Jersey New Waterworks Company Ltd.: Annual Report and Financial Statements 2013.

2013

Annual Report and Financial StatementS

The Jersey New Waterworks Company Limited

R.66/2014

2013 T£14,916,000urnover increased by 2.1% 2013 Profit before taxation2013 Equity dividend18.942

£4,318,000 01

PENCE PER  SHARE

Directors, Officers and Advisers

Directors

Non-Executive

Chairman Kevin Keen

MBA, FCCA, FCMA, FCMI, CDir

Stephen Kay

BSc (Eng), CdipAF,  MICE, MCIWEM, MIWater

Senior Independent  Director

Anthony Cooke

BA(Hons) Econ, CEnv,  FCIWEM, HIWater, FRSA

Stephen Marie

FICWCI, MBIFM, ACIOB, MIoD

Mary Curtis

MA, MIoD, Chartered FCIPD

Peter Yates

BSc, FCA

Executive

Managing Director and Engineer Finance Director Howard Snowden   Helier Smith

EurIng, BSc (Eng), MSc, CEng, FICE, FIMechE, FIET, MIWater BA(Hons), FCA, CDir, MIWater, FCMI

Officers and Advisers

Secretary Independent Auditors Registered Office

Margaret Howard   Price waterhouseCoopers CI LLP  Mulcaster House, Westmount Road MSc, ACIB, ACIS  37 Esplanade, St Helier, Jersey, JE1 4XA St Helier, Jersey, JE1 1DG

LEVEL of Reservoirs LEVEL of Reservoirs LEVEL of Reservoirs 100% 60% 94%

January 2013  DECEMBER 2013 SEPTEMBER 2013

Board of Directors

Kevin Keen

MBA, FCCA, FCMA, FCMI, CDir

Kevin Keen was appointed to the Board in May 2007

as a Non-Executive Director. Mr Keen is currently Chief Executive of Jersey Post Group. Prior to that he held leadership positions in a number of well-known local companies. Mr Keen is Chairman of the Board, chairs the Nomination Committee and is a member of the Remuneration Committee.

Howard Snowden  

EurIng, BSc(Eng), MSc, CEng, FICE, FIMechE, FIET, MIWater

Howard Snowden joined the Company in 1992 as Senior Engineer and became Managing Director in May 2000.

Mr Snowden has worked in the water industry since 1970 for a number of companies including Yorkshire Water Authority (the forerunner to Yorkshire Water Plc). He is a fellow of the Institution of Civil Engineers, the Institution of Mechanical Engineers, the Institution of Engineering and Technology and a member of the British Dam Society and is a Panel Supervising Engineer under the Reservoirs Act 1975.

Tony Cooke  

BA (Hons) Econ, CEnv, FCIWEM, HIWater, FRSA

Tony Cooke became a Non-Executive Director of the Company in June 2008. Mr Cooke is an economist by background and he is the former Managing Director of Bournemouth & West Hampshire Water Plc. He has previously held a number of Chief Executive and senior management roles in the United Kingdom and internationally. Mr Cooke is a Trustee of Utilities and Service Industries Training Ltd, a Trustee of a Pension Fund and an independent utilities consultant.

Mr Cooke is the Board s Senior Independent Director and is a member of the Audit and Nomination Committees.

Mary Curtis  

MA, MIoD, Chartered FCIPD

Stephen Kay

BSc (Eng), CdipAF, MICE, MCIWEM, MIWater

Stephen Kay, a Chartered Engineer, joined the Board as

a Non-Executive Director in April 2013. Mr Kay is a Non-Executive Director of South Staffordshire Water Plc and was previously Managing Director of Cambridge Water Plc. He is Chairman of Iceni Waters Limited, Chairman of the Water UK Standards Board and Chairman of the Water Regulations Advisory Scheme (WRAS).

Mr Kay is a member of the Audit Committee and the Nomination Committee.

Stephen Marie  

FICWCI, MBIFM, ACIOB, MIoD

Stephen Marie became a Non-Executive Director of the Company in 2002. Mr Marie is the Managing Director of ComProp (CI) Limited, a Channel Island commercial property development company and a Non-Executive Director to the Property Board of Fox International Property Holdings Limited (Fox Group). Mr Marie has been involved, at both senior executive and director levels, in the property industry for a number of years. He is a fellow of the Institute of Clerks of Works and Construction Inspectorate of Great Britain Inc.,

a member of the Institute of Facilities Management and an associate of the Chartered Institute of Building.

Mr Marie chairs the Remuneration Committee and is a member of the Nomination Committee.

Helier Smith  

BA (Hons), FCA, CDir, MIWater, FCMI

Helier Smith was appointed to the Board as Finance Director in October 2003 after joining the Company in 2002. He was previously employed by KPMG in the UK and Jersey where he worked for eleven years in the manufacturing, distribution and finance sectors. Mr Smith qualified as a Chartered Director in 2010. He became a Fellow of the Chartered Management Institute in 2012.

Mary Curtis joined the Board as a Non-Executive Director  Peter Yates

in June 2008. Mrs Curtis is a Fellow of the Chartered  BSc, FCA

Institute of Personnel & Development and is a Director of a

privately owned consultancy business, Calmera Business  Peter Yates was appointed to the Board in May 2009. Consultancy. She formerly worked in London before moving  Mr Yates, a Chartered Accountant, was previously a partner

to Jersey in the roles of Offshore Island Regional Human  of Price waterhouseCoopers working in the United Kingdom Resources Manager at Deloitte & Touche and then Director  and Jersey for over 31 years. He is a Non-Executive Director of Human Resources at Mourant du Feu & Jeune  and Chairman of the Audit Committee of Invesco Perpetual

oirs (now Mourant Ozannes).  Enhanced Income Limited and also a Non-Executive Director

of Bathroom Brands Limited and European Bathroom Limited. Mrs Curtis is a member of both the Remuneration

Committee and the Nomination Committee. Mr Yates chairs the Audit Committee and is a member of the

Nomination Committee.

Chairman s Statement

INTRODUCTION

The weather in 2013 was so very nearly a repeat of the extremely wet 2012. The first few months of the year were such that 2013 could easily have turned out to be another

of the wettest years on record. Thankfully, more normal weather patterns returned for the summer before the onset

of more rain at the end of the year. All of this meant that water resources throughout 2013 were healthy and we

saw a modest increase in demand. However, the ongoing inconsistency of weather patterns and deviation from seasonal norms, especially evident since the start of 2014, does present a challenge in terms of planning for the future. Whilst the previous two years have been considerably wetter than normal, the Board remains alert to, and is planning for, the possibility that the cycle could reverse and result in prolonged dry periods.

Rainfall aside, 2013 could be considered one of steady progress for your company. We met all of the objectives

we set ourselves in 2013, both in terms of financial and operational performance and we delivered substantially all of the capital expenditure projects that we set out to complete.

Turnover for the year increased by 2.1%. The increase is due to the effects of a below inflation tariff increase in April 2013 and an increase in the overall demand for water of 0.4%. These increases were offset by a small reduction in income from rechargeable works and other sources.

Your company is reporting a modest increase in operating profits of 0.8% to £4,800,000 (2012: £4,760,000). Operating costs increased by 2.7% during the year but this was below budget.

Profits before tax of £4,318,000 are some 3.7% down on the prior year. This is principally due to a reduction in profit on sale of fixed assets in 2013 offset by lower exceptional costs relating to the 130th Anniversary celebrations in 2012. Ignoring these items shows that performance remains positive with an underlying increase of 3.0%.

Your Board are pleased to recommend a final dividend

for 2013 of 12.516 pence per share ( pps ) for shareholder consideration and approval at the forthcoming Annual General Meeting. This is in addition to the interim dividend of 6.426 pence which was declared and paid during

the year. The total declared and proposed dividend for 2013 is 18.942pps an increase of 3% on the 2012 dividend of 18.39pps.

In 2013, the Company invested a total of £2,878,000 (2012: £2,905,000) in its capital programme. The majority of this was spent on mains renewals (we replaced 2.5km of mains

in the year) and our meter programme. In 2013, the

Company installed 3,700 meters as part of its rollout of island wide water metering. We have been pleased with the results of this project, which is on time and within budget. It is also positive to note that approximately 60% of customers who have switched to pay by meter are paying less for their water than they were before. We have now started metering in

St Helier, having completed the remainder of the Island, and plan to have installed meters on 90% of connections by mid-2015. Metering in St Helier is more challenging given the density of housing, the number of shared connections and

the complexity of the private pipework. Accordingly, the rate of meter installation is anticipated to reduce in 2014 and 2015 but this has been factored in to our timetable.

99.84%

compliance rate of water quality supplied during 2013

Demand for the year was 7,047Ml (1 Megalitre (Ml) is 1,000,000 litres), some 2.5% below the average for the previous 5 years. Some of this reduction will have been weather related but, as noted above, metering is having a noticeable impact on the demand for water and our ability to detect leakage. The full effect of the metering programme will only be known once all meter installations have been completed and demand for water has been assessed over a number of years. With this in mind, the Board have deferred the five yearly update of the Company s Water Resources Management Plan which was due in 2014. It will now be reviewed in 2017, when the degree to which demand for water has changed as a result of metering will be clearer. In spite

of the success of metering, regrettably it will not be sufficient to deal with the existing deficit in water available for use. The Company therefore continues to work on both demand management measures including metering, water efficiency and leakage control and supply side measures such as updating our desalination plant. The current plant is 15 years old and key components will need replacing within the next few years. There are opportunities for the plant to be modified to have a greater capacity (helping to improve the security of our water supply) and operate more efficiently. With rainfall over the last two years being unusually high,  it is easy to lose sight of how quickly water resources can become depleted when the weather turns dry. Whilst it may not be used every year, our desalination plant is a vital resource upon which the Island depends and whose regular updating and improvement is in all of our long term interests.

We do all we reasonably can to keep nitrates as low as possible but neither the weather, nor the volume of fertiliser applied to the land, are within our control. We are therefore dependant on the actions of the States of Jersey to introduce measures to reduce the diffuse nitrate pollution.

