Jersey Electricity: Report and Accounts 2015 – Sustaining Life and Growth, Investing for the Future.

REPORT AND ACCOUNTS 2015

NORMANDIE 1 ON TARGET   AFFORDABILITY

  Planning permissions  No tariff movements since April 2014

granted May   Price s 5% lower than EU15

  Contracts for manufacture standard domestic tariff on average and installation signed July  Tariffs materially lower than peer

  Seabed survey of route island jurisdictions

concluded August

  Contract for reactors

signed October

A YEAR IN FOCUS

CONTENTS

CONTENTS DIRECTORS, OFFICERS AND

PROFESSIONAL ADVISERS

NON-EXECUTIVE DIRECTORS Geoffrey Grime FCA (Chairman)

Clive Chaplin BA

Michael Liston OBE FREng, BSc, CEng, FIEE, CIMgt Aaron Le Cornu BSc, ACA

EXECUTIVE DIRECTORS

RICITYChristopher Ambler BA, MEng, CDipAF, CEng, MIMechE, MBA (Chief Executive)

Martin Magee CA (Finance)

BILITYA

SECRETARY

Peter Routier BSc, FCIS

REGISTERED OFFICE Queen s Road, St. Helier , Jersey

PLACE OF INCORPORATION Jersey

AUDITOR

, JENDEVDeloitte LLP, PO Box 403, 44 The Esplanade, St. Helier , Jersey OPERR

BANKERS

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

ITY

BROKERS

Canaccord Genuity Wealth Management, 38-39 The Esplanade, St. Helier , Jersey

REGISTRAR

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

1

CHAIRMAN'S STATEMENT

2014/15 has been an exceptionally good year for Jersey Electricity. The completion of our Normandie 3 (N3) submarine cable to France at the end of the last financial year and the resultant first full year with our importation capacity restored to pre-2012 levels has transformed our business in several ways. Profitability, supply reliability and carbon intensity have all showed a marked improvement when compared with the last three years.

Group revenue for the year to 30 September 2015 rose 2% to exceed £100m and reflects good underlying, sustainable progress in achieving our strategic goals. Pre-tax profits, pre-exceptional items, rose 24% to £12.4m from £10.0m. Profit before tax, after exceptional items, rose from £6.5m to £13.2m.

Our Energy business delivered a strong performance, with unit sales offsetting energy efficiency pressures, increasing by 1% from 621 million to 627 million units, with profits rising from £8.0m last year to £11.5m.

The strong performance has meant that despite our significant investment in N3, we have been able to

maintain tariffs at current levels whilst at the same time restore returns in our Energy business to a more normalised regulatory level which is key to funding on-going investment in our network.

and of our intention to make a pre-emptive repair. This challenging task was successfully completed in February when an 850-metre section of cable was lifted from the seabed, 500 metres off the Guernsey coast, cut and replaced by VBMS, our long-term partner in submarine cable maintenance services.

Our other non-Energy business units together produced a strong overall performance and, in particular, Powerhouse.je, our retail business, turned a £0.1m loss last year into a £0.3m profit in a challenging market following a significant restructure, re-brand and re-launch.

I am pleased to report a proposed final dividend for this year of 7.60p payable on 29 March 2016, being a 6% increase on last year.

During this year, we have put considerable effort into our Board succession plan.

Clive Chaplin has decided it is right

for him to retire at the next

AGM and I would

Providing a secure and reliable electricity supply is fundamental to our proposition. With the 100MW N3

subsea cable working in parallel with our existing 90MW Normandie 2 (N2) submarine cable since 16 October

2014, our supply reliability has, this financial year,

reached the exceptional level of just seven minutes loss of supply per customer (CMLs). A similar positive effect is seen on the carbon intensity of the power we distribute which

is at an all-time low of 33g CO2e/kWh this year. Both of these metrics come in at around ten times better than

typical UK levels.

We are as committed as ever to our successful long-term importation strategy, initiated in the late Seventies, using

a series of subsea cables built in partnership with our neighbours Guernsey Electricity (GEL) and overseen by the Channel Islands Electricity Grid (CIEG). In July we signed contracts worth £20m with an international consortium for the manufacture and installation of an enhanced 100MW Normandie 1 (N1) link to replace EDF1, our first submarine cable that came to the end of its life in 2012. N1 is on

plan and scheduled to be in service in 2017 at a total cost

of around £40m.

Last year I reported concerns over the condition of the Jersey-Guernsey cable (GJ1), a shared asset with GEL,

CHAIRMAN S STATEMENT

like to thank him for the enormous contribution he has made to the Board and the Company over his 12 years of service. We welcome Alan Bryce to the Board who joins us from the UK with significant power sector and island experience.

Finally, I would like to thank our Executive and non- Executive Directors and colleagues at all levels for their continued hard work and dedication. They have not only put Jersey Electricity back on track, but they have exceeded expectations and we are well poised as a Group to take advantage of many future opportunities.

Geoffrey Grime Chairman

17 December 2015

 ENERGY CHIEF EXECUTIVE S REVIEW

CHIEF EXECUTIVE'S REVIEW

I am delighted to report an exceptional set of results for 2014/15. Having successfully negotiated some

challenging circumstances over the past three years we have returned to a level of profitability necessary for continued

investment. Group turnover broke through £100m and pre-tax profits, pre-exceptional

items, rose 24% from £10.0m to £12.4m. The main factor that enabled this increased performance was the shift towards using a higher mix of lower cost imported power,

following the completion of our Normandie 3 (N3) interconnector which was delivered into service in October 2014, three months ahead of schedule and 10% below budget.

Since 2012, when our first interconnector, EDF1, came to the end of its working life, restricted levels of importation have been supplemented

with more expensive, on-Island oil-fired generation at our La Collette Power Station. Our singular

Group focus has been on restoring this importation capacity and 2014/15 was the first full year of

operation of that restored capacity. This financial year saw our imports return to the levels of pre-2012, with 94% of our requirements imported from France, up from 80% in 2014. We generated 1% of our electricity on-Island compared with 15% last year, with the remaining 5% coming from the States of Jersey- owned Energy from Waste plant. The result was a 44%

increase in Energy profits from £8m to £11.5m.

Increased electricity imports have also improved our carbon credentials. As this was the first full year of

operation under our 10-year supply agreement with EDF an agreement that guarantees power from certified low carbon hydro and nuclear sources the average carbon intensity of power distributed to customers during the year was at an all-time low of 33g CO2e/ kWh.

But N3 was not just focused on capacity. Laid entirely underground and connecting into a different, more robust 400kV section of the French grid, the cable was designed with supply security paramount. I am therefore delighted that our security performance was the best for seven years with only seven minutes on average of disconnected supply per customer, around ten times better than the UK average.

Investment in our subsea cable network has continued

this year with a pre-emptive repair to the Jersey-Guernsey link (GJ1) completed in February and rapid progress on

an additional link to France to replace EDF1. Planning permissions for the new cable known as Normandie 1 (N1) were granted in May, contracts for its manufacture and installation were signed in July and a survey of the seabed along the same route as EDF1 was completed in August. All being well, EDF1 will be lifted from the seabed next spring in preparation for N1 s installation later in the year.

At 100MW, N1 will be future-proofed , having an enhanced capacity compared with its 55MW predecessor, albeit its initial operation will be at 55MW followed by an upgrade to 70MW.

Following our experiences over recent years with the failure of critical infrastructure during difficult scenarios, we have examined our on-Island generating capabilities in some detail. As a result the Board has approved the installation of a 5MW black start diesel generator at La Collette to assist in quicker, more robust restoration during major interruptions to imported supplies, in this case protecting supplies that

the Power Station itself needs to implement a full island restoration. We expect its installation and commissioning to be completed next year at a total cost of around £2m.

Though progress on our £17m project to build a new St Helier West primary substation has been hampered by structural complications on site and civil design issues, works are expected to commence in early 2016 and we hope to have this important new facility in service by 2018, securing new and existing supplies to the north and west of St Helier.

SmartSwitch, our programme to install Smart Meters across the Island, has gained momentum this year. In February we appointed a Programme Manager to oversee the day-to-day logistics of this project and manage a team which has been installing the single element meter on a pilot basis. The dual element meter is undergoing a comprehensive programme of testing. We expect deployment of both types of meter to ramp up in 2016.

Elsewhere in the business, the re-structure and re-branding of our Powerhouse retail business has paid dividends with a £0.1m loss last year turned into a £0.3m profit. Our Property division, Jersey Energy, Jendev and Jersey Deep Freeze all had profitable years. JEBS, our building services business, has also undergone a management re-structure and re-focus on its core activities. This has resulted in a near 20% increase in revenue to £4.9m. Though margins are under pressure due to competition in the sector, we are making progress with the foundations that are necessary for the future.

