials for commercial vehicles and buses.

which will mandate a 20% reduction in carbon

emissions across all fuels to be used in a given  The States approved the construction of an Energy building compared to the prior baseline level.  from Waste plant last year, which will be located As the legislation is substantially fuel neutral  adjacent to our La Collette Power Station. We

it is conceivable that many buildings will not  have entered into a contract with the States to achieve their full carbon reduction potential if  purchase, at the wholesale market prices we

oil or gas is selected as the fi nal fuel and to that  achieve in Europe, the electricity generated by the extent it represents a lost opportunity. Our energy  plant, which we anticipate will be approximately consultancy, Jersey Energy is also providing  5% of our total electricity requirement. In addition, services to commercial organisations to help  we have also agreed to sell a range of other

them reduce their bills and, by so doing, reduce  services and facilities that are currently used carbon emissions.  at La Collette. We expect this partnership to

simultaneously reduce our operating costs at La Collette and provide additional diversity of supply.

28

* Jersey Energy Trends 2008 published by States of Jersey Statistics Unit

Road transport represents about

a third of the total CO2 emissions and is a real opportunity to grow off-peak load.

      29

The UK and Channel 50% of the entire tida of Europe, and at leas stream resource of the

Renewable Energy UK (REUK.com) 2009

"

Renewables signifi cant long-term opportunity. Of signifi cant local interest in Jersey is the  I am delighted to report Jersey Electricity's  "

opportunity presented by renewable energy.  achievement in reaching level two of the ECO-

Given the already low carbon intensity of  ACTIVE business accreditation scheme. This is

electricity in Jersey, however, the incentive for  an important initiative for us, given our focus on

developing locally sourced renewable power is  sustainability. To achieve this higher rating, we

primarily one of increased diversity and security  had to demonstrate to the Eco-assessment team

of supply. Following the recommendation of the  that we had signifi cantly lessened the impact

Tidal Power Working Party, on which we were  of our operations on the environment over a

represented, the States decided to establish  sustained period. In addition, we have also set

a Tidal Power Commission to determine the  out plans to reduce waste, improve recycling and

size of the opportunity for wind and tidal  reduce emissions. These are actions that are good

resource in Jersey waters, and establish an  for business as well as the environment, and will

appropriate consenting process for subsequent  be built on over the coming year.

commercialisation. Although we don't believe

that Jersey's renewable resources are currently  Apart from our progress in reducing carbon

economic, we do believe there is long term  dioxide emissions arising from the generation

potential in renewable development and are  of electricity, we also pay close attention to

assessing the various options, including closely  particulate emissions, sulphur dioxide, nitrogen

monitoring developments in both Guernsey  oxide emissions and all have been in compliance

and Alderney. Jersey Electricity remains well  with local standards. We also closely scrutinise

positioned to drive forward renewable energy  power station cooling water using sophisticated

development with its grid infrastructure and  assessment techniques to ensure that there is no

customer base within close proximity to the  adverse impact on the local environment.

resource and an established capability in power

We are clear that there is much to be done

engineering. Indeed, as a fl exible and clean

to further improve the Island's environmental

carrier technology for energy, electricity will

performance. We are not complacent, and we

be the enabler of future sustainable sources of

must continually strive to play our part in reducing

energy. We have continued to engage policy

emissions, encouraging recycling, reducing

makers in Jersey on the need for incentives

waste and improving energy effi ciency. We must

to encourage the development of utility scale

achieve the right balance; to simultaneously

renewable energy projects.

support economic growth and social progress

30 while protecting the environment and conserving

natural resources for future generations.

el Islands share almost

al stream resource  ast 10% of the tidal  he whole world.

31

Customer service and standards

Apart from delivering world class supply security for our customers, Jersey Electricity also invests heavily in providing our customers with excellent service levels across all our businesses. As expected, there were several challenges in implementing our 24% price increase and our Customer Care team worked hard to provide proactive support and advice to customers. In

the period up to January, when the tariff increase was implemented, we went to some length to explain to our customers the reasons for the tariff increase and provided practical advice on how customers might mitigate the effects by offering alternative tariffs, payment plan options and

free energy effi ciency advice. We also made customers aware of the grants available from the States Energy Effi ciency Service. Our customer communications successfully reduced incoming enquiries, as did our Extra Care Services'

which were made available to our special needs customers. In the course of our work, we were delighted to be supported by retired staff that were hired on a short term basis to assist the elderly and infi rm with home visits. Our actions have been endorsed by the welfare agencies, Consumer Council and Citizens Advice Bureau, with whom we consult regularly on tariff changes and support services.

Despite the challenges of the price rise and

a diffi cult economic climate, I am pleased to report that no domestic customers and only 3 commercial customers have been disconnected since January. Our popular key budget meters, which attract no additional charges and provide access to our full range of discounted tariffs, continue to prove successful and enable customers to better plan their electricity expenditure. In addition, our Customer Care and Finance teams were able to achieve a 50% direct debit penetration of our customer base, a target set by the Company two years ago. This has signifi cantly improved the cash fl ow of the business and reduced administration.

Jersey Electricity monitors its service performance across a range of 10 published Customer Service Quality Standards which include and improve

on those set by the regulatory authorities for the UK Electricity Supply Industry. I am delighted

to report that we achieved a performance of 99.96% compliance with these standards. On

the 24 occasions when we failed to meet our self-imposed 100% target, we have proactively reviewed these and taken action to prevent a reoccurrence.

Going forward, we plan to conduct a comprehensive customer survey next year which we hope will provide feedback on current performance as well as insight on new products and services.

October 2008 to September 2009

1  We will replace a main fuse within 3 hours of a customer's call. 99.99% 2  We will give at least 2 days notice of any planned

100% supply interruption.

3  We will restore lost power supplies within 18 hours. 100% 4  We will quote for the provision of new electricity supplies within

99.96% 15 working days, or 25 days, for major infrastructure schemes.

5  We will investigate any supply voltage complaints

100% within 5 working days.

6  We will respond to an enquiry about an electricity bill, and  

where necessary, check the reading and test the meter 100% within 5 working days.

7  We will, wherever practicable, avoid disconnection for debt

in domestic premises by free installation of a pre-payment meter,  100% without surcharge on the customer's normal tariff.

8  We will respond within 5 working days to a request for change

100% of account payment method.

9  We will provide free advice on energy effi ciency and agree an

99.99% appointment to visit within 7 working days.

10  We will agree attendance on a specifi c morning or afternoon

99.99% to provide any of our services.

      33

Christmas retail promotions at our toy store, Imagination

Developing  our non-core  businesses

B&Q are our largest retail partner at the Powerhouse Retail Park

As a company supplying all of Jersey, we have a privileged relationship with all inhabitants of the Island. This represents a signifi cant opportunity to extend our brand into adjacent products

and services, which simultaneously provide value to our customers as well as synergies

with our core Energy business. This strengthens our engagement with customers, provides new growth opportunities for the business as well

as developmental opportunities for staff, and importantly provides some mitigation against the risk of regulation and competition in the local electricity market.

Overall our non-core businesses constitute around a quarter of the Group profi t and a little less

of the total Group revenue. These proportions have reduced refl ecting increasing revenues generated from core Energy largely due to

the tariff increase, coupled with a reduction in profi tability of the non-core business in what has been a challenging economic environment. At an absolute level, total revenues of non-core activities grew slightly although profi ts were down by 4%.

Property

Our property business mainly comprises the rental income we derive from commercial premises developed in the last decade together with legacy residential properties originally built to house staff. For the year, underlying property profi t was £0.3m up on last year due to rent reviews. Property revenues were £1.8m and profi t was £1.3m.

