Jersey Electricity: report and accounts 2010.

Clear investment. Pure energy.

KEY ACHIEVEMENT IN 2009/10

CORE ENERGY

• Despite 5% reduction in tariffs, 16% increase in Core Energy profit with lower supply cost base

• Network security and reliability 8x better than UK performance, 2x better than Island benchmarks

• Achieved target of being within 10% of the European median retail price

• Carbon intensity of supply, A' rated performance and less than half the emissions of local oil and gas

• On-time completion of shared services and power connections to new Energy from Waste plant

• Project for third cable from Jersey to France on target for planning permission in 2011

• South Hill and cabling project on target for commissioning in Summer 2011

• Material progress in developing new post-2012 supply agreement for imported power from France

• Won fuel conversion of 1800 States homes from oil and gas heating to electric

• Celebrated 25 years of importing low carbon power from France and 10

years of Channel Islands Electricity Grid (CIEG) co-operation with our sister island Guernsey.

FINANCE AND STRATEGY

• Delivered goal of sustained real growth in ordinary dividends at 5% supplemented by £1m special dividend

• Group and Core Energy healthy cost and profit performance, ready for sustained period of investment

• Tariffs stable and frozen at current levels until December 2011, following 5% price reduction in January 2010

• Reset strategy – leading provider of sustainable energy and related services'

• Renewables strategy developed and in progress.

NON-ENERGY

• Significant increase in non-energy profit driven by improved rental yield, revaluation and receipt of Newtel funds

• Underlying operational performance strong in Retail and Building Services, given difficult economic climate.

OTHER

• Health, safety and environmental metrics are good' at 3 lost time accidents and 4 star rating in British Safety Council audit

• Customer satisfaction index of 7.14 or good' in Island survey, and achieved regulatory service standards of 99%+.

CONTENTS

CONTE NTS  DIRECTORS, OFFICE

PROFESSIONAL ADV

CHAIRMAN'S STATEMENT  4 NON-EXECUTIVE DIRECTORS

Geoffrey Grime FCA (Chairman)

Jeremy Arnold FCA

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 (Jersey) Limited, Queensway House, Hilgrove Street, St Helier, Jersey

THREE

CHAIRMA  N STATEMEN

I am delighted to report that your Company

has delivered another solid performance in 2009/10. Our Group profit for the year was £14.6m, boosted by some favourable one-offs in our non-energy business, such as the revaluation of our property portfolio, improved rental

yields as well as a distribution of funds from an associated company. Importantly, our underlying operational performance has also been very strong with increases in profit in all businesses, despite the challenging economic conditions.

Our Core Energy business delivered profit of £7.7m, around 16% higher than last year and was achieved despite the 5% reduction in tariffs implemented in January 2010. Return on assets

in the energy business is at a level needed to support our substantial investment programme that is so essential to securing supplies into the future.

CHAIRMAN'S STATEMENT

"Our underlying operational performance has been very strong with increases in revenue and profit in all businesses despite the challenging economic conditions."

Despite some volatility, we took advantage of generally lower global energy prices and were able to save energy supply costs by leveraging some new working arrangements with our power supplier in France, EDF. Foreign exchange volatility continued to be troublesome during

the year, but we were able successfully to use hedging contracts to manage downside risk

whilst simultaneously allowing participation in

a possible strengthening of Sterling. We are delighted that, following our tariff reduction in 2010, our efforts have enabled us to announce a tariff freeze until the end of 2011.

During the year, the Board had two Away Days', during which we discussed our strategy and growth agenda. We have reset our strategy to become the leading provider of sustainable energy and related services', alongside a goal to deepen

our penetration of current non-energy markets to achieve stronger leadership positions. We will seek to selectively broaden our participation into markets where we are truly advantaged.

In our Core Energy business, we seek to provide an affordable, secure and sustainable energy supply and we performed very well against these three goals. We have made good progress in the various critical capital projects that are ongoing. Our project to install a third submarine cable to France is making headway and our relationships in France remain strong, reinforced by our 10 year anniversary celebration of the Channel Islands Electricity Grid, our 50/50 joint venture with Guernsey, which has been such a successful example of cross-Island co-operation.

Our service standards, health and safety performance, staff and community relationships were all excellent again this year. Our challenge going forward is to build further on these strong positions.

The Board of Directors is proposing a final net dividend of £1.24 to be paid on 31 March 2011, being a 5% rise on the previous year and confirming our policy to maintain real growth

in dividends. In addition however, the Board is proposing a special dividend net of tax of 65p, to distribute the windfall proceeds of £1m received from Newtel, which resulted from the disposal of their Guernsey interests.

During the year, Chris Evans retired from the Board at the Annual General Meeting, and

Jeremy Arnold will retire from Christmas 2010. I would like to thank both Chris and Jeremy for their considerable contribution to both the Company and the Board over many years of service.

2009/10 has been a challenging year with the many projects and initiatives in progress across all of our business. We could not have delivered our strong performance this year without the skills, knowledge and experience of a committed and loyal workforce. My sincere thanks go to all our staff at all levels, our executives and our non-executives for their significant contributions throughout the year.

Geoffrey Grime Chairman

16 December 2010

FIVE

CHIEF EXECUT IV REVIEW

Despite the considerable financial, economic and energy market uncertainty, Jersey Electricity has delivered a very good performance in 2009/10. At a level of £99m, Group revenues were the highest on record, as were our profits which hit £14.6m substantially assisted by some one-off items in our non-energy businesses and a special cash distribution from an associated company. At an operating level, all businesses have delivered increases in revenues and profit, and are well positioned for the future. Generating enough profit and cash is essential for future growth

and investment, and is of particular importance to our Core Energy business which is investing considerably in essential infrastructure over the next few years.

"Our strong performance this year positions us well for a period of significant investment in essential energy infrastructure."

"We are committed to efficiency, flexibility and customer focus in everything we do."

COREEN ERGY

The Core Energy business has continued to perform well this year. Our energy revenues increased by 2% to £74m and our profits increased by 16% to £7.7m, reflecting our success in containing overheads whilst optimising the cost of energy supply by closer working with EDF, our electricity supplier in France. We are pleased that we have been able to deliver a solid performance whilst at the same time meeting our self-imposed standards for price competitiveness, security of supply and environmental performance.

Having delivered a 5% tariff reduction from 1 January 2010, and substantially procured our power and Euro requirements ahead of 2011, we are pleased to have been able to announce that we are maintaining tariffs at the present competitive rates until the end of 2011. This has provided welcome relief to our customers at a time of significant economic uncertainty.

OUR KEY IMPERATIVES

During the year, the Board had two Away Days', the outputs of which were shared with our employees at our Staff Seminar in June. This was an opportunity to reset strategy and formalise our purpose, vision and values, and galvanise staff around our key imperatives:

1 Deliver capital projects

2 Grow energy and related

business

3 Manage import cost volatility 4 Deliver 'Smart' metering

5 Grow non-energy business

6 Continuously improve

all processes

7 'Enable' offshore

 wind/marine

SEVEN

Jeremy Willis, Senior Project Engineer, and  Lisette Le Jehan , Finance Assistant,

Jason Baines, Construction Engineer, survey a  is on the button preparing bills for dispatch. site for new cable laying.

Jill Horton, Data Prep Clerk, updates our customer

database with new addresses.

Group Purpose

Electricity is a key enabler of virtually all activity  In our energy business, our vision is to become in our Island – and is used by both individuals  the leading provider of sustainable energy and and businesses in a vast array of applications. It  related services'. We believe this is the best way provides comfort and utility that are essential to  of achieving our triple goal of:

life, and supports virtually all economic activity  • providing affordable and fairly priced energy that is essential to growth and future prosperity.  • ensuring security and reliability of supply

• protecting the environment and conserving

Supplying power reliably, day-in, day-out is central  resources

to our purpose. Our staff are passionate about

our focus on security of supply and they refer to it  In our non-energy businesses, our vision is to colloquially as keeping the lights on'. In reality of  become the leading player in every market or course, it's much more than just the lights. category in which we choose to participate.

Jersey Electricity has two types of customers, those  Jersey Electricity has a distinctive positioning

that purchase: in our market around sustainability'. Although

• energy through our self-regulated, monopoly  an important aspect, this is not solely about network infrastructure, from which the  protecting our environment, but also fulfilling Company seeks a fair rate of economic return  our broader responsibilities to all stakeholders consistent with regulated markets (Core Energy) over the long term. We believe this is becoming

• other products and services in competitive  increasingly important in business and especially markets, from which the Company aims to  so in our Island community.

achieve higher rates of return and value

growth (non-energy such as Retail and Building  Our company values and our style of

Services (JEBS)) management reinforce sustainability concepts and are encapsulated in the phrase, private sector

Our commitment to being efficient, flexible and  enterprise, with a public sector conscience'. customer focused applies across the board.

Our strategy supports our fundamental commitment to maintaining annual real dividend growth going forward which we view as fair reward to shareholders for their risk.

"

   "

OUR VIEW OF SUSTAINABILITY IS:

Taking responsibility for our actions

Looking after the environment

Taking care of the local community

Offering dependable and secure supplies

Providing value for money and stable pricing

Being open and transparent in the way we do business

in essence, being fair to all stakeholders:

• shareholders

• customers

• employees

• suppliers

• and members of

  the general public

NINE

Chris Young, JEBS Electrician,  Andy Barker, High Voltage Jointer,  Danny Oberst, JEBS Plumbing and Heating

tests a new installation of  and Robert Pike, Apprentice Jointer,  Engineer, makes the final connections to one of the storage heating at Les Cinq  connect a cable. latest heat pump installations.

Chenes as part of the States

Housing Switch Project.

Energy growth

The total number of customers on supply at year end was 47,494, an increase of around 1%, which is broadly consistent with increases in previous years. Despite several periods of extreme cold in Jersey over the winter 2009/10, average temperatures throughout the year have been similar to previous years. Unit sales in

our energy business were 645 million units, an increase of 0.4% this year relative to last year.

This reflects the continuing increase in the number of electricity customers on the Island, our success at winning in excess of 90% of new heating load for new developments and fuel switching existing oil and gas customers, but is offset by a slight reduction in average electricity consumption per customer. We believe the latter is driven by increasing customer price sensitivity and use of energy efficiency measures.

At the beginning of the financial year, we were delighted to win a three-year contract to convert 1800 States tenanted homes from oil or gas to electricity. Reinforcing the distribution infrastructure has been a major project for our distribution teams. In addition, our contracting business, Building Services (JEBS), won several tenders

to complete in-home installations. By year end,

we successfully connected a third of the 1800 customers to electric heating. Our reported

demand for electricity does not yet fully reflect this fuel switching load, but we expect the full benefits to flow into next year's results, as this will include a full heating season.

This project was a clear signal of confidence

by the States in electricity as the 'affordable, reliable and sustainable' fuel of the future. Other benefits of electricity in States tenanted homes include ease of revenue collection, low cost of maintenance, system compactness, cleanliness and safety.

Our tariff portfolio remains strong, with discounted tariffs such as Comfort Heat, Economy 7 and Economy 20, proving to be popular. Customers on these tariffs increased by 5% to 13,294 during the year – up from last year's 3% growth rate.

"This year we have fuel switched 600 of 1800 States tenanted homes from fossil fuels to off-peak electricity services."

ELEVEN

DOMESTIC HEATING

September 2009 to September 2010

OIL

up 29%

GAS up 17%

Source: States of Jersey Statistics Unit Retail Price s Index Report September 2010

ELECTRICITY

down 5%

1.1 PROVIDING AFFORDABLE AND FA RLY PRICED ENERGY CHIEF EXECUTIVE'S REVIEW

PROVIDING AFFO RD AND FAIRLY PRICED

In 2009/10, the global energy markets

continued to be the subject of many headlines. Following record highs in crude oil, wholesale gas and electricity prices in 2008, we saw major corrections in all energy markets due to collapsing confidence in the wake of the global financial crisis. In 2009, energy markets recovered slightly with prices in 2010 remaining volatile around more modest levels. Demand from business customers in Europe has eased considerably

since the credit crunch as a result of reduced economic activity and it appears that residential customers are becoming more cost conscious and energy efficient. While forward curves indicate that prices will rise again over the short term,

it is clear that we are now operating in a very different commodity market from that in 2008.

As part of the Channel Islands Electricity Grid, we have continued our preparatory work to establish a new supply contract from January 2013, when the present supply arrangements with EDF come to an end. We are exploring several product options with a number of potential suppliers, and are consulting our advisors in France and the UK. Our goal is to find a suitable product-structure that would offer price advantage coupled with price stability. The new supply agreement is of critical importance and is not without challenges. The future of the French energy market is uncertain as government recommendations to open the market

to competition seem to have been frustrated'. The balance of short and long-term contracts is also difficult with forecasts of significant generation shortages for the 2-3 years following the middle

of the decade when EU Directives will remove a significant amount of the older, higher emission generation plant.

As part of our supply tendering preparations and after four years of negotiations, we successfully signed revised connection and operations agreements with French grid operator RTE. These revised agreements, coupled with the separate contracts that are in place with RTE and French supplier EDF, allow the Company to explore alternative suppliers should it be more attractive to do so.

Imported power from France represented around 93% of total Island demand this year. Given that our Island is so dependent on imported power, close management of our supply risk will remain of critical importance to the Board.

Lower energy prices but continuing volatility

Over the financial year, crude oil prices have oscillated between $65 and $85 per barrel,

and French forward power prices have traded between 50 and 65/MWh with outer years trading at higher premia, reflecting the market's view that prices will increase over the next few years. The last two years have provided good opportunities for Jersey Electricity to buy forward at more attractive prices, and we have taken advantage of this to the benefit of customers and shareholders. We continued our policy to buy forward a little and often during the year and typically 1-2 years in advance to secure volume and price certainty.

THIRTEEN

FRENCH FORWARD WHOLESALE POWER

  /MWh

Calendar 2010 Calendar 2011 Calendar 2012 Calendar 2013

Source: Utilyx

Having last year established new working arrangements with our French supplier EDF to save power procurement costs, we extended and refined these arrangements this year. This enabled us to take advantage of the lows in crude oil prices relative to wholesale electricity prices, and either generate locally when cheaper to do so,

or purchase power on the spot market in France when spot prices were lower than contract prices.

Given market conditions, we were able to invoke this arrangement on many occasions over the winter period. The scheme produced several valuable benefits, including reduced importation costs, lower emissions and reduced wear on plant and equipment.

In addition, we agreed provisions in this agreement allowing Jersey Electricity to generate locally, reduce its supply offtake from EDF and effectively sell back locally generated power at a premium when spot prices in France were high.

This new package of options has been extremely helpful in keeping the costs of La Collette standby facility and its emission levels low, as well as exercising our generation assets and standby capabilities, and was a major driver of improved financial performance in the Core Energy business.

Continued weak and volatile exchange rate

As a major importer of Euro-denominated power, the Sterling/Euro exchange rate continues

to be troublesome. It is extraordinary to note

that in 2007, the Sterling/Euro exchange rate was in excess of 1.50. Sterling weakened to

a low of 1.03 in 2008. Although we have

seen an improvement in exchange rates, it has remained volatile and weak, trading around 1.15 in 2010. Year-on-year deterioration in Sterling represents real cost increases that can be significant and have to be funded.

Given the complexity and uncertainty of these markets we have maintained tight discipline

in currency hedging. We have formalised our foreign exchange hedging policy to maintain currency hedges broadly in line with power hedges. In addition, given the continued weakness of Sterling, we have continued to use more complex derivative products that will both protect our position from further deterioration in rates whilst simultaneously allow participation in a Sterling recovery.

STERLING/EURO CURRENCY

BRENT CRUDE OIL PRICE

FIFTEEN

    200910

Dave Noel, Distribution Fitter, and Alex Le Long, Energy Division Apprentice, carry out essential substation maintenance.

ENSURING SE CURITY AND RELIABILITY OF

Our staff are passionate about keeping the lights on'. This is critical to the proper functioning of

a £4bn local economy of which the offshore financial services sector comprises a significant portion. Our customers in Jersey continue to benefit from one of the most reliable and secure networks in the world. This is no small feat for

an island that is remote and isolated from larger mainland communities and which cannot easily benefit from the extra diverse infrastructure that is a characteristic of larger networks.

The network is the mechanism through which

we deliver power to customers – clean, safe and efficient. There are three enablers to achieve secure supplies. Firstly, the network needs to

be robustly designed so that supplies can still continue in spite of the failure of an element of the network. Secondly, the individual components of the network need to be well maintained. Finally, should our network fail, systems and procedures need to be robust enough to restore supplies as quickly as possible.

In 2008/09, we put in place new business continuity arrangements over and above our plant emergency procedures. 2009/10 was a year for testing them. We have now conducted a variety

of desktop exercises designed to mimic a series

of catastrophic events. We hope we will never need to deploy these plans, but we continue our programme of testing and refining them.

Transmission

During the year we have made steady progress with the third submarine cable to France. This is a seven-year project, due for completion in 2013.

It is the replacement for our first cable, which was installed in 1984 and is coming to the end of its life. We expect the third cable to provide long- term mitigation against the possible difficulties of sourcing and shipping heavy fuel oil into Jersey. In addition, the cable will enable the company

to securely meet the full Island's demand for electricity over the peak winter demand.

We have now completed the project dossier for

the French land-based portion of the cable and

the consultation process has commenced without

any major objections. Cable routings have been

discussed for both the land and sea-based portion,

and we are aiming to secure planning permission

for the French portion by October 2011. We have  Robert Pike, Energy Division

Apprentice Jointer, connects a completed an Environmental Impact Assessment for

new supply line as part of our the Jersey based cable and are due to formalise the  reinforcement strategy of our

routing and finalise permissions. There remains  supply network.

a technical challenge regarding the operation of the

third submarine cable alongside our two existing

cables. Our engineers are working hard with RTE

engineers to provide the necessary mitigation and

comfort for them, but there remains a risk that costs

and security benefits could be adversely affected.

Our current forecasts for the project remain at £60m, and we continue to pursue all avenues of foreign exchange and commodity risk management. During the year, we implemented a revised policy for cash flow foreign exchange hedging on major capital projects.

SEVENTEEN

South Hill Switching Station becomes a reality and is on target for commissioning in Summer 2011.

Spring 2010. Summer 2010.

Distribution

A new record load of 158 MW was achieved in

January 2010, which was 1.5 MW higher than

the previous record which occurred in December

2007. In addition, we achieved another record

for unit sales in one day of 2.9 million units,

again achieved in January. During the year, the

network delivered 645 million units of power

safely and securely to around 47,000 customers. Initial site plans approved  Of this around 93% was low carbon power

in November 2009. imported from EDF.

We made solid progress with further network reinforcement and essential maintenance. We installed 19 MW of new transformer capacity, 34 km of new cable, 18 new substations, 20 refurbished substations and 889 new services. Maintenance work included new switchgear replacements at 18 substations and new distribution control systems at 16 substations. Work supporting the States Housing fuel switches has also proceeded quickly with 3 substations already installed to cater for the additional load.

Work commenced in March 2010 on the South Hill Switching Station, the most strategically critical of our on-Island facilities connecting the grid to the third submarine cable and La Collette Power Station. The South Hill Switching Station completes the transition from a radial system to a 90kV ring system around the Island, enabling the Island to continue supplies even on loss

of a major component. We have successfully overcome the planning and routing difficulties and agreed the reinstatement standards. The project is progressing well with the foundations and superstructure completed and the cable laying is now in process. The facility is expected to be commissioned in the Summer 2011.

• Site chosen with separation  • £10 million overall budget from La Collette hazards and  • Third INEO installation

clear of the sea front  for JEC

• Strategically critical network hub  • Houses twelve 90kV

linking Queens Road, Western  circuit breakers

Primary, Rue Des Pres and La

Collette providing superior  • Incorporates 3km extension to network security existing 90kV cable network

• Will accommodate future cables to France

Autumn 2010.

NINETEEN

IMPORTED ELECTRICITY FROM EDF 642MWh

Generation

         45MWh

     Locally generated

ORIGINS OF IMPORTED ELECTRICITY FROM EDF Nuclear 82.1%

Renewables 2.4%

Hydro electricity 7.1% Coal 3.5%

Gas 3.0%

Fuel oil 1.6%

Other 0.3%

TWENTY ONE

PROTECTING THE ENVIRONMENT

Jersey has a unique geography, ecology and bio-diversity which should be protected and cherished for future generations. The world's natural resources are also being used up at

an unsustainable rate. Jersey Electricity has

an important role in helping protect the local environment as well as helping the Island reduce its dependency on carbon.

It is well known that Jersey Electricity has made huge progress on behalf of Jersey, by displacing higher carbon on-Island generation with cleaner, more sustainable nuclear and hydro electric power imported from EDF. But there is much more work to be done, and we have a real responsibility in taking a leadership position.

Energy Policy

Although this has taken three years, there now appears to be real intent to publish the Energy Policy. The Industry Stakeholder Group, of which Jersey Electricity is a member, is presently being consulted, and we are hopeful that this matter will go to the States Chamber for debate in 2011. Whilst we support the motivations and ambitions of policymakers, we are concerned that the goals, targets and scope are not adequately matched

with a programme of practical policy measures and action plans. In addition, the overriding

focus is on energy efficiency rather than carbon reduction, not energy efficiency and carbon reduction. The proposed revisions to the Building Bye-laws are a key example of where the carbon reduction focus has been diluted, and to this extent represent a lost opportunity.

We also remain concerned that in times of austerity, the necessary funding that is needed to make tangible environmental progress may not be forthcoming. The Island's strong environmental performance could be promoted internationally alongside Jersey's exemplary regulatory standards in financial services.

AND CONSERVING RES

The Energy Policy references the need to consider         not just the price of supply but non-price factors      

such as security, reliability and environmental       performance in a properly functioning market.        Last year, application of Jersey's Electricity Law        

resulted in an independent pricing review of our        energy business, which concluded that the tariffs        

set by the Company were fully consistent with the       overarching public interest'.        

We strongly believe this conclusion verifies our        

repeated assertion to Jersey consumers and        

policy makers that this Law, when combined             with the threat of more interventionist and costly          

regulation, is an effective and proportionate form  

of regulation for Jersey.

TWENTY THREE

04,29 11,25

" lt  

   11,23

  11,25  " 12,28

06,12

17,40

04,09

   ale r    

      nd  

       an Renewables      

     08,12      10,24

      s o          

     radi          

        y El                and  

          06,14                  

is ti          

       06,15  

    l eco    

01,03

JERSEY'S CARBON EMISSIONS

Domestic and Commer

Energy from Waste Pl

TWENTY FIVE

CIEG TENTH ANNIVERSARY

" We value our relationship with our French and Guernsey partners enormously and look forward to an even deeper co-operation as we work towards laying another submarine cable

from Jersey to France." OyEelenacr2tsr3ics iiNntyc oeGvetrhimde,b fooerur mr2a50t01io/0n5,  0owf ejtohciene tlCevbhearnantutnereedl b1Ise0latwnedesn

Jersey Electricity and Guernsey Electricity (GEL)

– and the structure which has been so successful in building further on close relationships with our French partners.

The venture provides the governance structure through which we have invested in a submarine cable from Guernsey to Jersey and from Jersey on to France, 16 years after Jersey Electricity laid the first submarine cable in 1984. CIEG is also the vehicle through which we procure power from EDF in France.

We were joined at our celebration in Agneaux, Normandy, by senior representatives from the French, Guernsey and Jersey authorities, EDF, RTE, Jersey Electricity and Guernsey Electricity.

The high-tech RTE control room at Agneaux, Normandy, controls the electricity sent through the submarine cables to Jersey.

CIEG TENTH ANNIVERSARY

From left to right:

Chris Ambler (JEC CEO) Geoffrey Grime (JEC Chairman) Ken Gregson (GEL Chairman) Ian Watson (former GEL MD)

Just the beginning

In recent years there has been much talk about Channel Island co-operation. Our partnership with Guernsey Electricity is a shining example of inter-Island co-operation and how a joint venture should work.

The main beneficiaries of this energy marriage' are Jersey and Guernsey electricity customers. Not only does the partnership strengthen generation and transmission grid connectivity, it also helps to defer or avoid capital expenditure, reduce on-Island carbon emissions and reduce importation costs. During the past 10 years, we have successfully imported around 500m of secure, low carbon power from EDF in France – power that would have been more expensive had it been generated on the Island.

As we progress towards laying the third submarine cable to France – a major investment that will further increase the long-term security and growth of electricity in both Islands – we look forward to developing our relationship even further. Utility scale renewables will develop over the coming years and our unique partnership could see the potential of exporting green power generated in the islands to Europe.

Our two companies are working harder than

ever together – we're looking forward to an even  JEC Project Manager Peter Snape better relationship over the next 10 years. addresses senior officials from the

Channel Islands and Normandy

in the RTE control room during Chris Ambler the CIEG 10th Anniversary

Chairman, Channel Islands Electricity Grid celebration in Agneaux.

The partnership has also assisted with information and staff sharing, as well as developing best practice – all of which contribute to reduced overheads and better risk management. The effect is significantly improved supply security and lower costs, which is particularly important given the scale of our respective companies. Of course

there is always a natural rivalry between our islands, but despite this Jersey Electricity is ready on hand to support its Guernsey colleagues and I'm sure the feelings are mutual.

TWENTY SEVEN

Laying of Normandie 2 from  Cable laying vessel Sea Spider on the  Sea Spider on the Grève de Lecq to Guernsey section. Saint Remy des Landes. 27km route.

The Engineering challenge

The Channel Islands Electricity Grid (CIEG) was established to provide a second submarine power cable between France and Jersey. The CIEG project also connected Jersey and Guernsey

for the first time. But before work could start, permissions had to be obtained in all three jurisdictions with the full support and co-operation of the Normandy authorities and States of Jersey and Guernsey.

Four tenders were evaluated and Sweden's ABB was awarded a turnkey contract for the installation of all major plant. Equipment was built across Europe, with the submarine cables produced in ABB's factory in Karlskrona. Cable laying began in 2000 and a new substation was built at St Remy des Landes, Normandy.

The cable comes ashore at Archirondel, where

a 90,000V switch board was established. An existing cable was used to take power to La Collette, St Helier and a new cable was laid to JEC's headquarters at Queens Road to supply

the north and west of Jersey. This, in turn, runs to Grève de Lecq and onwards to Havelet Bay in Guernsey via another submarine cable.

Fibre optic cables were laid at the same time for use in controlling the grid and greatly assisting the telecommunications industry. The total cost of the project came in just under the £50million budget.

John Duquemin

Supply Manager, Jersey Electricity plc

A Guernsey perspective

Guernsey received its first public electricity supply on 20 February 1900. Produced locally, first by coal-fired steam turbines and later by diesel engines using imported fossil fuels, the supply was fragile and unreliable but perfectly acceptable to consumers of the day. Later in the 20th century, however, a reliable and economic electricity supply became a necessity of modern life.

Guernsey Electricity had been considering the possibility of linking Guernsey by cable either to Jersey or to France throughout the 1970s, so Jersey Electricity's decision to link Jersey to France in 1984 was looked upon somewhat enviously in Guernsey.

The benefits of that link became very clear once the first Jersey/France submarine cable was operational. When the opportunity to join with Jersey Electricity in developing the CIEG project arose in 1995, it was an opportunity GEL seized firmly.

The cable link has done all that was expected of it. Electricity in Guernsey is cheaper, substantially more reliable and better for the environment than it would otherwise have been.

The cable link has also laid the foundations for the development of substantial co-operation between JEC and GEL that greatly benefits both Island communities. I have no doubt that this relationship will continue and broaden in the future. Our colleagues in JEC have, indeed, become our friends.

Steve Morris

Engineering Director, Guernsey Electricity Limited

         Key Dates

                 1984  First submarine

                   cable from Jersey to                     France installed

                by Jersey Electricity

              1995  Jersey Electricity

        commits to second

                      submarine cable

               1996  States of Guernsey                   approve Guernsey

      Electricity's

                involvement

              1997  Outline co-operation

                   agreement between

                  Jersey Electricity and                Guernsey Electricity

        1998  Contracts placed

          with cable

         manufacturer ABB

                  2000  Submarine cable

          laid, commissioned

        and fully operational

Customer Care Advisor Jacqui Crawley gets out and about, providing customers with energy efficiency advice.

"Independent customer surveys have shown a customer service rating of 7.14 out of 10 or good'."

2.0

CUSTOM SEERRVICE AND STANDARDS

Providing high levels of customer service is fundamental to the Company's purpose and we have again maintained extremely high levels of success in meeting our published standards, with an average of 99% compliance across these measures.

With a growth of customers moving on to our discounted off-peak tariffs we have enabled increasing numbers of customers to benefit from lower energy prices. In conjunction with this, a major exercise on reviewing the tariffs of our larger customers has ensured a number have been able to enjoy lower energy costs as they move to more appropriate tariffs.

As seen elsewhere, a growing concern from customers about their ability to pay has led to a growth in use of our key meters, a form of pay as you go', which has enabled our customers

to accurately budget for their energy costs and has also enabled us to maintain a successful no disconnection' policy for our residential customers.

New online services have been introduced during the year as part of a programme to give further choice to our customers in those areas where they are most likely to need services from our Customer Services centre. Online services now include change of tenancy, billing and meter reading. We anticipate further enhancements on our website during the coming 12 months.

We continued to enhance our customer surveying this year, with primary research and analysis

on both the business and residential sectors. This has provided confidence in our competitive position and given significant insight on further opportunities for improvement.

STANDARDS OF SERVICE PERFORMANCE

1. Wa ceuwstoillmreerp'slaccael la. main fuse within 3 hours of  100%
2. Wplaenwneildl gsiuvpepalyt lienatesrtr2updtiaoyns. notice of any  100%
3. W18e hwoiullr sr.estore lost power supplies within  100%

We will quote for the provision of new

4. electricity supplies within 15 working days,  99.95% or 25 days, for major infrastructure schemes.
5. Wcoemwplialli nintsv ewsittihgiant e5 awnoyrskuinpgp ldyavyosl.tage  100%
6. Wbainleld, wateinlsldtr etwhseph oemnreed t entorecawenis thesaninqr yu5,i rycwhoaerbckokinutthgaednraeeyalesd.citrnicgi ty  100%

We will, wherever practicable, avoid

surcharge on the customer's normal tariff. 100 disconnection for debt in domestic premises by

7. free installation of a pre-payment meter, without  %
8. Wreqeuwesitl lforerscphoanndg we iothf ianc5cowunotr kpianygmdeanyt smtoet haod. 100%
9. Wewfifiethc iiwennil7lc ypwraoonvrkdidineaggf rrdeeaeeyaas.dnvaicpep oonin temneenrgt yto visit  99.99%
10. Wor ea fwteirllnaogorne etoapttreonvdidaen caen yo no faosupresceirfivci cmeso.rning  99.99%

THIRTY ONE

3.0

NON-COBRUES INESS

A key focus of our strategy is to leverage our capabilities into competitive markets and build

a balanced business across self-regulated and non-regulated activities. We have a huge asset – a relationship with every resident and business in

Jersey – a considerable opportunity to offer more enhanced products and services to mutual benefit.

This year, our non-energy businesses comprised around a quarter of the revenues of the Group, but enhanced their share of operating profit in

Imagination toy, crafts  what has been a difficult economic environment.

and hobby shop.

Retail

Our retail business is substantially made up of our electrical retail outlets, our toy store, Imagination, and our computing retailer, Beyond. The retail business performed very well during a difficult recessionary period, increasing sales by 11% and operating profit by nearly 60%, with a particularly strong performance from Beyond. Our St Helier store moved to a new, more central location at the end of last year and is successfully providing residential IT services and brown goods to a

new market that does not normally frequent our out-of-town store. The Powerhouse site has further consolidated its position as a key destination providing a wide range of products that are attracting increasing numbers of customers that are shared with our neighbouring retailer, B&Q. Retailing in the Island remains tough with the continued threat from internet stores and UK chains entering the local market.

Imagination

Our toys, crafts and hobby shop Imagination

has finished its fourth trading year with strong sales increases and has moved into sustainable profit. At the beginning of the year Imagination was awarded the Toy Retailers' Association, 'Small Independent Toy Retailer of the Year' Award. This is judged by the Trade Association and is a significant achievement for a relatively new business. The Award criteria included presentation, range, customer service and the trading environment and the achievement of these high standards is a credit to the enthusiasm and dedication of the retail team.

Property

Our property assets include commercial locations which we continue to develop coupled with legacy residential property, originally built to house staff. Our strategy is to further develop our property assets to optimise their yield and value over the long term. Profits from property, excluding non-cash adjustments, rose by almost 50% due to increases in rental flows. In addition, we enjoyed a significant favourable non-cash property revaluation of almost £2.5m.

THIRTY THREE

Jersey Energy's Stuart Gray, Assistant Engineer, Peter Cadiou, Managing Consultant, and Shaun Bisson, Principal Consultant, discuss one of the many projects they undertake as a services and design consultancy.

Ian Campbell, JEBS Plumbing and Heating Engineer, fits one of the highly insulated, efficient hot water cylinders at Les Cinq Chenes as part of the States Housing Switch Project.

Building Services (JEBS)

Gary Parsons, Jendev Manager, holds a team meeting with Debbie Wood, Business Analyst and Dave West, Business Systems Analyst.

Other

Our Building Services business (JEBS) comprises electrical and mechanical maintenance, small works, air conditioning and public lighting services to residential and commercial customers. We had a strong year considering the difficult economy, and increased turnover by a fifth

and profitability by a third. We were pleased

to win a material portion of the States Housing Department's programme this year to install electric heating systems to around 600 homes, and are well positioned to bid for the remaining 1200 homes over the next two years. Projects were won against severe competition and have required a significant amount of work in occupied properties in order to deliver the new heating systems. Our refrigeration and air conditioning business has further consolidated its position within the growing data centre market by winning the air conditioning works for the most recent data centre at Rue des Pres trading estate.

Our remaining non-core businesses mainly

include our IT developer, Jendev, our energy consultancy, Jersey Energy and our property business. Jendev coped well with delayed investment decisions from prospective customers but enjoyed a good performance that was

broadly in line with last year. Jersey Energy had an excellent year with high levels of consultant utilisation and the successful opening of a new office in Guernsey, and the property business was assisted with strong rent reviews and a favourable asset revaluation.

THIRTY FIVE

6

LOST TIME ACCI

(RIDDOR)

3 3 3

2 2 2

Health and Safety Technician Milford Lee conducts regular training with all staff.

4.0

HEAL TH  AND SAFETY

Nothing is more important than the health and  Although not within our direct control, I am  

safety of our staff, contractors, customers or  pleased to report a reduced number of cable  

members of the general public. Our target for  damage incidents this year by around a quarter,  

any given year is simple: zero accidents and  but levels still need to be reduced further. I am  

zero near misses. We believe that all injuries are  pleased to confirm that we had no accidents  

preventable and we continue to monitor these and  involving Jersey Electricity contractors on Jersey  

other metrics in close detail. Although still at a  Electricity schemes.

very low level, we regrettably had three lost time  

accidents this financial year, one higher than last  We continued refining our policies and reporting  

year. One of these was of a more serious nature  processes this year, including more formalisation  

when an employee broke a wrist whilst trying  of the Health & Safety agenda at Board level.  

to prevent himself from falling into an open pit.  Training is considered a central element of good  

Regrettably, this accident alone led to 34 out of  health and safety management, and this year  

the 45 RIDDOR days of lost work we reported  we had a particular focus on Generation Safety  Before you start any building modifications at a property,  this year. As with all accidents, a thorough  Rules. Next year's focus is on Distribution Safety  have you considered the dangers of electricity?

investigation was carried out and actions have  Rules and process safety.

been taken to minimise the risk of a recurrence.  

During the year, I commissioned a full  Building Services (JEBS), our contracting business,  independent health and safety audit by the  THIN continued their impressive record by reaching four  British Safety Council. The primary aim of this

consecutive financial years without having a lost  was to provide an external assessment of our

time accident. Considering the work they do and  safety management arrangements and provide  BUILDERS & DEVELOPERS

the hazards of working in non-Jersey Electricity  a benchmark for further improvement. The result  electrical hea premises, I congratulate them on this achievement. was a 4 out of a possible 5 star rating, an  SaSfaeftey tiys Ian smpeacjotor rfaotceu, swfeo ra JimeFr sRteoEy  Er  Ee OldeFuc ct Cre Hic t Aihty Re  Ga n n Eu dm inb e cr o o nf j  uin nc ci td io

equipment by raising awareness amongst Building Contr outstanding achievement given that this was our  If ayonidude ,a nartsei f pypalwarhtneonrfi eno guthroenedleocintrgic iatyn ys ubpupilldyi ncagb mleos dairfiec alot

During the year, we have worked closely with  first attempt. The review highlighted a series of  Simveprlyy sdeigrigoiunsg c ao nhsoelqeu oern kcneso.cking down a wall may hDonave 't risk your safety.

             C all  u5s0 to5da4y60

the Health & Safety Inspectorate on various  strengths, most notably a positive and open safety              o n

campaigns to actively raise awareness of the  culture which was prevalent at all levels. We  88414 JEC Health & Safety mailer.indd 1 dangers of third party contractors working  intend to learn from our weaknesses and build in  2

close to customers' electrical services. We have  actions for improvement as we move forward.

proactively implemented a range of measures,  Befo or r p ee xr coc aap• rve  raC yrt ityo nio r gn te nht ca osao c ut ir  nt tyd   J o as te hu  nro e s yaf e   gbray eau n E r iwy ldl de  ou ec inrn nt kr gd i oic ne wi fgtr customers, and via our externally published Trade  Theu nfoinlltoe  wnt ii no gn aald c  voicn eta,  cw  t hwici  thh ios uin  r   teeqndui epdm foenr t B. uilding Coo nr•  tm  rW aaeig cn wu ts oiw id cll ri aatu sbh bnn ,ei lcn ed e ip.  ste h l or eeg pn a

including mailing safety flyers to contractors and

Talk magazine, as well as radio advertisements.  It isth imec appboe olq s re tiua t a  iai or npe n ntm  d• w toh e  aoY f an ro s tttk hs ue yoai en q octm gu uiia naui nap acts e oytm rt : d  e  mn p e  mo ar in not wt e  g  piu atn een srt rre eed ityr rne f ov g e tr if h cr a e e a n tw y yi  otc h u ir tc hu im s stances.

• If yo of u t h inis te e nq du wip om rke in nt g,  y ino u th s eh o viu cl id nity contact Jersey Electricity for advice.

• Thii sn c al pu pd li inegs  ta op aa lr lt mpre on pt es. rty types,

88414 JEC Health & Safety mailer.indd 2

THIRTY SEVEN

5.0

SUPPORTING THE COMMUNITY

We want to be welcomed and seen as a valued partner in the community we serve. We have prioritised our community investment in areas where we have a business interest as well as knowledge and expertise to share, directing our resources towards environmental, educational and healthcare initiatives.

Our ongoing support of Durrell Wildlife Trust has meant we have funded and assisted them with

a fuel switching project for heating the gorilla enclosure, changing from oil to a sustainable heat pump solution.

We have provided support to Jersey Hospice, by contributing to the redevelopment of the hospice at Clarkson House. Our donation will enable the most energy efficient, environmentally friendly, integrated electric heating, cooling and ventilation system to be installed.

Our donation of the money saved by sending e-cards instead of Christmas cards each year, has enabled Family, Nursing & Homecare to purchase vital health assessment equipment, essential to the services they provide within our community.

JEC DONATION AND SPONSORSHI

5.0 SUPPORTING THE COMMUNITY CHIEF EXECUTIVE'S REVIEW

JEC Commercial Director Richard Plaster (left) with Morris Architects, winners of the Jersey Electricity Sustainability Award at the 2010 Jersey Construction Awards.

In addition, our staff have actively participated, on an individual and collective basis, in a wide range of local charity and community fundraising initiatives, as well as national appeals for funds, and our Company has continued to match the funds raised.

We have also provided support in other forms. We were delighted to sponsor the environmental awards for both the Jersey Construction Awards and the Jersey Enterprise Awards. These were highly successful events that enabled us to raise our profile in the business community and offer our environmental expertise to developing and established businesses.

JEC CEO Chris Ambler (left) presents the inaugural Jersey Electricity Environmental Enterprise Award to Jim Hopley (centre), CEO of the Chanel Islands Co-operative Society and his team.

We provided people resources and bill insert mailing support for the Energy Efficiency Service, as well as expertise for the public sector via a range of States bodies.

We continued to support schools at both primary and secondary levels, including environment week presentations, visits to La Collette power station and the Institute of Directors Workshadow Scheme amongst others.

JEC WERE PROUD TO HELP IN 201

• Commission Amicale

• Jersey Business Venture

• EEIBA (The Electrical and Electronics Industries Benevolent Association)

• Child Accident Prevention

• Sundeep Watts Memorial Fund

• Headway Jersey

• Diabetes Jersey

• Autism Jersey via Music in Action & marathon

• Bureau de Jersey

• Jersey primary and secondary schools

• Swimarathon (Government House & JEC teams)

• Centre Point Trust

• Jersey Mencap

• CLIC Sargent - Child Leukaemia

• Wellbeing of Women

• Masonic Charity

• Walk for Life Cancer Research

• NSPCC

• MacMillian Cancer Support

• Housing Community Award

• Prostate Cancer Support Group

• Think Pink - Breast Cancer

• Red Nose Day

• BBC Children in Need

• Go Yellow - Jersey Hospice

• Sports Relief

• Haiti Appeal

• Madeira Side by Side Appeal

• Shoe Box Appeal

• Tinathon - Shelter Trust

THIRTY NINE

6.0

OURPE  OPLE

Ensuring a stable, committed and flexible  In May 2010 the Company was publicly workforce is essential to the ongoing success of  recognised for its training and development and Jersey Electricity. We have maintained low staff  its commitment to training of others through work turnover levels of 4% and low sickness rate of  experience programmes and the current schemes 3.5%. The average length of service is 15 years  to retrain the unemployed, by being one of the and at the Long Service Awards this year, we  few organisations to be awarded the Platinum celebrated the achievement of no fewer than 12  Skills Development Award by the Jersey Skills employees reaching 21 years and two employees  Executive.

reaching 40 years. These achievements have

enabled us to maintain high levels of skill,  I believe that as a company we should be proud experience and productivity within the Company.  of our commitment to training and developing not Our development programmes ensure that we  just our own staff but for the support we offer the have a steady stream of young people entering  community in the various local schemes including our business as apprentices, trainee engineers and our ongonig supporting roll in the States`, Project other professionals. Such training is part of our  Trident, IOD Work Shadow, Undergraduate ongoing development planning to ensure we are  Work Experience and Advance to Work training able to meet our essential skill needs for the future,  initiatives.

as far as possible from within the Company.

Our succession plans were also refreshed this  I believe our people are our Company.

year, which has provided additional focus on  I am immensely proud of the dedication and

development and on organisational resilience. determination our people demonstrate 4%Low staff in their day to day work, and

turnover would like to thank them for

their considerable efforts and

achievements during the year.

15 YEARS Average length

of service

3.5%Lraotwe sickness

6.0 OUR PEOPLE CHIEF EXECUTIVE'S REVIEW

FORTY ONE

7.0 OUTLOOK

Over the last two years, we have restored stability in our pricing and simultaneously delivered a stronger, more profitable business that is well prepared for the future. Our new strategic imperatives set the agenda for the coming years

– these must include continued focus on efficiency, flexibility and customer service, at all levels in our organisation. We will seek to strengthen

our positions in energy and non-energy, only venturing into new areas if we can be confident of securing a leading position.

The UK alone needs to invest in excess of £200bn in the energy industry over the next 10 years,

in order to meet a lower carbon future whilst maintaining security of supply. In Jersey, we have our own investment challenges. Jersey Electricity has a strong balance sheet, but we will need to ensure that our operations continue to generate profit and cash needed for essential investment. As important, we must ensure financial discipline in capital deployment by both making investments that are capable of earning fair returns and by managing the delivery of engineering projects efficiently. The States of Jersey also has a vital role to play in providing a stable investment climate, planning regime and a light-touch but stable regulatory environment that incentivises our business to continue on its current course.