The dispensations for nitrates referred to above expired on 31 December 2013. The Company has since been granted a new set of dispensations for a period of three years ending 31 December 2016. During that time it will be necessary to identify the means by which we can consistently supply water that meets the 50mg/l without the need for ongoing dispensations. Our preference is for a sustainable catchment based solution and we are working closely with the Environment Department of the States of Jersey with this in mind.

The water quality supplied during the year was of a very high standard with a compliance rate of 99.84%. Were it not for the nitrate levels referred to above, the water quality would have been in 100% compliance with the quality parameters of the Water (Jersey) Law 1972. This is testament to the ongoing work to ensure the water we supply continues to

be wholesome. During the year we fitted Ultra-Violet (UV) disinfection equipment at our Handois Treatment Works,

as an additional disinfection process to help protect against bacteria and water borne viruses. We are planning to install a similar plant at the Augrs Works in 2014.

60% of customers who have AaalimnntddtihtinIIessg Chhtoaahllmellbblpeeeannrsgeeytt h eisr ik noAingfGgsfMe rrore vmi- niec tl Meehcetaot yiBoaSonrot.ae  u rpTdnhh dbee yn 3B rMtooetaraamr rtdii eos h,,n Hat.hs eiH sla i eem plri eeo Sral mi Scny ims t  ho i tf h  switched to A WATER meter twhiall t n hoat vsinege ks erer -veelde cotino  nth. e O Bno baredh  afolfr o1f2 t  hyeea Crso, m S pteapnhye, nI  sMhoa urield,

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In 2013, we conducted the Company s first ever staff

Last year I reported that the dry spring of 2012 meant that  engagement survey with the purpose of measuring what our nitrate levels in the water supplied by the Company all met the  staff thought about working at Jersey Water and identifying statutory limit of 50mg/l. By contrast, the rainfall in early 2013  areas where we could improve. We were delighted with the was heavy and prolonged. This meant that we had need to  results that showed an engagement level of 94%. We want use the dispensations granted to us by the States of Jersey  Jersey Water to be a great place to work and were very allowing up to 30% of samples to reach up to 70mg/l. During  pleased that our staff agreed that it was. The success of

the year 22% of samples exceeded the limit of 50mg/l.  the organisation depends on the enthusiasm and dedication Nitrates peaked at 58.2mg/l, well below the dispensation limit  of all of our people and we are grateful to them for the

of 70mg/l and well within the margins of safety published by  significant contribution that they make.

the World Health Organisation. The pattern in 2013 relative to

that in 2012 is an excellent demonstration of the unfortunate  Kevin Keen

correlation between the weather during the potato growing  Chairman

season (when fertilisers are being applied to the land) and

the level of nitrates in the water we take for treatment.  28 February 2014

Jersey Water supplies water to approximately 38,000 homes and businesses across the Island of Jersey. From our two water treatment works we serve a population of nearly 100,000 in an area of 120 square kilometres. In 2013, we supplied 7,047Ml through our 580km of network of water mains. We employ 80 staff and operate from our Head Office in St Helier.

Grve De Lecq Bonne Nuit Bay

Le Mourier

Grve De Lecq

Handois Reservoir

& Treatment Works Les Platons

La Hague Mont Gavey Val de la Mare

Dannemarche

St. Ouen s Bay AugrØs Treatment Works Grands Vaux

Laboratory

Les Blanche  Tesson Fern Valley Banques Boreholes

Millbrook Reservoir

Desalination  Pont Marquet St. Aubin s Bay ValleØ des Vaux

Plant Westmount Headquarters

St Brelade s Bay

Water resources

Jersey s water resources are nearly all derived from rainfall dependent surface

waters. We capture and store raw (untreated) water in six storage reservoirs     with a capacity of 2,687Ml, which is equivalent to approximately 120 days of     average demand. We also capture raw water from stream catchment ponds    and abstraction pumping stations across the Island. The nature of rainfall  

patterns in Jersey means that we generally rely on rainfall in the Autumn and

Winter to replenish water resources and keep them topped up for as long as       possible.    

The Company operates a reverse osmosis desalination plant capable of      providing 6Ml/d, which is approximately one third of daily demand. We    maintain the plant in standby mode, ready at short notice in the event of    

water resource shortages.

Our plan for meeting the demand for water is set out in Jersey Water s Water      Resource Management Plan, which was last updated in 2010. The plan    predicts that in 25 years time there will be a shortfall in water available for use     equivalent to approximately 26% of the forecast daily demand (6.5Ml/day).    

This shortfall being caused by a forecast increase in demand for water of 15%    coupled with a reduction in water available for use of 11% over that period.      

We have implemented a number of initiatives to meet this shortfall including     the island wide roll out of water metering between 2010 and 2015. The plan   will be updated in or around 2017, once the effects of metering are fully evident.

Stream Abstraction Point    

Raw Water Storage Tanks    St Catherine Laboratory Operations            

Raw Water Storage Reservoir  

Queen s Valley          

Ground Water Resources     Headquarters          

Desalination Plant  Water Treatment Plant

Water quality

Our treatment works both use the same two-stage process for water treatment comprising chemically assisted sedimentation and rapid gravity filtration followed by disinfection using chlorine and ammonia.

Treated water quality is generally very high. Bacteriological quality is good and there are very few issues with pesticides and herbicides.

The diffuse nitrate pollution across the Island does mean

the need for dispensations by the States of Jersey on water quality parameters for nitrates in treated water to cover the relatively minor exceedences at certain times of the year. The level of nitrates in raw water sources is outside of Jersey Water s control and is dependent on the rainfall, temperature and potato planting season. Accordingly, levels can

increase above the regulatory limit of 50mg/l during the late winter and spring months. It is our objective to supply water that is fully compliant with all parameters of the Water (Jersey) Law 1972 and we are working with the Environment Department of the States of Jersey with this aim in mind.

 229ML

Regulation

The supply of water in Jersey is regulated by the States of Jersey through various laws and regulations.

The Water (Jersey) Law 1972 sets out the service standards by which the Company must operate, the way in which it may charge for water and the minimum standards of the quality of the water that it must supply.

The Company s impact on the environment is controlled through the Reservoirs (Jersey) Law 1996, the Water Resources (Jersey) Law 2007 and the Water Pollution (Jersey) Law 2000.

2,687ML

Combined capacity OF RAW

Water Storage Reservoirs QUEEN S VALLEY - 1,193ML

Principal strategic risks and uncertainties

Jersey Water s operations are subject to a number of risks  We identify and manage these and other risks through our and uncertainties that could, either individually or in  risk management processes (which are described further on combination, impact on our operations, performance and  page 21). The risk management processes described below future prospects. The risks and uncertainties described in the  are designed to manage and mitigate risk (rather than to box below are those that we believe to be of strategic  eliminate it).

importance to the future of the organisation.

Unknown risks and those that the Directors believe are less significant may also have a material impact on the operations and performance of the Company.

Financial results

Turnover

Jersey Water s turnover in 2013 increased by 2.1% to £14,916,000 (2012: £14,609,000). Income from the sale of water was £14,166,000 compared to £13,841,000 in 2012.

Metered income in 2013 was £10,890,000 (2012: £9,497,000), an increase of 15% on 2012. The change in metered income is attributable to an increase in overall demand for water of 0.4%, the addition of 3,700 metered properties, 406 new connections and a 2% tariff increase. Metered water sales accounted for 77% of water related turnover compared to 69% in 2012.

Unmeasured water income totalled £2,686,000, compared

to £3,774,000 in 2012. The reduction of £1,088,000 corresponds with the transfer of customers to metered billing. Unmeasured charges now account for just 19% of water related turnover (2012: 27%).

Turnover in relation to rechargeable works was £320,000 (2012: £356,000). The modest reduction of £36,000 in the year was despite a 16% increase in the number of new connections to the network in the year. Rechargeable works relate mainly to the installation of new water connections. Each job is individually priced and the nature of the specific works undertaken during 2013 meant a lower average price than in 2012.

Operating expenditure

There was an increase of 2.7% in operating expenditure in 2013. Operating costs were £10,116,000 compared to £9,849,000 in 2012. The increase was principally attributable to electricity charges, advisory fees and planned increases in staff costs.

Operating profit before exceptional items

Operating profit for 2013 was £4,800,000 (2012: £4,760,000), 0.8% higher than the previous year.

Profit on disposal of fixed assets

In 2013, the company generated a profit on the sale of fixed assets of £179,000 (2012: £598,000) most of which was attributable to proceeds from the disposal of two small areas of land.

Net finance costs

There was an 11% reduction in net finance costs in 2013. The charge reduced by £81,000 to £661,000 as a result of the combined effects of lower interest payable on debt and an increase in the net finance income arising from the Company s pension scheme.

Profit before taxation

In 2013, Jersey Water s profit before tax was £4,318,000 compared to £4,486,000 in 2012. The reduction of 3.7% was principally due to lower profits on the sale of fixed assets offset by lower exceptional items (relating to the 130th Anniversary celebrations in 2012), lower net finance costs and better underlying operating performance.

Income tax

The charge for tax for 2013 totals £880,000 compared with £789,000 in 2012. The increase of £91,000 comprises an increase in the deferred tax charge of £3,000, additional provisions of £26,000 in respect of 2012 and an increase in the current year s income tax charge of £62,000, which was primarily due to the improved financial performance in the year.

Equity dividends

The Directors are recommending a final dividend on the Ordinary and A Ordinary shares of 12.516 pence per share (2012: 12.09 pence). This brings the total paid and proposed dividend for 2013 to 18.942 pence per share, an increase of 3% on the previous year s dividend of 18.39 pence.