Retail

Our retail business comprises white and brown goods, computing and mobile and toy categories. Lack of confi dence amongst consumers has made the environment challenging for all retail sectors and our categories were no different. Overall revenues were broadly unchanged from last

year at £13m, but we experienced signifi cant margin erosion, down 40% from last year to £0.3m. Margin pressure was particularly felt in the traditional areas of white and brown goods where supplier rebate support was particularly badly affected as were price defl ationary pressures which have become a feature of such markets. Encouragingly some of the weakness has been offset by a good performance from

our computing, mobile and accessory stores, Beyond and our toy store, Imagination which has benefi ted from high profi le exits from the market by two competitors. We have taken advantage of this and are well poised for the Christmas period when much of the profi t of the year is earned. During the year, we moved and expanded our Beyond town shop, which was successfully opened in September 2009. This store carries

a broader range and is better positioned in

St Helier's commercial centre. Day2day, our internet store is now close to breakeven and is experiencing some success in exploring new routes to market. Retailing in the Island remains tough with signifi cant pressure from off-island competition.

  deepen our relationship with customers and diversify.

Our new retail location for Beyond computers was  35 opened in St Helier town centre in September 2009

Securing hundreds of fuel switches a year in the heating replacement market.

Building Services

Our contracting business provides a wide range of electrical, mechanical and refrigeration services to domestic and commercial consumers. Although managed separately from our core Energy business, this business plays an important role in providing new heating, cooling and lighting electrical applications in both new build and retrofi t markets, which subsequently support the sale of electricity. As expected Building Services has felt the impact of the general downturn in the market. However, revenues

have held up well at £3.6m but profi ts have struggled at a level of £0.2m. We have seen

some reduction in maintenance work as customers scale back their spending. Furthermore, the environment into which to sell fuel-switch options became more challenging following our tariff increase. However with competitor fuel prices increasing and our reduction in electricity prices of 5.1% from January 2010, we are already seeing an upsurge in enquiries. Despite the challenging year, electricity continues to dominate the new build market and continues to secure an 85% share of all new heating systems refl ecting its strengths in effi ciency, safety and ease of installation. We are also securing hundreds of fuel switches a year in the replacement market where oil and gas heating systems are displaced by off-peak electrical heating. Heat pump and solar water technologies are being explored and seem to be promising options for larger residential properties with existing wet radiator systems, to which we can apply our extensive experience

36

gained from commercial property heating

systems. During the year we opportunistically launched some successful upgrade services for air conditioning systems, exploiting legislative changes which require the replacement of refrigeration

and air conditioning units that currently use the environmentally unfriendly R22 refrigerant.

Other Smaller Enterprises

Our remaining non-core businesses are small enterprises which have been opportunistic responses that exploit in-house expertise in energy or energy related sectors.

Among them, Jersey Energy has become a leader in the Channel Islands in providing independent and impartial building and energy related consultancy services, across all fuels. It provides policy support to governmental and non-governmental bodies, and also provides support to the Energy Effi ciency Service under a secondment arrangement. Our IT developer and consultancy, JENDEV serves a small portfolio of utility clients as well as Jersey Electricity, as a diversifi ed user of its utility enterprise systems. Jersey Deep Freeze is a business involved in selling and maintaining refrigeration equipment to small commercial customers. All three of these businesses had a profi table year.

Foreshore, our data centre joint venture, increased revenue slightly in the year but with lower

profi tability due to investment in additional capacity.

"

Our £0.5m donation is making a real impact on energy effi ciency in the community.

"

         37

Health and safety

Mark Wunsch, Linesman carries out overhead

supply network safety training

Running a safe business is our greatest responsibility. In an organisation with inherently high-risk activities, it is important that staff are competent and well trained, and that we have proper safe systems in place. We believe that all of our work can and should be carried out without harm to employees, contractors, customers or members of the general public. Our key measure is the number of lost time accidents, which occurs when any injury results in an employee's absence from work for more than three working days. Given our excellent performance last year with only two lost time accidents, our focus for this year was avoiding complacency, something that requires discipline and determination. I am very pleased to have achieved the same high performance level as last year - just two lost

time accidents, neither of which was serious.

In addition, I am proud to report that Building Services had another clean record with no lost time accidents for the third consecutive year.

This year we revised our Group Health, Safety

& Environment (H,S&E) Policy as well as our Organisation & Responsibilities Policy. These documents set the governance and responsibility framework needed for safe activities. We reinforced our commitment to H,S&E through various regular and formal meetings and by

supporting site inspections conducted by all levels of management. Continuous improvement is important and we introduced a number of actions to improve compliance with Safety Rules, audit management systems and provided refresher training. Our approach to on-the-job risk assessments has also been strengthened.

Third party damage to our electrical services

is still a major concern. We have employed

a range of proactive measures to reduce this, including widespread communication with contractors, industry bodies and the Health & Safety Inspectorate in Jersey. Although we have seen a slight reduction in third party damage

to our cables, we have seen an increase in the number of dangerous incidents involving smaller developers. We are now taking action to draw attention of these risks to smaller builders and those who employ them.

Our success can only be achieved with people who have the right attitude to their own safety and that of others. In this respect I would like

to specifi cally thank all staff, whose attitude and motivation are fi rst class. I would also in particular like to thank safety representatives and fi rst aiders for providing critical facilitative support to both the Company and its employees.

*

*A lost time accident occurs when  

any injury results in an employee's  

absence from work for more than  39 three working days

Supporting the community

As the provider of an essential public service,  Our modest sponsorship budget is directed  

we have long recognised our role as a corporate  towards helping environmental, educational and  citizen, and realise that community activities  community related initiatives that fi t our business  enhance our reputation with customers and  and benefi t the local community and our Island.  suppliers, strengthen our brand, build sales  During the year we continued our sponsorship of  and help us attract and retain a committed  Durrell, and we continued donations to Family  and skilled workforce. Nursing & Home Care. We also supported tree  

planting by Jersey Trees for Life at the Haute  Most notably our Company was able to see  Vallee and Mont a l'Abbe school sites. We  

and further support the £0.5m seed funding  assisted the Jersey Fire Service in providing a  donated last year used to initiate the States of  valuable service to ensure the safety of electric  Jersey Energy Effi ciency Service. The scheme is  blankets on the Island and provided a computer  

administered by the Planning and Environment  system for an internet café at St Ewolds residential  Department and is designed to help the  home, as well as sponsorship of the Jersey  

vulnerable reduce energy consumption and bills  Fisherman Festival and the Environmental prize at  Red Nose Day activities,  from all fuels. Since the scheme was launched  the Construction Awards, amongst many others.

just one of many charities  in April, the service has made contact with  

our staff have supported over 1,500 eligible households. The scheme  Much of the support we provide the local  

has reached a landmark of completed energy  community is delivered through the commitment  effi ciency improvement works in 100 homes, with  and motivation of our staff through various  

a further 300 in progress. Jersey Electricity is the  individual and group fundraising initiatives.  

only energy supplier making a contribution to this  Here our Company has pledged to match any  scheme, but it is expected that the scheme will  sponsorship gathered externally, and activities  continue to receive funding by the States of Jersey  have included Dragon Boat racing, Durrell Dash  over the coming years. running, and the Swimarathon amongst several  

others. We have also supported and participated  in various national appeals to raise funds such as  Think Pink, Red Nose Day and Children in Need.

We continue to work with local primary and  secondary schools as part of our ongoing  commitment to improving social and  environmental awareness. We received excellent  feedback on our Environment Week presentations  from both teachers and students alike and  

40 have made progress in raising awareness of  environmental and energy saving initiatives.