We have made some significant appointments during the year in JEBS, Jersey Energy and HR and have realigned resources to better focus on our business imperatives. Significantly, after an extensive recruitment process, we appointed a new Human Resources Director who has launched a multi-year programme of transformation to ensure our people processes, including people development, are better aligned to the future needs of the business.

GROUP PURPOSE CHIEF EXECUTIVE S REVIEW

 Introducing our

new 24-hour heating tariff- Economy 20+  

ENERGY GROWTH

Unit sales were 1% higher than last year, rising from 621 million to 627 million, despite a second successive mild winter and continued pressure from increased energy efficiency.

  The total number of customers on supply at

year-end was 49,320, an increase of 379 on last year

  Over 500 new domestic customers joined our

discounted space and water heating tariffs Comfort Heat, Economy 7 and Economy 20, bringing the total number of customers now on these tariffs to 16,131

  Peak load for the year was 148MW

recorded on 5 February at 9.30pm. This was an increase on last year s peak of 139MW but well below our all-time record of 161MW set on 2 February 2012

Energy Solutions

Launched at the end of last year from existing resources, we formed a new team, Energy Solutions, in response to a comprehensive study on load growth that identified several key opportunities. This small, specialist team is focused on unlocking new unit sales growth using new technologies in heating, cooling, cooking and transportation applications, across the commercial, residential and public sectors.

Fuel switch

Although our efforts will take many months, and in some cases years, before we will enjoy the full effect on unit sales growth, we are making progress in the commercial sector with real traction in switching professional kitchens to all electric by using modern induction cooking technology as well as commercial scale, ultra-efficient heat pump technology. We note a considerable shift in preference of professional chefs from gas to electric, assisted by significant new technological developments.

In the residential market, the Energy Solutions team, backed by a summer marketing campaign, made good progress increasing fuel switching by over 50% compared with normal baseline levels. The team has developed new user-friendly propositions for customers, a more streamlined system for handling the customer journey and has developed enhanced finance packages in support of fuel switching. It is also developing relationships with new technology providers to offer state-of-the-art solutions in Jersey for in-home energy services. Of note is the introduction of a new 24-hour heating tariff, Economy 20 Plus (E20+) which will launch in 2016 and provide attractively priced 24-hour electric heating for customers at a mix of off- peak rate and normal rate for approved heating systems.

Whilst we believe there is considerable opportunity for the States of Jersey to reduce its own energy bill, it has so far been difficult to make progress. We continue to try to engage at the highest levels to persuade it of the significant opportunity to save money and carbon across its building stock and in transportation.

Encouraging the use of high efficiency, lower cost off-peak heating across our customer base encourages customers to use electricity when supplies from France are cheaper. It also flattens the peak electricity demand, which is a significant driver of infrastructure costs. This enables Jersey Electricity to keep prices significantly lower than they otherwise would be.

ENERGY GROWTH CHIEF EXECUTIVE S REVIEW

New build

Despite the fall in oil prices, we have maintained  our position in securing electricity as the fuel of  choice for new build and this year more than  95% of new buildings were heated and cooled  

by all-electric solutions. Developers choose clean,  low carbon electricity for heating in energy  efficient building designs to meet increasingly  stringent standards on energy use and emissions.  Electric heating is also space efficient and  

avoids the need for storage tanks and flues. In  

the commercial sector, electric heating systems  can also be designed to cool, increasing cost  effectiveness.

Energy Plan

The Energy Plan recognises the importance  

of electricity to delivering a low carbon future  

and we are working closely with the new  We estimate there are around 150 registered all- Energy Partnership forum, a community panel  electric vehicles in the Island today but potential  established by the Planning and Environment  for significantly more. The market does require  Department, the States of Jersey ministry  incentivisation and we have made a number of  responsible for facilitating the plan.  proposals to the States of Jersey to assist this.  

We continue to innovate and adapt to market  Electric transportation conditions as we strive to maintain underlying  

unit sales across our network and where  

One third of the Island s carbon emissions is  

possible sell out spare capacity in the load  attributable to transportation and whilst some of  

curve. We have no doubt low carbon electricity  this market is not presently accessible, a good  

is the energy of the future in our Island and we  portion of it is with existing technology. We  

actively encourage our customers to get the best  strive for the States of Jersey to work with us to  

possible value from our service, encouraging  encourage uptake action which supports the  

energy efficiency whilst at the same time  

Clean Air Policy and the Sustainable Transport  

looking for opportunities to offset its impact by  Plan and essential if the Island is to stand any  

converting customers to electric solutions using  realistic chance of meeting its Energy Plan  

the most cost effective technologies available.  target of an 80% reduction in carbon emissions  

by 2050. We are also seeing an increase in  We position Jersey Electricity as the Channel  requests from developers to install electric vehicle  Islands low carbon, energy experts that  charging points as part of the initial build.  customers can trust.

MAINTAINING AFFORDABLE ELECTRICITY AND PRICE STABILITY

According to independent research, absolute energy prices and price stability are unsurprisingly the greatest concern of customers. As the sole supplier of over 40% of the energy used in Jersey, we are acutely aware

of our responsibility to deliver affordable energy not only at a point in time but sustainably into the future. We follow prices of local heating oil and LPG gas closely in Jersey and we regularly benchmark electricity prices in other countries using an external independent consultancy.

There were no changes to electricity prices during 2015 and we are delighted that our tariffs remained competitive, despite the heavy on-going investment in infrastructure (on which we need to earn a return) and our relatively small scale. We benchmark positively against the EU 15 Average and though that differential has reduced year-on-year due to the strength

of Sterling against the Euro, we have comfortably achieved our goal

of keeping our domestic tariffs within +/-10% of the EU Average. Our average prices at year-end were around 5% lower than the EU standard tariff for domestic customers. We also compare favourably with other island jurisdictions particularly as measured by our standard tariff, which is the normal measure used in international comparisons.

Although forecasting prices remains difficult, we believe we are well positioned, with lower cost import capacity available due to the successful installation of Normandie 3 (N3), coupled with a largely fixed hedge book on both power and foreign exchange over the next two to three years. These lower importation costs offset the higher borrowing costs associated with N3.

We continue to explore more innovative, customer focused heating tariffs which can deliver more value to consumers, including our new 24-hour Economy 20+ Tariff which will supply uninterrupted electricity to approved heating systems, improving sales, comfort levels and equipment performance. Today over 16,000 customers benefit from our lower cost, off-peak tariffs for heating and we are seeking to build on this further.

MAINTAINING AFFORDABLE ELECTRICITY AND PRICE STABILITYCHIEF EXECUTIVE S REVIEW

Space Heating 46%

Hot Wate2r2 %

Consumer Electronics 8%

Cooking 6% Lighting 6%

Wet Appliances 5% Cold Appliances 5%

ICT 2%

Source: UK Energy Saving Trust

Jersey Electricity is the sole supplier of over 40% of the energy used on island

SUPPLY SECURITY                 STANDARD            

To meet Jersey Electricity s                Security Standard, the               electricity system is designed             to meet:          

  A one-in-eight year winter          

peak demand      

  All normal load in the event        

of the loss of the single        

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

o diesel generator; and              

o gas turbine                

  75% of peak winter load                

for 48 hours from on-Island          

generation (no simultaneous                   loss of on-Island capacity)              

  No coincidence of the above      

* Island Monitor 3 is the third of six reports of island communities produced annually by Island Global Research

ELECTRICITY SOURCES IN %

+13.8% Year   JE  EfW  Import

2009-10  5.9%  0.6%  93.5% 2010-11  1.8%  2.6%  95.6% 2011-12  2.5%  5.2%  92.3% 2012-13  20.7%  3.9%  75.4% 2013-14  14.9%  4.9%  80.2% 2014-15  1.4%  4.6%  94%

-13.5%-0.3%

                 SmartSwitch

We have continued to make good

progress with our Smart Metering

programme, SmartSwitch, with

the launch of a pilot deployment

alongside business as usual

replacement of meters. We have

learned a great deal during this

process, and this has already been

incorporated into organisational

and process changes. A team of

installers has fitted the Liberty 140

Single Element Meter in around

2,700 homes, with over 3,000

installed as business as usual

replacements. The total number of

Smart Meters capable of automated

control and remote reading is now

                   over 16,000 when added to the

                    10,500 Horstmann Mainscom

                 Meters already in existence. The

               Liberty 115 Twin Element Meter

                is now undergoing testing and

                  technical trials and will be deployed                  next year. This will enable off-peak

               heating customers to enjoy the

                   benefits of Smart Metering.

Extensive work by our own

         Metering team, in-house software

          and data specialists Jendev and

             our Swiss Post Solutions (SPS)

                billing partner has enabled the

                 development of an online customer

                 portal Smart Account which staff

                have trialled. This will allow

               collection, analysis and presentation

               of data for customers to better

                understand their consumption via a                  user friendly interface. This is now

             under-going further development

                 and enhancement based on initial

                 learnings.