2013 2012 Dividends declared and paid £ 000 £ 000

Previous year - Final dividend  1,168 1,135 Current year - Interim Dividend 621 609

_______ ______

_£_1_,_7_8_9_ _£_1_,7_4_4_ Dividends proposed

_______ ______ Current year - Final dividend _£_1_,_2_0_9_ _£_1_,1_6_8_

Financial results (Continued)

Cash flow

There was a net cash outflow during the year of £1,555,000, in contrast to the inflow of £1,257,000 in 2012. The main reasons for the variance being a favourable increase in operating cash flows of £1,693,000 countered by the net increase in capital expenditure cash flows of £399,000 and the placement of £3,500,000 on fixed term deposit in 2013. The Company ended the year with cash balances totalling £4,598,000 (2012: £2,653,000), a sum which the Company has earmarked for capital expenditure currently in the planning stage.

Capital expenditure

In 2013, capital expenditure totalled £2,878,000, a small reduction of £27,000 on the prior year amount of £2,905,000.

The majority of the capital allocation for the year was spent on metering, £994,000, and mains renewals, £882,000, in line with our focus on these areas to reduce leakage and the discretionary use of water.

Loans and borrowing

During the year, we renewed loans totalling £6,000,000 with HSBC Plc for a term of ten years. Accordingly, total debt at 31 December 2013 was consistent with the previous year at £20,282,000 (2012: £20,282,000). Net debt reduced to £15,684,000 (2012: £17,629,000) as a result of an increase in cash balances of £1,945,000.

Defined benefit pension scheme

As at 31 December 2013, there was a net surplus on the combined FRS17 valuations of the Company s defined benefit plans of £227,000, compared with a net deficit of £385,000 in 2012. The improvement in 2013 is mainly due to strong investment performance in the year, partially offset by market driven changes in inflation rate assumptions leading to an overall actuarial pre-tax gain of £534,000 (2012: loss of £288,000).

Capital expenditure by type

Investment properties

Against a backdrop of falling prices in the Jersey residential

property market, we undertook a formal valuation of our

investment properties as at 31 December 2013. The

valuation concluded that the market value of the investment

p£1ro7p1,e0r0ty0 aotnt htheey eparer-veionuds wyaesa r£ w1,h07ic0h, 0h0a0s, bae reend urecctioogn noisf ed  30%

in the Statement of Total Recognised Gains and losses. 34%

vice Renewals

11% 8%

4% 13%

Connections, Metering and Charges

In 2013, we installed 3,700 (2012: 3,700) meters as part of our universal metering project bringing the total number of metered connections to just under 28,000 (2012: 24,000).

At the end of 2013 approximately 74% of connections are metered. The majority of the Island is now fully metered with just areas of St Helier remaining. We are on track to meet our target of metering 90% of connections by mid-2015 and will continue until all connections are metered.

The metering program in St Helier will inevitably progress at a slower pace due to the number of services, the complexity of the plumbing arrangements and the large number of multiple occupancy buildings. However, the process will be facilitated by our mains renewals programme which has ensured that large areas of town, where mains have been renewed, are ready for metering without the need for excavation. In 2014, we intend to install approximately 3,500 meters.

In 2013, the Company overhauled its billing processes. Historically, the company billed all customers on the same day, once per quarter. We have introduced a cyclical billing process whereby we bill a small number of customers each day, spreading the workload and improving customer service.

Our customers now receive their bills soon after the meter is read; improving their ability to monitor the volume of water they are using. Jersey Water has also benefitted through more efficient meter reading and billing processes and improved working capital.

During the year we installed 406 new water connections, an increase of 57 on the previous year and a positive sign that there has been a modest increase in activity in the building sector during the year.

The Company has recently announced a tariff increase

of 1% which takes effect on 1 April 2014. This is the 12th consecutive year in which our tariff increase has been kept

at or below the rate of inflation. In the absence of economic regulation of the water supply in Jersey, the Company applies a policy of limiting price increases wherever possible.

This is achieved by focussing on cost efficiency. The policy has been very effective; over the past decade, the price of metered water has fallen by 16% after taking inflation into account. In 2013, a 2% increase took effect from 1 April and accompanied the introduction of tiered standing charges dependant on the size of the meter installed.

Partially metered AREA

metered AREA

74%

of connections

are Metered

Water Supply

Rainfall patterns in 2013 continued the seemingly increasing habit of bucking the trend. Total rainfall for the year was 939mm, lower than the exceptional 1,089mm in 2012, but still 13% higher than the five year average of 835mm. The pattern of rainfall during the year was also unusual, with a wetter winter, spring and autumn than normal and a drier than usual summer.

Demand for water during 2013 was 7,047Ml, an increase of 0.4% on the prior year but a reduction of 2.5% on the five year average. The reduction is partly due to the wet first half of the year but will also be a result of the success of the Company s metering programme in reducing discretionary use of water. The effects of metering will only become fully apparent once a number of years have passed but it is clear from the trend that demand for water is reducing, despite an increase in the number of new connections and the population of the Island.

We started the year with full reservoirs and they stayed that way until April when the high stream flows and abundance of rainfall meant that we could safely reduce pumping. Levels in the reservoirs then declined steadily until September, when after reaching a low point of 60% full, they started to replenish.

The above average rainfall in the fourth quarter meant that

we ended the year with reservoirs nearly full at 94%.

In 2013, work continued on the planned replacement of the Desalination Plant at La Rosire. As reported last year, the current plant was designed in 1997 and desalination technology has moved on considerably since then as a result of the proliferation of reverse osmosis desalination plants in the Middle East and elsewhere. As our plant reaches the point at which key elements must be replaced, we are currently investigating how the latest technology could be deployed in Jersey to take advantage of improvements in operating efficiency and capacity.

Current indications suggest the existing plant could be modified to produce nearly double the output on the same footprint and with the same power requirement as the existing plant. Work will continue on this important project in 2014.

Water Quality

During 2013, the Company produced water that was 99.84% (2012: 99.99%) compliant with the water quality requirements of the Water (Jersey) Law 1972.

The bacteriological compliance of water leaving the treatment works was 100% and there were no herbicides or pesticides detected in the treated water supplied.

The wet weather during the winter and spring meant that there were a total of seven samples between January and May where the level of nitrates in treated water exceeded the regulatory limit of 50mg/l. The highest level recorded in the year was 58.2mg/l in February 2013, well below the World Health Organisation safety limit of 100mg/l for microbiologically safe water as supplied in Jersey. The results were also within the dispensation limit granted by the States of Jersey, which allows 33% of samples to exceed the statutory 50mg/l limit, but not to exceed 70mg/l.

The dispensation expired on 31 December 2013 and was replaced by a new, more restrictive, three year dispensation

that reduces the maximum limit to 65mg/l and places additional restrictions on samples exceeding the 50mg/l limit. The new dispensation expires on 31 December 2016.

Reservoir levels and rainfall 160 100% 90%

140

Monthly rainfall 2013 143 80%

120 135

70% Monthly rainfall 10 year average 100 114 117 111 60%

102

80 96 96 50%

85

Water in store 2013 40%

60 70 72

68 67 64

59 58 58 30% Water in store 10 year average 40 49 51

45 20%

32

20 29 28

25 10% Water storage capacity

0 0%

Jan Feb MaR APR May Jun Jul Aug Sep Oct NoV Dec

14

Mains Network

The Company works hard to ensure that, wherever possible, we supply water that meets the 50mg/l regulatory limit for nitrates. We carefully select the best sources of water for treatment and blend water from different sources to reduce nitrate concentrations. The extent to which we are able to meet the regulatory limit is outside of our control.

Nitrate concentrations in raw water sources are directly dependent on the timing and volume of rainfall during the potato growing season coupled with the volume of fertiliser being applied to the land; factors over which we have no control. It is our view that measures need to be implemented by the States of Jersey, such as effective catchment management programmes, that reduce the nitrate pollution

at source. We are working with the Environment Department of the States of Jersey to investigate the means by which measures can be introduced that will allow us to supply

water that meets the 50mg/l limit.

During 2013, the Company installed an ultraviolet (UV) treatment plant at Handois Water Treatment Works. The UV plant acts as a primary disinfectant to protect against organisms including Cryptosporidium. A further UV plant  will be installed at Augrs Water Treatment Works in 2014.

In 2013, we renewed 2.5km of water mains, predominantly in St Helier, the oldest part of our network. The renewal of mains involves not only the replacement of old, end of life, unlined cast iron or galvanised iron pipework but also the service connections in preparation for meter reading.

We also extended our network with the addition of just under 1.5km of new water mains connecting housing developments in line with the prior year.

The incidence of burst mains on Jersey Water s network is very low. In 2013, there were 14 bursts, below the 5 year average of 18 and compared to 21 the prior year. The burst frequency is one of the lowest in the British Isles and can be attributed to favourable ground conditions, the good condition of the

mains network and the mains renewal programme.

One of our key goals over the next few years is to reduce leakage from our network so that we have the lowest rates in the British Isles. Our leakage rate for 2013 was 3.19Ml/d (2012: 3.35Ml/d), already one of the lowest. The reduction of 5% in the year is testament to the beneficial effects of our proactive approach to detecting and fixing bursts quickly and the impact our metering and mains renewal programmes are having in identifying and resolving leakage.

During the year the Company s Water Regulations Enforcement Officer carried out 573 inspections to customer premises to inspect and advise on correct plumbing installations to ensure compliance with the Water Fittings Byelaws. A total of 10 rectification notices were issued following those inspections.

Max nitrate levels by month

70.0 60.0

Max concentration (mg/l)

50.0 40.0

50mg/l limit 70mg/l limit  

30.0

20.0

10.0

Jan Feb MaR APR May Jun Jul Aug Sep Oct NoV Dec

Employees

Our employees are what make Jersey Water the success that it is. We employ 80 dedicated and loyal staff and rely on them to deliver a high quality product and service 24 hours per day, every day.

The nature of our work can sometimes be hazardous, so providing a safe working environment is our primary concern. During the year there was one Time Lost accident reported in accordance with the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 1995 (RIDDOR).

We review the circumstances surrounding all accidents to determine whether changes in practices or procedures are required to help prevent their reoccurrence.

In 2013, we published a revised Safe Working Procedures Manual; with copies being provided to all staff. The Manual provides staff with practical guidance on the safe way to approach the many and varied tasks that are undertaken around the Company.

One of our key objectives is to ensure that Jersey Water is a great place to work. To measure this, we undertook our first ever staff engagement survey during 2013 and were delighted with the results which included an overall staff engagement score of 94%.

In December 2013, we launched our Ideas on tap staff suggestion scheme to encourage participation and involvement in the future of the organisation. The scheme rewards employees for submitting ideas and suggestions to improve customer service, efficiency and team work.

Long service awards were made to two members of staff in 2013; Peter Le Guilcher, Network Assistant Manager, and Edmund Huchet, a Treatment Works Plant Operator. Both have worked for Jersey Water for 30 years. The average length of service is 15 years and the average age of employees is 46.

Jersey Water actively supports staff wishing to develop new

skills and we have a number of staff working towards

professional qualifications. In 2013, we were proud to support

our Infrastructure Manager, Hugo Willson, and our Water Supply Manager, Malcolm Berridge, who both achieved the Certificate

in Company Direction from the Institute of Directors and our Procurement Supervisor, Terence Gasnier, who was awarded a Level 3 Certificate from the Chartered Institute of Purchasing and Supply. Malcolm Berridge was the recipient of a Business Skills Award by Utilities and Service Industries Training Limited (USIT), a UK charity providing grants and bursaries for education and training for the utilities industries.

Environment

As a water supply company our activities will inevitably have an impact on the environment. In 2013, the Company became a member of the States of Jersey Eco-Active scheme and we began the implementation of an Environmental Management System to help us run our business in an increasingly sustainable manner.

Jersey Water is one of the largest landowners in Jersey, with property around the reservoirs and in our catchment areas. Many of these areas of land are open to the public or used by local clubs and associations for special events. We are proud to support organisations including Jersey Trees for Life, who manage the Arboretum at Val De La Mare, the Jersey Motor Cycle and Light Car Club, who use our tracks to stage events, and the Jersey Fresh Water Angling Association whose members use the Company s main reservoirs for fishing.

In 2013, we submitted plans to demolish the property known

as Millbrook Lodge and rebuild it on a new site to the north of Millbrook Reservoir. The building, which is designated as a

 Potential listed building by the States of Jersey Planning & Environment Department, was built in c1890 on unstable ground and part of the foundations have subsided leaving the building with serious structural defects. The property has been uninhabited since the late 1990 s.

After years of investigation into the options available, including demolition, repair and rebuilding, the Company has concluded that the most appropriate and financially viable course of action is the careful transfer of the building to a new site. The Company awaits the outcome of the planning decision which is expected in early 2014.

In 2013, the Company became

a member of the States of  

Jersey Eco-Active scheme  

and we began the  

implementation of   an Environmental  

Management System

Community

In 2012, the Company celebrated its 130th Anniversary and offered grants of up to £10,000 to local charities. All of our winners have now received their awards which have been used to fund initiatives to help the local community. Jersey Water staff got to see first-hand how the awards were spent; each charity was teamed up with a member of staff who spent time with them to learn more about their activities and see how our funds were being put to good use.

To maintain some of the momentum created by the 130th Anniversary celebrations, the Company has established a Charity committee to raise funds for a nominated charity, chosen each year by the staff. In 2014, the charity we will be supporting is Friends of Jersey Oncology (www.Fojo.je), a local charity whose objective is to provide additional care, comfort and support for the Jersey Oncology Unit s patients and their families.

Following on from the success of previous fundraising events, Jersey Water s social club undertook another Butt Push in the summer, pushing a metric tonne water butt from West Park to St Aubin. Along the way, staff raised £500 for Jersey Cheshire Home.

Our reusable water bottles were very popular at events during the year. We were pleased to support the De La Salle College Round Island Walk and Primary School Walk, the Le Rocquier School Walk and the Big Gig in the Park.

In 2013, the Company provided work experience placements and interview experience to clients of the Jersey Employment Trust, Project Trident, Workwise and Advance to Work scheme.

The David Norman Bursary Award is now in its fifth year and becoming increasingly popular. The scheme is designed to assist local people embarking on a degree course in a subject related to the supply of water (e.g. engineering, environmental sciences, chemistry) and provides funding for one student each year towards the cost of study for the duration of their degree course. As well as the financial support, the bursary programme also includes paid work-place experience.

The Strategic Report was approved by the board on 28 February 2014 and signed on its behalf by:

Howard Snowden Managing Director

Jersey Children s CharityJersey Youth TrustJersey Child Care Trust Project Linus UKMultiple Sclerosis Society of JerseyThe Antoine Trust

St John Ambulance JerseyJersey Cancer Trust The Grace Trust Jersey The Donna Annand Melanoma CharityFriends of the Bridge Brook in Jersey Macmillan Cancer Support (Jersey)Jersey Friends of Anthony Nolan

La Motte Street Youth ProjectParkinson s UK Jersey BranchEarsay Jersey Alzheimer s AssociationFreedom Church JerseyBrighter Futures

Compliance with the UK  Director independence

Corporate Governance Code 2012Tbhee inBdoeapredn cdoennst idine crsh aarlal oc ft ethr  ea nNd o j nu -dEg xe emcue tn ivt e.    DIn i  rd ee ct te or rms tin oi ng

independence, the Board considers the specific circumstances The Company has adopted the principles of good corporate  of each Director. The Board has determined that notwithstanding governance and best practice set out in the UK Corporate  his length of service on the Board exceeding nine years (one of Governance Code 2012 ( the Code ). The Board is of the opinion  the criteria for independence set down in the Code), Mr Marie that, throughout the year under review, the Company has been in  remains independent in character and judgement. The size of compliance with the Main Principles of the Code. the Company and the role of Mr Marie on the board relative to

his other personal and professional interests means that in the Directors and the Board  opinion of the Board, independence has been maintained.

The Board has therefore concluded that Tony Cooke, Mary

Curtis , Stephen Kay, Stephen Marie and Peter Yates shall be The Board deemed independent.

The Board comprises eight Directors, two of whom are Executive and six of whom are Non-Executive Directors. The Board meets regularly, normally eight to ten times each year and for ad hoc meetings as and when required.

The role of the Board is to set the overall operating strategy, approve detailed operating plans and budgets, monitor performance against plans and oversee the activities of the Executive Directors. The Board has delegated the day to day operation of the Company and execution of strategic plans to the Executive Directors. The Board is supplied with regular timely management information through which it can monitor the performance, activities and financial position of the Company and on which decisions can be based.

Meetings and Committee membership

Mr Keen, as Chairman of the Company, was considered independent on appointment and, in accordance with the Code, is not subject to the independence test thereafter.

Performance evaluation

In order to ensure that the Board continues to operate effectively, it has developed and implemented a process of performance evaluation. The process measures the performance of the Board as a whole against a set of predefined targets and of individual Directors by way of self and peer appraisal. The results of the performance assessments and appraisals are fed back to the individual Directors and the Board as a whole (as appropriate) and action taken accordingly. A similar approach is adopted to assess the performance of the Audit, Remuneration and Nomination committees.

During the year, the Board met eight times. Details of  Other significant commitments

attendance at Board meetings are provided in the table below.

The Board has a process in place for reviewing the other

significant commitments of Non-Executive Directors and Board MEETINGStheir impact on the ability of the Non-Executive Directors  

to discharge their duties to the Company.

Number of meetings in 2013 8

Reappointment

Tony Cooke 8

Mary Curtis 8 Except where a Director is appointed to fill a casual vacancy,

all Directors are appointed by the Shareholders at the Annual Stephen Kay   6 of 6 General Meeting. One third of the Directors, or where the number (appointed 26 April 2013) of Directors is not a multiple of three, the number nearest to one

Kevin Keen 8 third, retire by rotation (based upon length of service) and, where

eligible, seek re-election each year. No Director may serve a term Stephen Marie 8 of longer than three years without seeking re-election. The

Company has adopted a policy of requiring Non-Executive Peter Yates 8

Directors who have served on the Board for nine years or more Helier Smith 8 to retire from the Board and seek re-election on an annual basis.

Directors appointed to fill a casual vacancy must seek formal Howard Snowden 8 appointment by the shareholders at the next Annual General

Meeting.

Relations with shareholders

The Company is in regular contact with its majority and controlling shareholder, the States of Jersey. Details of contact with and the views of the States of Jersey are passed on to the whole Board as necessary. The Company uses events such as the Annual General Meeting to interact with and hear the views of all shareholders.

Internal Controls

The Board is responsible for ensuring that there are effective systems of internal control in place to reduce the risk of misstatement or loss and to ensure that business objectives are met. These systems are designed to manage and mitigate (rather than to eliminate) the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.

The Company has developed and adopted corporate and operational risk registers detailing and risk grading the significant risks faced by the Company. Alongside the register is a process through which the significant risks faced by the business are identified and evaluated on a regular basis and the controls operating over those risks are assessed to ensure that they are adequate.

The process of risk assessment and reviewing the effectiveness of the systems of internal control is regularly reviewed by the Audit Committee, accords with Turnbull guidance and has been in place for the whole of the year, up to and including the date on which the financial statements were approved.

Controls adopted by the Board (or its Committees) to ensure the effectiveness of the systems of internal control include the following:

The review of the corporate and operational risk and control registers maintained and updated by the Company and of the status of any actions arising from their regular review.

The receipt of confirmation from Senior Management of the proper operation of controls throughout the period of the review.

The review and approval during the year of terms of reference of Committees.

The review and approval during the year of the schedule of matters specifically reserved for its attention.

The review of reports received from the Audit Committee concerning the findings of the external auditors on the financial statements of the Company and the systems

of internal control.

Audit Committee

The Audit Committee currently comprises Peter Yates (Chairman), Tony Cooke and Stephen Kay. Until Stephen Kay s appointment to the Committee in December 2013, Kevin Keen stood as an alternate. The auditors, Price waterhouseCoopers

CI LLP and the Executive Directors, Howard Snowden and Helier Smith, also attend the meetings by invitation. Attendance at Audit Committee meetings in 2013 are provided below.

*by invitation

The terms of reference of the Audit Committee require it to meet at least twice per annum. Additional meetings may be called where deemed necessary. The Committee is charged by the Board with the following main responsibilities:

To monitor the integrity of the financial statements of the Company and any formal announcements relating to the Company s financial performance.