Our people

As a signifi cant employer in Jersey with activities in a wide variety of sectors and functions, we draw upon a huge wealth of experience, knowledge

and skills that our staff possess. This has enabled us to build a distinctive brand and deliver products and services around the highest professional standards and customer service levels.

Workplace coaching and mentoring, personal development and extensive on and off-the-

job training are a key factor in attracting and retaining high calibre employees and have been instrumental in achieving the Company's enviable record of high retention and low absenteeism.

The average length of service is 15 years

and at the Long Service Awards this year, we celebrated the achievement of no fewer than 13 employees reaching 21 years and 2 employees reaching 40 years. The history of long service, stable employment and staff fl exibility refl ects an enormous commitment and loyalty of our staff and enables the Company to provide service levels that are second to none.

Succession plans are critical to an island

electricity supply business with a limited local market in the technical skills needed. We are

on track to ensure that we will be able to meet

our business needs from the local workforce,

but continue to invest in staff capabilities and multi-skilling that ensures fl exibility going forward. Despite the challenging economic conditions

we continue to hire trainees, apprentices and engineers some of whom will become the managers of tomorrow. In addition, we have

42 taken a full role in supporting Government

training initiatives, including Project Trident,

IOD Work Shadow, Undergraduate Work Experience and Advance to Work schemes.

We continue to work hard with the Unions and their representatives to preserve strong industrial relations and encourage a togetherness that strives to benefi t both Company and employees simultaneously.

The well-being of our staff is important to any caring employer and we promote initiatives

to increase awareness of health and fi tness.

In partnership with a local health monitoring company, we operate a successful occupational health scheme that provides additional care for staff with specifi c problems as well as medical screening for those working in more hazardous environments.

Staff at all levels of our business continue to achieve high levels of professional industry and business qualifi cations. We also remain well represented on various industry bodies including the Eurelectric Network of Experts of Small Islands Systems Group (NESIS).

Our staff have worked particularly hard this

year in responding to the unusually demanding environment we face. They have risen to the challenge by remaining focused on performance and service, and this has enabled our Island to continue to enjoy a world class electricity supply. I wish to thank all our staff for their considerable professionalism, support and commitment in achieving our goals.

Gavin Murphy

Manager Beyond Computers

Gavin won the Outstanding  Achievement Award in a  Professional Management  Qualifi cation for his course work in attaining the CMI level 3 Diploma in First Line Management.

Jeremy Willis

Senior Project Engineer

Jeremy achieved the second  highest examination marks  in the Prince2 Methodology  Foundation & Practitioner  project management course.

Iain Ormrod

Trainee Internal Auditor

Iain achieved the highest  aggregate exam score  worldwide for the Certifi ed  Accounting Technician (CAT)  qualifi cation course.

Report and Accounts 2009

Outlook

We expect the future to remain challenging. The global economy remains weak and credit remains scarce and this will provide a diffi cult backdrop for all industries. Although electrical technology

is well positioned in Jersey, our business faces its own unique challenges - energy price volatility, foreign exchange weakness, delivery of our

capital programme, growth on what is already

a well penetrated customer base, as well as the ongoing threat of regulation. We are striving to deliver a sustainable future in every sense. We

will need to strike the right balance between securing the commodity required for our customers in an affordable way, meeting our environmental goals and achieving satisfactory returns for our shareholders. I am confi dent that with the loyalty, commitment and professionalism of our staff we can deal with these challenges and build on the strong performance already achieved.

We are planning two  further primary substation  investments of a similar  

importance to Western  Primary shown above

Chris Ambler Chief Executive 17 December 2009

44

Seeking the right balance between affordability, supply security, environmental goals and returns.

Group Financial Results

Key Financial Information  2009  2008  %

movement

Group turnover for the year to 30 September 2009 at £93.6m was 14% higher than in the year ended 30 September 2008. The Energy business contributed £73.1m of this turnover being £11.0m above last year due mainly due to the impact

of our 24% tariff rise in January 2009 but also from a 1% rise

in unit sales of electricity. Turnover in our Retail business fell by 1% to £13.0m with a lower sales level in our traditional white/brown goods offering being largely offset by gains in

the toy/hobbies and e-retailing internet businesses within our Retail portfolio. Turnover in the Property business, including internal revenues, rose by 8% to £2.5m on improved rental yields from tenants. Turnover in Building Services rose 5% from levels experienced in 2008 to £3.6m. Turnover in our Other Businesses increased by 8% to £2.1m with rises in both Jersey Energy and Jendev.

Cost of sales rose by £10.9m to £66.9m with higher importation costs in the Energy business due to extreme volatility in energy markets in the second half of the 2008 calendar year, being the main driver. Operating expenses at £17.8m were

at the same level as in 2008.

Profit before tax, for the year to 30 September 2009 fell by 10% to £9.3m with lower interest received due to falling interest rates and profi t upside from property gains/revaluation not repeated in 2009. Profi ts in our Energy business moved

up from £6.3m last year to £6.7m in 2009. A substantial increase in our import costs due to rising prices in the European wholesale electricity marketplace was covered by a tariff rise of 24% from January 2009. Unanticipated lower oil prices during 2009 added to profi tability as we imported less electricity

(92% against 96% in the previous year) and replaced such

requirements with local generation. Unit sales of electricity were

marginally ahead of levels during 2008. Profi ts in our Property

division, excluding property revaluation/disposals, rose £0.3m

to £1.3m due to higher rental yields. Our investment property

portfolio was revalued downwards by £0.1m in 2009 against 46 corresponding gains recognised in the income statement from

the revaluation/sale of properties of £0.7m in 2008.

Our Retailing business saw profi ts fall from £0.5m to £0.3m.

A fall of £0.3m in profi ts in the traditional retailing areas of white/brown goods, driven largely by a weak marketplace, was offset by a stronger performance by our newer toy/hobbies and e-retailing internet businesses. The Building Services business produced a £0.2m profi t being down £0.1m on last year due

to pressure on margins in a very competitive marketplace. Our other business units - Jersey Energy, Jendev and Jersey Deep Freeze all had a profi table year. Foreshore, our data centre joint venture, saw an increased annual turnover which rose 15% from £4.1m to £4.7m but with lower profi tability due to investment in the expansion of existing facilities.

Interest received on deposits in 2009 was £0.6m against £1.1m due primarily to lower interest rates associated with the UK base rate falling substantially during this period. The taxation charge for the year, at £2.0m, was substantially higher than in 2008. As indicated last year as a result of transitional rules introduced in Jersey, and as a prelude to changes in the corporate tax regime, the effective tax rate for 2007 and 2008 was lower but reverted to 20% again from 2009 onwards.

Group earnings per share fell 29% to £4.70 compared to £6.58 in 2008 due to lower profi ts and a higher tax charge.

Ordinary Dividends

2009  2008 Dividend paid  - fi nal for previous year  £1.12  £0.75

- interim for current year  £0.77  £0.73

Dividend proposed - fi nal for current year  £1.18  £1.12

Dividends paid, net of tax, rose by 28% from £1.48 in 2008 to £1.89 in 2009. The proposed fi nal dividend for this year is £1.18, being a 5% rise on the previous year. Dividend cover fell from 4.4 times in 2008 to 2.5 times this year due primarily to a lower level of profi ts and a higher level of dividend associated with the alteration in dividend policy announced last year.

such non-performance is not anticipated given the high credit  Cash Flows

ratings (investment grade and above) of the established fi nancial  Summary cash fl ow data  2009  2008 institutions with which we transact. In addition, limits are set as  

to volume of business placed with such institutions.

