Jersey Electricity Report and Accounts 2012: Sustainability for life, growth and prosperity.

Clear investment. Pure energy.

REPORT AND ACCOUNTS 2012

161MW RECORD  NEW WEBSITE LAUNCHED PEAK DEMAND • New more customer-

centric website

• All time record

launched – designed to

demand occurred

increase operational

2 February

STRENGTHENING  efficiency and

2012, surpassing

POSITION IN  improve customer

previous record

ENERGY MARKET satisfaction

of 158MW on

• Electricity now 38%  12 January 2010

of final energy

consumption in Jersey

• Completed fuel switch

of 1,800 States  PAYMENTS REVOLUTION tenanted homes from  • Reduced our costs to

gas or oil to electric  serve' and improved

heating efficiency by

AFFORDABILITY successfully converting

• Despite a below-inflation  28,000 customers to

2.9% rise in May and a  Direct Debit payments

9.5% increase proposed in  and 15,600 to

January 2013, standard  ebilling by

tariffs still lower than peer  year end

jurisdictions and EU average

OUR YEAR

THIRD CABLE PLANS CONSENTED

• Finally obtained  

£9M SOUTH HILL SWITCHING  formal planning STATION OFFICIALLY OPENED permission from French

• General Sir John McColl, the Lieutenant Governor,  authorities in December officially opened £9m South Hill Switching Station  to install a third French on 24 April. Facility is the hub that now controls  supply cable expected in critical power flows around the network service by 2015

REPLACEMENT DIESEL GENERATORS DELIVERED AND INSTALLED

• Two replacement 132-ton, 11MW Sulzer diesel engines complete journey from Saudi Arabia on 15 March to be installed at La Collette Power Station following a strategic review of on-Island generation

JERSEY-GUERNSEY SUBMARINE   CABLE SUCCESSFULLY REPAIRED

• Following the first ever 90kV submarine cable failure, successfully completed complex and hazardous cable repair off Guernsey coast

on 15 August, two months ahead

of schedule, in partnership with Guernsey Electricity

FULL RESTORATION FOLLOWING TWO SUBMARINE CABLE FAILURES

• Both French supply cable links failed  on 17 June. Entire Island restored  within three hours on local generation;  EDF1 deemed irreparable; Normandie 2 restored within 24 hours

• Sole remaining French supply cable  failed on 25 September. Entire Island restored within four hours on  

local generation; Normandie 2  restored within six hours

36MILLION UNITS  FROM WASTE

• Received 36,409MWh  of power from States  of Jersey Energy from  Waste plant during first  full year of operation

SIGNED DEALS TO PROGRESS SMART METER PROJECTS

• Struck partnership agreement with Secure Controls UK (Horstmann) in August to supply

RE-COMMISSIONING OF  Liberty Meters for Island-wide GENERATION ASSETS Smart Meter roll-out

• Re-commissioned two  • Engaged Swiss Post to deliver steam boilers, steam turbine  tailor made secure web portal and associated generator  enabling customers to manage transformer to enable  their accounts and monitor further 30MW of electrical  power consumption online generating capacity

FIRST ALL-ELECTRIC COMMERCIAL VEHICLE

• Added first all-electric commercial vehicle, the Renault Kangoo ZE, to our

ENVIRONMENTAL  fleet in September COMMITMENT REWARDED

• Awarded ECO-ACTIVE Business Leader

status by States of  Jersey Environment Department

in April LARGE-SCALE  

RENEWABLES STUDY

• Completed full desktop  

evaluation of offshore

wind in Jersey waters  

GO-AHEAD FOR PUBLIC  

• 1-4GW of generation  ELECTRIC CAR CHARGE POINTS capacity and potential

• Reached agreement in

for £5bn inward

September with the States

investment and 500 jobs

of Jersey to install electric

• Opportunity for  vehicle charging points in all

£30-40million of  five St Helier multi-storey  

increased States of  public car parks

Jersey income per year

NEW BURSARY FIVE STARS FOR  SCHEME LAUNCHED HEALTH AND SAFETY • Launched in May,

• Achieved Five out of Five  Jersey Electricity Bursary

Star Rating following  Award for graduates to

second Health and  encourage development  Safety Management  of professional

System Audit in August  engineering skills

by British Safety Council in Jersey

• Zero Lost Time Accidents

NEXT GENERATION MAKE THEIR MARK

• Two young staff rewarded at Jersey Construction Council Awards as Apprentice of the Year and Achiever of Year

• Largest intake of new apprentices for several years

CONTENTS

CONTENTS  DIRECTORS, OFFICERS AND

PROFESSIONAL ADVISERS

 CHAIRMAN'S STATEMENT  2 NON-EXECUTIVE DIRECTORS

Geoffrey Grime FCA (Chairman)

 CHIEF EXECUTIVE'S REVIEW  4 Clive Chaplin BA

Michael Liston OBE FREng, BSc, CEng, FIEE, CIMgt CORE ENERGY  5 John Stares BSc, FCA

   MAINTAINING AFFORDABLE  Aaron Le Cornu BSc, ACA

 ELECTRICITY AND PRICE STABILITY 10

 ENSURING SECURITY AND EXECUTIVE DIRECTORS

 RELIABILITY OF SUPPLY  12 Christopher Ambler BA, MEng, CDipAF, CEng, MIMechE, MBA (Chief Executive)

Martin Magee CA (Finance)

DIESELS PROJECT  14 Richard Plaster FCIPD, CDir, MIOD (Commercial and Human Resources)

 NORMANDIE 3  18

JERSEY GUERNSEY CABLE REPAIR 20 SECRETARY

Peter Routier BSc, FCIS

   PROTECTING THE ENVIRONMENT

 AND CONSERVING RESOURCES 24 REGISTERED OFFICE

RENEWABLE ENERGY  26 Queen s Road, St. Helier , Jersey

ELECTRIC TRANSPORTATION  28 PLACE OF INCORPORATION

CUSTOMER SERVICE AND STANDARDS 30 Jersey

NON-CORE BUSINESS  32

AUDITORS

HEALTH AND SAFETY  36 Deloitte LLP, 66-68 The Esplanade, St. Helier , Jersey SUSTAINABILITY IN THE COMMUNITY 38

BANKERS

OUR PEOPLE  40

Royal Bank of Scotland International Limited,  

OUTLOOK  42 71 Bath Street, St. Helier , Jersey

 FINANCIAL REVIEW  45 BROKERS

Collins Stewart (CI) Limited, 37 The Esplanade,

 GOVERNANCE  48 St. Helier , Jersey

REGISTRAR

 FINANCIAL STATEMENTS  60 Computershare Investor Services (Jersey) Limited,  

Queensway House, Hilgrove Street, St Helier, Jersey

CHAIRMAN'S STATEMENT

At the beginning of the year, we would never have predicted the extraordinary events facing the business during 2011/12. On 29 April we experienced our

first ever submarine cable fault on the Channel Islands Electricity Grid (CIEG), resulting in the temporary loss of the Jersey-Guernsey link. Less than two months later, on 17 June, both interconnectors to France failed within an hour of each other, resulting in only the second Island-wide power failure in six years. Then on 25 September, Jersey Electricity faced its most difficult restoration ever following the failure of the sole remaining submarine cable connecting Jersey to France and a third instance of loss of power to the Island.

The pressure on staff then and since has been huge and their response exceptional. Our financial result reflects the challenges but belies staff s efforts; Group turnover was £97m with Group pre-tax profit £5.7m, reflecting the higher than planned use of fossil fuel generation, various one-off costs and a difficult retail environment.

Having substantially hedged power and foreign exchange

for the full financial year, we applied a 2.9% price rise

from 1 May 2012, our first price increase since 1 January 20091 a rise below inflation and considerably less than

the average UK electricity price rises of 15% in 2011.

Good progress on several key strategic projects was interrupted by the cable issues. The diagnosis and subsequent repair of the Jersey-Guernsey link was a complex, major project requiring significant and immediate attention of our senior management and engineers. Working with colleagues at Guernsey Electricity (GEL) and cable repair contractors, we successfully cut out the defective section of cable and completed the repair in

just four months, two months earlier than planned and, importantly, well in advance of winter.

1 Excludes increase in GST from 3% to 5% in June 2011

The cable failures in June and September cut power flows to Jersey. In the first case, engineers, working with RØseau de Transport d' lectricitØ (RTE) in France, restored the younger 90MW capacity submarine cable, installed in 2000, within 24 hours. However, it was not technically possible nor economically viable to repair the older, 55MW cable, installed in 1984. It remains out of service pending de-commissioning. In the second case, we removed the failed component from the cable and restored supplies within hours. Regrettably, these events have had an adverse impact on our financial performance this year. Operating profit in Core Energy fell to £4.2m.