ENVIRONMENT | RENEWABLES CHIEF EXECUTIVE S REVIEW

CUSTOMER SERVICE STANDARDS CHIEF EXECUTIVE S REVIEW

Jendev

Jendev, a Microsoftfi certified Dynamics NAVTM Partner specialising in software development for utilities, is a key in-house asset for Jersey Electricity and continues to play an important role in the Group s portfolio.

The business continues to

move through a busy period

of renewal focused on the redevelopment of its flagship solution Jenworks Billing, which targets small and medium

sized water, electricity and gas utilities. Jendev is now planning to extend the Jenworks brand

to include Jenworks CRM, based upon leading Dynamics CRMTM technology. This related diversification will significantly strengthen Jendev s value proposition when tendering for new business.

Comprised of a small team

of highly experienced utility industry IT professionals, Jendev continues to support Jersey Electricity in a number of strategically important projects including Jersey Electricity s major smart metering project, SmartSwitch. The business

will also play a critical role

in JE s upcoming enterprise system upgrade delivering

the latest Microsoft Dynamics NAVTM technology, providing

a significantly improved user interface and increased system flexibility and efficiency.

Jendev serves external utility customers in Guernsey, the Isle of Man and the UK and generated revenues of over £1m this financial year. In

line with Jendev s plans for sustainable revenue growth, a number of strategic partners have been identified and the business is actively engaged in commercial opportunities in export markets.

HEALTH AND SAFETY

In view of the hazardous activities in which many of our 340 staff are engaged on a daily basis, managing Health and Safety risk is of paramount importance and an area in which we invest considerable resource in manpower, training and senior management commitment. Safety is also one of our

six core values:  We do everything safely and responsibly or not at all nothing is more important than the safety of the public, our customers and our staff  and we are proud of our safety record and culture.

This year we have enhanced slightly the size our Health, Safety and Environmental (HSE) team as part of our succession planning in this vital area. Each year the HSE team produces a plan that aligns its aims with our business objectives, and in particular seeks to address improvement opportunities identified in audits. Governance is provided by various HSE Committees and includes a forum for direct communication between myself as Chief Executive, Senior Management and Safety Representatives. Safety Representatives play a vital role within operational teams to help create the conditions and culture for safe working among all colleagues, contractors and the public.

Our approach to HSE is flexible and risk based to prevent complacency and it seeks to address new legislation and adapt to the changing operational environment. We ensure all our colleagues are fully competent in the work we ask them to do and all employees are trained to recognise

their own limits of competency. They are also expected to proactively identify hazards and take action to mitigate the risks associated with those hazards in their day-to-day work so that the potential for injury or damage is removed or reduced to an acceptable minimal level. We identify third party service providers and temporary contractors as a particular risk that needs close management and this is an area we have focused on over recent years.

In March the British Safety Council (BSC) carried out

our third audit of our occupational health and safety management arrangements. The auditor was particularly impressed with the strong Health and Safety culture, saying that if the audit had been based solely on what he had

observed during his site inspections, we would have retained the five stars we achieved in 2012. But the BSC has made considerable changes to the audit specification since then and the four stars awarded reflected a very good performance against new, more exacting standards. A number of areas for improvement came out of the review, including a need for a more integrated documentation policy. The HSE team is working with line management to address this, developing action plans with responsibilities and timescales.

Though we have scaled back generating activity at La Collette Power Station since the completion of Normandie 3 (N3), the Production team has been heavily engaged in the de-commissioning of steam plant and enhancing our black start capabilities at both La Collette and our Queen s Road sites as well as the installation of a new highly complex transmission protection scheme. Having any Lost Time Accidents (LTAs) at all is regrettable, but our Energy Division suffered only two LTAs this year from minor injuries, reflecting our positive HSE culture.

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

risk trends. We have suffered a total of six LTAs throughout the entire Company this year, five applying the three-day standard. Thankfully, none of these was serious. Had the seven-day UK standard been applied, the figure would be one LTA.

My thanks go to all colleagues for their individual contribution in making Jersey Electricity, and all the people the Company touches, safe. I would particularly thank our Safety Representatives and the Health and Safety team for their commitment, passion and professionalism in supporting all our employees. They have helped create our excellent

safety culture.

HEALTH AND SAFETY CHIEF EXECUTIVE S REVIEW

RIDDOR is the acronym  LOST TIME ACCIDENTS for Reporting of Injuries,  (RIDDOR)

Diseases and Dangerous

Occurrence Regulations and

is the UK standard used for  6

the reporting of health and

safety statistics.

A Lost Time Accident (LTA) is  2

an accident that results in the

ifnrojumrewd oprek rosor nu nbaebinleg taowdaoy  0

their normal work for more

twhae na st eJevresne yd aEylesc itnri cthitey UapKpblyu t  0

the more stringent standard

odfa tyhsr etheedyawyos u(ilndcnluodt innogr amnayll y  6

be expected to work such

as weekends, rest days or

holidays) and not counting

the day of the injury itself.

. ..nothing is more important than the safety of the public and staff  

DAYS LOST (RIDDOR)

SUSTAINABILITY IN THE COMMUNITY

As the leading provider of energy in Jersey, our responsibility to our community goes far beyond the provision of sustainable, low carbon energy and our other business activities.

We strive to be a partner in our community, supporting

Jersey s many volunteer groups, schools and charities, focusing largely on health, education and the environment.

We are committed to protecting Jersey s environment and believe it is fitting that we recognise and reward those

who are equally passionate. This year we were pleased

to sponsor the inaugural Pride of Jersey Environmentalist Award, organised by the Jersey Evening Post as part of a

series of community awards nominated and voted for by the community. We also continued our long-term support for the Jersey Construction Council s (JeCC) Sustainability Award that recognises environmental best practice in this vital industry.

The completion of the restoration of PlØmont headland from a disused holiday camp site to its natural state by the National Trust for Jersey was one of the most significant environmental successes in the Island for many years. We were proud to have played an important part, not just

in terms of sponsorship but also pro-bono services in the form of removal and replacement of old but still in-service electrical infrastructure, including the relocation of a substation and cabling.

In recent years we have supported the work undertaken by Durrell Wildlife Conservation Trust but this year we provided funding for an important new conservation project led by the SociØtØ Jersiaise Marine Biology Section. In 2010 we gifted the SociØtØ the sediment cores extracted from the seabed during our surveys for our Normandie 3 subsea cable and from which scientists and historians have plotted the ancient terrestrial landscape that existed between Jersey and France millennia ago. This year we have enabled the SociØtØ to start to create an interactive biological map of Jersey s coasts and offshore reefs to form a baseline from which to monitor changes to the health of key habitats brought about by rising sea levels, climate change, ocean acidification and invasive marine species then act to mitigate against these dangers.

At a corporate level, we continue to sponsor the National Trust, Jersey Heritage, Genuine Jersey and the JeCC and

we backed the Council s Brick Foundation charity in its refurbishment project at Durrell. We have helped a multitude of charities, including Family Nursing & Home Care, Autism Jersey, Headway, Age Concern, Stroke Association and St John s Ambulance. We also supported the Channel Islands Mountain Bike Association s Urban in the Park event around the site of our proposed new primary substation in Westmount Gardens, St Helier. We support our staff in their many collective fund raising activities. We had our biggest ever entry in the Lions Club of Jersey Swimarathon and Dragon Boats Festival in aid of Jersey Hospice Care, while a ten-man team again competed in a round-island extreme relay in aid of the Silkworth Charity Group.

Our colleagues raise thousands of pounds for good causes

in their own right and in all cases this year, the Company matched the money raised. The innovative monthly Staff Number Charity Draw continues to raise over £3,000

a year for staff-nominated charities, including Teenage Cancer Trust, Friends of Jersey Oncology, Guide Dogs for the Blind Association (Jersey), Jersey Hyperbaric Treatment Centre, Friends of Special Care Baby Unit, Brooke Hospital for Animals, Help A Jersey Child, CAT Action Trust, Hope for John, Help an African School Child Trust and Diabetes Jersey. In addition, our staff Charity Committee has supported Macmillan Cancer Support, After Breast Cancer Jersey, Headway Jersey, Help A Jersey Child and Yes (Youth Enquiry Service), a youth counselling and advice service.

SUSTAINABILITY IN THE COMMUNITYCHIEF EXECUTIVE S REVIEW

 We strive to  

be a partner in  

our community,  supporting Jersey s  many volunteer  groups, schools  and charities

Our employees are unquestionably our most important asset and we rely on them tremendously. As the sole supplier of electricity in a small offshore island our workforce is diverse, highly skilled, flexible and dedicated to serving the community.

Their efforts were recognised this year by a number of external awards. Our Normandie

3 (N3) Project, involving a large team right across the organisation, was named Jersey Construction Council Project of the Year in the largest Over £1million category. N3 s former Project Manager received the Council s Lifetime Achievement Award, while our Senior Projects Engineer was short-listed as Achiever of the Year for his work on the project. In addition, our Powerhouse Retail team was rewarded at the Travel Solutions Customer Service Awards with the Customer Service Strategy Award.

We are fortunate to have many long-serving staff who have acquired the skills and experience necessary to deliver a first class service over many years but as the industry changes we must re-set our compass and ensure we and our workforce are fit for the future.

The Purpose, Vision and Values (PVV) work, started in 2013 to re-focus everyone on our objectives and chart the way we work together to meet them, has continued this year.

Last year all our staff have attended workshops, Toolbox Talks and inter-site visits to help them better understand each other s roles and how to work together to achieve our goals.

OUR PEOPLE CHIEF EXECUTIVE S REVIEW

Two areas that have already undergone significant change

are the Powerhouse Retail store and JEBS, our Building

Services business. JEBS are working through the challenges

of major management re-structures and changes in working This year we have built further on this work. Crucially, PVV,

practices while results can already be seen in the Powerhouse coupled with an Employee Survey at the end of last year,

in terms of improved performance and employee job

gave us a measure of where we are and where we need

satisfaction. Our aim is to fairly and transparently recognise to improve. To this end we have made some significant

and reward good performance throughout the business and appointments this year that reinforce the Company s

make Jersey Electricity a better place to work.

commitment to developing our people and attracting the best

new recruits.  We have traditionally also recognised and rewarded long-

service and this year was no exception. We presented two

In March, we appointed a new Director of Human Resources

employees with awards for 21 years service and two for 40 and in September she was joined by a new Talent Manager.

years. The average length of service is currently 14.3 years The HR Director has written the HR Strategy clearly laying

and the average age of the workforce is 43.5 years. At the out the next three to five years in determining our people

year end, we employed 340 people across the Group of approach. This has been supported by the Talent Manager

which 282 were full time, 52 part time and six were zero who has developed our Talent Strategy capturing the

hours. Staff turnover is at a low level of just 4.5% and we important work started under EmPower, our cultural change

also enjoy a low sickness rate.

programme covering training and development, succession

management, career planning, reward and progression of  In a year when we have seen improved performance in terms our people areas that were key themes in the feedback  of financial results, unit sales, supply reliability, significant received from our colleagues through EmPower workshops,  project progress and excellent customer service ratings, I PVV and the Employee Survey. Both will play vital roles in  would like to extend a personal thank you to all colleagues overseeing EmPower.  who have been so central to this successful year.

OUTLOOK

OUTLOOK CHIEF EXECUTIVE S REVIEW

FINANCIAL REVIEW

Group Financial Results

Key Financial Information  2015  2014 Revenue   £100.5m  £98.4m

Profit before tax pre-exceptional items  £12.4m  £10.0m Earnings per share pre-exceptional items  32.94p  24.26p Dividend paid per share  12.45p  11.80p Final proposed dividend per share  7.60p  7.20p Net debt  £17.5m  £20.2m

Group revenue for the year to 30 September 2015 at £100.5m was 2% higher than in the previous financial year. Unit sales volumes of electricity were 1.0% higher than last year with Energy revenues rising 1.6% to £80.7m. Turnover in Powerhouse.je, our retail business, decreased by 3% from £11.4m to £11.1m as the floor space utilised by the business was reduced following the leasing of floor space to a new external tenant from May 2014. Revenue in the Property business rose from £2.0m to £2.1m

linked to changes in tenancy arrangements during the last two financial years. Revenue from JEBS, our building services business, including internal sales, rose 18% from levels experienced in 2014 to £5.0m. Turnover in our Other Businesses, including internal sales, remained at £3.2m.

Cost of sales fell by £3.9m to £64.6m associated mainly with a higher level of electricity importation displacing oil purchases in our Energy business. Operating expenses, at £22.0m,

rose by £1.9m from their 2014 level with a £1.7m rise in depreciation, associated with our recent material infrastructure spend, being the main item.

Profit before tax, pre-exceptional items, for the year to 30 September 2015, rose 24% to £12.4m, from £10.0m in 2014, reflecting a strong performance in our Energy business, and a recovery in our retail interests, Powerhouse.je. Profit before tax post-exceptional items, rose from £6.5m last year to £13.2m in 2015. Exceptional items have had a material impact on profits in the last two years and a narrative detailing the background to such items is contained within the Financial Review.

Our Energy business unit sales saw volumes up 1%, rising from 621m to 627m kWh. The first quarter of the financial

year was milder than the corresponding period in the previous year but there was a reversal in the second quarter. However both the overall winter periods in the last two years have seen temperatures above the long-term average and therefore milder than anticipated. Profits in our Energy business rose from £8.0m to £11.5m. Two main factors contributed to this increase in performance; firstly lower generation and secondly, the rising asset base (on which we apply a return) due to heavy spend on infrastructure in recent years. As reported previously, until the

new submarine cable to France was commissioned in September 2014, we had been capacity constrained on importation and reliant on a heavier mix of more expensive on-island oil-fired generation, particularly in winter, when volumes are higher. In

the financial year we imported 94% of our requirements from France (up from 80% in 2014) and only generated 1% of our electricity on-island (compared to 15% last year). The remaining 5% of our electricity came from the local Energy from Waste plant being at the same level as in 2014. There were no customer

tariff movements during 2015 and our tariffs continue to remain competitive with other jurisdictions.

Profits in our Property division, excluding the impact of investment property revaluation, rose by £0.1m from £1.4m last year

with changes in occupancy levels being the main driver. Our investment property portfolio was revalued downwards marginally this year whereas it moved up by £0.1m in 2014. Our retailing business, Powerhouse.je, had a year of change post a reduction

in floor space, a restructuring and re-branding of the business during the 2014 financial year. This has been positive with the loss of £0.1m last year moving to a profit of £0.3m in 2015. JEBS, our contracting and business services unit produced a marginal loss due to competitive pressures. Our other business units - Jersey Energy, Jendev and Jersey Deep Freeze all had a profitable year.

Interest paid in 2015 was £1.5m whereas in 2014 it was negligible as most of this cost was capitalised up to the date

of commissioning of our new N3 subsea cable. The taxation charge at £2.4m was materially higher than the 2014 figure of £1.5m due to higher profits and the taxation of the exceptional items. Group earnings per share, pre-exceptional items, increased 36% to 32.94p compared to 24.26p in 2014 due mainly to an increase in profitability. Earnings per share, after exceptional items, rose from 16.10p in 2014 to 35.00p in 2015.

Dividends paid in the year, net of tax, rose by 6%, from 11.80p in 2014 to 12.45p in 2015. The proposed final dividend for this year is 7.60p, a 6% rise on the previous year. Dividend cover, pre-exceptional items, rose from 2.1 times in 2014 to 2.6 times due to a higher level of profits. If exceptional items are included dividend cover rose from 1.4 times last year to 2.8 times in this financial year.

Ordinary Dividends

2015  2014

Dividend proposed  - final for current year  7.60p  7.20p

Net cash inflow from operating activities at £23.4m was £3.3m higher than in 2014 with increased profitability being the primary driver. Capital expenditure, at £16.8m fell from £33.0m last year as the Normandie 3 project spend dominated

FINANCIAL REVIEW

last year albeit there was the settlement of £5.5m of residual project cost in quarter 1 of this financial year. Net debt, at the year-end was £17.5m, which was £2.7m lower than last year.

Cash Flows

Summary cash flow data  2015  2014

Decrease/(Increase) in net debt  £2.7m  £(15.0)m

Exceptional items

A number of items of an exceptional nature were incurred in the last two financial years.

During this financial year we had two exceptional credits amounting to £0.8m which have been adjusted in arriving at our underlying profit figure. The first exceptional item resulted from a network issue in France during March 2015 for which the CIEG received a compensation payment from RTE (the grid operator) and the net upside for the Jersey Electricity proportion was £0.5m. Secondly we had created a provision in 2012 in relation to work associated with the failure of the EDF1 subsea cable. Now that the N1 project is progressing, the provision is no longer required, as such work is part of the wider project, and £0.3m in relation to this issue was released back to

profit and is viewed as exceptional. All these items have been assumed to be taxable.

In the 2014 Annual Report we reported exceptional costs of £0.6m and £1.2m in restructuring our retail business, Powerhouse.je, and exiting our investment in Foreshore Ltd respectively. In addition, a £1.8m provision was established in September 2014 for a repair to the subsea cable between Jersey and Guernsey. As reported in our Interim Report this pre-emptive repair was successfully performed during January 2015 with the cost fully covered by the provision.

Treasury matters and hedging policies

Operating within policies approved by the Board and overseen by the Finance Director, the treasury function manages liquidity, funding, investment and risk from volatility in foreign exchange and counterparty credit risk.

As a substantial proportion of the cost base is the importation of power from Europe, which is contractually denominated in the Euro, the Company enters into forward currency contracts to reduce exposure and as a tool to aid tariff planning. The average Euro/Sterling rate underpinning our power purchases during the financial year, as a result of the hedging program, was 1.21 /£. The average applicable spot rate during this financial year was 1.35 /£. In addition we also materially hedge any foreign exchange exposure attributable to capital expenditure once planning consents and firm pricing is known and hedges were placed in July 2015 for 27.5m at an average rate of 1.42 in respect of our N1 subsea cable project.

Interest rate exposure is an area of potential risk but is managed by the £30m of private placement monies received in July 2014 having a fixed coupon and represents all of our borrowings at present.

The Group may be exposed to credit-related loss in the event of non-performance by counterparties in respect of cash and cash equivalents and derivative financial instruments. However, such potential non-performance is monitored despite the high credit ratings (investment grade and above) of the established financial institutions with which we transact.

In the last financial year the Company imported 94% of

the electricity requirements of Jersey from Europe. It jointly purchased this power, with Guernsey Electricity, through the Channel Islands Electricity Grid, from EDF in France. The supply contract allows power prices to be fixed in Euros in advance of decisions being made on customer tariffs. A ten year contract power purchase agreement with EDF commenced in January 2013 which combines a fixed price component with the ability to price fix future purchases over a rolling three year period based on a market related mechanism linked to the EEX European Futures Exchange. The goal is to provide our customers with a market based price but with a degree of certainty in a volatile energy marketplace. A CIEG Risk Management Committee exists, consisting of members from Jersey Electricity, Guernsey Electricity and an independent energy market adviser and follows guidelines approved by the Board.

Defined benefit pension scheme arrangements

As at 30 September 2015 the scheme deficit, under IAS 19

 Employee Benefits rules, was £5.8m, net of deferred tax, compared with a deficit of £1.1m at 30 September 2014. Scheme assets rose 2% from £104.8m to £106.8m since the last year end. However asset values as at our half year were £117.5m but have been impacted in the interim by turbulent equity markets

in the last quarter of our financial year. Liabilities increased 7% from £106.1m to £114.0m in the last year with the discount

rate assumption, which heavily influences the scheme liabilities, falling from an assumed 3.9% in 2014 to 3.6% in 2015 to reflect sentiments in prevailing financial markets.

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

by relatively small movements in the underlying actuarial assumptions. If, for example, the discount rate applied to the liabilities had been 3.1%, rather than the 3.6% advised by our actuaries under IAS 19 for 2015, the net deficit of £5.8m would rise to a net deficit of £13.3m.

The last triennial actuarial valuation was performed as at

31 December 2012 and resulted in a deficit of £9.3m. The contribution rate by Jersey Electricity was increased to 20.6% of pensionable salaries from January 2013 (up from the previous level of 14.2%). Employees continue to contribute an additional 6% to the pension scheme. The final salary scheme was closed to new members in 2013, with new employees, since that time, being offered defined contribution pension arrangements. Unlike most UK schemes, the Jersey Electricity pension scheme is not funded to pay mandatory annual rises on retirement. The next triennial actuarial valuation of the defined benefit scheme has

an effective date of 31 December 2015, the results of which are expected to be known in this coming financial year.

Returns to shareholders

62% of the ordinary share capital of the Company is owned by the States of Jersey with the remaining 38% held by around 600 shareholders via a full listing on the London Stock Exchange.

Of the holders of listed shares Huntress (CI) Nominees Ltd owns 5.8m (50%) of our A Ordinary shares which represents 19% of our overall Ordinary shares and around 5% of Voting Rights. This nominee company is held within the broker firm Ravenscroft which has placed our stock with a number of private clients residing largely in the Channel Islands and also an investment fund specialising in local business. During the year the ordinary dividend paid increased by 6% from 11.80p net of tax to 12.45p. The proposed final dividend for 2015, at 7.60p, is a 6% increase on last year and consistent with the underlying dividend pattern in recent years and with our stated policy to aim to deliver sustained real growth in the medium-term.

The share price at 30 September 2015, at £4.50, was 35% above the level of £3.34 at the 2014 year end. This gives a market capitalisation of £138m as at 30 September 2015

against a balance sheet net assets position of around £150m. However the illiquidity of our shares, due mainly to having one large shareholder, combined with an overall small number in circulation, constrains the ability of the management team to influence the share price. At the 2011 Annual General Meeting an all-employee share scheme, to more closely align the interests of both employees and shareholders, was approved, and during 2015, 266 qualifying staff received 100 shares each at a value

of around £4 per share at the time of issue (which will vest in 2018) and this is likely to be repeated going forward. We also appointed Edison (an investment research firm) during the year to market our shares to a wider body of potential investors. Such initiatives seek to improve our longer-term liquidity.

Our largest shareholder, the States of Jersey also owns holdings in other utilities in Jersey. It holds 100% of Jersey Telecom and Jersey Post, as well as around 75% of Jersey Water. The total direct cash return to the States of Jersey from Jersey Electricity in the last year was £7.3m (2014: £7.0m). Note that no corporation tax was paid in 2014 or 2015 due to capital allowances associated with our heavy investment spend.

2015  2014

The Company regularly communicates with its largest shareholders and details of discussions, including any concerns, are reported to the Board by both the Chief Executive and the Finance Director.

Group Risk Management

Approach

The Board is ultimately responsible for managing the Group s approach to risk and determining a strategy for managing identified risks within the business. The Board is supported by the Audit and Risk Committee which has delegated responsibility for reviewing the effectiveness of the Group s system of internal controls and risk management. The Board recognises that any risk management process cannot eliminate all level of risk but rather manages the Group s exposures, and sets the acceptable level of tolerance required to successfully deliver the Group s strategy and growth.

The management team has an established risk management framework which is designed to identify the key risks. This framework also assists in developing risk mitigation

FINANCIAL REVIEW

activities and making assessments of their effectiveness. In its maintenance of the Group s Risk Register, each business unit, together with the executive management team, identify the principal risks together with the mitigation strategies in place. Following this process the principal risks and mitigation actions are collated and reviewed by the management team, Audit & Risk Committee and Board. The output from this exercise forms the basis of the key principal risks set out below.

Other key features of our system of risk management, which have been in place throughout the financial year, include:

 Regular business and financial reviews by the Executive team

and the Board;

 Established and documented risk management policies including a schedule of matters reserved for the Board;

 Systems and tools to monitor key risks with the aim of

providing regular and succinct information to the Board and Executive team; and

 A comprehensive insurance programme.

Key changes to the risk profile of the Group in 2015

The successful commissioning of Normandie 3 (N3) has significantly reduced a number of exposures associated with the potential operational loss of the existing subsea cable to France (N2) or issues with on-Island generation plant. This was generally viewed as the largest existing risk which was largely mitigated when the N3 project was delivered on 24 September 2014. This asset has subsequently become bedded in during the 2015 financial year.

Principal risks

The Directors have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity.

The table below summarises the Group s principal risks and how they are managed. The Board considers these to be the most significant risks that could materially affect the Group s financial condition, ongoing performance and future strategy. The risks listed do not comprise all risks faced by the Group and are not set out in any order of priority. Additional risks not presently known to management, or currently deemed to be less material, may also have an adverse effect on the business.

Risk  Description and possible impact  Mitigation activities

 Regulatory / Political or Legislative change

Regulatory Not acting in line with expectations on behaviours  Ensure we find the correct balance associated with being a key service

of a monopoly utility resulting in the introduction of  provider on an Island but recognising our responsibilities to a wide sector specific regulation with the attendant cost of  number of stakeholders.

compliance and impact on public relations. Regular communication with key stakeholders.

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

Political Unfavourable political and/or legislative  Monitor political and legislative developments (e.g. the Government s developments which cause a significant change to  Energy Plan) and analyse the opportunities and threats to enable us

the operation of the business. to respond effectively. Develop proposals for approval by the Board to address any specific risks identified.

 Major capital project management

Project Unsuccessful delivery of our major projects resulting  Project risks are recorded and monitored and regular progress updates

in inability to achieve overall project objectives. issued to both management and the Board.

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

Asset failure Financial implications associated with the loss of  Scenario and sensitivity analysis as part of our long- term budgeting

significant plant and/or importation assets. process. Insurance obtained where appropriate/cost effective.

Effective monitoring and maintenance of the plant / assets.

Financial /  Impact of the economic environment on the  Our retail business, Powerhouse.je, was restructured/rebranded during Reputational profitability of our Retail and Building Services  2014 with a stronger online presence.

operations.  JEBS, our building services business, has a new management team in

place with considerable experience in the sector. A review and rebrand of this business is in progress.

Pension Liabilities Volatility of markets impacting our Defined Benefit  The Board regularly monitors the latest position regarding the Scheme

Pension Scheme position e.g. liabilities increase due  and the impact that it is having on the Company.

to market conditions or demographic changes and/

or investments underperform. The Defined Benefit scheme was closed to new members in 2013.

Triennial valuation to formally report on performance.

Volatility A significant proportion of our profitability and price  Power and foreign exchange are hedged in accordance with the agreed

competitiveness is dependent upon our ability to  strategies which are themselves reviewed and approved by the Board on manage exposure to increasingly volatile power and  a periodic basis.

foreign exchange markets.

 Security of Supply / Supply Chain / Asset & Plant Management

Business Continuity Failure and/or unavailability of significant plant and/ A range of predefined Security of Supply standards have been devel -

or importation assets which cause disruption to our  oped and we seek to design the system to meet those standards. operations. A programme of maintenance exists to optimise the life of assets.

Use of a comprehensive business continuity planning process including periodic performance of scenario exercises.

A number of diverse sources of supply have been developed such

as importation cables and on-Island generation (deploying various technologies) to ensure that we are not over-reliant on any single source, fuel or technology.

Asset & Plant  Failure of ageing metering infrastructure.  The SmartSwitch project will result in a smarter more modern metering Management solution replacing legacy systems. Contingency plans are under continu -

ous development to enable the Company to mitigate the failure of the

key systems.

Supply Chain Impact on ability to generate due to availability,  Programme in place to ensure all fuel tank storage facilities are storage and transportation of heavy fuel oil.  refurbished. Contract in place with Esso for supply of fuel to 31

December 2016.

 Health, Safety & Environment

H,S & E Non-compliance with relevant legislation, regulations  A proactive Health, Safety and Environment culture has been nurtured

and accepted codes of practice resulting in  throughout the organisation supported by a safety management unnecessary exposure to our staff, customer, member  structure, safety representatives, programmes of site inspections, regular of the general public or our plant and equipment.  training and employee induction amongst other areas.

Use of British Safety Council for external benchmarking.

 People / Succession Planning

People The Group s strategy is largely dependent on the  The Group has appointed a new Human Resources Director and Talent

skills, experience and knowledge of its employees.  Manager to develop an HR strategy that effectively supports the business. The inability to retain executives and other key  This includes focus on development/training, succession and new employees, or a failure to adequately plan for  approaches for reward within Jersey Electricity.

succession, could negatively impact Group  Succession plans are under continuous development covering our performance.  Energy business and plans are also in place for other key areas within

Around 40% of the current work-force are anticipated  the wider business.

to retire from the business in the next 10 to 15 years.

 Cyber Security

Catastrophic breach  Due to the nature of our business we recognise that  We continue to use industry best practices as part of our cyber security of our systems our critical infrastructure systems may be a potential  policies, processes and technologies.

target for cyber threats. We must protect our business  We have also commissioned a review by an external consultancy of assets, infrastructure and sensitive customer data and  the measures we employ to mitigate our cyber security. The results of be prepared for any malicious attack. the review have confirmed that we are in a sensible cyber security

state although further initiatives have been identified and are being pursued that will further strengthen our security posture. We also intend instigating an awareness campaign for our managers to ensure they understand that this is seen as a rising area of potential risk for all companies.

System improvements to our SCADA (supervisory control and data acquisition) operational package are scheduled in the next planned upgrade.

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

Viability Statement

In accordance with provision C.2.2 of the 2014 revision on the Code, the Directors have assessed the prospect of the Company over a longer period than the 12 months required by the Going Concern provision. The Board conducted this review for a period of five years, selected because an annual refreshment of the Five Year Plan is performed with the latest version approved by the Board on 1 October 2015. This document considers our forecast investment, hedging policy for electricity procurement and linked foreign exchange requirements, debt levels and

other anticipated costs, and the resultant impact on likely customer tariff evolution. In addition, material sensitivities to this

base case are considered. Based on the results of this analysis the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five-year period of their assessment.

GOVERNANCE

Board of Directors

Geoffrey Grime Chairman (68) R/N

Geoffrey joined the Board in 2003. He retired in

1999 as Chairman of Abacus Financial Services, a leading offshore trust company in which he played an instrumental role as one of its founders. A Chartered Accountant, his career in Jersey commenced in 1969 with Cooper Brothers & Co. and progressed to his appointment as Channel Islands Senior Partner of Coopers & Lybrand in 1990. He currently holds

a number of professional appointments as both director and trustee. In November 2002 he was elected as a Deputy in the States of Jersey and he retired from that position in December 2005.

In September of 2014 he was elected as a Jurat of the Royal Court of Jersey where he sits as a lay judge.

Chris Ambler Chief Executive (46) N

Chris was appointed

to the Board as Chief Executive on 1 October 2008. He previously

held a number of senior international positions in the global utility, chemicals and industrial sectors

for major corporations including Centrica/British Gas, The BOC Group

and ICI/Zeneca as well

as corporate finance

and strategic consulting roles. He is a Director of Channel Islands Electricity Grid Limited. Externally, he is also a non-Executive Director of Apex Global Alpha and Foresight Solar Fund Limited, both being listed funds on The London Stock Exchange. Chris

is a Chartered Engineer with the Institution of Mechanical Engineers and has a First Class Honours Degree from Queens College, Cambridge and a MBA from INSEAD.

Mike Liston Non-Executive Director (64) N/R

Mike joined Jersey Electricity in 1986 from the UK Power industry as Chief Engineer and was Chief Executive

for 15 years before retiring

in 2008 to focus on his portfolio of directorships with listed investment funds and operating companies

in the international energy infrastructure, wind, solar and bio-fuels sectors.

His current Board roles include Chairman of London-listed, Renewable Energy Generation Ltd, and Chairman of the postal utility, Jersey Post. His private equity and venture capital directorships include the global Fiduciary Services firm, JTC Group.

Mike is a Fellow of the Royal Academy of Engineering

and a Fellow of the Institution of Engineering and Technology. He was

until 2010, Chairman of

the Jersey Appointments Commission, established

by government to ensure probity in public sector appointments.

Mike was awarded an OBE in Her Majesty the Queen s 2007 New Year Honours

List and in 2012 he was elected Jurat of the Royal Court of Jersey, where he

sits as a lay judge.

Clive Chaplin Non-Executive Director (64) A/N/R

Clive joined the Board

in 2003. He trained as

a solicitor in London, qualifying in 1977 and moved to Jersey in 1979. He was admitted as a solicitor of the Royal Court of Jersey in 1985 and from 1994 until his retirement on 31 January 2012 was

a partner of Ogier. He remained Chairman of its Fiduciary Services Holding Company until 31 January 2014. He is now Chairman of Bathroom Brands Plc and a director of a number of companies operating in the financial services sector. He is also Chairman of the Jersey Law Commission. He is Chairman of the Remuneration Committee.

Martin Magee  Aaron Le Cornu Finance Director  Non-Executive Director (55) (45) A/R

Martin joined the Board as  Aaron was appointed to Finance Director in May  the Board as non-Executive 2002. He moved from  Director in January 2011 Scott ish Power plc, after  and is currently the Chief nine years in a variety of  Financial Officer for Elian, senior finance roles. He  a Fiduciary Firm with previously worked for nine  headquarters in Jersey and years with Stakis plc (now  operations in 10 countries. part of the Hilton Hotels  Prior to that appointment, Group). He is Chairman of  Aaron held a number of Jersey Deep Freeze Limited  senior positions within

and a Director of the  HSBC, latterly as the Deputy Channel Islands Electricity  CEO of HSBC International. Grid Limited. Externally,  During his 10 years with

he is also the non- HSBC, he held a number of Executive Audit Committee  Board positions for HSBC Chairman for AIM listed  subsidiaries and was also Stanley Gibbons plc and  involved in acquisitions non-Executive Chairman  (such as the purchase of

of the Standard Life Wealth  Marks & Spencer Money) Offshore Strategy Fund  and setting up Greenfield Limited. He is a member of  retail banking operations in the Institute of Chartered  Central Europe. Aaron is a Accountants of Scotland  Chartered Accountant. He having qualified in 1984. qualified with and worked

for Andersen for eight

years, including two years

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

Directors

All non-Executive Directors are viewed as being independent with the exception of Mike Liston who was formerly the Company s Chief Executive. Geoffrey Grime and Clive Chaplin are still regarded as independent even though they are now in their 13th year as Directors.

The Nomination Committee has formulated a plan for

a controlled change in the constitution of non-Executive Directors going forward.

Key to membership of committees

A  Audit and Risk Committee N  Nominations Committee R  Remuneration Committee

GOVERNANCE

Directors Report

for the year ended 30 September 2015

The directors present their annual report and the audited financial statements of Jersey Electricity plc for the year ended 30 September 2015.

Principal activities

The Company is the sole supplier of electricity in Jersey. It is involved in the generation and distribution of electricity and jointly operates the Channel Islands Electricity Grid System with Guernsey Electricity Limited importing power for both islands. It also engages in retailing, property management, building services and has other business interests, including software development and consulting.

Dividends

The Directors have declared and now recommend the following dividends in respect of the year ended 30 September 2015:

2015  2014 Preference dividends £  £

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

Ordinary dividends

Ordinary and A Ordinary Shares

Interim paid at 5.25p net of tax for the year ended 30 September 2015 (2014: 5.00p net of tax)  1,608,600  1,532,000 Final proposed at 7.60p net of tax for the year ended 30 September 2015 (2014: 7.20p net of tax)  2,328,640  2,206,080 3,946,213  3,747,053

Re-election of directors

In accordance with the requirements of the UK Corporate Governance Code, Directors should offer themselves for re-election no less frequently than every three years. Accordingly, Aaron Le Cornu will retire and, being eligible, offers himself for re-election. Furthermore, Directors with more than 9 years service should offer themselves for re-election on an annual basis. Accordingly, Geoffrey Grime and Mike Liston will retire and, being eligible, will offer themselves for re-election. Clive Chaplin will not offer himself for re-election as he is retiring at the AGM.

Directors and officers insurance

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

Policy on payment of creditors

It is Group policy, in respect of all of its suppliers, to settle the terms of payment when agreeing each transaction, to ensure that suppliers are made aware of the terms of payment and to abide by those terms. The number of creditor days in relation to trade creditors outstanding at the year end was 19 days (2014: 21 days).

Directors Report

for the year ended 30 September 2015

Substantial shareholdings

As at 17 December 2015 the Company has been notified of the following holdings of voting rights of 5% or more in its issued share capital:

Equity Ordinary Shares

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

 A Ordinary Shares

 A Ordinary shares entitle the holder to 1 vote for every 100 shares held whereas the Ordinary shares carry voting rights of 1 vote for every 20 shares held.

Huntress Nominees (CI) Limited are the largest shareholder of our listed shares and hold 5,840,070 A Ordinary shares which represent 5.3% of the total voting rights. It is understood that the underlying owners of these shares are substantially private investors based in the Channel Islands.

Auditor

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

BY ORDER OF THE BOARD P.J. ROUTIER

Secretary

17 December 2015

GOVERNANCE

Corporate Governance

Corporate Governance

The Directors are committed to maintaining a high standard of Corporate Governance in accordance with The UK Corporate Governance Code September 2014 ( the Code ), as incorporated within The Listing Rules, issued by the Financial Conduct Authority. The Listing Rules require the Company to set out how it has applied the main principles of the Code and to explain any instances of non-compliance.

In accordance with Listing Rule ( LR ) 9.8.4 R, the agreement related to Independent business required by LR 9.2.2A (2) (a) R has been entered into with the States of Jersey, the controlling shareholder, with effect from 17 November 2014. The company has complied with the independence provisions included in the agreement during this financial year and believes the controlling shareholder is also compliant. The other applicable information required by LR 9.8.4 R (5)/(6) is disclosed in external appointments.

Statement of Compliance

The Board considers that the Company is a smaller company for the purposes of the Code as it is not a member of the FTSE350. Throughout the financial year ended 30 September 2015 the Board considers that it has complied with the Code, with the following exceptions:

The Code (Provision B.2.1) recommends that a majority of members of the Nomination Committee should be independent non-Executive Directors. Throughout the year the Company s Nomination Committee has comprised Mike Liston, Geoffrey Grime, Chris Ambler and Clive Chaplin. Whilst the Board acknowledges that Mike Liston cannot be considered independent due to his membership of the Company s pension scheme he has served a number of years as Chairman of the Jersey Appointments Commission, established by the government of Jersey to ensure probity in all public appointments, and is considered eminently qualified to Chair the company s Nominations committee.

The Main Principle B.6 states that annual board performance evaluations should take place. Whilst the Board is in total agreement that their effectiveness is vital to the success of the Company it has concluded that due to the stability and size of the business these do not necessarily have to be performed annually. An external evaluation took place during the course of this financial year.

The Main Principle B.7 states that all directors should be submitted for re-election at regular intervals, subject to satisfactory performance. Executive Directors are not subject to retirement by rotation but they are subject to the same periods of notice of termination of employment as other members of the Company s senior management. This is deemed appropriate by the Board because it is felt that our largest shareholders have sufficient powers to remove Executive Directors if they saw fit.

The Board

The Board provides effective leadership and currently comprises four non-Executive and two Executive Directors. They are collectively responsible for the long-term success of the Company and bring together a balance of skills, experience, independence and knowledge. The Chairman and the Chief Executive roles are divided with the former being appointed by the Directors from amongst their number. Clive Chaplin is the Senior Independent Director.

Independence

All the non-Executive Directors are viewed as being independent with the exception of Mike Liston who was formerly the Company s Chief Executive. The Board have determined that Geoffrey Grime and Clive Chaplin remain independent notwithstanding that they have served on the Board for more than thirteen years. In making this determination, the Board took into account their breadth of experience, their financial independence and their other business interests.

There have been no appointments to the Board during the financial year 2014/15 but Alan Bryce was appointed subsequently. On appointment to the Board the required time commitment is established and any significant changes to their time commitments are notified to the Board.

An induction process is in place for all newly appointed Directors. Clive Chaplin, one of our non-Executive Directors, will be retiring at the forthcoming Annual General Meeting.

The Board is responsible to the Company s shareholders for the proper management of the Company. It meets regularly to set and monitor strategy, review trading performance and risk management, examine business plans and capital and revenue budgets, formulate policy on key issues and reporting to shareholders. Board papers are circulated, with reasonable notice, prior to each meeting in order to facilitate informed discussion of the matters at hand.

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

Corporate Governance

The following table sets out the number of meetings (including Committee meetings) held during the year under review and the number of meetings attended by each Director.

Board  Audit and Risk  Remuneration  Nominations No of meetings  7  5  3  2

G.J. Grime  7  -  3  2 C.A.C. Chaplin  7  5  3  2 A.D. Le Cornu  6  4  3  - M.J. Liston  6  -  3  2 J.B. Stares  3  2  2  2* C.J. Ambler  7  4*  3*  2 M.P. Magee  7  5*  -  -

* attendees by invitation

Nominations Committee

The Nominations Committee members are currently Mike Liston (Chairman), Geoffrey Grime, Chris Ambler and Clive Chaplin. They:

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

composition of the Board;

 consider succession planning; and

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

specified term of office.

A Company-wide policy exists on diversity. The Board recognises the benefits of diversity and will continue to appoint Executive and non-Executive Directors to ensure diversity of background and on the basis of their skills and experience. The Terms of Reference for the Nominations Committee and the Terms and Conditions of the Appointment of non-Executive Directors are available on request.

During the year a plan was formulated for a controlled change in the constitution of non-Executive Directors going forward in light of corporate governance requirements on independence. It is suggested that Alan Bryce will join the Audit and Risk Committee to replace Clive Chaplin.

Audit and Risk Committee

The Audit and Risk Committee s members are Aaron Le Cornu (Chairman) and Clive Chaplin. The meetings provide a forum for discussions with the external auditor. Meetings are also attended, by invitation, by the Chief Executive, the Finance Director, the Financial Controller, the Company Secretary, and members of both the external audit and internal audit teams.

The Audit and Risk Committee is responsible for reviewing the Annual and Interim Management Statements and accompanying reports before their submission to the Board for approval and for the reporting of its findings to the Board. As part of the review process the Audit and Risk Committee reviews the likely significant issues in advance of the publication of both the Half and Full Year Results and in particular any critical accounting judgements identified by both the Company and the external auditor most of which are disclosed in Note 2 to the Financial Statements (Critical Accounting Judgements). Comprehensive position papers on each key area are produced by the Finance Director at both the half and full year. Some of the areas are recurring items such as revenue recognition, impairment of assets, retirement benefit obligations and hedge accounting. The Committee reviews any year-on-year changes in methodology for reasonableness. In addition there may be one-off issues that surface. The Committee also takes comfort that the Finance Director liaises with our external auditor during the course of the year to establish a consensus opinion where possible.

GOVERNANCE

Corporate Governance

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

financial, operational and compliance controls and risk management procedures) to ensure the integrity of the financial information reported to the shareholders. It also considers reports from the internal and external auditors and from management. It reports and makes recommendations to the Board. In addition, the Audit and Risk Committee regularly reviews the scope and results of the work undertaken by both the internal and external auditors. The Terms of Reference for the Audit and Risk Committee are available on request.

The Committee has approved the external auditor s remuneration and terms of engagement and is fully satisfied with the performance, objectivity, quality of challenge and independence of the external auditor. Having undertaken a tender process, the Committee has recommended that a resolution to reappoint the external auditor as the Company s statutory auditor is to be proposed at the Company s forthcoming AGM. In the 2014 Annual Report and Accounts it was reported that consideration was likely to be given to conducting a competitive tender to select an external auditor for the year ending 30 September 2016. This was on the basis that this coincided with the rotation of the Deloitte LLP partner and also because they have been incumbent since 2003. A tender took place during this financial year and Deloitte LLP were reappointed. Non-audit services are reviewed on a case by case basis and also in terms of materiality of the fee by the Audit and Risk Committee. Note 6 to the Financial Statements details the quantum and split of auditor fees.

The Board requested that the Committee advise them on whether they believe the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for the shareholders to assess the Company s performance, business model and strategy. The Audit and Risk Committee has concluded that this is the case and has reported this to the Board. The Committees terms of reference have been modified to reflect this additional responsibility.

Internal Control

The Board is responsible for establishing and maintaining the Company s system of internal control and for the management of risk. Internal control systems are designed to meet the particular needs of the business and the risks to which it is exposed, and by their nature can provide reasonable but not absolute assurance against material misstatement or loss. This process has been in place throughout the year up to the date of approval of the financial statements and is in accordance with The UK Corporate Governance Code. Whistleblowing arrangements are reviewed annually by the Audit and Risk Committee.

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

Board Reports

Key strategic decisions are taken at Board meetings following due debate and with the benefit of Board papers circulated beforehand. The risks associated with such decisions are a primary consideration in the information presented and discussed by the Board who are responsible for determining the nature and extent of the significant risk it is willing to take to achieve the strategic objectives. Prior to significant investment decisions being taken, due diligence investigations include the review of business plans by the Board.

Management Structure

Responsibility for operating the systems of internal control is delegated to management. There are also specific matters reserved for decision by the Board; and these have been formally documented and a summary of the key types of decision made by the Board is as follows:

 Strategy and Management including:

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

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

Changes in structure and capital of the Company

Corporate Governance

Financial reporting and controls including:

Approval of the Annual Report and Financial Statements.

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

Internal controls/Risk Management

Reviewing the effectiveness of the Company s internal control and risk management systems. An external review of the risk management process is conducted every three years.

Contracts approval of

Major capital projects. Major contracts. Major investments.

Board membership and other appointments

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

Remuneration

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

Corporate governance matters

Undertaking a formal and rigorous review every two years of its own performance, that of its committees and individual Directors. Review of the Company s overall corporate governance arrangements.

Approval of key Company policies

Internal Audit/Risk Management

There is a permanent team of internal audit staff involved in a continuous structured review of the Company s systems and processes, both financial and non-financial. Internal Audit manage the process of strategic and operational risk reviews and facilitate risk review workshops with departmental managers. The Head of Internal Audit routinely reports to the Company Secretary with direct access

to the Audit and Risk Committee Chairman and also attends Audit and Risk Committee meetings, at which internal audit s plans are discussed and approved. During this financial year an independent review was performed of the effectiveness of the Internal Audit function. This was largely positive with some recommendations for improvement which have, or will be, implemented.

Personnel

The Company ensures that personnel are able to execute their duties in a competent and professional manner through its commitment to staff training, regular staff appraisals and organisational structure.

Budgetary Control

Detailed phased budgets are prepared at profit centre level. These budgets are approved by the Board, which receives sufficiently detailed financial data to monitor the performance of the Company with explanations of any material variances.

Audit and Risk Committee

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

accounting period as outlined above. In addition it regularly conducts deep dive reviews on specific identified risks to test assumptions on the substance of such risks and their mitigation. More detail on the Group s principal risks, and how they are managed, is provided in the Financial Review within this Annual Report.

GOVERNANCE

Statement of Directors Responsibilities

Directors Responsibilities for the Financial Statements

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

Company Law requires the Directors to prepare Financial Statements for each financial year. The Directors are required by the IAS Regulation to prepare the Group Financial Statements under IFRS as adopted by the European Union. The Financial Statements are also required by Company Law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

International Accounting Standard 1 requires that Financial Statements present fairly for each financial year the Company s financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board s Framework for the preparation and presentation of financial statements . In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRS. However, Directors are also required to:

 properly select and apply accounting policies;

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

information;

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

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

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

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies (Jersey) Law 1991. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

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

The Directors consider that the Group has adequate resources to continue in operational existance for the foreseeable future. The Financial Statements are therefore prepared on a going concern basis. Further details of the Group s going concern review are provided in note 1 of the financial statements on page 60.

Having taken advice from the Audit and Risk Committee, the Board considers the annual report and financial statements, taken as a whole, to be fair, balanced and understandable and that it provides the information necessary for shareholders to assess the Company s performance, business model and strategy.

Responsibility Statement

We confirm that to the best of our knowledge:

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

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

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

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

By order of the Board

C.J. AMBLER

Chief Executive Officer 17 December 2015

M.P. MAGEE Finance Director 17 December 2015

Remuneration Report

Remuneration Committee

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

Remuneration Policy

The policy of the Committee is to ensure the provision of remuneration packages for the Executive Directors that fairly reward them for their contribution to the overall performance of the Group. Remuneration packages comprise basic salary and benefits together with a performance related annual bonus. Benefits for Executive Directors principally comprise a car or car allowance, private health care and housing subsidy.

The salary and benefits of the executive team are reviewed by the Committee annually and any adjustments take effect on 1st April. The Committee make use of a locally focussed benchmarking report as well as assessing the remuneration of the executive team by reference to comparable companies within the United Kingdom. The Committee seeks to ensure that, excluding any share based remuneration (of which there is none other than the all-employee share scheme disclosed later in the report), the overall value of the remuneration package of the executive team members including bonus and other benefits matches, in broadest terms, relevant comparative benchmarks for executive director remuneration. The bonus payable to the Executive Directors is performance related and as highlighted last year we developed more clearly defined criteria and constructed bonuses around key project milestones for the Company. The criteria remain deliberately unrelated to profit. One of the project milestones related to the installation of the strategically important Normandie 3 subsea cable and as the conditions surrounding the project were fully satisfied specific bonus payments were made to the Executive Directors in early 2015 in addition to their normal bonus arrangements based on overall performance.

The remuneration of individual Directors for the year ended 30 September 2015 was as follows:

Basic  Bonus  Bonus  Benefits  Total  Total salary/fees  normal  Normandie 3  in kind  2015  2014

£  £  £  £  £  £

EXECUTIVE DIRECTORS

C.J. Ambler  207,901  74,884  110,000  13,869  406,654  289,548 M.P. Magee  172,342  47,353  77,000  11,753  308,448  221,161 R.A. Plaster (resigned from the Board  

on 30 May 2014)  -  -  -  -  -  308,318

NON-EXECUTIVE DIRECTORS

G.J. Grime  31,500  -  -  3,404  34,904  34,562 M.J. Liston[1]  17,850  -  -  1,702  19,552  19,381 C.A.C. Chaplin[2] 19,950  -  -  1,602  21,552  21,499 J.B. Stares[3] (retired from the Board  

on 5 March 2015)  8,983  -  -  766  9,749  22,531 A.D. Le Cornu3/4 19,629  -  -  1,602  21,231  19,399

Total  478,155  122,237  187,000  34,698  822,090  936,399

GOVERNANCE

Remuneration Report

Service Contracts

The Executive Directors service contracts provide for a notice period of six months. Non-Executive Directors service contracts have no unexpired term at the time of election or re-election at the Annual General Meeting.

Pension Benefits

Set out below are details of the pension benefits to which each of the Directors is entitled. These pensions are restricted to the scheme in which the Director has earned benefits during service as a Director, but include benefits under the scheme for service both before and after becoming a Director, including any service transferred into the scheme from a previous employment.

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

pension  30.9.20152 30.9.20153 30.9.20143 during year  less directors during the year1  contributions4

C.J. Ambler  £4,003  £34,535  £471,932  £352,935  -  £118,997 M.P. Magee5 £4,244  £73,025   £1,294,971  £1,075,249  £10,336  £209,386

Notes

1. The increase in accrued pension during the year represents the additional accrued pension entitlement at the year end compared to the previous year end.
2. The pension entitlement shown is that which would be paid annually on retirement at age 60, based on service at the year end.
3. The transfer values have been calculated using the basis and method appropriate at each accounting date. It is assumed that the deferred pension commences from the earliest age at which the member can receive an unreduced pension.
4. The increase in transfer value over the year is after deduction of contributions made by the director during the year.
5. Along with all other Scheme members, Directors have the option to pay Additional Voluntary Contributions (AVCs) to the Scheme to purchase additional final salary benefits. AVCs paid by the Directors during the year were nil. The transfer values include the value of any accrued AVC pensions.

All-Employee Share Scheme

At the 2011 Annual General Meeting approval was granted to launch an all-employee share scheme. During the 2012 financial year 100 A Ordinary Shares were issued to all staff (subject to Scheme Rules) including the Executive Directors. These shares vested on 2 July 2015. A further 100 A Ordinary Shares were issued to all staff (subject to Scheme Rules) during 2015 and these are due to vest on 18 February 2018.