Power purchasing policy

The Company imports over 90% of the electricity requirements  of Jersey from Europe. It jointly purchases this power, with  Guernsey Electricity, from EDF in France based on a market  related mechanism linked to the Powernext Futures Exchange  in Paris. This allows power prices to be fi xed in advance of  decisions on customer tariffs being made. A Risk Management  Committee exists, consisting of members from Jersey Electricity,  Guernsey Electricity and an independent energy market adviser  and it follows guidelines approved by the Board. The aim  

of Jersey Electricity is to hedge future purchases for between  one and three years ahead on a rolling basis to provide our  customers with a market based price but with a degree of  certainty in a very volatile energy marketplace.  

Net cash inflow from operating activities at £15.6m was  

£0.7m higher than 2008. Capital expenditure was £12.1m  

with the spend to fi nish the £14m Western Primary capital project  

to reinforce the electricity network in the west of Jersey, and initial  

spending on the third interconnector to France, being the primary  

drivers. Cash at bank, including short-term investments, at the  Defi ned benefi t pension year end was £16.8m being £0.7m higher than last year.  scheme arrangements

Treasury Policy As at 30 September 2009 the scheme defi cit, under IAS 19  

Employee Benefi ts rules, was £3.0m, net of deferred tax compared  Operating within policies approved by the Board and overseen  with a surplus of £5.4m at 30 September 2008. This movement  by the Group Finance Director, the treasury function manages  was due mainly to an actuarial loss of £11.4m associated with a  liquidity, funding, investment and risk from volatility in foreign  revision in the discount rate applied to scheme liabilities. Scheme  exchange and counterparty credit risk. As a substantial  assets rose 8% from £63.8m to £69.1m since the last year end  proportion of the cost base is the importation of power from  but liabilities rose from £57.1m to £72.8m. Turbulence in fi nancial  Europe, which is contractually denominated in the Euro, the  markets impacted both the assets and liabilities with the discount  Company enters into forward currency contracts to eliminate a  rate on the latter falling from 7.0% in 2008 to 5.5% in 2009 due  large percentage of currency exposure which aids tariff planning. to a weakening of the credit squeeze in fi nancial markets. Unlike  

the UK, the Jersey Electricity pension scheme is not funded to  In addition a substantial proportion of capital expenditure  pay mandatory annual rises and no ex-gratia award was made  incurred by the Energy Division is Euro denominated and  to pensioners this year in light of the defi cit.  

therefore foreign exchange volatility exists and hedging policies  

have been created to mitigate such risk. Our defi ned benefi ts pension scheme is an area of risk that still  

requires careful monitoring as it is driven largely by movements  The average Euro/Sterling rate achieved during the fi nancial year,  in fi nancial markets and materially impacted by relatively small  as a result of the hedging program was 1.33. The average  movements in the underlying actuarial assumptions. If, for  

applicable spot rate during the same period was 1.15.  example, the discount rate applied to the liabilities had been

5.8%, which is a rate we would have been likely to have utilised

The Company does not manage interest rate exposure as it has  if the scheme was undergoing its triennial actuarial revaluation,

maintained cash in bank in the full period since the last year end. The  rather than the 5.5% advised by our actuaries under IAS 19 for

average rate of interest received in the fi nancial year was 3.2%. 2009, the defi cit of £3m would have been eliminated. However if

a discount rate of 5% was used the scheme net defi cit would rise

The Group may be exposed to credit-related loss in the event  from £3m to approximately £8m.

of non-performance by counterparties in respect of cash and  47 cash equivalents and derivative fi nancial instruments. However  The next triennial actuarial valuation of the defi ned benefi t

scheme is at 31 December 2009.

Prior Year Adjustment - Energy Revenues

Revenue is recognised on the basis of energy supplied during the period and includes an assessment of electricity used by customers between the date of the last meter reading and the balance sheet date. The methodology employed to calculate the total number and value of the unbilled units at each period end has been regularly refi ned as there is a degree of estimation

in the process. During the most recent review in early 2009 an error in the methodology became apparent and the necessary adjustment is refl ected in the fi gures for this fi nancial year. The 2008 restatement resulted in an increase in revenues and profi t before tax of £0.3m. The reserves were adjusted by £1.5m, net of tax, to refl ect the same prior year error in the periods 2002 to 2007 inclusive.

Taxation changes in Jersey

As indicated last year Jersey has undertaken a fundamental review of both its direct and indirect tax systems. Utilities will continue to pay corporate tax at the current rate of 20% while most other companies in Jersey pay tax at a rate of either

0% or 10% from 1 January 2009. However as part of the migration to the new tax regime transitional rules require all companies to move from a prior year to a current year basis

of tax assessment. The impact on Jersey Electricity was that

our effective tax rate for 2007 and 2008 was around half the previous rate of 20% but has risen to 20% again in 2009.

The resultant reduction in the overall corporate tax revenues in Jersey is being fi lled by an increase in direct personal taxation for individuals and by the introduction of a goods and services tax (GST) of 3% which was introduced in May 2008. GST is applied to our electricity sales at the full rate of 3% (with the exception of certain International Service Entities who are not billed GST). The States of Jersey are currently reviewing Energy Policy and there is the potential that a carbon tax' might be applied to energy and fuel suppliers in Jersey. No decisions

have yet been made but it is anticipated that if such a charge was levied on Jersey Electricity we would have no option other than passing through such a tax to our customers as it would be an increase in our cost base that is not within our control.

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 300 shareholders via a full listing on the London Stock Exchange. Of the holders of listed shares there is one large institution, Utilico Ltd, which owns 19% of the total ordinary share capital.

During the year the ordinary dividend paid was increased by 28% from £1.48 net of tax to £1.89. The proposed fi nal dividend for 2009 at £1.18 is a 5% increase on last year.

The share price at 30 September 2009 was £69 against the £57 that prevailed at the 2008 year end. This gives a market capitalisation of £106m for the Company as at 30 September 2009. However the illiquidity of our shares, due mainly to having two large shareholders combined with an overall small number in circulation, limits the management team from having the ability to infl uence the share price. Discussions have taken place with the States of Jersey on whether they would approve a potential all employee share scheme to more closely align the interests of both employees and shareholders. The taxation rules surrounding such schemes are currently being reviewed by the Jersey Government and this may infl uence decision making in this area.

Our largest shareholder, the States of Jersey also owns holdings in other utilities in Jersey. It owns 100% of Jersey Telecom, 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 £5.8m (2008: £3.7m).

2009  2008

The return to States of Jersey rose due to an increase in the dividend level, and the fi rst full year impact of the introduction of a Goods and Services Tax in May 2008.

Board of Directors

Geoffrey Grime Chairman (62) R/N

Chris Ambler Chief Executive (40) N

Mike Liston Non-Executive Director (58) N/R

Jeremy Arnold Non-Executive Director (71) A/N/R

Clive Chaplin Non-Executive Director (58) A/N/R

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. He is currently the Chairman of Computer Patent Annuities Holdings Limited and EFG Offshore Limited and also holds many 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.

Chris was appointed

to the Board as Chief Executive on 1st 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 fi nance

and strategic consulting roles. He is Chairman of Foreshore Limited and a Director of Channel Island Electricity Grid Limited. 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 joined Jersey Electricity in 1986 as Chief Engineer and became Managing Director in 1993. He previously held

a number of senior posts

in the United Kingdom's Electricity Supply Industry. He is Chairman of AIM listed, Renewable Energy Generation Limited, and nonexecutive Chairman

of Jersey Post. Mike is

a Fellow of the Royal Academy of Engineering,

a Fellow of the Institution of Engineering and Technology and a

Member of its Audit and Disciplinary Committees. He is a Companion of the Chartered Management Institute and past Chairman of its Jersey Branch. He was appointed by the States of Jersey in 2002

as Chairman of the Jersey Appointments Commission. Mike was awarded an

OBE in 2007. Mike retired as an executive director on 31 December 2008 and became a non-executive director from that date.