To provide advice, when requested by the Board, on whether the annual report taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess performance, the business model and strategy.

To review and monitor the adequacy, operation and effectiveness of the Company s internal financial and other controls and make recommendations for improvement where necessary.

To oversee the external audit process and manage the relationship with the external auditors.

To make recommendations to the Board as to the re-election and remuneration of the auditors at the Annual General Meetings based upon its assessment of the performance of the auditors and giving due regard to their continued independence and any other regulatory or professional requirements.

The Committee regularly assesses the need for an internal audit function and has determined that the establishment of such a function is, at the present time, not cost effective.

Review of financial statements

To enable the Committee to effectively discharge its responsibilities in respect of the financial statements a number of processes are in place.

The Committee is briefed by the Finance Director in advance of the year-end on the significant issues pertaining to the financial statements and how they will be dealt with. These issues are generally focused on the areas of subjectivity in the financial statements (income recognition, pension scheme valuation assumptions and property valuations), changes in accounting or disclosure requirements and the accounting or disclosure implications of one off events occurring in the year. Where necessary, the Committee considers evidence and independent third party advice

on the key matters for consideration.

At the year-end, the Committee reviews the financial statements and related announcements and considers them

in the context of the significant issues identified, the suitability of any key assumptions and the extent that they have been disclosed. The whole process is completed in consultation with the auditors whose view is sought by the Committee. The Committee also consider, based on their knowledge of the business and issues arising, whether they can advise the Board that the annual report taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess performance, the business model and strategy.

Auditor reappointment and additional services

The performance and effectiveness of the external auditors is monitored on an ongoing basis and formally considered by the Committee before recommendation is made to the Board regarding their reappointment. The Audit Committee considers the length of service of the incumbent audit firm, the effectiveness of the audit process, the independence and objectivity of the team, the depth and breadth of the audit approach, the level of fees and the quality of service received.

The Audit Committee considers the impact of the provision of any non-audit services by the external auditor on the objectivity and independence of the audit. The consideration has regard to the nature of the non-audit work, size of the fee relative to the audit, any potential involvement of the audit team in the work and the longer term effect of the non-audit services on the relationship with the audit firm, including an assessment of their continuing objectivity and independence. The fees paid to the auditors for non-audit services are detailed in note 13 of the accounts.

Remuneration Committee

The Remuneration Committee comprises Stephen Marie (Chairman), Mary Curtis and Kevin Keen. The Executive Directors, Howard Snowden and Helier Smith, may also attend the meeting by invitation. No Director plays any role in the determination of their own remuneration. Details of meetings and attendance are provided below.

Review and determine the level of remuneration of Executive Directors.

Review and determine the level of remuneration of the Senior Management Team.

Review periodically the terms and conditions of employment of the Executive Directors and Senior Management Team.

Make recommendations to the Board on the Company s overall framework of salaried staff remuneration and costs.

Review and make recommendations to the Board concerning the remuneration of the Chairman (subject to approval by shareholders at the Annual General Meeting).

Nomination Committee The other duties of the Committee include:

The Nomination Committee comprises Kevin Keen  Making recommendations to the Board as to the re- (Chairman), Tony Cooke, Mary Curtis , Stephen Kay, Stephen election of Directors under the retirement by rotation Marie and Peter Yates. The Executive Directors, Howard  provisions in the Company s Articles of Association whilst Snowden and Helier Smith, may also attend the whole or parts  giving due regard to their performance and ability to

of meetings by invitation. Details of meetings held and  continue to contribute to the Board in light of the attendance in 2013 are included in the following table: knowledge, skills and experience required.

Reviewing and making recommendations to the Board as to the succession planning for Executive and Non-Executive Directors.

Regularly reviewing the structure, size and composition including the balance of skills and attributes required of the Board compared to its current position and making recommendations to the Board with regard to any changes.

Keeping under review the leadership needs of the organisation, both Executive and Non-Executive, including succession plans, with a view to ensuring the continued ability of the organisation to operate effectively.

When selecting candidates for potential appointment as a Non-Executive Director, the Committee evaluates the needs of the Company and identifies the necessary skills and experience required by candidates for consideration.

In 2013, the Company used an independent external recruitment consultancy, Thomas & Dessain Limited,

to assist in the selection process for Board appointments.

The Committee is primarily responsible for the selection and  The Nomination Committee makes recommendations to the appointment of the Company s Executive and Non-Executive  Board taking into account the performance of the candidates Directors as and when required. at interview, their skills and experience and their ability to meet

the specific needs of the Company.

It is the policy of the Board to populate itself with Directors  who have a diverse range of skills, attributes and backgrounds so that collectively, the Board is appropriately resourced to discharge its duties effectively and meet the changing needs of the business. A wide range of factors are considered in determining the appropriate composition of the Board including but not limited to technical expertise, local market knowledge experience, independence, length of service on the Board and diversity including gender balance.

Activities of the Company

The Company, which was incorporated in 1882, has adopted Jersey Water as its trading name. Jersey Water is the sole supplier of treated water to the Island of Jersey.

Dividends

Ordinary and A ordinary shares

The Company paid an interim dividend of 6.426 pence per share on 6 November 2013 (2012: 6.30p). The Directors are proposing a final dividend on ordinary and A ordinary shares for 2013 of 12.516 pence (2012: 12.09p), bringing the total dividend for 2013 to 18.942 pence per share (2012: 18.39p).

As described on page 20, the Board has undertaken an

annual formal assessment of its performance and that of the individual Directors, including structured meetings between the Directors being assessed and the Chairman or, in the case of the Chairman, the Senior Independent Director. Following this review, the Chairman has confirmed that the Directors standing for re-election at the Annual General Meeting continue to perform effectively and demonstrate commitment to their roles. In the case of the Chairman s re-election, this confirmation has been made by the Senior Independent Director.

Directors interests

Particulars of the holdings of Directors, including family and beneficial interests, in the share capital of the Company as

at 31 December 2013 are:

2013 2012

£ 000 £ 000

Interim dividend paid 621 609 Final dividend proposed

1,209 1,168 _______ ______

£1,830 £1,777

Preference shares

There have been no subsequent changes in Directors interests In 2013, the Company paid dividends on preference shares  up to the date of approval of the financial statements.

totalling £381,000 (2012: £381,000).

Insurance of Directors and Officers of the Company

Directors

Changes in Directors

The Directors of the Company on the date the financial statements were approved are detailed on page 1. With the exception of Mr Stephen Kay, all Directors were Directors of the Company throughout the year ended 31 December 2013. Mr Kay was appointed to the Board on 26 April 2013.

In accordance with the provisions of Article 49 of the Company s Articles of Association, Mr Kevin Keen, Mr Stephen Marie and Mr Helier Smith will retire by rotation at the forthcoming Annual General Meeting, and except for Mr Marie, being eligible, offer themselves for re-election. Mr Stephen Marie is retiring from the Board and will not be seeking re-election.

The Company maintains an insurance policy on behalf of all Directors and Officers of the Company against liability arising from neglect, breach of duty and breach of trust in relation to their activities as Directors & Officers of the Company.

Significant shareholdings

Set out below are details of the significant voting rights (3% or more) in shares of the Company as at 28 February 2014.

Our leakage Shareholder % of total voting  rate for 2013

rights held was 3.19Ml/d

The States of Jersey 83.33% 5% lower than 2012

The States of Jersey owns 4,620,000 (100%) A Ordinary shares, 2,520,000 (50%) Ordinary shares and 900,000

(100%) 10% cumulative fifth preference shares.

The A Ordinary shares, whilst in their ownership, have voting rights that confer twice the number votes than those cast in respect of all other shares.

Independent Auditors

A resolution to re-appoint Price waterhouseCoopers CI LLP  we replaced

as the Company s auditor will be proposed at the  2.5km of mains fFoortrh acnodmoinng b Ae nh naluf aolf Gtheen Beroaal rMd:eeting. in the year

Margaret Howard Company Secretary

28 February 2014

We added

406 new

connections  We extended during 2013 our network of water mains by

just under 1.5km

Directors responsibility statement

Statement of Directors responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Jersey Company Law requires the Directors to prepare financial statements for each financial period in accordance with generally accepted accounting principles. The financial statements of the Company are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors should:

select suitable accounting policies and then apply them consistently;

make judgments and estimates that are reasonable and prudent;

specify which generally accepted accounting principles have been adopted in their preparation; and

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping accounting records which are sufficient to show and explain its transactions and are such as to disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements prepared by the Company comply with the requirements of the Companies (Jersey) Law 1991. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company s website. Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement of the directors in respect of the Annual financial report

We confirm that, having taken all of the matters considered by the Board and brought to its attention during the year into account and to the best of our knowledge, the financial statements, taken as a whole, are fair, balanced and understandable and provides the information necessary for shareholders to assess the Company s performance,

business model and strategy.

Approved by the board on 28 February 2014 and signed on its behalf by:

Kevin Keen Chairman

120 daThe Company s resercapacity to store apprAverage demand for wvoirs hav yse sufficient oximatelyater

Independent Auditors Report

to the members of The Jersey New Waterworks Company Limited

Report on the financial statementsAn audit also includes evaluating the appropriateness of

accounting policies used and the reasonableness of accounting estimates made by the directors, as well as

We have audited the accompanying financial statements  evaluating the overall presentation of the financial statements. of The Jersey New Waterworks Company Limited  

(the Company ) which comprise the balance sheet as of  We believe that the audit evidence we have obtained is

31 December 2013, the profit and loss account, the statement  sufficient and appropriate to provide a basis for our audit

of total recognised gains and losses and the cash flow  opinion.

statement for the year then ended and a summary of

sinigfonrimficaatinotna.ccounting policies and other explanatory  Opinion

Directors responsibility for the financial statements

The directors are responsible for the preparation of financial statements that give a true and fair view in accordance with United Kingdom Accounting Standards and with the requirements of Jersey law. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control.

In our opinion, the financial statements give a true and fair view of the financial position of the Company as of 31 December 2013, and of its financial performance and its cash flows for the year then ended in accordance with United Kingdom Accounting Standards and have been properly prepared in accordance with the requirements of the Companies (Jersey) Law 1991.

Report on other legal

And regulatory requirements

We read the other information contained in the Annual Report and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. The other information comprises only the Directors Report, the Directors Responsibilities Statement and the Five Year Summary

In our opinion the information given in the Directors Report is consistent with the financial statements.

This report, including the opinion, has been prepared for and only for the Company s members as a body in accordance with Article 113A of the Companies (Jersey) Law 1991 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Mark James

For and on behalf of   Price waterhouseCoopers CI LLP Chartered Accountants  

Jersey, Channel Islands

28 February 2014

BALANCE SHEET 31 DECEMBER 2013

Note 2013 2012

£ 000 £ 000 £ 000 £ 000

Fixed assets 2 68,222 67,732

Current assets

Stock and work in progress 555 622 Debtors 3 3,555 4,590 Bank and cash 4,598 2,653

______ ______

8,708 7,865

Creditors - Amounts falling due within one year

Creditors and accruals 4 (2,062) (2,236) Bank loans 6 - (6,000) Income tax  (700) (620)

______ ______

(2,762) (8,856)

Net current assets / (liabilities) 5,946 (991)

________ _______ Total assets less current liabilities 74,168 66,741

Creditors - Amounts falling due after more than one year

Bank loans 6 (14,900) (8,900) Non-equity preference shares 9b (5,382) (5,382)

______ ______

(20,282) (14,282)

Provisions for liabilities and charges

Deferred taxation 7 (5,824) (5,690)

________ _______ Net assets excluding pension liability 48,062 46,769

Pension asset / (liability) 8 227 (385)

________ _______

Net assets £__4____8__,__2__8__9__ £__4____6__,3__8__4__

Equity capital and reserves

Called up equity share capital 9a 4,830 4,830 Reserves 10 43,459 41,554

________ _______

Shareholders funds 11 £__4____8__,__2__8__9__ £__4____6__,3__8__4__

The financial statements on pages 29 to 47 were approved by the Board of Directors on 28 February 2014 and were signed on its behalf by:

Kevin Keen Chairman

PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 31 DECEMBER 2013

Note 2013 2012

£ 000 £ 000 £ 000 £ 000

Turnover 12 14,916 14,609 Operating Expenditure 13  (10,116)  (9,849)

_______ ______ Operating Profit before exceptional items 4,800 4,760

Charitable Contributions 15 - (130)

_______ ______ Operating Profit after exceptional items 4,800 4,630

Profit on disposal of fixed assets 179 598

Interest

- payable 16 (518) (539)

- receivable 10 6 Non-equity dividends 17 (381) (381) Other finance income 8 228 172

____ ____

(661) (742) _______ ______

Profit before taxation 4,318 4,486 Jersey income tax 5  (880)  (789)

_______ ______ Profit for the financial year £____3__,__4__3__8__ __£__3__,6__9__7__

Earnings per ordinary share of £0.5 19 £__0____.3__6__ __£__0__.3__8__

There is no material difference between the reported profit for 2013 and 2012 and the profit prepared on the historical cost basis. The results for the current and prior year all relate to continuing operations.

Statement of Total Recognised

Gains and LossesFOR THE YEAR ENDED 31 DECEMBER 2013

Note 2013 2012

£ 000 £ 000

Profit for the year 3,438 3,697 Gain / (Loss) arising on pension liabilities 8 427 (231) Loss arising on revaluation of investment property 2 (171) (94)

_______ ______

Total recognised gains and losses for the year  __£__3__,__6__9__4__ __£__3__,3__7__2__

CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2013

Note 2013 2012

£ 000 £ 000 £ 000 £ 000

Net cash inflow from operating activities 20 7,979 6,286 Returns on investments and servicing of finance

Interest received 10 6

Interest paid (554) (536)

Non-equity dividends paid (381) (381)

____ ____

Net cash outflow from returns on

investments and servicing of finance (925) (911) Taxation

Jersey income tax paid (620) (73) Capital expenditure

Purchase of fixed assets (2,886) (3,015)

Disposal of fixed assets 186 714

______ ______

(2,700) (2,301)

Equity dividends paid (1,789) (1,744)

_ _ ___ _____ Cash inflow before the use of liquid resources 1,945 1,257

Management of liquid resources

Term deposit (3,500) -

_______ ______

(Decrease) / Increase in cash 21 (£____1__,5____5__5__) __£__1__,2__5__7__

Reconciliation of net cash flow to movement in net debt

Note 2013 2012

£ 000 £ 000

(Decrease) / Increase in cash 21 (1,555) 1,257 Liquid resources movement 21 3,500 - Foreign exchange currency movement - (1)

________ ________

Movement in net debt 21 1,945 1,256 Net debt brought forward 21 __(1_7_,_6_2_9_) _(_1_8_,_8_8_5_)

Net debt carried forward 21 __£__(1____5__,6____8__4__) __£__(1__7__,__6__2__9__)

Notes to the financial statements

1 Accounting policies

The following statements outline the main accounting  Stock and work in progress

policies applied in the preparation of the financial

statements. Stock and work in progress is valued at the lower of cost and

net realisable value.

Basis of accounting

Fixed assets and depreciation

The financial statements are prepared under the historical cost convention as modified for the revaluation of investment properties and in accordance with United Kingdom Accounting Standards.

Going concern

The Company s business activities, together with the factors likely to affect its future development, performance and position and a summary of the financial position of the Company, its cash flows, liquidity position and borrowing facilities are described in the Strategic Review Section on pages 6 to 18 and in notes 6 and 21. The Company has

a wide and varied customer base within Jersey, steady demand for its products and services and a stable and

well established treatment and distribution network.

The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future and

have therefore selected the going concern basis in preparing the financial statements.

Turnover

Turnover represents the total value of water charges net

of GST, together with minor contracts and rental income. Income from minor contracts is recognised within turnover upon completion of the contracted works. Income arising on minor contracts to be provided in the future is treated

as deferred income.

Water charges

Water charges are billed either as a fixed rate (in advance) or as a metered charge (in arrears). Both fixed rate and metered water income is recognised for the year up to

31 December.

Stocks of water

In accordance with normal water industry practice, no value is placed on stocks of water held within reservoirs, treatment works or the mains network.

Fixed assets under construction are recognised within

 Uncompleted Works until such time as they are first brought into use. At this point the asset is transferred to Property and Completed Works and depreciation commences. Subsequent qualifying expenditure is transferred directly to

 Property and Completed Works .

Depreciation is charged on a straight line basis in accordance with the rates of depreciation set out below for each major asset type. No depreciation is provided on freehold land.

Asset type Depreciation period

Investment property

Certain of the Company s properties originally acquired for business purposes, or otherwise used within the business,

are no longer so used and are now held for investment purposes. These properties are treated as investment properties and accounted for in accordance with Statement

of Standard Accounting Practice 19, Accounting for Investment Properties, and are included in the balance sheet at open market value. The surplus or deficit on revaluation is taken to the revaluation reserve. No depreciation is provided in respect of freehold investment property.

Notes to the financial statements (CONTINUED)

Interest rate swaps

Net interest payable or receivable under interest rate

swap contracts entered into to hedge the interest rate risk exposure on borrowings is recognised in the profit and loss account within Interest Payable or Interest Receivable as appropriate. Accrued net amounts payable or receivable are carried in the balance sheet within Accruals and deferred income and Accrued income and other debtors respectively. No carrying value is recognised for interest rate swap contracts entered into to hedge the interest rate risk exposure on borrowings.

Deferred taxation

Deferred taxation is calculated on a full provision basis

in accordance with Financial Reporting Standard 19

 Deferred Taxation . As required by the standard, no provision is made for deferred tax in respect of expenditure on which all of the conditions for retaining tax allowances have been met. Deferred tax balances are not discounted to reflect the time value of money.

Retirement benefits

The Company values its liability in respect of defined retirement benefits in accordance with FRS 17 and following the projected unit cost method of calculation.

Any surplus or deficit in the defined benefit plan, being the difference between the value of the plan assets and the

present value of the plan liabilities, is recognised in the balance sheet as an asset or liability to the extent that any surplus is recoverable through future reduced contributions or that, conversely, any deficit reflects a legal or constructive obligation. The defined benefit asset or liability is shown net of any related deferred tax liability or asset.

Cash at Bank and liquid resources

Included within liquid resources in the cash flow statement are cash balances held on fixed deposit for a term of one month or greater. These items are included within Bank and Cash in the balance sheet.

2. Fixed Assets

Property and  Freehold  Uncompleted   Motor vehicles,   Total

completed   investment  works mobile plant &

works property equipment

£ 000 £ 000 £ 000 £ 000 £ 000

Cost or valuation

Brought forward  93,421 1,241 141 2,405 97,208 Additions 2,348 - 299 231 2,878 Disposals (747) - - (129) (876) Transfers 134 - (134) - - Deficit on revaluation - (171) - - (171)

________ _______ _____ _______ ________

Carried forward £95,156 £1,070 £306 £2,507 £99,039

________ _______ _____ _______ ________

Depreciation

Brought forward (27,744) - - (1,732) (29,476) Charge for the year (1,905) - - (305) (2,210) Disposals 747  -  - 122 869

 _________ ___ ___ _______ _________

Carried forward £(28,902) £ - £ - £(1,915) £(30,817)

_________ ___ ___ _______ _________

Net book value

Brought forward __£__6__5__,__6__7__7__ __£__1__, __2__4__1__ __£__1__4__1__ __£__6__7__3__ __£__6__7__,__7__3__2__

Carried forward £____6__6__,__2__5__4__ __£__1__,__0__7__0__ __£__3__0__6__ __£__5__9__2__  £____6__8__,__2__2__2__

Included within fixed assets is £114,000 (2012: £101,000) relating to internal labour costs capitalised in the year. At 31 December 2013 capital commitments contracted for amounted to £37,000 (2012: £11,000).

Market value of freehold investment properties

The Company owns two freehold residential investment properties.

The freehold investment properties were valued in 2013 by an external valuer, CB Richard Ellis Limited, on the basis of open market value in accordance with the requirements of the RICS Appraisal and Valuation Standards. The properties, which had a combined net book value of £1,241,000, were revalued as at 31 December 2013 at £1,070,000.

3. Debtors

2013 2012

£ 000 £ 000

Trade debtors 1,513 3,138 Prepayments 399 354 Accrued income and other debtors 1,643 1,098

_______ ______

__£__3__,__5__5__5__ £__4____,5__9__0__

4. Creditors and accruals

2013 2012

£ 000 £ 000

Trade creditors 751 709 Other creditors 452 248 Contract retentions 7 25 Accruals and deferred income 852 1,254

_______ ______

__£__2__,__0__6__2__ £__2____,2__3__6__

5. Jersey income tax

2013 2012

£ 000 £ 000

Current tax

Income tax on the profit for the year 720 658 Income tax on the profit for prior year 26 -

_____ _____

746 658

Deferred tax

Charge for the year 134 131 _____ _____

Total tax charge for the year __£__8__8__0__ __£__7__8__9__

Factors affecting tax charge for year

The tax assessed for the year is lower than the standard rate of Jersey income tax (20%) applicable to utility companies. The differences are explained below:

2013 2012

£ 000 £ 000

Profit before tax __£__4__,__3__1__8__ £__4____,4__8__6__

Profit before tax multiplied by the standard rate of Jersey income tax of 20%  864 897 Tax at 20% on:

Capital allowances for period in excess of depreciation (13) (38) Capital expenditure, deductible for tax purposes (171) (157) Profit on sale of fixed assets (36) (120) Dividends on non-equity shares - non deductible 76 76

_____ _____

Current tax charge for year __£__7__2__0__ __£__6__5__8__

6. Bank loans

Repayment Dates 2013 2012

£ 000 £ 000

Facilities drawn down

HSBC Bank plc 2013 - 6,000 HSBC Bank plc 2015  3,650 3,650 HSBC Bank plc 2021  5,250 5,250 HSBC Bank plc 2023  6,000 -

________ _______

__£__1__4__,__9__0__0__ £__1__4__,__9__0__0__

Loans falling due within one year - 6,000 Loans falling due between one and two years 3,650 - Loans falling due after two years but less than five years - 3,650 Loans falling due after five years  11,250  5,250

________ _______

__£__1__4__,__9__0__0__ £__1__4__,__9__0__0__

The Company has a rolling overdraft facility with HSBC Bank plc. Unconditional guarantees have been given by the States of Jersey for the repayment of the principal and interest on loans up to a maximum of £16.2m taken out to fund the Company s capital works programme.

During the year facilities totalling £6,000,000 due for repayment in 2013 were renewed for a further period of ten years and are now due for repayment in 2023.

Notes to the financial statements (CONTINUED)

7. Deferred taxation

2013 2012

£ 000 £ 000

Accelerated capital allowances 5,824 5,690 _______ ______

Net liability £5,824 £5,690 ______________ ____________

Brought forward 5,690 5,559 Amounts charged in the profit and loss account 134 131

_______ ______

At 31 December __£__5__,__8__2__4__ £__5____,6__9__0__

8. Pensions

The Company operates two formal pension schemes; a defined contribution scheme and a defined benefit scheme. There are also certain past employees whose pension or pension supplements, which are of a defined benefit nature, have not been funded by the Company s present or previous pension agreements (the unfunded scheme ). Where applicable, the liability of the Company in respect of the unfunded scheme is included within the disclosure below relating to the defined benefit section. The defined benefit section of the scheme was closed to new entrants with effect from 1 January 2003.

The defined contribution scheme and defined benefit scheme are both sections of The Jersey Water Pension Plan. Defined contribution section

The defined contribution section of the plan was opened to new members on 1 May 2003. Employer contributions during the period to 31 December 2013 totalled £78,000 (2012: £70,000).

Defined benefit section and unfunded scheme

The full FRS17 actuarial valuation as at 31 December 2013 shows a net surplus of £227,000 compared to a deficit of £385,000 at 31 December 2012.

The major assumptions used by the actuary were:

2013 2012 Rate of increase in salaries 3.80% 2.87% Rate of increase in pensions accrued after 1 January 1999 3.50% 2.82% Discount rate 4.46% 4.45% Expected return on plan assets 6.02% 5.78% Inflation assumption 3.80% 2.87% Life expectancy assumptions

Current pensioners at 65 - Male 88 88 Current pensioners at 65 - Female 91 91 Future pensioners at 65 - Male 91 90 Future pensioners at 65 - Female 93 93

The post-retirement mortality assumptions allow for expected increases in longevity.

The overall expected rate of return is based on the weighted average return of each class of asset at the start of each accounting period.

2013 2012

£ 000 £ 000

Reconciliation of the present value of scheme liabilities

Opening scheme liabilities 19,794 17,908 Current service cost 290 298 Employee contributions 82 82 Interest cost 881 879 Actuarial losses 782 1,523 Past service costs 70 - Benefits paid (701) (896)

________ _______

Closing scheme liabilities __£__2__1____,1__9__8__ £____1__9__,7__9__4__

Analysis of funded and wholly unfunded scheme liabilities

Funded scheme 21,118 19,679 Wholly unfunded scheme 80 115

________ _______

Total present value of scheme liabilities £21,198 £19,794

________________ ______________ Reconciliation of the fair value of scheme assets

Opening fair value of scheme assets 19,312 17,524 Expected return 1,109 1,051 Employer contributions 364 317 Employee contributions 82 82 Actuarial gains 1,316 1,235 Benefits paid (701) (896)

_______ _______

Closing fair value of scheme assets £21,482  £19,313

______________ ______________ Actual return on scheme assets £2,425 £2,286

______________ ______________

Analysis of amounts shown in the balance sheet

Fair value of plan assets 21,482 19,313 Present value scheme liabilities (21,198) (19,794)

_______ _______

Surplus / (deficit) 284 (481) Related deferred tax (liability) / asset (57) 96

_______ _______

Net surplus / (deficit) ______£__2__2__7__ ____£__(__3__8__5__)

2013 2012

£ 000 £ 000

Analysis of amounts recognised in the profit and loss account

Current service cost (290) (298) Expected return on pension plan assets 1,109 1,051 Interest on pension plan liabilities (881) (879) Past service cost (70) -

______ _____

Total __£__(__1__3__2__) __£__(1__2__6__)

Current service costs, past service cost and curtailments are included within operating expenditure in the profit and loss account. Expected returns on pension plan assets and interest on pension plan liabilities are shown net within other finance income in the profit and loss account.

2013 2012

£ 000 £ 000

Analysis of amounts recognised in the statement of total recognised gains and losses

Actual return less expected return on pension scheme assets 1,316 1,235 Experience gains arising on scheme liabilities 117 63 Changes in assumptions underlying the present value of scheme liabilities (899) (1,586)

 _______ _____

Actuarial gain / (loss) recognised in the statement of total recognised gains and losses  534 (288) Current tax relief 46 38 Movement in deferred tax relating to net liability (153) 19

______ ______

Gain / (loss) recognised in the statement of total recognised gains and losses __£____4__2__7__ __£____(2__3__1__) Cumulative amounts recognised in the statement of total recognised gains and losses £(4,068) £(4,495)

________________ ______________

Analysis of scheme assets 2013 2012

% of total  % of total fair value  fair value

of scheme   of scheme

assets assets

Equities 48% 48% Property 6% 7% Corporate bonds 44% 44% Cash and receivables 2% 1%

_____ _____

1__0____0__%__ 1__0____0__%__

History of experience gains and losses

Present value of scheme assets Present value of scheme liabilities

Gross scheme surplus / (deficit)

Experience gains / (losses) on scheme liabilities

Amount

Difference between the expected and actual return on scheme assets

Amount

Funding of the defined benefit pension scheme

2013 2012 2011 2010 2009

£ 000 £ 000 £ 000 £ 000 £ 000

21,482 19,313 17,524 16,783 14,316

(21,198) (19,794) (17,908) (16,298) (15,383)  _______ _______ _______ _______ _______

£284 £(481) £(384) £485 £(1,067) ______________ ______________ ______________ ______________ ______________

117 63 658 90 (310) 1,316 1,235 (455) 640 914

The actual funding of the defined benefit pension scheme is determined by the triennial actuarial valuation and this differs from the amount that is required to be charged to the profit and loss account under Financial Reporting Standard 17. During the year, the Company made scheduled retirement benefit contributions into the defined benefit scheme totalling £348,000 (2012: £300,000).

Following the results of the latest actuarial valuation as at 1 January 2012, the contribution rate for 2012, 2013 and 2014 was set at 12.6% of Pensionable Salaries plus a fixed contribution of £50,000 per annum to reduce the actuarial scheme deficit.

9 Share capital

1. Equity share capital

  Authorised, issued & fully paid up

Shares of  2013 2012 £0.5 each

 000 £ 000 £ 000  Ordinary shares 5,040 2,520 2,520  A Ordinary shares 4,620 2,310 2,310

_____ _______ ______

  Total __9__,6__6__0__ £____4__,__8__3__0__ __£__4__,__8__3__0__

Ordinary and A ordinary shares carry no right to fixed income and rank after preference shares and other liabilities.

Each ordinary share carries one vote in the event of a poll. Each A ordinary share, whilst in the ownership of the States of Jersey, entitles the holder to such additional votes at a poll as brings the total number of votes attaching to the A ordinary shares to twice the number of votes cast in respect of all other shares.

2. Non-equity preference share capital

2013 2012

£ 000 £ 000

 Authorised

20,000 cumulative preference shares of £5 100 100 20,000 cumulative second preference shares of £5 100 100 100,000 cumulative third preference shares of £5 500 500 100,645 cumulative fourth preference shares of £5 503 503 900,000 cumulative fifth preference shares of £5 4,500 4,500

_______ ______

__£__5__,__7__0__3__ £____5__,7__0__3__

 Issued and fully paid

 17,261 5% cumulative preference shares of £5  86 86 17,402 3.5% cumulative second preference shares of £5  87 87 23,509 3% cumulative third preference shares of £5  118 118 16,036 3.75% cumulative third preference shares of £5  80 80 11,400 5% cumulative third preference shares of £5  57 57 90,877 2% cumulative fourth preference shares of £5  454 454 900,000 10% cumulative fifth preference shares of £5  4,500 4,500

_______ ______

__£__5__,__3__8__2__  £__5____,3__8__2__

Preference shares bear interest at the rates indicated above and rank, in the order listed, above ordinary and A ordinary equity shares in the event of winding up.

Upon a poll, every holder of a preference share present at a general meeting in person or by proxy shall have one vote only for all the preference shares held by the holder, irrespective of the number and class of such preference shares.

10 Reserves

Revaluation  Retained  Total

reserve  profit

£ 000 £ 000 £ 000

Brought forward  1,220 40,334 41,554 Profit for the financial year - 3,438 3,438 Deficit on revaluation of investment properties in the year (171) - (171) Equity dividends  - (1,789) (1,789) Gain relating to pension plan recognised in the statement

of total recognised gains and losses ______ _- ___ __4_2_7_ _ _ _ _ _4_2_7_

Carried forward £____1__,__0__4__9__ __£__4__2__,__4__1__0__ £____4__3__,__4__5__9__

11 Reconciliation of movement in equity shareholders funds

Profit for the year Equity dividends

Retained profit for the year

Gain / (loss) arising on pension plan

Deficit on revaluation of investment properties in year Opening equity shareholders funds

Closing equity shareholders funds

12 Turnover

Measured water charges

Unmeasured water charges

Service charges and other charges for water

Total water supply charges Rechargeable works income Other income

Turnover

13 Operating expenditure

Included in operating expenditure are the following:

Net employment costs

Depreciation

Materials, consumables, hired in services and other costs Directors fees

Auditors fees - Statutory audit

- Other services (Tax compliance)

- Other services (Pension scheme audit)

Total operating expenditure

2013 2012

£ 000 £ 000

3,438 3,697

(1,789) (1,744) ________ _______

1,649 1,953 427 (231) (171) (94)

46,384 44,756 ________ _______

£____4__8__,__2__8__9__ £__4__6____,3__8__4__

2013 2012

£ 000 £ 000

10,890 9,497 2,686 3,774

590 570 ________ _______

14,166 13,841 320 356

430 412 ________ _______

__£__1__4__,__9__1__6__ £__1__4____,6__0__9__

2013 2012

£ 000 £ 000

3,663 3,648 2,210 2,245 4,077 3,814 109 88 46 42

5 7

6 5 _______ _______

£__1__0____,1__1__6__  £____9__,__8__4__9__

Notes to the financial statements (CONTINUED)

14 Net employment costs

2013 2012

£ 000 £ 000

Wages, salaries and other payments 3,152 3,206 Social Security 188 175 Pension contributions 437 368

_______ ______

3,777 3,749

Less amount capitalised within fixed assets (114) (101) _______ ______

Net employment costs __£__3__,__6__6__3__ £__3____,6__4__8__

15 Charitable contributions

In the year ending 31 December 2012, to mark Jersey Water s 130th Anniversary, the Company granted awards totalling £130,000 to 20 local charities.

16 Interest payable

2013 2012

£ 000 £ 000

Bank loans and overdrafts 421 442 Interest rate swap contract 97 97

_____ _____

__£__5__1__8__ __£__5__3__9__

In October 2011, the Company entered into an interest rate swap contract with HSBC Bank Plc in order to hedge against the interest rate risk exposure of the Company on the loan of £5,250,000 maturing in 2021. The interest rate swap contract has a nominal value of £5,250,000 and also matures in 2021.

17 Non-equity dividends

5% cumulative preference shares

3.5% cumulative second preference shares 3% cumulative third preference shares 3.75% cumulative third preference shares 5% cumulative third preference shares 2% cumulative fourth preference shares 10% cumulative fifth preference shares

Total dividends on non-equity shares recognised in the year

18 Equity dividends

Ordinary and A Ordinary shares

Dividends paid

Final dividend for the previous year Interim dividend for the current year

Dividends proposed

Final dividend for the current year

2013 2012

Paid Payable Charge  Paid Payable Charge

for the year for the year

£ 000 £ 000 £ 000 £ 000 £ 000 £ 000

2 2 4 2 2 4 2 1 3 2 1 3 3 - 3 3 - 3 2 - 2 2 - 2 2 - 2 2 - 2 7 - 7 7 - 7

360 - 360 360 - 360 _____ ___ _____ _____ ___ _____

__£__3__7__8__  __£__3__  __£__3__8__1__  __£__3__7__8__ __£__3__ __________ £381

2013 2012 2013 2012 Pence per share Pence per share £ 000 £ 000

12.090 11.75 1,168 1,135

6.426 6.30 621 609 _____ ____ ______ ______

1__8____.5__1__6__ 1__8__.0__5__ £__1____,7__8__9__ __£__1__,7__4__4__

1__2____.5__1__6__ 1__2__.0__9__ £__1__,__2__0__9__ __£__1__,1__6__8__

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in the financial statements.

19 Earnings per ordinary share

Earnings per ordinary share of £0.36 (2012: £0.38) is based on earnings of £3,438,000 (2012: £3,697,000), being the profit available for distribution to equity shareholders and 9,660,000 (2012: 9,660,000) ordinary and A ordinary shares of £0.5 in issue.

20 Reconciliation of operating profit to net cash flow from operating activities

2013 2012

£ 000 £ 000

Operating profit after exceptional items 4,800 4,630 Depreciation 2,210 2,245 Change in order to bring pension charges onto a contribution basis (4) (19) Decrease / (increase) in stock and work in progress 67 (1) Decrease / (increase) in debtors 1,053 (2) (Decrease) / increase in creditors (147) (567)

_______ ______

Net cash inflow from operating activities __£__7__,__9__7__9__ £__6____,2__8__6__

21 Analysis of changes in net debt

Bank and cash

Term deposit

Debt due within one year Debt due after one year

Total

At 1 January Cash Flows  Other Changes At 31 December

2013 2013

£ 000 £ 000 £ 000 £ 000 2,653 (1,555) - 1,098

- 3,500 - 3,500

(6,000) - 6,000 -

(14,282) - (6,000) (20,282) _________ ________ ______ ________

__£__(__1__7__,6____2__9__) ____£__1__,__9__4__5__  __________£__- £__(__1__5__,__6__8__4__)

22 Directors emoluments

During the year the Company made pension contributions of £15,000 in respect of Mr Snowden and £12,000 in respect of Mr Smith.

Benefits for Mr Snowden consist of full expenses for the use of a motor car, private health care, prolonged disability and death in

46 service insurance. Benefits for Mr Smith consist of motor fuel, private health care, prolonged disability and death in service insurance.

23 Related party transactions

The Company has identified the following material related party transactions:

The States of Jersey is the Company s majority and controlling shareholder. Jersey Electricity Plc is majority owned and controlled by the States of Jersey. JT Group Limited and Jersey Post International Limited are both wholly owned by the States of Jersey. All transactions are undertaken on an arm s length basis.

In addition to the transactions included above with the States of Jersey, the Company made payments of income tax, social security, GST, water resource licence fees and other statutory payments.

The Company leases the site of the La Rosire Desalination plant from the States of Jersey on a 99 year lease ending in 2067. Under the terms of the lease, the rental, which for 2013 was £25,000 (2012: £25,000) (included in the above table), increases every five years in line with the movement on the Jersey Retail Price Index.

24 Ultimate controlling party

The ultimate controlling party of The Jersey New Waterworks Company Limited is the States of Jersey.

Five year summary

Units

Balance sheet

Equity shareholders funds £ 000 Net debt £ 000

Profit and loss account

Turnover £ 000 Operating profit (before exceptional items) £ 000 Profit before tax £ 000 Profit for the financial year £ 000 Equity dividends paid1 £ 000

Financial statistics & ratios

Capital expenditure £ 000 Net cash (outflow) / inflow  £ 000 Earnings per share2 £ Dividend cover1 Times Interest cover Times Gearing3 %

Operational statistics

Total water supplied Ml Maximum daily demand Ml Annual rainfall mm New mains laid km Mains re-laid / relined km New connections No Live unmeasured supplies 000 Live metered connections 000 Employees No

Water quality

% Compliance with water quality parameters

2013 2012

48,289 46,384 15,684 17,629

14,916 14,609 4,800 4,760 4,318 4,486 3,438 3,697 1,789 1,744

2,878 2,905 (1,555) 1,257

0.36 0.38

1.9 2.1

5.6 5.7 42 44

7,047 7,015

24.8 23.4 939 1,089

1.5 1.5

2.5 2.1

406 349 10 13 28 24 80 79

99.84% 99.99%

2011 2010 2009

44,756 42,957 40,933 18,885 18,630 17,491

14,811 14,652 14,728 4,858 5,058 4,577 4,961 4,151 4,085 4,581 3,321 3,299 1,671 1,594 1,444

5,574 3,460 3,309 (252) (1,139) 543 0.47 0.34 0.34

2.7 2.1 2.3

6.2 5.0 5.1 45 47 50

7,152 7,220 7,253

24.7 25.8 25.7 773 982 843

2.0 1.7 3.1

4.0 2.7 1.8 492 337 412 18 21 23.8 20 16.2 13.2 83 84 80

99.81% 99.86% 99.84%

1 Equity dividends and the calculation of dividend cover exclude the special dividend paid in 2010 2 Comparatives have been restated to reflect the bonus dividend and share subdivision in 2011

3 Gearing = Debt (including preference share capital) / equity shareholders funds

48

Mulcaster House, Westmount Road, St. Helier , Jersey, JE1 1DG

T: 01534 707300 F: 01534 707400  

E: customerservices@jerseywater.je www.jerseywater.je

Jersey Water is the trading name of The Jersey New Waterworks Company Limited.