Electrical failures are notoriously difficult to predict. However, it had been anticipated that the older cable

was nearing the end of its design life and we had already initiated eight years ago a major project to install a third cable to France. We finally received planning permission from the French authorities in December, and expect to deliver this cable into service by 2015. Until then, we

will need to generate more electricity on Island using oil, again exposing us to the vagaries of global markets. Our challenge is always to find the right balance between supply risk and affordability while maintaining a fair return for shareholders. To cover the extra costs of generating from oil, we have announced a tariff increase of 9.5% from 1 January 2013. Even with this increase, prices remain lower than EU average benchmark levels.

During the year, the Channel Islands Competition and Regulatory Authority (CICRA) conducted an independent review of the electricity market and Jersey Electricity.

We welcome the conclusions of this which confirmed

that electricity prices represent fair value to consumers, especially considering the scale of our business and additional costs of infrastructure that are needed for a relatively isolated island system. We also welcome CICRA s view that more onerous regulation is not needed at this time.

Our Company has made excellent progress on the installation and commissioning of two diesel engines that will come into full service in the New Year. We have also re-mobilised La Collette Power Station, re-commissioning and enhancing steam capacity with an additional generator transformer.

CHAIRMAN S STATEMENT

We have signed important agreements with Secure Horstmann for the provision of Smart Meters and with Swiss Post for the design and implementation of an exciting web platform to complement our Smart Metering infastructure. These will improve efficiency of operations and transform the way we interact with consumers.

We continue to provide an affordable electricity supply to islanders and, given the strength of our balance sheet, we propose to hold our final dividend at the same level as last year. The Board of Directors is recommending the maintenance of the final dividend at

6.5p to be paid on 4 April 2013.

Given the scale and importance of our Core Energy infrastructure programme and our short-term operational challenges, David Padfield has decided to step down from the Board to devote his full attention to the programme. David continues his reporting lines to the Chief Executive and he will remain an important

part of our team. I would like to thank him specifically for his significant contribution to the Board over recent years.

I also want to thank all staff at all levels, our executive and non-executive Board members and pay tribute to their dedication, hard work and loyalty. Collectively, they make the difference and this has certainly been proven this year.

Geoffrey Grime Chairman

20 December 2012

 CORE ENERGY CHIEF EXECUTIVE S REVIEW

CHIEF

EXECUTIVE'S

REVIEW CORE ENERGY

Energy is critical to Jersey now and into the future. It is essential for personal well-being and economic prosperity. The Island is dependent on financial services, agriculture, tourism and other industries, and it is important that we help protect and grow these sectors as well as create the conditions for new ones to emerge.

Jersey Electricity (the Company) has been

a strong advocate of technology and e-commerce as a new sector in which the Island could excel, which is why we seeded Foreshore Limited and the offshore data hosting industry over ten years ago. We believe the Island can and should look to sectors that would leverage its competitive advantage while simultaneously benefitting from competitively priced, reliable and clean electricity.

Our business purpose is broad: to help

our community by sourcing, generating, transmitting, trading, distributing, supplying, storing, servicing and saving energy sustainably. Sustainability reflects our responsibilities to many stakeholders the interests of whom we have to balance.

 Intergenerational equity is also important. We must ensure, where practical, that current and future generations can rely on secure and affordable energy supplies and not be unfairly burdened with the bill for services enjoyed by their predecessors.

For these reasons we are making vital capital investments across our full supply chain:

• Additional interconnection capacity with Normandie 3, our third submarine cable between France and Jersey.

• Smart Metering enabling instant and accurate metering, improved efficiencies and better services.

• A new primary substation in the west of St Helier, to service the economic centre of Jersey.

• Renewed and re-commissioned on-Island generation, creating flexible supply headroom and facilitating power trading with France.

• New applications such as electric transportation facilities and new heating and cooling technologies, providing even higher levels of comfort, flexibility and affordability.

• New large and small scale renewable technologies, to diversify energy sources for our customers and create wealth for Jersey.

GROUP PURPOSE CHIEF EXECUTIVE S REVIEW

Our vision is to be the leading provider of sustainable energy and related services in our chosen markets . We will achieve this by delivering great performance across three areas:

• Providing affordable and fairly priced energy.

• Ensuring security and reliability of supply.

• Protecting the environment and conserving resources.

Given the size of our customer base, higher on-Island costs and lack of interconnectivity as an island, our goals are particularly challenging.

Our non-Energy businesses indirectly or directly support Core Energy. Our vision

in these businesses is to be the leading player in every market or category in which we participate . We are already delivering against these targets in some areas.

We have revised our key near-term priorities given the recent loss of interconnection capacity. They are:

• Deliver the following capital projects on time, on budget and in full:

o Put Normandie 3 in service by 2015

o Complete twin diesel project (22MW)

o Re-commission additional steam capacity (30MW)

o Secure site for St Helier West    Primary substation

o Commence an evaluation of an additional  interconnector project, Normandie 1

• Launch SmartSwitch

o Finalise customer portal

o Commence full rollout

o Develop additional services

• Grow energy and related services

o Launch electric transportation in  commercial and domestic markets

o Develop heating and cooling systems and solutions

o Develop propositions around micro-renewables

• Manage risk and import costs

o Power, FX and now heavy fuel oil  procurement

o Physical supply chain

• Develop strategy for renewables

o Plan for offshore wind development

o Monitor tidal power opportunities

• Continuously improve across all activities

o Back office and support function  efficiency

ENERGY GROWTH

States of Jersey 2011 Energy Trends Report

Electricity demand in Jersey has increased during the past 20 years by an average of

2% a year and was almost 50% higher in 2011 than 1991. According to the latest

States of Jersey Energy Trends report, 2011 showed another 2% increase in electricity demand on 2010, with almost half (46%) of that consumption used by domestic customers. Overall, final energy consumption[1] in Jersey in 2011 was 3% lower than 2010. Overall domestic energy consumption was 7% lower than 2010, with heating oil and gas down 12% and 18% respectively and electricity the only fuel bucking the downward trend.

Electricity now comprises 38% of Jersey s

total final energy consumption, an increase from 31% in 2008 a change driven largely

by the increase in electricity use for heating. Excluding transport, almost half the final energy consumed in Jersey is distributed through our electricity grid. Transport is the last major untapped energy market for electricity, and one which we intend to address with the development of electric vehicle technologies and related propositions.

2011/12 versus 2010/11

Although our unit sales of 637 million units for the financial year were 2% down on the previous year s 650 million units, this came off the back of mild winter weather coupled with increased energy conservation. We forecasted reductions in average consumption per customer last year but we are confident that electricity remains the energy of the future . We believe new applications and additional heating customers will more than compensate for reductions in sales through energy efficiency.

The total number of customers on supply

at year-end was 48,452 an increase of around 1% on last year and in line with previous years. In addition, the increase in off-peak tariff customers can be attributed

to fuel switching the remainder of around 1,800 States tenanted homes, our success in winning electric heating in 91% of new build and existing owner-occupiers fuel switching following marketing campaigns.

Despite the mild start to last winter, we met a new record demand of 161MW on 2 February 2012, surpassing our previous record of 158MW recorded in January

2010. The measures we have put in place to compensate for our temporary limited import capacity are more than capable of meeting a new record should demand peak further.

ENERGY GROWTH CHIEF EXECUTIVE S REVIEW

ENERGY USE AND TRENDS IN JERSEY

New record demand of 161MW 2 February 2012

158MWMW Electricity as proportion of Jersey s  January 2010

Total Final Energy Consumption

38%+7%

Electricity now comprises 38%

of Jersey s final energy consumption

New record demand

Overall Domestic Energy  ElectricityElectricity is the

Consumption in Jersey only fuel bucking

2010 v 2011 +2% this downward trend Fuel of choice

for developers domestic energy consumption Overall

was 7% lower

Developers continue to choose electricity. It is  than in 2010

easy and relatively low cost to install, clean, safe  -7%

and with no flue or fuel storage requirements.

Electricity is generally the preferred fuel for new

efficient building designs and of significance

to all customers, electricity remains very

competitively priced in Jersey compared with

other jurisdictions and competing fuels.

Heating Electricity demand in Jersey Oil

Fuel of choice  since 1991 -12%

for the States of Jersey 2001 2002 2003 2004 2005

2006

I am pleased to report the completion of the  2007

initial campaign to fuel switch States tenanted

homes from fossil fuel to all electric. By the end  2008 Gas of this year our Building Services business will  1994 2009 -18% have completed the works for the remaining  1993

156 States homes out of the 1,800 chosen for  1992 Electricity demand in Jersey

conversion. We have also completed several  1991 is almost 50% higher now than

infrastructure reinforcement projects to support  in 1991, having increased by

this new load.  an average of 2% each year

Electricity demand in Jersey 2011

Aof kheigyhgeroffiwctihe ninciyt,i aotifvf-ep eisa ktoheenactionugr aagcerotshseouusre  Customers by user type

customer base. This allows new customers to  +1%

benefit from our access to lower cost imported  increase in the total  Domestic Other

units from France whilst simultaneously  number of customers  47% 53%

minimising peak electricity loads, which is  on supply at year end

a significant driver of infrastructure costs.  Electric Transport

Our discounted tariffs such as Comfort Heat,  Domestic customers accounted for almost half Economy 7 and Economy 20, originally  of the total electricity used in Jersey in 2011

introduced to give households flexible lower cost

alternatives to fossil fuels, continue to be popular.

Customers on these tariffs increased significantly,  Transport is the last major untapped energy market for electricity, and one which we intend to address by 7% to 15,249.

Source: Jersey Energy Trends 2011

MAINTAINING AFFORDABLE ELECTRICITY

MAINTAINING AFFORDABLE ELECTRICITY AND PRICE STABILITY CHIEF EXECUTIVE S REVIEW

Scott Power  8.9%  10.0%  7.0%

SSE  11.0%  9.0%

British Gas  7.0%  16.0%  -5%   6.0%

Npower  5.1%  7.2%  9.1%

Eon  9.0%  11.0%  -6%   7.7% EDF  7.5%  4.5%  10.8%

Jersey Electricity  2.9%  9.5%

ENSURING SECURITY AND RELIABILITY OF SUPPLY

Above: Newly installed Sulzer diesels 1 and 2 exhausts.

Below: Installation of new flue inside the chimney stack.

A significant challenge and a key responsibility of Jersey Electricity is to maintain security and reliability of electricity supply, particularly to the key financial and commercial district in St Helier and other organisations providing critical services to the community.

The business this year experienced an unprecedented series of unforeseen, extraordinary events and coincidental asset failures that threatened our long-standing and proud record on supply security.

Cable failures, restoration and response

Our first ever submarine cable failure on the CIEG occurred on the Jersey-Guernsey link on 29 April and was followed by the failure of both our French interconnectors on 17 June, causing the second Island-wide blackout in

six years. Unfortunately although power via Normandie 2 was restored the following

day, the older 28-year-old cable, EDF1,

was deemed irreparable, leaving us solely reliant now on a single interconnector until Normandie 3 is installed.

Its continued operation has been of paramount importance but a separate plant failure in France tripped out this cable again late at night on 25 September, resulting in another blackout and challenging our restoration

and distribution teams with a particularly complex restoration on an already abnormal network. These incidents collectively pushed our Average Customer Minutes Lost (the total length of time supplies were interrupted during the year for the average customer) to a level of 293. Fortunately, most CMLs were overnight. We were able to bring the financial district

and St Helier back in service within two hours and the rest of the Island well ahead of the start of the working day.

Although our reliability performance continues to better that of typical island communities, it is not consistent with Jersey Electricity s usual standards and prompted a comprehensive review of transmission assets, accelerated refurbishment and replacement of selected plant and the use of more extensive spinning reserve to cover supplies to St Helier.

Diesels project

We have made tremendous progress with our £10million project to acquire and install two replacement 11MW Sulzer diesel generators

at La Collette. This project was approved

in December of last year and was well in process when the EDF1 submarine cable

failed. To secure additional supply margins, ELECTRICITY SOURCES  we accelerated the project following the loss of

2011-2012 EDF1 and both engines will be commissioned

and in service in the New Year. This was an 36,409MWh  16,925MWh  outstanding achievement by the Energy Division

Generated by JE locally  and means that our four Sulzers will play a EfW plant generated vital role in safeguarding supplies following our

unexpected reduction in import capacity.

643,813MWh Imported from EDF

ELECTRICITY SOURCES IN %

ORIGINS OF IMPORTED +.7%  +2.6% ELECTRICITY FROM EDF

Year   JE  EfW  Nuclear 84.7%

14 Import Hydro 4.6%

2008-09  6.6%  0.9% 92.5% Renewables 3.7%

2009-10  5.9%  0.6% 93.5% Coal 2.7%

2010-11  1.8%  2.6% 95.6% Gas 2.7%

2011-12  2.5%  5.2% 92.3% Fuel oil 1.2%

-3.3%  Other 0.4%

Following much work to secure the contracts for the supply of the engines and the difficult process of dismantling and removing the two decommissioned 5MW Mirrlees engines they replaced, the Sulzers arrived on 15 March aboard one of the largest vessels ever to dock in St Helier Harbour.

The 107-metre, 7,380-ton, Croatian-registered Atlant Frauke was chosen because its

cranes were able to handle the 452 tons of generating equipment, while the ship itself was under the maximum length of 135 metres able to dock in the port.

Once unloaded, the Sulzers completed the final, short leg of their complex journey from Dammam in Eastern Saudi Arabia, via Antwerp, to La Collette via an 11-

axle, 88-wheel low loader, brought from Portugal and assembled on site, for the job of transporting the engines from the harbour to the Power Station. They were moved into position on the empty beds with the aid of heavy load-bearing airfloat skids .

Specialist Swiss company MIE was contracted with the complex task of their safe delivery, installation and refurbishment which continued apace throughout the summer.

The fast start Sulzers are twice as powerful, cleaner, more efficient and cost effective than their predecessors and will be a valuable addition to our generation fleet for the foreseeable future.

Huge heavy duty jacking beams were installed to lower the 132-ton Sulzer engines into position on  the old Mirrlees beds at  La Collette Power Station after their journey from Saudi Arabia, via Antwerp.

Far left: Chief Engineer John Duqemin, MIE Project Manager Philippe Staehli, CEO Chris Ambler and Reis Goncalo, CEO of PowerVia, the heavy lift contractor.

Left: One of the Sulzers arrives at La Collette.

SUPPLY SECURITY STANDARDS:

To meet Jersey Electricity's security standards, the system is designed to meet:

• A one-in-eight year winter peak demand.
• All normal load in the event of the loss of the single largest interconnector with France  (N-1) plus a simultaneous failure of the largest:

• diesel generator; and

• gas turbine.

• 75% of peak winter load for 48 hours from on-Island generation (no simultaneous loss of on-Island capacity).
• No coincidence of the above.

1 2 3

6 7

11 12 14

13

THE INSTALLATION PROCESS:

1  The 7,380-ton Atlant Frauke

completes its journey from

Antwerp to St Helier Harbour. 2  The Atlant's giant crane

unloads the first Sulzer from

the ship at high tide.

3  Each generator is carefully craned onto support struts.

4  Securing first engine on the

low loader specially brought in from Portugal.

5  The low loader moves the first

to La Collette Power Station.

6  Chief Engineer John Duqemin

and CEO Chris Ambler look on.

7  11 axles and 88

independently steered wheels distribute the load.

8  The short but slow journey to

La Collette is complete.

8 9 10

15

16 17 18

9  Pipe work fabrication by  11  La Collette cranes placing the  15  The heavy lift' installation  Pictures: Alison Richards.

skilled welders. skid rails to allow the Sulzers  crew.

10  The two refurbished beds  to be jacked into place. 16  Rotating the second engine

left vacant by the removal of  12  Checking alignment. into place.

the Mirrlees await the Sulzer  13  Welding oil pipework. 17  Checking cylinder liners.

engines. 14  Removing heavy duty jacking  18 The two 11MW Sulzers are in

beams. position.

Normandie 3 Key Dates

Third interconnector first discussed. Three routes considered.

Initial costing and feasibility discussions with RTE.

Board formally initiate project.

Desktop feasibility study complete. Discussions with RTE who preferred northern route. Southern route preferred by Jersey Electricity seeking least risk and greatest strategic benefit.

Major breakthrough as announcement of a third nuclear reactor to be built at Flamanville shows a 400kV substation to be built near Periers. Reinforces southern route credentials of sandy seabed with a solid connection point. Start of marine geophysical and benthic studies.

Agreement on route from French fishermen's Committee Local des Pêches and Jersey Fishermen Association.

French companies IFREMER and CERESA commissioned to produce marine and landside enquiry documents.

Consultations with French authorities. Jersey Environmental Impact Assessment.

Technical and Financial Proposition received from RTE.

French authorities formally declare project live'. Forecast consultation process of four years.

Simultaneous installation of Normandie 4 investigated but would jeopardise project schedule.

Planning Application due before Prefet de la Manche.

Expected Public Enquiry June 2011 delayed due to French administration changes and IFREMER diverted by French Oyster disease crisis.

Planning Application submitted.

Public Enquiry starts.

Favourable outcome announced.

Final Planning Permission confirmed. Tenders being considered and accepted.

JG1 Cable repair

The first ever cable fault on our 90kV CIEG  circuit occurred on 29 April on a submarine  section of JG1, the 55MW, three-core  

cable that supplies Guernsey with imported  electricity via Jersey.  

Although of primary benefit to Guernsey,  

JG1 is co-owned by Jersey Electricity and  

strategically important to us for network  

security as Guernsey has additional  

generation capacity to export to Jersey in the  The repair was a complex and challenging event of disruption to French supplies. It was  operation, at the mercy of the weather and therefore in both islands interests to restore  strong tides, which again demonstrated the JG1 as quickly as possible. The majority of the  spirit of co-operation between Jersey and

costs will be borne by insurance.  Guernsey Electricity through our partnership in

the Channel Island Electricity Grid (CIEG).

Locating the fault on 40km of cable accurately  

enough to mount a repair is a highly skilled  Both companies had representatives available process. Engineers send voltage signals down  24 hours a day on board the repair vessel

the cable and listen for where it jumps the  Team Oman during the four-week operation fault gap in a process known as thumping .  that included a support vessel and a remotely It was soon established that the fault lay  operated vehicle (ROV). Senior Project approximately 10km off the coast of Guernsey  Engineer Jeremy Willis represented Jersey on a section of cable buried in sand at a  Electricity, ensuring the repair was carried depth of 50 metres of sea. out in the proper manner, that power cable

safety procedures were followed, permits The repair contract was awarded to ABB, the  were correctly issued and that the joints were original manufacturers and installers. They  completed and installed to specification. shipped a 2.5km spare length of repair cable

from Sweden, where it has been stored since  The operation was successfully completed 2000, and which we had strategically held  on 15 August when the cable proved sound over from the original installation. during initial re-commissioning.

 The repair was  

a complex and  

challenging operation,  at the mercy of the  weather and strong  tides, which again  demonstrated the

spirit of co-operation  TEAM OMAN FACTS: between Jersey and  Mvine usthslteie l p,wuoornprelodosecf aocpnaalbybl el2e 5l ao yvf iesnsugscehls  

demanding work. Guernsey Electricity...  CAinhBdaBer ftmoerrae nfiddveba y ys  e So awf rfess ,hd oaisrnhed- Swmwinuisdcsh  

projects increase.

Formerly known as Team

Sea Spider it is the ship that originally laid the Jersey- Guernsey link and Normandie 2 from Jersey to France.

Built in the Netherlands in 1999.

4,800-tonne turntable capacity, 24m outside turntable diameter.

Owned by Dubai-based Topaz Energy and Marine.

Can accommodate 56 people.

Has dynamic positioning capability.

Distribution

Workload in Distribution remained high, however we observed a slight decrease of 13% in switching operations on last year

but we were 30% higher than normal years. The main reason for the slight decrease is

the slowing of the building trade in Jersey and the completion of the States Housing fuel switching programme.

Overall, we installed 14MVA of new transformer capacity, 32km of new cable,

22 new substations and refurbished a further 21 and installed 700 new services. We maintained 124 substations and patrolled 13km of overhead line. The number of substations under Jersey Electricity s control is now 727.

SmartSwitch

SmartSwitch, our programme to introduce

a Smart Metering system to Jersey, has

made good headway this year. As well as progressing infrastructure installation, we have finalised various agreements and contracts that position us well to progress this important project next year.

Smart Meters, an essential precursor to a Smart Grid, have the potential to revolutionise electricity distribution and our relationship with customers. The technology benefits ourselves and the customer and we have

had an encouraging response from customer focus groups.

Manual and estimated meter readings will be a thing of the past as accurate and remote readings are transmitted automatically

to Queen s Road daily via Local Data Concentrators (LDCs) in substations providing 48 readings a day. Tariff configuration, changes from credit to pre-pay, will all

be managed remotely, eliminating labour intensive site visits. Access to up-to-date accurate information on usage and payment status, will enable customers to better manage their consumption while, crucially, enabling us to better control the load curve. This is important for controlling costs associated

with both importations and local generation, preserving the integrity of our infrastructure and could eventually facilitate new tariffs and customer energy efficiency.

We now have a partnership agreement with Secure Controls UK the parent company of Horstmann that provides the added security of a tie-in with the UK s Smart Metering roll- out specifications of hardware and software while, unlike the UK, permitting individual development solutions for us as a vertically integrated power company.

The tried and tested Liberty Meter is our Smart solution of choice. The Liberty can be configured to credit or pre-pay remotely of particular advantage in apartment blocks

with high change of tenancy rates. Secure Controls UK are also developing the Liberty to accommodate our Comfort Heat and Economy 20 tariffs.

Customer benefits

More  Improved

Eliminates  Convenient,  prepayment  Accurate  Early  customer

Aids Eliminates  self meter  Faster remote  tokenless  options:  customer  credit  under-

energy estimated bills readings/ tariff changes prepayment  online,  profile  alert/  standing

efficiency submissions system Smart  access alarm and

phone satisfaction

We have also signed a contract with Swiss Post for the development of the customer interface. This will now be via a secure web portal, designed in conjunction with our new website. Customers will be able to access and view their electricity consumption data, payment status and generally manage their account online. It will greatly enhance our relationship with our customers and provide them with a deeper understanding of their energy usage.

Our engineers have so far installed LDCs at over 600 of the necessary 650 substations. We have been developing a GPRS solution with Jersey Telecom and Airtel as part of the communications infrastructure for substations where we are currently unable to provide our own Wide Area Network (WAN).

Around 8,000 Smart Meters are already in place and will be tested with the infrastructure and portal in Q2 2013. The full roll-out of the new Liberty Meter across a further 40,000 properties will begin in earnest

in Q4 2013.

8,000 Smart Meters already in place

Full roll-out begins Autumn 2013

Manual and estimated readings a thing of the past

Up to 48 readings a day

Can be configured to manual or prepay remotely

Replaces  Eliminates

Enables  Enables  Aids

ageing cyclo  hard-to-  Enables  Reduces

Cuts  Reduces  control system read meters  remote  customer

remote remote credit/ improved

costs site visits and Itron  (must-be- tariff changes complaints

connection/ prepayment  load curve

disconnectionconfiguration management

handheld reads)

Company benefits

PROTECTING THE ENVIRONMENT AND CONSERVING RESOURCES

Last year I announced our intention to achieve ECO-ACTIVE Level 3 Certification from the States of Jersey Environment Department. This year I am delighted to report that we achieved our goal in April when the States elevated our status to ECO-ACTIVE Business Leader in recognition of our performance and commitment to environmental excellence.

The award follows a British Safety Council 5-Star environmental pre-audit in January, involving three days of inspections and assessments. This provided the road map

for the implementation of an Environmental Management System (EMS), which covers air and water based emissions, waste minimisation, water use and energy efficiency amongst other areas.

Although we comply with all current legislation, we want to go beyond this in

our commitment to sustainable business and environmental best practice and we believe the British Safety Council environmental audit is an appropriately stretching aspiration.

ECO-ACTIVE Business Leader is an important step for the Company but it is only the preliminary step and much needs to be done

to take the programme forward. Our Health, Safety and Environmental Engineer is now dedicated full-time to applying the EMS throughout the business. We have already conducted an energy audit and work is underway at our Powerhouse Queen s Road administrative and retail premises to upgrade our air-conditioning system and deploy new technologies to lower our energy consumption.

Last year we undertook a successful trial, under the supervision of UK marine scientists and with the approval of the States of Jersey Environment Department, into the flow and dilution of cooling water leaving La Collette Power Station and the neighbouring States- owned Energy from Waste plant. A harmless green dye was used to monitor the flow and dissipation of the cooling water. The results were deemed a success by all concerned. This year we have gone further, introducing a new, more environmentally sound water treatment system. Initial studies suggest that this will exceed expectations.

We are now also using the latest fuel emulsification technology described as delivering the triple crown of economic

and environmental benefits. The technology binds the base fuel, such as diesel, with water, increasing fuel efficiency by improving combustion, which, in turn, reduces greenhouse emissions and the overall amount of diesel we use during on-Island generation. This is now even more important as local generation will once again play an increased role in meeting the Island s electricity demand over the short term.

Despite the loss of one supply cable, our sustainability strategy remains unchanged to act to reduce our impact and that of our customers on the environment and the drivers of climate change and to help reduce the Island s consumption of natural resources.

PROTECTING THE ENVIRONMENTCHIEF EXECUTIVE S REVIEW

Health Safety and Environmental Engineer Chris Bester monitors water outflow in the field (far left) and in his La Collette laboratory.

Although we comply

with all current legislation, sustainability is at the heart   of our business and we  

want to go beyond this...

RENEWABLE ENERGY

Offshore Wind

RENEWABLE ENERGY CHIEF EXECUTIVE S REVIEW

Tidal Power

ELECTRIC TRANSPORTATION

As part of our long-term strategy to reduce  In addition,  

Jersey s overall carbon emissions while  we used the ceremonial

encouraging new applications for electricity,  opening of South Hill Switching Station we have again been at the forefront of  to showcase our EV fleet to senior ministers increasing public awareness of the economic  and politicians, many of whom have taken and environmental benefits of electric  up the offer of experiencing electric driving transportation with great success. for themselves.

We have increased the Company s own  The year of activity culminated with the fleet of EVs from five Mercedes Smart cars  agreement of the States of Jersey Transport to now include the Peugeot iOn, the award- and Technical Services Department to allow winning Nissan Leaf and the first all-electric  us to install two dedicated, JE branded EV commercial vehicle available in Jersey, the  charging points in five of St Helier s multi- Renault Kangoo ZE. story car parks. These are in addition to our

own EV charging bay on our Retail car park.

As well as helping to reduce the Company s

own emissions and fuel costs by using the  Going forward, we have plans to introduce vehicles for meter reading, mobile Customer  an EV owners club with meter recognition Care Advisers and many other staff journeys,  swipe cards that would enable customers to all the vehicles have been used to actively  charge up and conveniently add the promote the benefits of electric transport  cost to their electricity bill.

among the public, politicians and the Island s

business community.

Hundreds of people visited our first EV static display at the Jersey International Motor Show in May, where we also showcased the charging infrastructure that can be used in homes or public. We also helped the

Island s main Renault dealer launch the French manufacturer s extensive EV fleet  in Jersey with a JE backed, informative Open Day.

ELECTRIC TRANSPORTATION CHIEF EXECUTIVE S REVIEW

Electric transportation is still an untapped  GREEN LIGHT FOR market in Jersey but at nine miles by five and  EV CHARGING POINTS: with speed restrictions of 40mph, we believe

it is the ideal place for EVs to flourish. In  Jersey Electricity has been

addition, with the States of Jersey beginning  given the go ahead to install

to electrify its fleet with the acquisition of ten  two dedicated EV charging

Peugeot iOns, States departments looking at  points in the following St Helier

electric utility vehicles and large fleet owners  multi-storey car parks:

in the telecommunications industry showing  • Sand Street

interest, we believe electric transport is an  • Pier Road

important area for potential growth.  • Minden Place

• Green Street

• Patriotic Street

CUSTOMER SERVICE AND STANDARDS

As the sole supplier of

of residential customers electricity in the Island, we were either satisfied or  are acutely conscious of very satisfied  our responsibility to our

with running  customers. We respect the costs fact that whilst customers may have a choice across alternative fuels, they have

no choice of alternative electricity provider. For this reason it is especially important that we work hard to focus on the needs of our customers and to continuously

challenge ourselves to perform better each year.

of residential customers

were either satisfied or  Three years ago we began very satisfied with comfort annual market research levels (of electric  studies using a specialist

heating  analytics company. These systems) were designed to establish

a baseline assessment of our offer and provide insight on where

and how we could improve. We assess our offer for business and residential customers across two application segments : water/

space heating and general light and power , which together

of residential customers comprise the bulk of our were either satisfied or  myeaarkr ewt.eI na dadd dnietiwon q, ueeascthio ns

very satisfied  on topical issues.

with customer /

technical support

These surveys enhance our understanding

of how customers value the attributes of our offer, and of how we perform against these compared with alternative fuels or prior years:

• I am delighted to report that in the water/ space heating segment, we performed

significantly better than both oil and gas,

for both residential and business segments

with scores of 6.5 and 6.6 respectively

out of 10.

• In general light and power , residential customers told us we had improved year on year in both customer service and overall value for money with current scores of 7.6 and 6.4 respectively.

• Similarly, business customers told us that we had improved the strength of our overall

offer compared with 2010/11 with a score

of 7.0 compared with 6.5.

We are delighted with these results, but we must not be complacent. Next year will be more challenging given the proposed tariff increase and the shadow of a lower supply reliability.

CUSTOMER SERVICE AND STANDARDS CHIEF EXECUTIVE S REVIEW

We have decided this year to review our ten

 core business service standards , against which we have additionally monitored performance in the past in line with regulated utilities in UK, to make them even more robust and valuable for the future and reflect the local characteristics of our business.

We carried out further extensive customer research before designing and building our new website which is designed to enhance the user experience and provide more help and advice on demand.

Responsiveness and accessibility were our key focus. The architecture and navigation have been designed around customer friendly self-help ; to empower the customer, enabling them to obtain the answers they want quickly and manage their account with ease. This, in turn, frees our Customer Care Team to focus on the more complex customer enquiries,

either in person or on the telephone, and respond to the needy and vulnerable more effectively.

The site has also been designed to accommodate the secure online customer portal, due to be launched in 2013, that complements our Smart Meter project. This will be the our biggest advancement in customer engagement for many years, giving customers instant access to a whole new range of information about their accounts and energy usage, enabling them to manage all aspects of their accounts online and facilitating remote prepayment on Pay As You Go Meters without the need to leave home.

The portal is being custom designed alongside leading experts who are using our business as a test bed and our product as a forerunner in their offering for Smart utilities, putting Jersey Electricity at the cutting edge of this customer service revolution.

NON-CORE BUSINESS

It has been a tough year for our non- Retail

Energy businesses, reflecting a very difficult

economy in Jersey. Revenues from non-

Jersey has experienced significant reductions Energy activities fell by around 6% relative

in domestic spending during the financial

to last year, but still represented around a

year. In Jersey Electricity, the Retail business quarter of total Group revenues. Despite

comprises electrical, computing and the toy and an increase to around 40% of Group

craft categories. It generated around £15.5m profit (excluding property revaluation

revenue, a 6% fall on last year. In addition,

and investment impairment), non-Energy

the UK Government s decision to end Low aggregate profit reduced by around

Value Consignment Relief (LVCR) resulted in our 16%, largely due to difficult retail trading

profitable online retail arm, day2dayshop.com, conditions.

moving into loss, despite efforts to diversify into

the European market. This led to the decision to

close the business this year. Removing the effects  Recognising growth

of day2dayshop.com would indicate underlying retail profits at a level of around £250k.

in the market for built-  During the year we began a rolling

in appliances, we have   rPaeonfwdur ebarichschoemussseeon.r tiBeoesfy boouunrsdi rn,e eotsausir,l  btreeulsespivnoisenisod sne e,ds c  awotmi Tth hp  eu ter

refocused our offer...  pginooesoiadtirvsl ey dNsoaomlevese smrteicbs uealrpt.s p.R lTeiahcneoc gre en  fib usiu rnbsgi ins theheses d g o rwpoe hwn itte ehd

in the market for built-in appliances, we have refocused our offer and moved into the sale and installation of built-in kitchens and associated appliances, with some early success.

Imagination, our toy store has experienced greater competition this year since the arrival of a large independent UK retailer. In a local market largely fixed in size, this has been a challenge but we believe it has had a worse effect on smaller toy competitors in St Helier. Despite the difficulties, our site remains a key asset and this business continues to attract large numbers of customers, resulting in cross-sales across all categories.

Building Services delivers services for  Our Property business comprises the largest commercial and domestic customers around  out of St Helier retail space in Jersey, The our Core Energy offer. These services mainly  Powerhouse Retail Park as well as legacy include electrical, refrigeration, plumbing  residential property originally built to house and public lighting and together comprised  staff. Our goal is to continue to optimise and total revenues of £4.2m for the financial  enhance the yield of these assets by selectively year. Despite a reduction in revenues of 11%  developing the property to create space, compared with last year, profits increased  improve appearance and enhance usability.

by 36%. This was a particular achievement  Profit arising from property income, excluding in a difficult construction economy and can  non-cash elements, remained around £1.6m be attributed to electrical installation and fuel  despite the loss of a commercial tenant in switching into storage heating, electric flow  The Powerhouse.

boilers, heat pumps and other new electric

heating technologies.

Business unit Jendev, our Microsoftfi Certified Partner for Dynamics NAV, specialising in software configuration for small utilities, broke the £1m revenue barrier during this financial year. Given the focus of Jersey Electricity

on improving the efficiency of back office

and enabling functions, Jendev, comprising eight staff, is a key asset to the Group. Jersey Electricity s ability to access this expertise easily and quickly reduces the risk and cost

of engaging third parties. Jendev will have

an especially important role in the smart metering programme, SmartSwitch, which will bring about Company-wide change over the next few years. Jendev continues to leverage capabilities used internally into external, third party clients, allowing profit generated to be reinvested into improving our capabilities.

through all parts of a wet underfloor heating system, with no blockages, without having to remove furniture or carpet from the room.

Jersey Energy and its     subsidiary Channel Design Consultants     (CDC) in Guernsey, together     comprises seven staff and provides

professional consultancy services to the     construction industry, government and    private companies. With a strictly fuel    neutral brief that is independent of    

Jersey Electricity, it provides best       practice environmental advice,    building services design and low    energy solutions, for both new     and refurbishment projects.    

Jersey Energy performed very well  this year, generating revenues of £0.5m

and providing a profitable return to the parent

business despite difficult economic conditions

across the Channel Islands and a reduction in

large scale property development and new-

build activity.

Jersey Energy successfully secured several key commissions throughout the year

against significant off-Island competition, underlining their capabilities, expertise and professionalism in their advisory field. Jersey Energy has also demonstrated the importance of and business benefits of staff training and development. This was highlighted when Jersey Construction Council recognised Senior Building Services Engineer Stuart Gray with its award for Outstanding Achievement in Construction Studies and named him Industry Achiever of the Year against some very experienced competition.

6

LOST TIME AC CIDE5NTS

(RIDDOR)

3 3 3

2 2 2

2004 2005 2006 2007 2008 2009 2010 2011 2012

35 43 66 21 22 9 45 134 0

HEALTH

DAYS LOST 0 AND SAFETY(RIDDOR)

RIDDOR is the acronym for  Nothing is more important to us than the Reporting of Injuries, Diseases  health and safety of our staff, contractors,

and Dangerous Occurrence  customers and all those that could be affected Regulations and is the UK  by our operations. We recognise that by the

standard used for the reporting  very nature of our business our activities can

of health and safety statistics. pose risks. I am therefore especially pleased

to report two very significant achievements in A Lost Time Accident (LTA)  health and safety this year.

is an accident that results in

the injured person being away  First, we have completed the year with zero

from work or unable to do  Lost Time Accidents (LTAs) for the first time in their normal work for more  10 years. Second, we have been awarded

than three days (including any  awarded the maximum Five Stars by the British

days they would not normally  Safety Council following our second Health

be expected to work such  and Safety Management Systems Audit by the as weekends, rest days or  UK Government regulated body.

holidays) and not counting the

day of the injury itself. Both achievements are exceptional given

the extent of project work and activity in our Energy Division this year. They are a credit

not only to the commitment of our Health and Safety Representatives but our entire staff for their diligence in all our business areas.

Zero LTAs has long been our goal. Its achievement, in part, is due to small accidents

being prevented by staff being more conscious of small risks and assessing even minor risks. It is well understood among health and safety

professionals that if you create a culture to report and manage the smaller incidents, the

larger risks should also fall naturally.

The BSC audit provides us with an external, independent assessment of

our safety management arrangements and their effectiveness and is a process

we commit to every other year. The audit this year followed the first one I

commissioned in 2010 to provide a benchmark for improvement. On that occasion we achieved Four Stars. I am therefore pleased that the actions we have taken to improve our weaknesses have proven successful. These included improved change management and communication and more robust vetting of third party contractors.

In its report, the Council highlighted the open and honest culture among all JE staff, their competencies and their efforts to maintain these, and the strong commitment of management

to improve and maintain systems to reduce accidents and ill health . We attained 94%

of the marks available across 57 areas and

we have already taken action in areas where there is still room for improvement, including increased site inspections on contractors.

All these improvements in key areas also reflect our commitment to in-house training and internal awareness raising. This year has included completing Managing Safely refreshers, Stress Management Awareness for managers and safety reps and Safety Inductions for a large intake of apprentices.

This year, better than ever before, we have shown that by being clear about roles and responsibilities, adhering to proper processes, risk assessments and training, we can mitigate risks and eradicate injuries even at times of extreme activity and high workload. My thanks go to our Health and Safety Representatives for their central contribution in helping Jersey Electricity create a positive health and safety culture that has been so central to this year s tremendous successes.

HEALTH & SAFETY CHIEF EXECUTIVE S REVIEW

The safety squad  

(from back, l to r):

Robin Amy, Kris Moore , Andy Barker, David Silva, Martin Sampson,  

Neal Vautier, Milford Lee (Health, Safety and Environment Technician), Ian Manuel, David Whitt, Andre de St George (Health, Safety and Environment Engineer), Craig Rowe,  Kevin Nursey, Ian Campbell and Miriam Taylor .

Not present:  

Theresa Crehan- Ferey , Eamonn McLaughlin, Richard Cotittard,

Shaun Howe, Steve Creedy, Trevor Le Cornu.

SUSTAINABILITY

IN THE COMMUNITY

In these difficult economic times, as a public utility providing power to every household and business within our Island community, it is important that we continue to support our community because we are very much part of that community.

We focus support on sustainability and,

in particular, projects, organisations

and charities related to the environment, healthcare and education. Following our presentation of an eco-friendly 4x4 pickup

to aid National Trust Rangers last year, we

are equally pleased this year to have helped Durrell in its conservation work by sponsoring two all-electric John Deere trucks used by rangers, keepers and landscape maintenance teams for moving heavy loads. Durrell s all- electric choice and our support reflect both organisations commitment to sustainability and lower carbon transportation.

To further promote low carbon transport, we also helped Jersey International Air Display bring the electric powered, twin-engined CRI- Cri to this year s event.

Forests have also featured this year. A fund

set aside for Jersey Trees For Life (JTFL), with donations we made to encourage more environmentally acceptable electronic billing, launched JTFL s Forgotten Forest project in this their 75th anniversary year.

The restoration of a 50,000 sq metre arboretum started with a JE funded schools competition to design a logo. The prize included sponsorship of an area of the

forest for winning school Le Rocquier and an educational day out for pupils to visit it. We

also provided the signage around the forest that was officially opened by the Lieutenant Governor General Sir John McColl in June.

Earlier in the year we jointly sponsored the International Year of the Forest reception at which the Rt Hon John Gummer, Lord Deben, was guest speaker.

We continue to support healthcare associated charities, including Jersey Hospice Care, Jersey Alzheimer s Association, Teenage Cancer Trust, Friends of Anthony Nolan, After Breast Cancer Care, Diabetes Jersey, Headway and, of course, Family Nursing and Homecare. Our annual gift to FNHC, from funds saved not sending corporate Christmas cards, was two 50 flat screen TVs which double as computer monitors to enhance staff training.

We have this year become corporate sponsors of Genuine Jersey Products Association and Jersey Construction Council. In supporting Genuine Jersey we are supporting

local producers and craftsmen who put sustainability at the heart of their enterprises enterprises such as Jersey Fishermen s Association, Classic Herd, Woodside Farm, La Mare Wine Estate and Jersey Oak.

We continue to sponsor the JeCC Sustainability Award won this year by

the Millennium Town Park and the Jersey Enterprise Environmental Award (won by La Mare Wine Estate) to recognise and reward those businesses that are doing much to preserve and protect our Island environment. The introduction of a Schools Category to the Environmental Award attracted inspiring

SUPPORTING THE COMMUNITY CHIEF EXECUTIVE S REVIEW

entries and enabled us to help our schools directly by making cash awards to further their environmental projects.

As a significant local employer of technical engineering skills, we also support our schools and students through Trident, Advance To Work, Undergraduate Work Experience and our Apprentice Scheme through which we employed no less than eight young islanders this year. We were also very pleased this year to launch the Jersey Electricity Bursary Award Scheme as an extension of our commitment

to the Island s youth and the development of professional engineering capabilities in the Island.

Sustainability means meeting our responsibilities, professionally and socially, long-term and that means investing in our people, our community, our environment and our business.

Main picture: CEO Chris Ambler presents Durrell CEO Paul Masterton and his team with the John Deere trucks. From top: Forgotten Forest logo winner. Part of the arboretum. Beyond Manager Alan Teeling presents FNHC with two TVs.

Left: La Mare MD Tim Crowley receives the Jersey Electricity Environmental Award.

Below left: Brenwall Ltd team receive the Sustainability Award for the Millennium Town Park.

OUR PEOPLE

OUR PEOPLE CHIEF EXECUTIVE S REVIEW

OUTLOOK

While the past year has been immensely challenging operationally, leading to some difficult near-term financial results, it has brought into sharp focus the value of our importation strategy which remains central to our business model going forward.

Our submarine cables have sheltered customers from high and volatile fossil fuel prices and, for the moment, some of this shelter has been temporarily lost. Despite this, we have built an energy system that has been remarkably resilient to these extraordinary uncontrollable events and our staff have responded exceptionally.

With significant regulatory and customer pressure on affordability in recent years, it would have been easy for Jersey Electricity to have ceased investment in La Collette and Queen s Road and closed down these standby generation facilities to reduce short-term costs. This would have been a false economy, damaging services to customers and our reputation. This year has clearly demonstrated the value of both sites in maintaining critical electricity supplies, the lifeblood of Jersey.

We are already actioning initiatives and projects with a focus over the next two to three years on restoring and maintaining our high standards of supply and managing new risks until we install additional interconnection capacity.

We are delighted to have secured planning permission from the French authorities for Normandie 3, our third cable link to France. We started this crucial project eight years ago and are finally poised to move into the procurement and installation phase. While this is a costly investment for a business of our size, the economic case is solid and it promises to restore not only our usual high standards of reliability, but also enables access to more cost effective and sustainable energy.

Of course, in the meantime, our reduced importation capacity means we are more exposed to global oil markets. This, in turn, means we have the added commodity risk of fuel oil to manage as well as electricity. We have excellent processes for hedging and managing risk and will be deploying these with our usual rigour.

OUTLOOK CHIEF EXECUTIVE S REVIEW

In summary, Jersey Electricity s business model remains resilient, underpinned

by strong cash flows and many

exciting investment projects

across our Energy and non-

Energy businesses. Our market

share of final energy has

increased to 38% and we will

continue our successful track record

in fuel switching customers from fossil fuels to electricity alongside developing new markets in services and transportation.

Despite the short-term challenges, our strategy is robust; there is no doubt that electricity remains the energy of the future in the Channel Islands, with the promise of rewards to shareholders, customers and employees.

Chris Ambler Chief Executive 20 December 2012

FINANCIAL REVIEW

Group Financial Results

Key Financial Information  2012  2011  %

movement Turnover  £97.2m  £100.5m  (3)% Profit before tax  £5.7m  £11.1m  (48)% Profit in Energy business  £4.2m  £7.7m  (45)% Earnings per share  12.55p  28.05p  (55)% Dividend paid per share  11.00p   13.70p  (20)%

Group turnover for the year to 30 September 2012 at £97.2m was 3% lower than in the year ended 30 September 2011. Unit sales volumes were 2% lower than last year and consequently revenues in our Energy business fell to £72.7m. Turnover in our Retail business decreased by 6%, from £16.5m to £15.5m, with around half this shortfall being in

our e-retailing internet business, daytodayshop.com, which

we closed in August 2012. Turnover in the Property business, including internal revenues, fell by £0.1m to £2.8m due to loss of a commercial tenant. Turnover in Building Services fell 11% from levels experienced in 2011 to £4.2m. Turnover in our Other Businesses rose from £2.6m to £2.7m with increased revenues in both Jendev and Jersey Energy.

Cost of sales fell £0.6m to £69.3m associated mainly with the fall in revenues in both our Energy and Retail business units. Operating expenses, at £20.9m, were £1.3m higher than in 2011. The increase in such costs was largely linked to interconnector issues during the year with £0.9m being our portion of uninsured risk on the Guernsey-Jersey cable repair and an estimated £0.5m cost to decommission the failed interconnector to France being the most material movements.

Profit before tax for the year to 30 September 2012 fell to £5.7m from £11.1m. Our Energy business saw £3.5m of this reduction with mild weather and issues directly and indirectly associated with interconnector failures during the year being the primary drivers. In addition, the non-cash, £1.1m impairment of our investment in Foreshore Ltd was the other material reason for reduced year-on-year group profit.

Profits in our Energy business fell £3.5m from £7.7m to £4.2m. Unit sales of electricity were 2% behind those in 2011, due to a particularly mild winter period, and contributed to a £1.9m reduction in gross margin. In addition, the uninsured risk of £0.9m from the £9m repair of the Guernsey-Jersey subsea cable and the decommissioning of our irreparable 28 year old cable to France at £0.7m, including accelerated depreciation, were unexpected costs. Tariffs to our customers were increased by 2.9% in May 2012 and it has been announced that unit

charges will unfortunately rise by 9.5% from 1 January 2013

as we will be generating more heavily during the coming year due to the aforementioned issues associated with the loss of the interconnector to France. The forthcoming tariff rise is primarily a result of the differential price between generating using oil against importing from France. These additional costs are forecast to remain until the planned replacement interconnector to France is delivered by 2015. We have materially hedged our imported power and foreign exchange requirements for 2013 and 2014 and 75% of our expected oil requirements for the 2012/13 financial year. We again imported most of our power requirements from France (92% against 96% in the previous year) but this will fall in the next financial year to an expected level of around 80%.

Profits in our Property division, excluding the impact of investment property revaluation, were at a similar level to 2011 at £1.6m. Our investment property portfolio was revalued downwards 2% by £0.3m to £14.9m this year due mainly

to higher yield assumptions. Our Retailing business had a challenging year with turnover falling from £16.5m to £15.5m. Profitability was impacted by reduced margins and the closure of our internet retailer, daytodayshop.com, due to the ending

of the Low Value Consignment Relief (LVCR) tax concession by the UK Government. The Building Services business produced a £0.3m profit, being £0.1m ahead of last year despite pressure

on margins in a very competitive marketplace. In addition, our other business units - Jersey Energy, Jendev and Jersey Deep Freeze all had a profitable year. Foreshore, our data centre joint venture, had a turnover of £4.9m being at the same level as

2011 with profitability remaining around the breakeven level. However an impairment review of our investment resulted in

the writing off of £1.1m. Future forecast returns have been impacted by changing circumstances, including the impending loss of its largest customer, who was also impacted by the abolition of the LVCR tax concession that previously existed between Jersey and the UK.

Interest received on deposits in 2012 at £0.3m was at the same level as in the previous year with a lower cash level offset by marginally better achieved returns. The taxation charge

at £1.8m was lower than in 2011 because of reduced profits. Group earnings per share fell 55% to12.55p compared to 28.05p in 2011 due to lower profits.

Dividends paid in the year, net of tax, fell by 19.9%, from 13.70p in 2011 to 11.00p in 2012. However the underlying increase was 5% as a special dividend of 3.25p per share

was paid last year. The proposed final dividend for 2012 is maintained at 6.50p, resulting in a total proposed dividend for the year of 11.00p, being an underlying rise of 2.3% on the previous year. Dividend cover fell from 2.1 times in 2011 to 1.1 times due to a lower level of profits.

FINANCIAL REVIEW

Ordinary Dividends

2012  2011

Net cash inflow from operating activities at £11.9m was £8.9m lower than 2011 with lower profits and a large insurance debtor for the Guernsey to Jersey cable repair being the main reasons. Capital expenditure at £18.8m rose from £15.0m last year with the £8.5m spend on diesel engines, which are due to be commissioned before the end of 2012 being the most material project spend. Cash and cash equivalents, including short-term investments, at the year-end were £14.3m being £10.3m lower than last year.

Cash Flows

Summary cash flow data  2012  2011

(Decrease)/increase in cash  

during year  £(10.3)m  £1.8m

Treasury Policy

Operating within policies approved by the Board and overseen by the Group Finance Director, the treasury function manages liquidity, funding, investment and risk from volatility in foreign exchange and counterparty credit risk. As a substantial proportion of the cost base is the importation of power from Europe, which is contractually denominated in the Euro, the Company enters into forward currency contracts to eliminate a large percentage of currency exposure as a tool aid tariff planning.

The average Euro/Sterling rate underpinning our power purchases during the financial year, as a result of the hedging program, was 1.18 /£. The average applicable spot rate during this financial year was 1.18 /£.

The Company does not manage interest rate exposure as it has maintained cash and cash equivalents in the full period since the last year end. The average rate of interest received in the financial year was 1.7%.

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

of non-performance by counterparties in respect of cash and cash equivalents and derivative financial instruments. However, such non-performance is not anticipated, given the high credit ratings (investment grade and above) of the established financial institutions with which we transact.

Power purchasing and oil hedging policies

The Company generally imports over 90% of the electricity requirements of Jersey from Europe. It has jointly purchased this power, with Guernsey Electricity, from EDF in France and allowed power prices to be fixed in advance of decisions being made on customer tariffs. As communicated last year, a new ten year contract has been agreed with EDF, commencing in 2013, which combines a fixed price component with the ability to hedge future purchases over a rolling three year period based on a market related mechanism linked to the EEX European Futures Exchange. The goal is to provide our customers with

a market based price but with a degree of certainty in a very volatile energy marketplace. A Risk Management Committee exists, consisting of members from Jersey Electricity, Guernsey Electricity and an independent energy market adviser and follows guidelines approved by the Board.

In addition, due to the loss of one of our interconnectors to France, we anticipate generating a proportion of our electricity requirements using oil to fuel our on-island plant. We have established a policy to hedge around 75% of the oil price, using a financial derivative product, in advance of the financial year when such oil is likely to be utilised.

Defined benefit pension scheme arrangements

As at 30 September 2012 the scheme deficit, under IAS 19 Employee Benefits rules, was £4.9m, net of deferred tax compared with a deficit of £3.5m at 30 September 2011.

This movement was due mainly to an actuarial loss of £2.3m associated largely with the increase in liabilities being at a greater scale than the rise in scheme assets. Scheme assets

rose 11% from £76.5m to £85.3m since the last year end and liabilities increased 13% from £80.9m to £91.3m. The discount rate, which heavily influences the scheme liabilities, fell from 5.1% in 2011 to 4.2% in 2012 to reflect sentiments in prevailing financial markets.

Our defined benefits pension scheme is an area of risk that continues to require careful monitoring as it is driven largely by movements in financial markets and materially impacted

by relatively small movements in the underlying actuarial assumptions. If, for example, the discount rate applied to the liabilities had been 3.7% rather than the 4.2% advised by our actuaries under IAS 19 for 2012, the net deficit of £4.9m would rise to a net deficit of £11.0 m.

An amended IAS 19 accounting standard comes into force for financial periods beginning on or after 1 January 2013 and will materially impact the calculation of the charge to the income statement when it takes effect (beginning with our 2013/14 financial statements). This is because the amended IAS 19 replaces the interest cost and expected return on scheme assets with a single net interest charge (or income) on the scheme deficit (or surplus). This change effectively means that the expected return on scheme assets is calculated at the discount rate, instead of at an expected rate of return on scheme assets held. To illustrate the impact on the charge to the income statement, the expense of £0.8m for this current financial year would be an estimated £2.0m under these new accounting

rules. The amended IAS 19 also introduces additional disclosure requirements.

The last triennial actuarial valuation was carried out as at

31 December 2009 and resulted in a surplus of £6.5m. The contribution rate by Jersey Electricity was reduced to 14.2%

of pensionable salaries from January 2010 (down from the previous level of 19.2%). Employees continue to contribute an additional 6% to the pension scheme. Unlike the UK, the Jersey Electricity pension scheme is not funded to pay mandatory annual rises in pensions. The next triennial actuarial valuation of the defined benefit scheme on pensions is at 31 December 2012 and the results will be disclosed in our financial statements next year.

dividend growth of 2.3% is consistent with the underlying dividend growth pattern in recent years.

The share price at 30 September 2012, at £3.09, was below the level of £3.45 at the 2011 year end. This gives a market capitalisation of £95m as at 30 September 2012. 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 influence the share price. At the 2011 Annual General Meeting an all-employee share scheme, to more closely align the interests of both employees and shareholders, was approved and during the year 289 qualifying staff received 100 shares each at a value around £300 at the time of issue in July 2012. Such initiatives seek to improve our longer-term liquidity.

Our largest shareholder, the States of Jersey also owns holdings in other utilities in Jersey. It owns 100% of Jersey Telecom and Jersey Post, as well as around 75% of Jersey Water. The total direct cash return to the States of Jersey from Jersey Electricity in the last year was £8.6m (2011: £8.1m).

2012  2011

The total return to States of Jersey rose 6% this year due primarily to an increase in the level of the Goods and Services Tax in Jersey from 3% to 5% from 1 June 2012.

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 16% of the total ordinary share capital.

During the year the core ordinary dividend paid increased by 5.3% from 10.45p net of tax to 11.00p. The overall dividend was 19.7% lower as the payment last year also included a special dividend of 3.25p declared in the 2010 financial year. The proposed final dividend for 2012 at 6.50p is maintained at the same level as last year but the overall total proposed

Board of Directors

Geoffrey Grime Chairman (65) R/N

Geoffrey joined the Board in 2003. He retired in

1999 as Chairman of Abacus Financial Services, a leading offshore trust company in which he played an instrumental role as one of its founders. A Chartered Accountant, his career in Jersey commenced in 1969 with Cooper Brothers & Co. and progressed to his appointment as Channel Islands Senior Partner

of Coopers & Lybrand

in 1990. He is currently the Chairman of 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 Ambler Chief Executive (42) N

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 finance and strategic consulting roles. He is Chairman of Foreshore Limited and Chairman of Channel Islands 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 Liston Non-Executive Director (61) N/R

Having previously held a number of senior posts

in the United Kingdom s Electricity Supply Industry, Mike joined Jersey Electricity in 1986 as Chief Engineer and was Chief Executive

for 15 years before retiring

in 2008 to focus on his non-executive directorships. He is Chairman of AIM listed, Renewable Energy Generation Limited, and Chairman of the postal utility, Jersey Post. He

also sits on the boards of private equity and venture capital companies in the international solar energy sector. Mike is a Fellow

of the Royal Academy

of Engineering and a

Fellow of the Institution of Engineering and Technology where he has served on

its Council, Audit and Disciplinary Committees.

He is a Companion of the Chartered Management Institute and past Chairman of its Jersey Branch. He

was until 2010, Chairman

of the Jersey Appointments Commission, which was established by government

to ensure probity in public sector appointments.

He is Chairman of the Nominations Committee. Mike was awarded an OBE in 2007.

Clive Chaplin Non-Executive Director (61) A/N/R

Clive joined the board

in 2003. He trained as

a solicitor in London qualifying in 1977 and moved to Jersey in 1979. He was admitted as a solicitor of the Royal Court, Jersey, in 1985 and since 1994 has been a partner

of Ogier. He retired as a partner of the firm on 31st January 2012 but remains

a consultant to the Ogier Group and Chairman of its Fiduciary Services Holding Company. He is a director of a number of other companies operating in

the financial services sector and is also Chairman of the Jersey Law Commission. He is Chairman of the Remuneration Committee.

Martin Magee Finance Director (52)

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 finance roles.

He previously worked for nine years with Stakis plc (now part of the Hilton Hotels Group). He is Chairman of Jersey Deep Freeze Limited, a Director of the Channel Islands Electricity Grid Limited and Foreshore Holdings Limited. Externally, he is also the non-Executive Audit Committee Chairman for AIM listed Stanley Gibbons plc and

a non-executive director of the Newton Offshore Strategy Fund Limited. He was also a member of

the Jersey Public Accounts Committee until 2011. He is a member of the Institute of Chartered Accountants of Scotland having qualified in 1984.

Richard Plaster Commercial and Human Resources Director (51) N

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 Stares Non-Executive Director (61) A/R

John joined the Board in 2009. Before moving to Guernsey in 2001 John

was with Accenture for 23 years. During that period, he worked as a strategic, financial, change and IT consultant with major clients in most industry sectors and during his 15 year tenure

as a partner held a wide variety of leadership roles in Accenture s Canadian, European and Global consulting businesses. John is also a Non-Executive Director of the Guernsey entities of Terra Firma. He recently completed a 10 year term as the Managing Director of Guernsey Enterprise Agency and

5 year terms as a Non- Executive Consultant to

the Ogier Group and a Non-Executive Director of Aurigny Airlines. John is Chairman of Governors

of More House School,

a Trustee of the Arts & Islands Foundation and

a former President of Rotary Guernesiais. John

is a graduate of Imperial College London, a Fellow of the Institute of Chartered Accountants of England & Wales and a Member of

the Worshipful Company of Management Consultants.

Aaron Le Cornu Non-Executive Director (42) A/R

Aaron was appointed to

the Board as Non-Executive Director in January

2011 and is currently the Group Chief Operating Officer for Ogier, a Legal and Fiduciary Firm with headquarters in Jersey and operations in 10 countries. Prior to that appointment, Aaron held a number of senior positions within HSBC, latterly as the Deputy CEO of HSBC International. During his 10 years with HSBC, he held a number of Board positions for HSBC subsidiaries and was also involved in acquisitions (such as the purchase of Marks & Spencer Money) and setting up Greenfield retail banking operations in Central Europe. Aaron is a Chartered Accountant. He qualified with and worked for Andersen for eight

years, including two years

in Australia. He also has a First Class Honours Degree in European Management Science from Swansea University.

Directors

All non-executive directors are viewed as being independent with the exception of Mike Liston who was formerly the Company s Chief Executive. Geoffrey Grime and Clive Chaplin are still regarded as independent even though

they are now in their 10th year as directors.

Key to membership of committees

A  Audit Committee

N  Nominations Committee R  Remuneration Committee

Director s Report

for the year ended 30 September 2012

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 internet data hosting.

Dividends

The directors have declared and now recommend the following dividends in respect of the year ended 30 September 2012:

2012  2011 Preference dividends  £  £