He is Chairman of the Nominations Committee.

Jeremy joined the Board  Clive joined the board

in 1997. He trained as  in 2003. He trained

a Chartered Accountant  as a solicitor in London and spent 37 years in  qualifying in 1977 and public practice. His career  moved to Jersey in 1979. was mostly with Arthur  He was admitted as a Andersen, for whom  solicitor of the Royal Court, he worked in London,  Jersey, in 1985 and has Birmingham, Toronto and  been a partner of Ogier Brussels. His experience  since 1994. With effect

as a partner was with  from 1 February 2009 clients in a wide range  he became Chairman

of industries such as  of Ogier Group. He is a manufacturing, consumer  director of a number of products, fi lm and music  other companies operating production and advertising.  in the fi nancial sector and At present he serves on  is also a member of the

the boards of a number  Jersey Law Commission. of Jersey companies and  He is Chairman of the

is Chairman of the Audit  Remuneration Committee. Committee and also Senior

Independent Director.

Directors

All non-executive directors are viewed as being independent with the exception of Mike Liston who was formerly the Company's Chief Executive and Chris Evans due to his role as managing director

of our Foreshore joint venture. Jeremy Arnold is still regarded as independent even though he is now in his twelth year as director.

Key to membership of committees

A  Audit Committee

N  Nominations Committee R  Remuneration Committee

Chris Evans Martin Magee David Padfield Richard Plaster John Stares Non-Executive Director Finance Director Operations Director Commercial and Human  Non-Executive Director (55) A/R (49) (55) Resources Director (48) N (58) R

Chris joined the Board

in 1998 and he formed Omicron Computer Systems, a Jersey based Information Technology company in 1983. He merged the company with Itex in 1993 where he

was Deputy Chairman.

He is currently Managing Director of Foreshore Limited, our joint venture internet business providing services to offshore registered companies and e-business.

Martin joined the Board as Finance Director in May 2002. He moved from Scott ish Power plc, after nine years in a variety

of senior fi nance roles.

He previously worked for nine years with Stakis plc (now part of the Hilton Hotels Group). He is also Chairman of Jersey Deep Freeze Limited and a Director of the Channel Islands Electricity Grid Limited and Foreshore Holdings Limited. He is also a member of the Jersey Public Accounts Committee. He is a member of the Institute of Chartered Accountants of Scotland having qualifi ed in 1984.

David joined Jersey Electricity in 1987 as Planning & Construction Engineer after 14 years with South Western Electricity Board and was appointed as Operations Director in 2004, following several years as Energy Division Manager. He

is responsible for the management of the Company's Energy businesses of electricity transmission, distribution, generation and supply, which also incorporates corporate health and

safety. He is also a director of the Channel Islands Electricity Grid Limited. He graduated from Bath University in 1976 with an Honors Degree in Electrical and Electronic Engineering. He is a Chartered

Engineer, a Fellow of the Institution of Engineering and Technology and a Member of the Chartered Management Institute, Chairman of the NESIS Group at Eurelectric and a Chartered Director.

Richard joined the HR function in Jersey Electricity in 1987 following a retail management career with Woolworths and joined

the Board in 2004. He is now responsible for Human Resources, Customer

Care, Procurement, Marketing and the Retail businesses. He chairs the management board of the Building Services business and was appointed as a director of Jersey Deep Freeze Limited in October 2004. Externally, he is former Chairman of the Employment Forum in Jersey and the current Chair of

the Skills Jersey Board He

is a Chartered Fellow of

the Chartered Institute of Personnel and Development, and a Chartered Director.

John is the Managing  Director of Guernsey  Enterprise Agency  

and a non-Executive  Director/Advisor to four  other Channel Island  headquartered groups of  companies. He is a Fellow  of the Institute of Chartered  Accountants of England  

and Wales, a Member of  

the Worshipful Company of  Management Consultants  and a member and  

former President of Rotary  Guernesiais. Prior to moving  to Guernsey in 2001, John  was with Accenture for 23  years. During that period,  he worked as a strategic,  

fi nancial, change and IT  consultant with major clients  in most industry sectors and  held a variety of leadership  roles in Accenture's  Canadian, European  

& Global consulting  businesses.

Director's Report

for the year ended 30 September 2009

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 telecommunications and internet data hosting.

Dividends

The directors have declared and now recommend the following dividends in respect of the year ended 30 September 2009:

2009  2008 Preference dividends   £  £

5% Cumulative Participating Preference Shares at 6.5%  5,200  5,200 3.5% Cumulative Non-Participating Preference Shares at 3.5%  3,773  3,773

Ordinary dividends

Ordinary and A' Ordinary Shares

Interim paid at 77.0p net of tax for the year ended 30 September 2009 (2008 - 73.0p net of tax)  1,179,640  1,117,360 Final proposed at 118.0p net of tax for the year ended 30 September 2009 (2008 - 112.0p net of tax)  1,807,760  1,715,840

2,996,373  2,842,173

Re-election of directors

In accordance with Article 115 of the Articles of the Company, John Stares retires at the Annual General Meeting and in accordance with Article 127 of the memorandum of the Company, Jeremy Arnold retires by rotation and, being eligible, both directors offer themselves for re-election.

Directors' and officers' insurance

During the year the Company maintained liability insurance for its directors and offi cers.

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 34 days (2008 - 40 days).

Director's Report

for the year ended 30 September 2009

Substantial shareholdings

As at 17 December 2009 the company has been notifi ed 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 represents 86.4% of the total voting rights.

Equity Shares

A' Ordinary shares entitle the holder to 1 vote for every 5 shares held whereas the Ordinary shares carry voting rights of 1 vote for each  share held.

A' Ordinary Shares

Utilico Limited hold 287,468 Ordinary A' shares which represent 5.23% of the total voting rights.

Auditors

A resolution to re-appoint Deloitte LLP as auditors will be proposed at the next annual general meeting.

BY ORDER OF THE BOARD P. ROUTIER Secretary

17 December 2009

Corporate Governance

Corporate Governance

The directors are committed to maintaining a high standard of Corporate Governance in accordance with Section 1 of the Principles of Good Governance of the Combined Code as incorporated within The Listing Rules issued by the Financial Services Authority. The Board is of the opinion that it has complied with the Provisions of the Code throughout the year.

The Board

The Board currently comprises six non-executive and four executive directors. The Chairman is appointed by the directors from amongst their number. Jeremy Arnold is the Senior Independent Director. The Board has determined that Jeremy Arnold remains independent, notwithstanding that he has served on the board for more than nine years. In making this determination, the Board took into account his breadth of experience, his fi nancial independence and other business interests.

The executive directors are not subject to retirement by rotation but they are subject to the same periods of notice of termination of employment as are other members of the Company's senior management.

The Board is responsible to the Company's shareholders for the proper management of the Company. It meets regularly, approximately fi ve times a year, setting and monitoring strategy, reviewing trading performance and risk management, examining business plans and capital and revenue budgets, formulating policy on key issues and reporting to shareholders. Board papers are circulated 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.

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  Remuneration  Nominations No of meetings  5  3  5  3

* attendees by invitation ** retired 5 March 2009

 appointed 28 May 2009

Performance Evaluation

The effectiveness of the Board is vital to the success of the Company. During the year a self assessment review was undertaken to assess the performance of the Board and its committees. The outcome of this review was satisfactory, and we continue to seek opportunities for improvement.

Corporate Governance

Nominations Committee

The Nominations Committee is chaired by Mike Liston. It has a remit to:

• 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  specifi ed term of offi ce.

Audit Committee

The Audit Committee's members are Jeremy Arnold (Chairman), Clive Chaplin and Chris Evans. The meetings provide a forum for discussions  with the external auditors. Meetings are also attended, by invitation, by the Chief Executive, the Finance Director, the Company Secretary and  internal auditors.

The Audit Committee is responsible for reviewing the annual and interim management statements and accompanying reports before their  submission to the Board for approval. It meets at least three times a year and is also responsible for monitoring the controls which are in  force, (including fi nancial, operational and compliance controls and risk management procedures) to ensure the integrity of the fi nancial  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. The Audit Committee also advises the Board on the appointment of external auditors and on their  remuneration, including monitoring any issues that could impact auditor independence. In addition the Audit Committee regularly reviews the  scope and results of the work undertaken by both the internal and external auditors.

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 ended 30  September 2009 and is in accordance with Revised Guidance for Directors on the Combined Code.

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 benefi t of Board papers circulated  beforehand. The risks associated with such decisions are a primary consideration in the information presented and discussed by the  Board. Prior to signifi cant investment decisions being taken, due diligence investigations include the scrutiny of business plans by the  Board.

Management Structure

Responsibility for operating the systems of internal control is delegated to management. There are also specifi c 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 material changes to them.

• Changes in structure and capital of the Company

• Financial reporting and controls including

Approval of the annual report and accounts.

Declaration of the interim dividend and recommendation of the fi nal dividend.

• Internal controls

Monitoring the effectiveness of the Company's risk management and control processes.

Corporate Governance

• 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 Nomination 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 annually 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

There is a permanent team of internal audit staff involved in a continuous structured review of all the Company's systems and processes both fi nancial and non-fi nancial. Internal Audit manage the process of strategic and operational risk reviews and facilitate risk review workshops with departmental managers. The team routinely reports directly to the Company Secretary and attends Audit Committee meetings, at which its plans are discussed and approved.

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 profi t centre level. These budgets are approved by the Board, which receives suffi ciently detailed fi nancial data to monitor the performance of the Company with explanations of any material variances.

Audit Committee

The Audit Committee reviews the effectiveness of the internal control process as outlined above.

The Board has overall responsibility for establishing and maintaining an adequate system of internal controls and for reviewing the effectiveness of the system. The effectiveness of the system is kept under review on a continual basis throughout the year through the work of the Audit Committee on the Board's behalf. The system of internal control is designed to manage rather than eliminate risk. In pursuing these objectives, internal control can only provide reasonable and not absolute assurance against material misstatement or loss.

Statement of Directors' Responsibilities

Directors' Responsibilities for the Accounts

The directors are responsible for preparing the Annual Report, Directors' Remuneration Report and the fi nancial statements in accordance with  applicable law and regulations.

Company law requires the directors to prepare fi nancial statements for each fi nancial year. The directors are required by the IAS Regulation  to prepare the group fi nancial statements under IFRS as adopted for use in the European Union and have also elected to prepare the  Company's fi nancial statements in accordance with IFRS as adopted for use in the European Union. The fi nancial statements are also required  by law to be properly prepared in accordance with the Companies (Jersey) Law 1991 and Article 4 of the IAS Regulation.

International Accounting Standard 1 requires that fi nancial statements present fairly for each fi nancial year the Company's fi nancial position,  fi nancial performance and cash fl ows. This requires the faithful representation of the effects of transactions, other events and conditions in  accordance with the defi nitions 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 fi nancial 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 specifi c requirements in IFRS are insuffi cient to enable users to understand the  impact of particular transactions, other events and conditions on the entity's fi nancial position and fi nancial 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 fi nancial position  of the Company and enable them to ensure that the fi nancial 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 fi nancial information included on the Company's website.

Remuneration Report

Remuneration Committee

The Remuneration Committee (the Committee) is chaired by Clive Chaplin and its membership includes all non-executive directors. The Committee operates within terms of reference agreed by the Board and such terms are regularly reviewed.

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 benefi ts together with a performance related annual bonus. Benefi ts for executive directors principally comprise a car or car allowance, private health care and housing subsidy.

During early 2009 the Committee commissioned a benchmarking report from Hassell Blampied, an independent remuneration consultant, which reviewed the Company's executive director remuneration against a number of other London Stock Exchange listed entities with similar market capitalisation. This report formed the basis of discussion for the 2009 review. The salary and benefi ts are reviewed by the Committee annually and any adjustments take effect on 1 April. The Committee seeks to ensure that the overall remuneration package including bonus matches, in broad terms, the comparative group benchmark for executive director remuneration, excluding any share based remuneration (of which there is none). The performance related bonus payable to executive directors takes account of their individual responsibilities within the Company and is dependent on the overall performance of the Group against expectations but is deliberately not profi t related.

The remuneration of individual directors for the year ended 30 September 2009 was as follows:

Basic  Benefi ts  Total  Total salary/fees*1 Bonuses  in kind  2009  2008

£  £  £  £  £

EXECUTIVE DIRECTORS  

C. Ambler  171,912  -  27,325  199,237  -

M. Liston (retired 31 December 2008)  60,716  36,000  4,089  100,805  244,813

M. Magee  148,924  24,770  17,223  190,917  192,290

D. Padfi eld  140,388  23,500  11,323  175,211  171,160

R. Plaster  141,138  23,500  11,323  175,961  167,432 NON-EXECUTIVE DIRECTORS  

G. Grime  30,000  -  939  30,939  26,309

J. Arnold*2 20,000  -  2,773  22,773  22,773

C. Evans*3 17,000  -  975  17,975  17,944

M. Liston*4 (appointed 1 January 2009)  12,750  -  925  13,675  -

C. Chaplin*5 19,000  -  975  19,975  19,944

J. Stares (appointed 28 May 2009)  5,151  -  939  6,090  -

J. Le Maistre (retired 5 March 2009)  6,250  -  -  6,250  15,900

D. Maltwood (retired 5 March 2008)  -  -  -  -  12,903 Total  773,229  107,770  78,809  959,808  891,468

*1 The executive directors received no rise to their salary level in the year ended 30 September 2009.

*2 Includes fees as Chairman of the Audit Committee - £5,000.

*3 Includes fees as Member of the Audit Committee - £2,000.

*4 Includes fees as Chairman of the Nominations Committee - £2,000.

*5 Includes fees as Member of the Audit Committee - £2,000 and as Chairman of the Remuneration Committee - £2,000. The total fees for C. Chaplin were paid directly to his fi rm.

Remuneration Report

Service Contracts

The executive directors' service contracts provide for a notice period of six months.

Pension Benefits

Details of the pension benefi ts to which each of the executive directors in the Jersey Electricity fi nal salary scheme is entitled are shown in the  table below. These pension benefi ts have been earned in the period as a director, but also include benefi ts for service before becoming a  director where applicable.

Increase  Accrued  Transfer  Transfer  Directors'  Increase in in accrued  pension at  value at  value at  contributions  transfer

pension  30.9.20092 30.9.20093 30.9.20083 plus transfers-in  value4 during the year1  during the year

100. Ambler  £2,318  £2,318  £14,762  -  -  £14,762
101. Magee5 £4,530  £47,890  £548,646  £445,853  £8,875  £93,918
102. Padfi eld  £5,990  £82,681  £1,107,102  £908,573  £8,423  £190,106

R. Plaster  £4,741  £55,178  £577,393  £458,198  £8,423  £110,772

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 65, based on service at the year end.

A director who leaves early with a deferred pension entitlement has the right to receive his pension from age 60. In transfer value  calculations it is assumed that the deferred pension commences at age 60.

3. The transfer values have been calculated using the basis and method appropriate at each accounting date.  
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 Additional Voluntary Contributions (AVCs) to the Scheme to  purchase additional fi nal salary benefi ts. The AVCs paid by the directors and the resulting benefi ts are included in the above table.  

Share Option Scheme / Long-Term Incentive Plan

There are no share option schemes, other share based schemes nor a long-term incentive plan operated by the Company.  

External Appointments

The Company encourages executive directors to diversify their experience by accepting non-executive or other external appointments to  companies or other organisations outside the Group. Such appointments are subject to the approval by the Board, which also determines the  extent to which any fees may be retained by the director. At balance sheet date external appointments held by executive directors, excluding  those directly connected with their employment by the Company, were as follows:

R. Plaster

Jersey Skills Board - Chair  Fees £15,000 (£12,000 retained)

Remuneration Report

Non-Executive Directors' Remuneration

The remuneration of the non-executive directors is determined by the Board with the assistance, if required, of independent advice concerning comparable organisations and appointments. The non-executive directors who Chair the Audit, Nominations and Remuneration Committees, and those directors who are members of the Audit Committee, receive an additional fee due to the additional time involved.

Directors' Loans

The Company provides a loan to an executive director, M.Magee for the purchase of a property. The loan bears interest at base rate. The balance as at 30 September 2009 was £574,821 (2008 - £218,000).

Directors' Share Interests

The directors' benefi cial interests in the shares of the Company at 30 September 2009, are shown below:

A' Ordinary Shares 5% and 3.5%

Preference Shares

2009  2008  2009  2008

G. Grime  350  350  -  -

M. Liston  100  100  -  -

M. Magee  -  -  960  960

C. Evans  -  -  100  100

J. Arnold  150  150  100  100

100. Chaplin  300  300  -  -
101. Padfi eld  -  -  260  260

R. Plaster  -  -  700  600

900  900  2,120  2,020

There have been no other changes in the interests set out above between 30 September 2009 and 17 December 2009. C. Evans has a benefi cial shareholding in Omicron (Computer Systems) Limited (see note 12 – Foreshore Holdings Limited).

On behalf of the Board

C. CHAPLIN Chairman

17 December 2009

Independent Auditors' Report

to the Shareholders of The Jersey Electricity Company Limited

We have audited the Group and individual Company fi nancial statements (the fi nancial statements') of The Jersey Electricity Company Limited  for the year ended 30 September 2009 which comprise the consolidated income statement, the consolidated and individual Company balance  sheets, the consolidated and individual Company cash fl ow statements, the consolidated and individual Company statements of recognised  income and expenses and the related notes 1 to 23. These fi nancial statements have been prepared under the accounting policies set out therein.  

This report is made solely to the Company's members, as a body, in accordance with Article 110 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  auditors' report 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.

Respective responsibilities of directors and auditors

The directors' responsibilities for preparing the annual report, the directors' remuneration report and the fi nancial statements in accordance  with applicable law and International Financial Reporting Standards ( ) as adopted for use in the European Union are set out in the statement  of directors' responsibilities.

Our responsibility is to audit the fi nancial statements in accordance with relevant legal and regulatory requirements and International  Standards on Auditing (UK and Ireland).  

We report to you our opinion as to whether the fi nancial statements give a true and fair view and whether the fi nancial statements have been  properly prepared in accordance with the Companies (Jersey) Law 1991. We also report to you if, in our opinion, the Report of the Directors  is not consistent with the fi nancial statements. We also report to you if the Company has not kept proper accounting records or if we have not  received all the information and explanations we require for our audit.

We read the Report of the Directors and the other information contained in the annual report for the above year as described in the contents  section and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the  fi nancial statements.

Basis of audit opinion

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An  audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the fi nancial statements. It also includes an  assessment of the signifi cant estimates and judgements made by the directors in the preparation of the fi nancial statements, and of whether  the accounting policies are appropriate to the Group and Company's circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide  us with suffi cient evidence to give reasonable assurance that the fi nancial statements are free from material misstatement, whether caused by  fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the  

fi nancial statements.

Opinion

• In our opinion the fi nancial statements give a true and fair view, in accordance with IFRS as adopted for use in the European Union, of the  state of affairs of the Company and the Group as at 30 September 2009 and of the profi t of the Group for the year then ended; and

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

Deloitte LLP

Chartered Accountants

St Helier

17 December 2009 61

Consolidated Income Statement

for the year ended 30 September 2009

Statements of Recognised Income and Expense

for the year ended 30 September 2009

Group  Company

62 Note 2 provides details of the restatement of the prior year comparative fi gures. All results in the year have been derived from continuing operations.

Balance Sheets

30 September 2009

Group  Company

Approved by the Board on 17 December 2009

G.J. GRIME  M.P. MAGEE Director  Director

Note 2 provides details of the restatement of the prior year comparative fi gures. All results in the year have been derived from continuing operations. 63

Cash Flow Statements

for the year ended 30 September 2009

Group  Company

64 Note 2 provides details of the restatement of the prior year comparative fi gures.

Notes to the Financial Statements

for the year ended 30 September 2009 1  Accounting policies

Basis of preparation

The Group's accounting policies as applied for the year ended 30 September 2009 are based on all International Financial Reporting  Standards (IFRS) issued by the International Accounting Standards Board (IASB) and which have been adopted for use in 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 consolidation

The Group's consolidated fi nancial information for the year ended 30 September 2009 comprises the Company and its subsidiaries.

Subsidiaries are those entities over which the Group has the power to govern the fi nancial and operating policies, accompanying a  shareholding that confers more than half of the voting rights.

Minority interests in the net assets of consolidated subsidiaries are identifi ed separately from the Group's equity therein. Minority interests  consist of the amount of those interests at the date of the original business combination and the minority's share of changes in equity since  the date of the combination.  

The consolidated fi nancial information includes the Group's share of the post-tax results and net assets under IFRS of associates and  jointly controlled entities using the equity method of accounting since the Company exerts signifi cant infl uence over it's associate and joint  venture. Equity accounting is a method of accounting by which an equity investment is initially recorded at cost and subsequently adjusted  to refl ect the investor's share of the net profi t or loss of the investee. Associates are all entities over which the Group has signifi cant  

infl uence, but not control, generally accompanying a shareholding that confers between 20% and 50% of the voting rights. 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, fi nancial and operating decisions.

Going Concern

The Company'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 6 to 7). The fi nancial position of the Company, its cash fl ow and its liquidity position are described  in the Financial Review (see pages 46 to 48). In addition, note 22 to the fi nancial statements include the Company's objectives, policies  and processes for managing its capital; its fi nancial risk management objectives; details of its fi nancial instruments and hedging activities;  and its exposures to credit risk and liquidity risk. The Company has considerable fi nancial resources together with a large number of  customers both corporate and individual. As a consequence, the directors believe that the Company is well placed to manage its business  risks successfully despite the current uncertain economic outlook. 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 accounts.  

Foreign currencies

The functional and presentation currency of the Company 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. Gains and losses arising on translation  are included in net profi t or loss for the period.

Revenue

Revenue is recognised to the extent that it is probable that economic benefi ts will fl ow 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.

Notes to the Financial Statements

for the year ended 30 September 2009

The following specifi c 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.

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 fi bre to other telecom network operators seeking to extend their own networks through IRU agreements. Income from IRU's where an IRU agreement does not transfer substantially all the risks and benefi ts 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 benefi ts of ownership to the buyer the resulting profi t/(loss) is recognised in the income statement as a gain/(loss) on disposal of fi xed assets.

Taxation

The tax expense represents the sum of tax currently payable and deferred tax.

The tax currently payable is based on taxable profi t for the year. Taxable profi t differs from net profi t 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 profi ts, 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 taxable profi t 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 charged in the income statement, except where it relates to items charged or credited to equity via the statement of recognised income and expense, in which case the deferred tax is also dealt with in that statement.

Intangible assets

The costs of acquired computer software are capitalised on the basis of the costs incurred to acquire and bring to use the specifi c software and are amortised over their operational lives. Costs directly associated with the development of computer software programmes that will generate economic benefi ts over a period in excess of one year are capitalised and amortised over their estimated operational lives. Costs include employee costs relating to software development and an appropriate proportion of directly attributable overhead. Amortisation is charged on a straight-line basis over its expected useful operational life which is estimated to be over 3 years.

Property, plant and equipment

Property, plant and equipment excludes investment property and are stated at cost and are depreciated on the straight-line method to their expected residual values over their estimated operational lives. Property, plant and equipment include capitalised employee, interest and other costs that are directly attributable to construction of these assets.

Depreciation is charged as follows: Buildings

Interlinks

Plant, mains cables and services Fixtures and fi ttings

Computer equipment

Vehicles

up to 50 years

up to 25 years up to 33 years

up to 10 years

up to 4 years

up to 10 years

Notes to the Financial Statements

for the year ended 30 September 2009

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

Impairment of tangible and intangible assets

At each balance sheet date, the Group reviews its tangible and intangible assets to determine whether there is any indication that those  assets may 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 any applicable impairment loss. Where the asset does not generate cash fl ows that are independent from other  assets, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs.

Investment Property

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 include it  as an investment property when it is fully occupied by external tenants.

Other Investments

The results and assets and liabilities of associates and joint ventures are incorporated using the equity method. Investments in associates  and joint ventures are therefore carried in the balance sheet at cost as adjusted by changes in the Group's share of net assets, less any  impairment in the value of individual investments.

Operating leases

Rentals payable under operating leases, where a signifi cant 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.

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 average method with the exception of fuel oil which is calculated using the fi rst-in fi rst-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 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 with a maturity greater than three months.

Trade and other receivables

Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated  irrecoverable amounts.

Trade payables

Trade payables are not interest bearing and are stated at their nominal value.

Notes to the Financial Statements

for the year ended 30 September 2009

Financial Instruments continued

Derivative Financial Instruments

Changes in the fair value of derivative fi nancial instruments which are designated as hedges of future cash fl ows are recognised directly in equity and any ineffective portion is recognised immediately in the income statement. For hedges that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognised in the income statement in the same period in which the hedged item affects net profi t or loss.

Changes in the fair value of derivative fi nancial 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 qualifi es for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity 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 recognised in equity is transferred to the income statement.

Dividends

Dividends are recorded in the Group's accounts 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.

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 outfl ow of resources embodying economic benefi ts will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Retirement benefits

The Group provides pensions through a defi ned benefi t scheme. The cost of providing benefi ts 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 recognised income and expense. The net fi gure derived from the current service cost element of the pension charge, the expected return on pension scheme assets and interest on pension scheme liabilities is deducted in arriving at operating profi t. Retirement benefi ts recorded in the balance sheet represent the net

fi nancial position of the Group's defi ned pension scheme and the net liability in the Group's other post-retirement benefi t arrangements, principally healthcare liabilities.

Accounting developments

In preparing these Accounts, 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 Accounts. The Group does not expect that the adoption, in the future, by the EU of other IAS, IFRS and interpretations of the IFRIC, issued by the IASB but not yet approved by the EU, will have a material effect on the Group's results and fi nancial position.

Notes to the Financial Statements

for the year ended 30 September 2009

At the date of authorisation of these fi nancial statements, the following Standards and Interpretations which have not been applied in  these fi nancial statements were in issue but not yet effective:

IFRS 9  Financial Instruments

IAS 24 (revised November 2009)  Related Party Disclosures

Improvements to IFRS 2009 (April 2009)  Improvements to IFRS 2009

Amendments to IFRIC 9 and IAS 39 (March 2009)  Embedded Derivatives

Amendments to IFRS 7 (March 2009)  Improving Disclosures about Financial Instruments

IFRS 1 (revised November 2008)  First-time Adoption of International Financial Reporting Standards IFRS 3 (revised January 2008)  Business Combinations

Amendments to IAS 23 (March 2007)  Borrowing Costs

Amendments to IAS 1 (September 2007)  Presentation of Financial Statements

Amendments to IAS 27 (January 2008)  Consolidated and Separate Financial Statements

Amendments to IAS 32 and IAS 1 (February 2008)  Puttable Financial Instruments and Obligations Arising on Liquidation Amendments to IFRS 1 and IAS 27 (May 2008)  Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate Amendments to IAS 39 (July 2008)  Eligible Hedged Items

IFRS 8  Operating Segments

IFRIC 17  Distributions of Non-cash Assets to Owners

IFRIC 15  Agreements for the Construction of Real Estate

IFRIC 18  Transfers of Assets from Customers

The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the  

fi nancial statements of the Group, other than IAS 1 which will impact the format of the primary statements and IFRS 7 which will require  additional disclosure around the fair value of derivatives.

Notes to the Financial Statements

for the year ended 30 September 2009 2  Critical Accounting Judgements

In preparing the fi nancial 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 identifi ed as requiring critical accounting judgements or involving particularly complex or subjective decisions or assessments. These are discussed below and have been determined by Group's senior management and approved by the Audit 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 system losses and the corresponding unbilled revenue is estimated and recorded as sales. Unbilled revenues included within trade and other receivables in the balance sheets relating to such customers at 30 September 2009 amounted to £5.3m (2008: £2.5m). The methodology employed to calculate the total number and value of the unbilled units at each period end has been regularly refi ned as there is a degree of estimation in the process. During the most recent review in early 2009 an error in the methodology was established and the method of calculation altered and this is refl ected in the fi gures for this fi nancial year. The 2008 comparatives were restated resulting in an increase in revenues and profi t before tax of £0.3m. The reserves were adjusted by £1.5m, net of tax, to refl ect the same prior year error in the periods 2002 to 2007 inclusive.

ii Impairment of property, plant, equipment and investments

In certain circumstances, 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 fl ows 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 fl ows involve a signifi cant degree of judgement and are consistent with management's plans and forecasts.

iii Retirement benefit obligations

The Group provides pensions through a defi ned benefi ts scheme for its employees which is accounted for in accordance with IAS 19 Employee Benefi ts'. 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 infl ation. 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 refl ects yields on high quality, fi xed-income investments. The discount rate used in 2009 was 5.5% and in 2008 was 7%. If, for example, the discount rate applied to the liabilities had been 5.8%, which is a rate we would have been likely to have utilised if the scheme was undergoing its triennial actuarial revaluation, rather than the 5.5% advised by our actuaries under IAS 19 for 2009, the IAS 19 net defi cit of £3m would have been eliminated. However if a discount rate of 5% was applied the scheme net defi cit would rise from £3m to approximately £8m.

Notes to the Financial Statements

for the year ended 30 September 2009 3  Turnover and profit

The contributions of the various activities of the Group to turnover and profi t are listed below:

Materially, all the Group's operations are conducted within the Channel Islands. All transfers between divisions are at arms-length basis.

Notes to the Financial Statements

for the year ended 30 September 2009

Operating assets, liabilities, capital additions and depreciation/amortisation are analysed as follows:

Unallocated assets includes cash deposits, investments and the retirement benefi t obligation surplus. Unallocated liabilities includes deferred and current taxation. Capital additions for the Property' segment includes £(106)k (2008:£294k) for revaluation of investment properties.

4  Operating expenses

5  Directors and employees

Detailed information in respect of directors' shareholdings and emoluments, pensions and benefi ts is given in the Remuneration Report on pages 58 to 60. The number of persons employed by the Group (including non-executive directors) at 30 September was as follows:

The aggregate payroll costs of these persons were as follows: