Jersey Electricity: Report and Accounts 2016 – Investment to Power a Sustainable Future

INVESTMENT TO POWER A SUSTAINABLE FUTURE REPORT AND ACCOUNTS 2016

R.35/2018

ENERGY GROWTH/SOLUTIONS OUR YEAR 625 million units of electricity sold.49,532 customers on supply.

KEY ACHIEVEMENTS 2016   Won 98% of new developments.

 Doubled fuel switch conversion rate.

 New E20+ Tariff launched.

RECORD TURNOVER

 Best ever Group performance with

revenues of £103m, generating the profit to fund on-going investment.

 Group pre-tax profits up 6% at £13m.  Retail turnover up 8% to £11.9m.

PEAK DEMAND

 149MW recorded on 19 January 2016 at

9.30pm. Close to last year s 148MW but well below our record 161MW set on 2 February 2012.

NORMANDIE 1

 Primary project completed on time

and under budget.

 Feb: EDF1 cable beach recovery starts.  March: EDF1 offshore recovery.

 April: EDF1 recovery completed.

 July: N1 cable leaves Naples.

 Aug: Marine installation.

 Dec: N1 circuit live.

HEALTH AND SAFETY

 Just one minor Lost Time

Accident (LTA) despite three major on-going infrastructure projects involving multi-national contractors.

ST HELIER WEST

 Good progress made on a difficult site.  Dec 2015: Civil works contract signed.  Jan 2016: Civil works start.

 Jun 2016: INEO contract signed.

 Sept 2016: Foundation piling starts.

SUPPLY SECURITY

 24 Customer Minutes Lost (CMLs).  Black start Diesel 5 in position

and expected in service early 2017.

50 YEARS OF LA COLLETTE

 29 September marked 50 years

of generation at La Collette Power Station.

A YEAR IN FOCUS

SMARTSWITCH

 Over half the Island switched to Smart Meters.  25,296 meters installed.

 Post Code Billing launched.

SMART METERS INSTALLED SO FAR

25,296

ENVIRONMENT

 Delivered power at a carbon intensity

level of 47g CO2e / kWh.

 One ninth of the UK grid. AFFORDABILITY   One fifth of local fossil fuels.

 No tariff increase since April 2014.

  Price s to be frozen throughout 2017.

 Within target of +/-10% of EU15 Average.

ELECTRIC TRANSPORT

 215 electric vehicles registered.

 Jersey Post starts to electrify fleet.

CONTENTS

CONTENTS DIRECTORS, OFFICERS AND

PROFESSIONAL ADVISERS

NON-EXECUTIVE DIRECTORS Geoffrey Grime FCA (Chairman)

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

Alan Bryce MSc, CEng, FIET

8Phil Austin MBE, FCIB, FCMI

Wendy Dorman BA (Hons), ACA

CTRICITY

10EXECUTIVE DIRECTORS

BILITY A Christopher Ambler BA, MEng, CDipAF, CEng, MIMechE, MBA (Chief Executive)

Martin Magee CA (Finance)

SECRETARY

SION  Peter Routier BSc, FCIS

REGISTERED OFFICE Queen s Road, St. Helier , Jersey

PLACE OF INCORPORATION Jersey

AUDITORS

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

BANKERS

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

BROKERS

NITY U Canaccord Genuity Wealth Management,

PO Box 3, 37 The Esplanade, St. Helier , Jersey

REGISTRAR

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

44

1

I am pleased to report that Jersey Electricity has delivered another excellent year s performance in 2015/16.

The Company has continued to make great progress in implementing its infrastructure strategy, at the centre of which was the successful delivery of another 100MW interconnector, Normandie 1(N1), installed between Jersey and France, and delivered ahead of schedule and materially below budget. A shared investment with our partners Guernsey Electricity, N1 is the replacement for EDF1, Jersey Electricity s first interconnector, which came to the end of its life in 2012. This new cable link gives Jersey and Guernsey the benefit of three submarine cables between Jersey and France, across two diverse routes. The primary project was completed in just four years at

a cost of around £30m, representing another notable achievement.

The Company s success this year is not limited to delivering capital projects. It has also produced its best ever Group financial performance supported by strong improvements

in its non-Energy businesses. In the Energy supply business, Jersey Electricity has built on the good progress made last year, maintaining profitability at a level needed to support on-going investment and commensurate with a rate of return that we see in regulated entities elsewhere. Importantly, despite the recent period of sustained investment, we have been able to maintain prices at current levels for nearly three years and we remain competitively priced relative to other islands and even larger EU countries. Furthermore, we have announced that electricity prices will not increase until 1 January 2018 at the earliest. Our supply reliability, health and safety and environmental performance,

including the carbon intensity of supplied electricity, remain strong relative to peers which is notable given the particular challenges of operating in an island context.

As sole supplier of over 40% of the Island s energy requirements we have a huge responsibility to our customers and it is gratifying that we maintained our overall customer service rating at a level assessed as being excellent when compared with similar service providers in the market.

Group revenue for the year to 30 September 2016 at

£103m was 3% higher than in the previous financial year

and profit before tax, before exceptional items, at just

over £13m, reached a level 6% higher than last year

both supported by stable underlying performance in the Energy business and increased activity in our non-Energy businesses, especially our retail business, Powerhouse.je which continues to show improvement. Unit sales volumes of electricity held up given the challenges of energy efficiency and the mild weather this year only marginally behind last year at 625 million units, in part reflecting our success at

fuel switching customers to electricity. Profits in our Energy business rose from £11.5m to £11.6m with higher supply margins partially offset by a £1.1m rise in pension costs of which £0.7m was of a non-recurring nature associated with the granting of an ex-gratia rise in pensions in service.

I am therefore pleased to report a proposed final dividend for this year of 8.00p payable on 30 March 2017, being a 5% increase on last year.

We have continued our programme of Board renewal that we announced last year, welcoming two new non-Executive Directors in Phil Austin MBE and Wendy Dorman. Phil joined us in May after a long career in banking with HSBC followed by appointments in the Jersey financial services sector. Wendy joined us in July from PwC where she led

its Channel Islands Tax Practice. Finally, Mike Liston, our former Chief Executive, who also served as a non-Executive director over the last eight years, retired in December 2016. Mike has served Jersey Electricity from 1986 and has made an extraordinary contribution to the Company, greatly influencing its success over the last 30 years, and to whom I would like to extend our sincere thanks.

CHAIRMAN S STATEMENT

As always, I would like to thank our Executive and all our non-Executive Directors and colleagues at all levels of the business. Without their continued commitment, hard work and loyalty to the Company, we could not have made the progress we have over these last few years. Thanks to

their efforts, Jersey Electricity is now well positioned for the future and delivering the performance needed to sustain our service long into the future.

Geoffrey Grime Chairman

13 December 2016

As a Group, I am delighted to report that we have delivered our best ever financial performance, with a 6% increase in profits, before exceptional items, to £13.1m on a turnover

of £103m. This reflects strong performances in all our business units and importantly has not been delivered at the expense of operational performance and customer service. Though unit sales of electricity at 625 million (kWhs) were marginally down on last year due to a mild 2015/16 winter and the impact of increased energy efficiency, our Energy business delivered profits of £11.6m, £0.1m ahead of last year. But it was our non-Energy business units that delivered most of our profit increase. In particular, our retail arm, Powerhouse.je has gone from strength to strength, turning a loss of £0.1m in 2014 into a £0.5m profit this year.

The level of profitability in our Energy business is necessary to finance our long-term investment programme and this has continued this year with the successful installation of our

third undersea supply cable to France, Normandie 1 (N1). This was a complex project delivered ahead of schedule

and below budget. At a cost of around £30m, shared

with Guernsey Electricity (GEL) under the oversight of the Channel Islands Electricity Grid (CIEG), N1 replaces EDF1, our first cable that was decommissioned in 2012.

It was less costly than N3, laid in 2014, as it follows the

same route as its predecessor from Surville, Normandy, to Archirondel on Jersey s east coast and connects to much existing on-land infrastructure. N1 represents

the next step in our continued subsea cable

investment programme and will enable us to securely meet Jersey s full electricity requirements with low carbon imports.

This year we imported 92% of our energy requirements from France, generated 3%

on-Island with the remaining 5% from the States of

Jersey-owned Energy from Waste plant. Though we had two submarine cables to France in operation throughout 2015/16, Normandie 2

(N2) and Normandie 3 (N3), the higher level

of local generation was due mainly to increased training at our La Collette Power Station.

This small rise in on-Island generation has, in turn, slightly increased the carbon intensity of our distributed power in Jersey from 33g CO2e / kWh last year to 47g CO2e / kWh. This is still well within target and at a level that is one ninth

of the carbon intensity of UK s electricity system and less than one fifth of that of local fossil fuels. The completion of N1 will enable us to virtually decarbonise Jersey s electricity supply

as well as enhance the security of that supply. We measure supply reliability in Customer Minutes Lost (CMLs) which is the average duration of interrupted supplies during the year experienced by each customer. This year our CMLs were 24. Although higher than last year, due mainly to the all-Island failure on 9 May, Jersey Electricity s lost minutes of supply was still around a third of the normal UK average.

We have also enhanced our emergency on-Island generation capabilities. The 5MW black start Sulzer diesel generator the Board approved last year is in the process of being installed at La Collette and is scheduled to be commissioned in early 2017. The importance of the Power Station to supply security was recognised when we marked 50 years since the first units of electricity were generated at La Collette on 29 September 1966.

The year saw progress on our £17m St Helier West primary substation. Preparations for the actual build are nearing completion. Our civil contractors have removed 27,000 tons of material from the old quarry site and began piling for the foundation and new retaining wall at the end of the financial year. French specialist contractors INEO are expected to start work in summer 2017, with the facility in service the following year.

Our other major investment project, SmartSwitch, has also moved forward this year with over 25,000 smart-enabled meters now installed. SmartSwitch has already enabled us to introduce Post Code Billing for a large number of customers by providing readings on the same date every quarter so our customers receive bills that cover four equal periods through the year. And, of importance to our load growth strategy, this new metering technology has enabled us to introduce our first 24-hour uninterrupted heating tariff, Economy 20 Plus (E20+) by automatically switching over to the higher General Domestic Rate during four peak hours of the day which were formerly an interruption to the heating supply.

This is already proving a huge incentive for customers we are encouraging to switch from fossil fuel-fired heating.

Elsewhere in the Group, both our retail interests, Powerhouse.je and JEBS, our contracting and building services business, continued to improve post restructuring and re-branding. JEBS produced a profit of £0.1m against a near breakeven position in 2015 and is making great inroads

into building a foundation for the future. Other business units

- Jersey Energy, Jendev and Jersey Deep Freeze all had a profitable year. Profits in our Property division, excluding the impact of investment property revaluation, at £1.7m, rose by £0.1m from last year.

Internally, our new HR team has introduced an extensive programme of staff training, including a bespoke Management Development Programme, and IT has undertaken a major programme of upgrade works, all essential to meet the future needs of the business. All of our functions have had their own projects and challenges during the year in which they have made notable progress.

GROUP PURPOSE CHIEF EXECUTIVE S REVIEW

Our purpose is to sustainably serve our community with affordable, secure, low carbon energy, today and long into the future, enabling quality of life for residents and economic prosperity for businesses . Sustainability is at the centre of everything we do and we think of this more broadly than environmental sustainability and low carbon. For Jersey Electricity, sustainability is also about security and reliability in our services provision. It is about fair pricing for customers that ensures the business is economically viable and competes effectively with other fuels, enabling the business to make a fair profit, satisfy shareholders and fund new investment. It is about the safety and health of all the people that touch our business and it is also reflected in our corporate and social responsibility activities.

This year we have built further on the Purpose, Vision and Values work instigated in 2013, to ensure every employee understands our purpose, the part they play in helping us fulfil our purpose; the vision of where we are trying to get to as a business and the values that describe the way we go about our work.

A major part of this is understanding our customers and serving them in the fairest and most efficient way. In the absence of competition in electricity or formal regulation, it is customers who drive us and they feature heavily in our strategy:

 To sustainably serve our community today and long

into the future Purpose

Strengthening our relationships with customers by better understanding their needs and meeting them Vision

 By being customer focused in our behaviours: We listen

to our customers and seek to understand and respond to their needs, treating them the way we would wish to be treated, with respect and honesty Values

Our vision  

Is to responsibly and sustainably deliver value to customers by:

 Growing unit sales and offsetting pressure from energy

efficiency by fuel switching from fossil fuels as well as finding new applications for electricity.

 Developing services and solutions that create value for

customers by designing, installing, maintaining, repairing and financing equipment and any new technologies that use electricity.

 Developing Smart infrastructure that will supply clean electricity securely in the most cost effective manner.

 Strengthening our relationships with customers by better

understanding their needs and meeting them.

Our priorities

 Grow electricity s market share using resources in Energy

Solutions, JEBS and Energy in a more efficient way.

 Continue our roll-out of the multi-year SmartSwitch Smart

Metering programme safely and reliably, in a way that delivers more value to the consumer and the business.

 Keep our major St Helier West primary substation

on track for delivery by winter 2018 and in accordance with budget.

 Design and develop new Queen s Road infrastructure,

securing final Board consent for the investment.

 Deliver the Nav2016 enterprise system upgrade on

time and on budget while minimising risk to services over the transition.

 Optimise La Collette Power Station to robustly protect

supplies in the most efficient way; as part of this, complete installation of the Diesel 5 black start generator.

 Continue our programme of managed change,

succession and people development across the business.

Our values

 Safety: 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.

 Customer focus: We listen to our customers and seek to

understand and respond to their needs, treating them the way we would wish to be treated, with respect and honesty.

 Teamwork: We respect and value our colleagues as

individuals and we believe we are stronger as a team, leading to better solutions and a more enjoyable and rewarding work life.

 Responsibility: We accept responsibility for everything we

do, safeguarding the natural environment and the local community, as well as the interests of all our customers and staff.

 Excellence: We strive to work in a way that is both

effective and efficient, continuously improving everything we do innovating where we can but keeping things simple.

 Reliability: We are trustworthy, dependable and reliable,

delivering on our commitments and always there when you need us.

49,532

total customers 212 increase in the year

2,000thcustomer 360 on Economy20 new space/water

heating customers

ENERGY GROWTH

While many utilities have witnessed reductions  We have also made progress in the commercial  in unit sales due to energy efficiency and  sector, with professional kitchens in particular  weaker economic growth, Jersey Electricity  continuing to switch to all electric solutions using  has broadly held volumes stable over recent  energy efficient induction cooking technology as  years, with unit sales of 625 million being  well as commercial scale, ultra-efficient heating  only marginally below last year s 627 million,  and cooling heat pump technology.

largely due to a mild 2015/16 winter and,  

inevitably, increased energy efficiency. Our  We believe there are enormous opportunities to  approach is to encourage customers to become  reduce both carbon emissions and costs within  more energy efficient, while developing value  the States of Jersey portfolio of properties and we  propositions that will help customers switch from  believe we are well positioned to assist in energy  fossil fuels to electricity. Our Energy Solutions  management. While engaging with the States has  Team is dedicated to this goal and has made  been difficult, we continue our efforts  

good progress. to persuade it of the significant financial  

opportunity across its building stock and its  Energy Solutions transportation needs.

This small, specialist team is focused on achieving unit sales growth using traditional and new technologies in heating, cooling, cooking, lighting and transportation across commercial, residential and public sectors.

In only its second full year, the team has

made good progress in the domestic market. Having developed user-friendly propositions, streamlined the customer journey and enhanced the finance packages in support

of fuel switching, the team has increased fuel switch conversion rate by almost 100%. Going forward, the team will be strengthening our relationships with the trade and leveraging a new Economy 20 Plus (E20+) tariff, our first 24-hour, uninterrupted low price heating tariff, offering a mix of off-peak rate and normal rate for approved heating systems.

New Build

Despite continued low oil prices, electricity remains the first choice for developers seeking energy efficient building designs. Indeed, with building standards that are continually being enhanced, little energy is needed for heating so most of the opportunity is in general light and power and cooling applications. We have maintained our position with over 98% of new build choosing electric solutions for heating and cooling.

ENERGY GROWTH  

Electric Transportation

While uptake of private electric vehicles remains  Our assistance included installing a new,

slow without the government incentivisation we  independent and dedicated electricity supply  PURE ELECTRIC

have seen in other developed economies, we  and metering equipment at Jersey Post s Head  VEHICLES REGISTERED are beginning to see growth off the back of  Office, 270 metres of cable and eight dual

technology development and a broader range  outlet Rolec wall chargers that operate on our  IN JERSEY

of models from all the major car manufacturers.  overnight discounted Commercial Economy 7

There were 215 all electric vehicles, of which  Tariff. Based on 46 miles (74km) a day, in use

131 were all electric cars registered in Jersey at  five and a half days a week, the vans will cost

to 40% over four years. 131

30 September.  just 2p a mile or 92p a day to run and Jersey

Post has identified a potential cost saving of up

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de-carbonisation of Jersey Post s 110-vehicle

fleet as the utility intends to replace other diesel

vehicles as and when they come to the end of

chance of meeting its Energy Plan target of

5,579 Ultra Low Emission Vehicles registered

with DVS by 2020.

OTHER

3

215TOTAL

PLUS 424

 HYBRIDS

Providing 40%

of Jersey s energy

MAINTAINING AFFORDABLE ELECTRICITY AND PRICE STABILITY

Energy price and price stability are still largely considered to be the most significant factors for customers in their choice of energy supply according to our independent research. As sole provider of over 40% of the Island s total energy needs we have a duty and responsibility to do everything we can to maintain an electricity supply that is affordable, not just today, but long into the future. It is one of our core objectives and one on which we dedicate much resource and effort.

With the considerable uncertainty in power and foreign exchange markets in recent times, we are particularly pleased to have been able to announce a price freeze until the end of 2017, meaning our prices will have been held for at least a three-year period since the last increase of 1.5% in

April 2014. Our tariffs remain competitive despite our heavy on-going investment in infrastructure, such as the Normandie 1 (N1) project, on which we expect to earn a fair return to allow us to continue to invest in the Channel Islands. Although our price differential has reduced slightly against European comparators due mainly to foreign exchange movements - we are now marginally more expensive than the EU 15 Average we continue to meet our target of keeping our standard domestic tariffs within 10% of the EU Average. We also maintain a strong position, with our power prices materially lower than comparable islands, and we remain marginally below the pricing of market leader British Gas in the UK.

Source: UK Energy Saving Trust

The UK vote for Brexit in June 2016 has

seen Sterling heavily impacted against most currencies, including the Euro, the currency in which we procure power from France. Our ten-year power purchase agreement with EDF, which began in January 2013, combines a fixed price component with the ability to price fix future purchases over a rolling three-year period ahead based on a market related mechanism linked to the European Energy Exchange (EEX). This hedging on power and foreign exchange enables us to provide our customers with a degree of near-term certainty in the volatile worlds of energy and foreign exchange markets.

While we invest considerable time examining our main tariffs, we are also developing more innovative, customer focused heating tariffs and this year launched Economy 20 Plus (E20+). This is our first 24-hour, uninterrupted heating tariff that offers a mix of off-peak rate and normal rate for approved heating systems improving comfort levels and equipment performance. Off-peak heating tariffs encourage customers to use electricity when imports are cheaper and also help to flatten peak demand, which is a significant driver of infrastructure costs. This year over 360 new domestic customers joined our discounted space and water heating tariffs bringing the total number of customers now on our off-peak tariffs to

around 16,500.

MAINTAINING AFFORDABLE ELECTRICITY AND PRICE STABILITYCHIEF EXECUTIVE S REVIEW

ENSURING SECURITY AND RELIABILITY OF SUPPLY

SUPPLY SECURITY STANDARD  Supply security is largely taken as a given by  in the maintenance of our transmission and

our customers but nevertheless crucial to our  distribution networks, including undergrounding Jersey Electricity s system

service and our reputation. Ensuring we have  cables where cost effective, and we ensure are is designed to meet an

enough supply, whether from generation or  well prepared to restore supplies quickly when

 adapted N minus 1 security

importation assets, to meet demand is the first  a failure does occur.

standard as follows:

step. The installation of Normandie 1 (N1) this

Like all public network operators we cannot

A one-in-eight year winter  year gives us three links to France and access to

guarantee security of supplies. We recorded peak demand. 190MW of importation capacity across those

24 Customer Minutes Lost* (CMLs) this year three circuits, far in excess of our record peak

All normal load in the event  due largely to only our fifth Island-wide outage

demand of 161MW in February 2012, even

of the loss of the single  in 10 years, which occurred on 9 May 2016

excluding our on-Island generation sources. This

largest interconnector with  and to which 15 CMLs are attributed this

headroom is known as supply margin and is

France (N minus 1) plus a  year. Although disrupted supply is always

greater than most larger countries that tend to

simultaneous failure of the  inconvenient, our restoration procedures worked

aim for a margin of around 10% above peak

well in this instance with all customers back on largest: demand. We also have access to generation

supply within 27 minutes.

o Diesel generator; and at La Collette Power Station and Queen s Road

o Gas turbine. although these are largely maintained to meet  Following this incident, which also affected demand during certain stress conditions should  Guernsey supplies, we undertook remedial

75% of peak winter load  imports be disrupted. works on the Channel Islands Electricity Grid for 48 hours from on-Island  (CIEG) System Integrity Protection Scheme

generation (no simultaneous  We work to an adapted N minus 1 standard.  (SIPS), which was commissioned in late 2015 to loss of on-Island capacity). In essence, we seek to maintain supplies during  provide cover and balance to the transmission the failure of the largest component in the

No coincidence of the  network at times of stress. Further work is

system (see panel). We strive to minimise the

above. scheduled during 2017.

risk of such an asset failure by also investing

*CUSTOMER MINUTES

LOST (CMLs)

Is the aggregate average duration of interrupted supplies during the year faced by each customer.

AVERAGE CUSTOMER MINUTES LOST

(CMLs) DURING THE YEAR

90m long 28m wide 60 crew

Weight of the N1 cable

2500 N1 laid at rate of 300m tonnes 10m per horizontal drill minute under French

sand dunes

The project took just four years from initial Board approval to completion. Laid in parallel with N2, over the 27km route of EDF1, from Surville, Normandy, to Archirondel on the east coast of Jersey, our first task was to safely recover the old cable from the seabed. This began in earnest in early March after we signed contracts with Hughes Sub Surface Engineering of Merseyside for its recovery and disposal.

Beach works on both sides of the Channel

were carried out by GPC of Cumbria.The team worked in the windows of low tide to excavate EDF1 from the beach to the low tide mark. They then relocated to Surville to carry out the same process on the French beach before Hughes SSE deployed the multi-cat MC Ailsa to carry out the recovery in shallow waters.

On completion of this section, the Atlantic Carrier passed along the remainder of the route to hoist the 55MW cable on board where it was cut

into manageable sections and later taken to the UK to be responsibly disposed of with as much material as possible recycled. The substation

at Surville Plage, known as Poste de Surville which connected EDF1 to the French grid, will be dismantled and the land returned to nature in the spring of 2017.

While the recovery of EDF1 was underway,

N1 was being produced by leading cable manufacturers Prysmian Powerlink in Naples. It was loaded out of the factory on to the cable laying vessel Stemat Spirit on 23 July.

 The team worked

in the windows of

low tide to excavate EDF1 from the beach to the low tide mark

 The work

included two complex landfalls in difficult tidal conditions

The installation was carried out by Dutch specialists VBMS with whom the CIEG already has a Power Cable Maintenance Agreement and an established relationship. The work included two complex landfalls in difficult

tidal conditions. In France, VBMS performed

a 300-metre horizontal drill under the dunes followed by the installation of the cable through a rocky gulley, close to where the existing N2 cable is routed. At Archirondel, the landfall was by means of float-out and direct pull-in into the onshore substation.

The operation began on 9 August when the Stemat Spirit set up on anchors on the Surville Beach. The VBMS team pulled the cable ashore with the aid of a mid support pontoon in a two-hour tidal window between 9.15pm and 11.20pm. After two more tide cycles operating on anchors, the Stemat crew were able to deploy the vessel s full power and dynamic positioning system, which manages the thrusters to ensure the precise route is adhered to and begin the journey to Jersey at the rate of 10 metres a minute. On land, N1 had already

been pulled through to the RTE joint bay where

it was connected to a new 2km land cable that runs to St Remy des Landes and connection to the French Grid.

Operating within a 1,000-metre mobile exclusion zone, the 90-metre-long Stemat made excellent progress and eased into St Catherine s Bay on the rising tide of Monday 15 August to offload the cable in Jersey. The cable was marked by 126 buoys ready to

be re-floated later in the week for the beach landing operation and pull in to Archirondel substation. With around 60 metres to spare, the cable was cut and positioned for connection to the existing substation switch gear by jointers from Prysmian. Norwegian company Seatrench buried 1km of cable beneath the seabed,

while, higher up, towards the sea wall, the rocky trench was filled and the sea wall itself reinstated.

At the start of October the two £750,000 Voltage Regulators built by ABB in Vassa, Finland arrived at St Remy des Landes for the final complex connections to be completed. N1 began importing power to Jersey at 3.17pm on 1 December 2016.

Generation

On 29 September 2016 we marked 50 years since

the first units of electricity were generated at La Collette Power Station and we used the occasion to re-iterate the importance of our continued investment in the Power Station and the valuable role it continues to play in the supply security of the Island.

I reported last year that, after further analysis of our system resilience, we had decided to acquire a black start

diesel generator following all-Island supply failures on 25 September 2012 and 27 January 2014. The 5.5MW Sulzer, Diesel 5 is an eight-cylinder inline version of our four existing 11MW V16 Sulzers but importantly designed to start using compressed air.

Since being moved into place in July, the engine has been completely refurbished by specialist contractors who installed the two 11MW Sulzers we acquired in 2013.

Although we do not expect to use Diesel 5 heavily, its black start capabilities will enable the Company to restore full electrical supplies to the Power Station and all its ancillary controls in the event of a major disruption to imported supplies, without itself being reliant on electrical power to start. It also enables us to continue to meet our published Security of Supply Standard by adding another 5.5MW of flexible generation. We expect Diesel 5 to be in service in early 2017.

On-Island supply security will be further enhanced over the next two years when we intend to replace ageing electrical plant at our Queen s Road primary substation. We intend to submit a Planning Application in 2017, with the installation of the replacement equipment commencing in 2018.

ELECTRICITY SOURCES 2015/2016 IN %

+1.5% +0.9%

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% 94.0% 2015-16 2.9% 5.5% 91.6%

-2.4%

Peak demand this year was 149MW recorded at 9.30pm on 19 January, similar to last year s 148MW but still well below our all-time record of 161MW in February 2012. This year we imported 92% of our energy requirements from France compared with 94% in 2015 and generated 3% on-Island. The remaining 5% came from the States of Jersey- owned Energy from Waste plant.

Transmission

In addition to the successful installation of Normandie 1,

we have also undertaken works on the Channel Islands Electricity Grid (CIEG) System Integrity Protection System (SIPS) installed in 2015 across the entire transmission network. SIPS has been in service throughout winter 2015/16 to provide cover and balance to the transmission network at times of stress such as after asset failures occur in the network.

Since the installation, SIPS has been out of service for one week during summer to have remedial works completed which could not be fully addressed last year. N1 has

also had to be integrated into SIPS. This required the replacement of many protection schemes necessitating different interface signals that need to be catered for, integrated, tested and verified.

607 GWh

Imported from EDF

Hydro 36% Nuclear 64%

37 GWh 19 GWh Generated by EfW plant JE locally generated

St Helier West primary substation

Progress so far

Distribution

Maintaining and investing in our distribution  works was properly scoped so that the old

network is vital to ensure supply security   quarry wall could be safely removed while

at a local level. This year we installed  retaining the ground stability of the site. Apr 2014 around 28km of new cable, 10 new  With this work completed, we were able to

substations and 910 new services. We also  award the civils contract to local firm Jayen

refurbished 16 substations and maintained  Ltd in December 2015 and the team has

218 substations and almost 10km of  made good progress throughout the year.

overhead line. Substations on the network

now number 774.  Around 27,000 tons of material, including 5,000 tons of rock, have been removed and

At £17m, our biggest network investment,  work on the new retaining wall is underway. however, is the construction of the new  Once this has been fully re-instated in spring

Nov 2014 primary substation, known as St Helier  2017, our specialist French contractors West, on the site of a disused quarry at  INEO will begin the actual build. The

Westmount. Although we obtained planning  substation is expected in service in 2018. permission in 2014, identifying the ground  The new retaining wall will blend into the conditions of this old coastal quarry involved  surrounding landscape and provide a careful clearance and investigation of the  public viewing platform, while granite

site to ensure the specification for the civil  cladding and landscaping will further

minimise its impact.

Jan 2016

Apr 2016

Aug 2016

Oct 2016

WHEN COMPLETED

SMARTSWITCH

Our Smart Metering programme, SmartSwitch, has made significant progess in 2015/16. Following on from last year s pilot deployment we have this year launched a full scale roll-out by a dedicated team

of installers working over and above our

 business as usual replacement meter work by our Metering Technicians who have also made live 632 Local Data Collectors (LDCs) on the network.

At year end, we had switched over half the Island to the new meter system, with 25,296 Smart-enabled meters in operation, capable

of automated control and remote reading. As well as avoiding the cost and inconvenience of Meter Readers visiting premises, estimated bills and self reads, the number of Smart Meters now in operation has enabled us to introduce Post Code Billing. This means that customers with Smart Meters will receive four equal quarterly bills each for a standard 90-day period, reducing the number of

billing queries we receive. Our bespoke Pay As You Go option has been scoped and we expect to deploy over 4,700 of these meters

in 2018.

Work on the customer facing online portal, Smart Account, that will enable us to present consumption data to customers, continues involving the Metering team, our in-house software and data specialists Jendev and our billing partner Swiss Post Solutions (SPS) as we work to enhance and upgrade

our offering.

At a cost of £11m SmartSwitch is now

expected to be completed at the end of  

2018. It is very much in line with our  

strategy to enhance our infrastructure  

for a Smart future, strengthens our  

provides opportunities to develop  25,296 relationships with customers and

new products and services. SMART METERS

INSTALLED SO FAR

PROTECTING THE ENVIRONMENT

AND CONSERVING RESOURCES

 There is a possibility for Jersey to harness offshore wind and export the energy back  into the French grid

We recognise that we are privileged to live and work on

a beautiful island. And we also appreciate that as a major business in Jersey we have a significant responsibility in playing our part in looking after it. Minimising the impact of our activities on climate change and encouraging others to do the same is the obvious way in which we can do this and has been at the centre of our efforts for some time. It also aligns with the States of Jersey s Energy Plan - Pathway 2050, which was approved in the States Chamber in March 2014 and

which commits Jersey to reducing its carbon emissions by 80% of 1990 levels by 2050.

We have made great progress on our decarbonisation

agenda over the last three decades assisted by our importation strategy which has enabled us to access low carbon electricity from France. We are proud of the role we have played in helping the Island reduce its carbon emissions by around a third over the last 20 years despite a significant increase in the consumption of electricity.

Our ten-year supply agreement with EDF that came into force in January 2013, guarantees that our imports are from certified low carbon sources. This year low carbon imports, of which around two thirds came from nuclear sources and one third from hydro-electric sources, met 92% of our demand. Our importation levels were slightly down on last year s 94% import level, however, the addition of our third submarine cable, Normandie 1 (N1), will enable us to meet the Island s full power requirements, even during the winter peak. Using the DEFRA Greenhouse Gas (GHG) Reporting Guidelines

in addition to adopting the principles of GHG Protocol for Electricity Emissions Reporting, this has meant that we have delivered power to customers for the financial year 2015/16 at 47g CO2e /kWh, around one ninth of the UK Electricity system. Our four-year average is 105g CO2e /kWh.***

JERSEY ELECTRICITY 47GCO2 /KWH

JERSEY LPG

241G CO2 /KWH*

2JER9SEY8 HEGATIN CGO 2O / ILKWH* 4UK1EL2ECTGRIC CITOY2 /KWH**

As well as actively encouraging our domestic and commercial customers to become more energy efficient through self-help measures and our free and paid for advisory services, we also work hard to minimise our direct and indirect impact on the

environment from our operations and we believe we need to continuously lead by example by continuing our own energy saving measures. The majority of LED lighting in the La Collette offices has been completed and proven a great success. LED lighting is now being installed in the main Powerhouse offices. We are also looking to enhance our existing solar installation

to produce hot water for showers and basins in the wash

rooms among a number of other measures.

The British Safety Council (BSC) Five Star Audit we undertook last year provided a structured path for continuous improvement of our already robust environmental management system. Though we were delighted to be awarded Four Stars or a very good rating, we continue to refine and improve our systems in preparation for the next BSC audit in 2018.

Renewables

Over the last few years, we have invested significant effort

in exploring the potential for wind and tidal power in Jersey. We believe economically viable tidal power is still many years away and carries very high development risk. We consider onshore wind to be an extremely difficult proposition in a small island like Jersey but a smaller venture at the La Collette Reclamation Zone could feasibly be consented albeit the economics are more difficult. However, there are opportunities for Jersey Electricity in facilitating offshore wind. In the absence of government subsidies the economic opportunity

of offshore wind remains difficult to unlock but we do believe there is a possibility for Jersey to harness offshore wind and export the energy back into the French grid in such a way where it could attract the subsidy it needs to make it viable. Such a project could produce a useful source of income for

the States of Jersey and to this end, we have developed a proposal to work with them to take offshore wind forward, however it relies on active and significant engagement and commitment from the States which has thus far proven difficult to secure.

This year, therefore, we have focused on solar photovoltaic (PV), building on our knowledge developed from our own PV test array on the Powerhouse building which we installed in 2013. Solar PV technology has been widely installed

in Europe, the US and Australia and off the back of this development we have seen significant reductions in panel costs leading to almost a complete withdrawal of subsidy in many locations. As a result of low installation costs, we do see some potential for solar PV in Jersey in the medium term albeit the economics are at best marginal without subsidy either at domestic or commercial scale. We are currently considering our corporate position on solar PV but we continue to connect private installations and we continue

to offer a Buy Back Tariff for customers who wish to export surplus energy back into the grid.

  We maintained our

overall customer

service rating in the  CUSTOMER SERVICE domestic market at  STANDARDS

7.7 out of 10 which

we are advised is an  As the sole supplier of over a third of the Island s energy

excellent result...  requirements we have a huge responsibility to our customers for all the serinteractions dealing with their day-to-day needs and difficulties. In addition to our published Standards of vices we provide and in our

Service and Customer Charter, one of our six core Values

is: Customer Focus - We listen to our customers and  2010/2011

seek to understand and respond to their needs, treating

them the way we would wish to be treated, with respect

Our latest call logging software, Microsoft Dynamics  6.90

and honesty.

Customer Relationship Management System (CRM),

designed to log and help us track every customer

interaction against our Charter, right across the business is

now in its second year. A review across the organisation

on the way we use CRM resulted in further improvements in

this system. This progress is now flowing into performance

data, with no reported Charter failures on response

and resolution times for eight months. This has led to

both a better overall understanding of the purpose of the

software and tighter overall departmental management and

monitoring of cases. The review also showed that structural

and managerial changes in several departments since the

original CRM design was implemented need to be reflected

in further process changes and design updates which we

are undertaking with our own in-house Microsoft Dynamics

NAV team Jendev.

The CRM system has also enabled our dedicated fuel switching team, Energy Solutions, supported by Customer Care, to streamline the customer journey for those enquiring about and undergoing fuel switching. Further CRM enhancement will pull together all aspects of our fuel switch and heating enquiries offering under a single case per customer.

Customer Care has also continued to support our Smart Metering project, SmartSwitch, facilitating the booking of meter change appointments to minimise inconvenience for customers. An additional customer benefit arising from this project has been the introduction of Post Code billing which provides customers with four equal quarterly billing periods of 90 days helping to smooth the burden of bills throughout the year. The project has enabled us to offer customers our first 24-hour uninterrupted heating tariff, Economy 20 Plus (E20+). Not only does this tariff provide greater comfort levels and control for existing heating customers, it is also proving attractive for fuel switching customers.

CUSTOMER SERVICE STANDARDS CHIEF EXECUTIVE S REVIEW

2015/2016

2014/2015 7.74

7.71

2013/2014

7.70

2012/2013

2011/2012 7.32 2010/2011 7.10

6.90

Powerhouse.je

Following a significant re-structuring and re-branding exercise in 2014, our retail business Powerhouse.je has continued to make good progress and this year, has delivered an excellent financial result. Turnover increased by 8% from £11.1m to £11.9m for the year ending 30 September 2016. The business has turned a loss of £0.1m in 2014 to a profit of £0.3m in 2015 and to almost £0.5m this year.

This is a significant achievement given the intense competition in the local marketplace and from online UK companies. The restructure has

helped to reduce our cost base which when coupled with better procurement, has enabled the business to be more price competitive. Investment in training in sales and customer service skills, coupled with product training with support from brand manufacturers, has had a positive impact across this business. Better skilled and more engaged staff are now delivering even higher levels of customer service which is such

an important differentiator in the local market and against the online threat. The positive feedback we have received from customers on both price and service has been notable during the year.

Our investment in the store itself has continued with the introduction of the largest display of built-in kitchen appliances in Jersey. We aim to champion new technologies and lead the way on smart appliances and products for the mid-market. We have also brought our Technical Support Services into the shop creating a bright, new easily accessible customer service point for those seeking technical repairs or general advice. This has enabled us to further promote our after sales support and service packages.

The rapid advancement of smart appliances and the inter-connected home present exciting opportunities for the future of electrical retailing and we intend to exploit these to the full with a dynamic store and online offering and well-trained motivated, knowledgeable staff.

COMMERCIAL CHIEF EXECUTIVE S REVIEW

Jendev

Jendev, a Microsoftfi partner for Dynamics NAVTM, specialises in software development and configuration for the utility industry with a focus on billing. A strategically important in-house asset , Jendev continues to play an important role in the Group s portfolio.

First established in 1998, Jendev is moving through a significant programme of renewal and Jersey Electricity has actively invested in redevelopment of the team, technology and commercial proposition. The business is now well-placed to target sustainable growth through its flagship product

 Jenworks Billing .

Comprised of a small team of highly experienced utility industry IT professionals, Jendev continues to support Jersey Electricity in a number of strategically important activities, including the Smart Metering project, SmartSwitch. The business is also leading JE s enterprise system upgrade to the latest version of Microsoft Dynamics NAVTM technology, a major company-wide initiative.

Jendev also 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 its plans for sustainable revenue growth, Jendev has identified a number of strategic technology partners and the business is actively engaged in commercial opportunities in several export markets.

Property

Our Property portfolio comprises the Jersey Electricity Retail Park on Queen s Road and a number of residential properties as well as income from the leasing of mobile aerial sites and fibre optics to telecoms operators. The Retail Park comprises our main office and retail building, Jersey s B&Q store and

a large medical centre. The ground floor of the main office building is home to our own retail store, Powerhouse.je, which occupies approximately half of the available space, with the other half being occupied by SportsDirect.com.

The middle floor of the building is occupied by the telecoms operator Sure and their subsidiary, Foreshore, the data centre operator formerly owned by Jersey Electricity. The Company s offices are situated on the top floor of the building.

Profits in our Property Division, excluding the impact

of investment property revaluation, at £1.7m, rose by £0.1m from last year with a higher rental level and lower maintenance costs being the main drivers.

268,000 125

UTILITY END-CUSTOMERS BILLEDCOLLECTIVE YEARS EXPERIENCE IN MICROSOFT

DYNAMICS NAV

133 COLLECTIVE YEARS

EXPERIENCE IN THE

UTILITY INDUSTRY

COMMERCIAL CHIEF EXECUTIVE S REVIEW

Sustainable Engineering

HEALTH AND SAFETY  

RIDDOR LOST TIME ACCIDENTS (RIDDOR)

RIDDOR (Reporting of  

2016 Injuries, Diseases and  

Dangerous Occurrence  

Regulations) is the UK

standard for reporting  

Accidents and Near Misses.  2015 In the UK, an LTA is defined  

as an accident that results

in the injured person being  

away from work or unable  

to do their normal work for  2014 more than seven days. Jersey  

Electricity applies the more

stringent standard of more

than three days. This enables  2013 us to benchmark against

other peer group entities and

allows us better oversight on

risk trends. 2012

DAYS LOST (RIDDOR)

0 0 39 37 7

2012 2013 2014 2015 2016

SUSTAINABILITY IN THE COMMUNITYCHIEF EXECUTIVE S REVIEW

33

The 50th anniversary of the operation of La Collette Power Station on 29 September 2016 was made even more poignant by the presence of several pensioners who had served at the Power Station during its early years, including

- incredibly - one of three shift engineers who completed the hand written generation ledger on the very first day in 1966. It was a reminder not only of our proud history but of the dedicated staff that have served the Company and our community so well over the decades.

That dedication is evident today. We have many long-serving employees who have acquired the skills and experience necessary to deliver a first class service over many years. But as the industry moves forward we must ensure that we continue to maintain a highly skilled, flexible and dedicated workforce to meet the demands of the future. In that respect we are committed to developing the potential of our existing staff and attracting the best new recruits that in both cases exemplify our values.

Our new HR team is now fully in place and has delivered year one of a multi-year HR strategy that aligns with business needs and builds on the Purpose, Vision and Values work instigated in 2013 to re-focus everyone on our objectives and chart the way we work together to achieve them.

A Talent Manager supports the HR Director in our cultural change programme covering training and development, succession management, career planning, reward

and progression of our people. We have published a comprehensive annual training programme, created a brand new Management Development framework and associated Management Development training programme and initiated an Executive Coaching and Mentoring model. This has been met with enthusiasm from managers and once extended across our business, promises to significantly transform

our management skills and capabilities at all levels in the organisation.

The Energy business has recruited seven

new apprentices this year, our largest

intake since 2012. We were met with an

encouraging response at a Jersey Skills Fair

where we had an interactive stand and aired our

new recruitment video in which staff from all areas of the business play a part.

Staff wellbeing is another area in which we have invested resource and tried new ideas with the help of colleagues. The Health, Safety and Environment Team and HR Team have worked together on various trials to promote wellbeing in the workplace. To date these have included free fresh fruit, lunchtime yoga, Dress Down Fridays and Wellbeing Seminars. Unum our new Permanent Health Insurance provider supports employees with counselling services and pro-active wellbeing management.

Whilst we are clearly a capital intensive, asset driven business, it is our staff that delivers the services and makes us distinctive. Our objective is to help everyone reach their full potential and fairly recognise and reward them

for great performance across the business.

Our aim is to make Jersey Electricity the

 employer of choice in the fight for

talent across the Channel Islands right

across the skills levels.

14.5 years

OUTLOOK CHIEF EXECUTIVE S REVIEW

  ...we are well positioned to

manage the risks, challenges and opportunities of

the future

In 2012 we declared a medium term objective to deliver

a transmission network comprising three submarine cables between Jersey and France, across two separate routes, co-owned with our partners, Guernsey Electricity (GEL).

By the end of 2016 we have achieved this. This puts power supplies into Jersey in a more resilient configuration than ever before at the same time building in headroom for growth that should cover our interconnection requirements for the next decade or more.

Albeit at a lower monetary level, our infrastructure investment continues in 2017 with the completion of Diesel 5, further progress on our SmartSwitch programme, and the important St Helier West primary substation that will give relief to three quarters of St Helier, the economic hub of Jersey. This will

be followed by a significant new investment which we are planning in our Queen s Road primary substation towards

the end of the decade.

A significant part of what we do is focused on business risk and opportunity management of a strategic, financial and operational/supply nature. We live in an uncertain world. That has never been clearer with the surprise outcomes of Brexit and the US Election. Although these events may feel remote, they have the potential to indirectly impact our activities in material ways. Jersey Electricity is an importer of energy and a price taker . The Brexit vote has immediately led to a significant weakening of Sterling relative to the

Euro and Dollar, impacting the cost of imported energy

and the cost of infrastructure (in which a material portion is generally denominated in Euro). Putting aside the impact on the markets, it is also unclear how Brexit, the US Election or other European elections (yet to take place), might impact our customers, the economy and Jersey as a jurisdiction.

As far as strategic risk and opportunity is concerned, we believe that our product is well positioned for the future. The Energy Plan promises an important role for electricity in the energy mix if Jersey is to have hope of meeting

its decarbonisation objectives. We face new disruptive technologies, some of which will bring new opportunities, and we face pressures from energy efficiency, which we believe is right that we encourage, but we are offsetting this with real progress on fuel switching and we will continue to invest in this.

From the financial risk perspective, we have put in place strong risk management and hedging processes that have sheltered customers from much uncertainty and volatility in foreign exchange and energy markets over recent years. Our hedge book is strong over the short to medium term, and we have already declared a price freeze to customers for

the calendar year 2017. But if Sterling stays weak relative

to the Euro, and it is not clear it will, we can expect this

to eventually flow into our cost of imported electricity and potentially capital projects. If Sterling stays weak relative to the Dollar, we could see this increase the price of oil, our primary feedstock for the power station albeit oil is also a product with which we compete in the heating market.

We believe our operational and supply risk, although can never be eliminated completely, has reduced over recent years. Jersey Electricity s network is now well invested

and well positioned for the future. Although some of

this investment aims to improve security of supply, as a commercial business that is self-funding, we are acutely aware we need to make a return to shareholders on every pound invested in infrastructure. I am delighted that we have been able to do so, whilst preserving a very competitively priced product into the local marketplace that compares favourably with EU average prices, UK prices and local Island comparators.

The energy sector and all the exogenous factors described above continue to present threats and opportunities. Although we are a capital intensive business, our assets are managed by people and we achieve nothing without them. I am confident that with the highly motivated, flexible and skilled workforce we are developing, we are well positioned to manage the risks, challenges and opportunities of

the future.

Chris Ambler Chief Executive 13 December 2016

FINANCIAL REVIEW

Group Financial Results

Key Financial Information  2016  2015 Revenue   £103.4m  £100.5m

Profit before tax pre-exceptional items  £13.1m  £12.4m Earnings per share pre-exceptional items  33.31p  32.94p Dividend paid per share  13.10p  12.45p Final proposed dividend per share  8.00p  7.60p Net debt  £29.0m  £17.5m

Group revenue for the year to 30 September 2016 at £103.4m was 3% higher than in the previous financial year. Unit sales volumes of electricity were marginally behind last year with Energy revenues at £81.2m against £80.7m in 2015 slightly higher due

to some non-recurring installation work in the year. Turnover in Powerhouse.je, our retail business, increased by 8% from £11.1m to £11.9m. Revenue in the Property business rose by £0.1m to £2.1m due to a higher level of rental income. Revenue from

JEBS, our contracting and building services business rose £1.0m from levels experienced in 2015 to £5.1m. Turnover in our Other Businesses rose £0.5m to £3.0m.

Overall cost of sales rose by £0.6m to £65.2m due mainly to additional costs in the non-Energy business units associated with the aforementioned rise in revenue, partially offset by a fall in the Energy business. Operating expenses, at £23.5m, rose by £1.6m from their 2015 level with an increase in IAS19 pension costs of £0.4m and a £0.7m ex-gratia award for current pensioners being the main items.

Profit before tax, pre-exceptional items, for the year to 30 September 2016, at £13.1m, increased by 6% from £12.4m

in 2015. The rise was primarily generated from improved performance in our non-Energy business units. Profit before tax post-exceptional items, rose from £13.2m last year to £14.8m in 2016. The exceptional credit of £1.7m in 2016 was in respect

of the release of a rent accrual that had been accumulated over many years for our La Collette Power Station site. As highlighted previously in the Related Party Transactions Note to the Accounts the lease had been subject to a rent review dispute which

was settled by an arbiter (and confirmed by subsequent legal judgement) in our favour at the existing peppercorn rent, rather than at a higher level suggested by our landlord.

Our Energy business unit sales saw volumes falling marginally from 627m to 625m kilowatt hours after another relatively mild winter period with both the last two winters seeing temperatures above the long-term average. Profits in our Energy business rose from £11.5m to £11.6m. A lower cost of sales resulted in a higher margin but this was offset by higher pension costs. The main factor that contributed to the increase in such costs was a £0.7m charge of a non-recurring nature associated with the granting of an ex-gratia rise in pensions

in service. Further details are provided in the section dealing with pension matters within this report.

In the financial year we imported 92% of our requirements from France (2015: 94%) and generated 3% of our electricity on-island at La Collette Power Station (2015: 1%). Additional generation for training was the main reason for the lower level of importation in 2016 compared to the previous year. The remaining 5% of our electricity came from the local Energy from Waste plant being at the same level as in 2015. Continuing with the trend since 2014 there were no tariff changes during 2016 and our prices continue to remain competitive with other jurisdictions. Our last tariff movement was an average 1.5% increase in April 2014.

Profits in our Property division, excluding the impact of investment property revaluation, at £1.7m, rose by £0.1m from last year with

a higher rental level and lower maintenance costs being the main drivers. Our investment property portfolio was revalued downwards this year by £0.3m to £20.1m by the external consultants

who review the position annually. The main reason for this 2% devaluation is that a break clause exercisable in 2023, for one of the leases, impacts such calculations between now and that date. Our retailing business, Powerhouse.je, had a strong year post the restructuring and re-branding of the business with a loss of £0.1m in 2014 moving to a profit of £0.3m in 2015 and to £0.5m in 2016. JEBS, our contracting and business services unit produced a profit of £0.1m compared with a near breakeven position in 2015 in a challenging industry with high competition for staff. Our other business units - Jersey Energy, Jendev and Jersey Deep Freeze all had profitable years ahead of internal targets.

The interest charge in 2016 was £1.1m against £1.5m in 2015 with capitalisation of interest associated with the new N1 subsea cable being the primary reason for the reduction. The taxation charge at £3.2m was £0.8m higher than 2015 due to a higher level of profitability.

Group earnings per share, pre-exceptional items, rose 1% to 33.31p compared to 32.94p in 2015 due mainly to an increase in profits. Earnings per share, before adjusting for exceptional items, increased from 35.00p in 2015 to 37.69p in 2016.

Dividends paid in the year, net of tax, rose by 5%, from 12.45p in 2015 to 13.10p in 2016. The proposed final dividend for this year is 8.00p, a 5% rise on the previous year. Dividend cover, pre- exceptional items, at 2.5 times fell marginally from 2.6 times in 2015. If exceptional items are included, dividend cover rose from 2.8 times last year to 2.9 times in this financial year.

Ordinary Dividends

2016  2015

Dividend proposed  - final for current year  8.00p  7.60p

FINANCIAL REVIEW

Net cash inflow from operating activities at £25.2m was £1.9m higher than in 2015 with an increase in profit, prior to IAS 19 pension accounting, being the primary driver. Capital expenditure, at £32.4m rose from £16.8m last year as the N1 project spend dominated this year and resulted in net debt at the year-end of £29.0m being £11.5m higher than last year.

Cash Flows

Summary cash flow data  2016  2015

(Increase)/Decrease in net debt  £(11.5)m  £2.7m

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 relates to the importation of power from Europe, which is contractually denominated in 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 1.20 /£. The average applicable spot rate during this financial year was 1.28 /£ but the rate

fell materially in the last quarter of the financial year due to the UK decision to leave the EU. We were substantially hedged for the 2017 and 2018 calendar years before the Brexit decision.

In addition we also materially hedge any foreign exchange exposure attributable to capital expenditure once planning consents and firm pricing is known and the commitment is made to proceed with the 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 the majority 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 Jersey Electricity imported 92% of the electricity requirements of Jersey from Europe. The Company 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 power purchase agreement with EDF, which commenced in 2013, 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 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 2016 the scheme deficit, under IAS 19

 Employee Benefits rules, was £9.2m, net of deferred tax, compared with a deficit of £5.8m at 30 September 2015.

Scheme assets rose 20% from £106.8m to £127.8m since the

last year end. However, liabilities increased 22% from £114.0m to £139.2m in the same period with the discount rate assumption, which heavily influences the scheme liabilities, falling from an assumed 3.6% in 2015 to 2.3% in 2016 to reflect sentiments in prevailing financial markets after the UK decision in June 2016 to leave the EU.

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 2.8%, rather than the 2.3% advised by our actuaries under IAS 19 for 2016, the net deficit of £9.2m would have been fully eliminated.

The last triennial actuarial valuation as at 31 December 2015

was completed during this last financial year and resulted in a surplus of £6.9m. Unlike most UK schemes, the Jersey Electricity pension scheme is not funded to pay mandatory annual rises

on retirement. The Pension Scheme Trustees recommended an ex-gratia award be made to pensioners in light of the surplus

and the Board approved this recommendation. The capital cost

of this 1.5% rise to pensions in service as at 31 December 2015 was £0.7m and was paid by the Scheme but generated a £0.7m charge against the income statement of the Company. The last ex- gratia award was granted in 2011. The contribution rate by

Jersey Electricity was maintained at the previous rate of 20.6%

of pensionable salaries. 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. The next triennial actuarial valuation of the defined benefit scheme has an effective date of 31 December 2018.

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 5.4m (47%) of our A Ordinary shares representing 18% 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, and a fund, residing largely in the Channel Islands. During the year the ordinary dividend paid increased by 5% from 12.45p net of tax to 13.10p. The proposed final dividend for 2016, at 8.00p,

is a 5% 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 2016 stood at £4.25 against £4.50 at the 2015 year end. Before the decision was made by the UK electorate in June 2016 to exit the EU our share price was above the level seen at the last year end but like many

small cap plc s in the UK we have seen a downward trending. This gives a market capitalisation of £130m as at 30 September 2016 compared with a balance sheet net assets position of around £160m. However the illiquidity of our shares, due mainly to having one large majority 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 2016, 275 qualifying staff received 100 shares which will vest in 2019 and this may be repeated going forward. We also use Edison (an investment research firm) 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 £7.9m (2015: £7.3m). Note that no corporation tax was paid in 2015 and a relatively small amount in 2016 due to capital allowances associated with our recent heavy investment spend.

2016  2015

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 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, assess and help manage the key risks. This framework also assists in developing risk mitigation 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.

FINANCIAL REVIEW

Principal risks

The Directors have carried out a robust assessment of the principle 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.

In our Interim Report, issued in May 2016, we made reference

to the forthcoming UK vote in June on EU membership. Although Jersey is not in the EU the Brexit decision has created a level of uncertainty for the Island. It is unclear, at this stage, what the full repercussions will be to both Jersey Electricity and its customers. However a watching brief will be maintained on this

particular dynamic over the coming years.

Risk  Description and possible impact  Mitigation activities

 Regulatory / Political or Legislative change

Regulatory Not acting in line with expectations of 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. Ensure transparency of objectives and 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, or prospects for, 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 milestones, costs and risks are recorded and monitored and

in inability to achieve overall project objectives and/ regular progress updates issued to both management and the Board, or additional costs or delays. including plans to address any issues.

 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 and where it can be cost

effective.

Effective monitoring and maintenance of the plant/assets.

Financial Reduction in unit sales of electricity due to, for  In principle the user pays model implies that if unit sales of electricity example, energy efficiency and the corresponding  fell then Jersey Electricity would raise tariffs to retain our target return

impact on the competitiveness of electricity in the  on assets. However one of our prime defences to offset an expected heating marketplace.  continued focus on energy efficiency is to migrate existing customers

who use gas/oil as their primary heating source to all-electric solutions. A dedicated team work on initiatives in this area.

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. The Trustees have

to market conditions or demographic changes and/ recently implemented an LDI strategy to reduce the exposure to

or investments underperform. movements in the value of pension liabilities.

The Defined Benefit scheme was closed to new members in 2013. A triennial valuation formally reports on performance, allowing any appropriate action to be taken.

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 Security of Supply standard has been developed and published and

or importation assets which cause disruption to our  we seek to design the system to meet those standards.

operations including major emergency, incident or  A programme of maintenance exists to optimise the life of assets.

loss of electricity supplies to customers.

Use of a comprehensive business continuity planning process including periodic testing under various 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.

 Health, Safety & Environment

H,S & E Non-compliance with relevant legislation, regulations  A Health, Safety and Environment team has been resourced to put in and accepted codes of practice resulting in  place standards and monitor performance against those standards. A unnecessary exposure to our staff, customer, member  proactive safety culture has been nurtured throughout the organisation of the general public or our plant and equipment.  supported by a safety management structure, Safety Representatives,

programmes of site inspections, regular training and induction amongst other areas.

 People / Succession Planning

People The Group s strategy is largely dependent on the  The HR Director has developed a long range HR Strategy. HR now

skills, experience and knowledge of its employees.  have the resource and capability to provide frameworks for developing The inability to retain executives and other key  succession plans, development plans and attracting new talent to enable employees, or a failure to adequately plan for  planning for the future and mitigate and reduce the talent drain from succession, could negatively impact Group  Jersey Electricity. Extensive networks have been built including access to performance.  UK (Utility) skills to enable best practice development.

Around half the current work-force is anticipated to  We are currently recruiting for a new Operations Director for the Energy retire from the business in the next 10-15 years. business as the incumbent retires in 2017.

 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  Cyber awareness training has been carried out for all staff who have assets, infrastructure and sensitive customer data and  access to corporate IT systems and there is a programme of follow-up be prepared for any malicious attack. monitoring and training. Following a review by external cybercrime

security consultants, additional security appliances with enhanced mitigation technologies are being installed.

An external review has recently been carried out on our operational systems and a prioritised action plan is now being drawn up. Additional cyber security hardware was incorporated in a recently replaced SCADA system and similar hardware will be incorporated in a further SCADA system replacement scheduled for 2017.

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 of 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. As disclosed last year, the Board conducted this review for a period of five years, selected because annually a refreshment of the Five Year Plan is performed with the

latest version approved by the Board on 22 September 2016. 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. The installation of Normandie 1 this year gives us three links to France and access to 190MW of importation capacity across those three circuits, in excess of our record peak demand of

161MW in 2012, even excluding our on-Island generation sources. This recent increase in supply margin decreases risk to the business. We also have access to generation at La Collette Power Station and Queen s Road although these are largely maintained to meet demand during certain stress conditions should imports be disrupted.

The immediate weakening of Sterling against the Euro, after the Brexit Referendum, is a concern albeit it does not impact our cost base in the near-term due to our foreign exchange hedging policy. However as we employ a user pays model the Board has comfort on the longer term consequences of a permanent weakening in Sterling.

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 (69) 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. In 2001, he became the founding Chairman

of Jersey Finance Limited, the body set up as a

joint venture between the Government of Jersey

and its finance industry,

to represent and promote the industry at home and abroad. 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 (47) 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 Apax Global Alpha Limited 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 OBE Non-Executive Director (65) 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.

Martin Magee Finance Director (56)

Martin joined the Board as Finance Director in May 2002. He moved from Scott ish Power plc, after nine years in a variety of senior finance roles. He previously worked for nine years with Stakis plc (now part of the Hilton Hotels Group). He is Chairman

of Jersey Deep Freeze Limited and a Director

of the Channel Islands Electricity Grid Limited. Externally, he is also the non-Executive Chairman of the Standard Life Wealth Offshore Strategy Fund Limited. He is a member of the Institute of Chartered Accountants of Scotland having qualified in 1984.

Aaron Le Cornu Non-Executive Director (46) A/R

Alan Bryce Non-Executive Director (56) A/N

Philip Austin MBE Non-Executive Director (67) R

Wendy Dorman Non-Executive Director (55) A/N

Aaron was appointed to  Alan is a non-Executive the Board as non-Executive  Director of Scott ish Water, Director in January 2011  Chair of the wind-farm

and is currently the Chief  developer Viking Energy Financial Officer for Elian,  Shetland, and an advisor

a Fiduciary Firm with  in the utilities industry. He headquarters in Jersey and  is a former non-Executive operations in 10 countries.  Director of Infinis Energy Prior to that appointment,  plc and at Iberdrola USA. Aaron held a number of  Prior to 2010, he held a senior positions within  number of senior positions HSBC, latterly as the Deputy  at Scott ish Power, including CEO of HSBC International.  Managing Director of During his 10 years with  Energy Networks, and HSBC, he held a number of  Managing Director of Board positions for HSBC  Generation. He is a subsidiaries and was also  Chartered Engineer and involved in acquisitions  Fellow of the Institution (such as the purchase of  of Engineering and

Marks & Spencer Money)  Technology.

and setting up Greenfield

retail banking operations in

Central Europe. Aaron is a

Chartered Accountant. He

qualified with and worked

for Andersen for eight

years, including two years

in Australia. He also has a

First Class Honours Degree

in European Management

Science from Swansea

University.

Directors

All non-Executive Directors are viewed as being independent with the exception of Mike Liston who was formerly the Company s Chief Executive. Geoffrey Grime is still regarded as independent even though he is now in his 14th year as Director.

The Nominations Committee has formulated a plan for a controlled change in the constitution of non-Executive Directors going forward.

Philip spent most of his career in banking with HSBC. In 1993 he moved to Jersey where, from 1997 to 2001,

he was Deputy CEO of

the Bank s business in the Offshore Islands. In 2001,

he became the founding CEO of Jersey Finance

Ltd, the body set up as a

joint venture between the Government of Jersey and its finance industry, to represent and promote the industry

at home and aborad. In

2006, Philip joined Equity Trust as CEO of its Channel Islands business, a position he held until 2009 when he left to take on a portfolio

of non-executive positions

a portfolio that currently consists of both publicly listed and privately owned businesses. Philip is a Fellow of the Chartered Institute

of Bankers and a Fellow of the Chartered Management Institute. In January 2016,

he was awarded an MBE

in the Queen s New Year s Honours list. Philip is a non-Executive Director of the following publically quoted companies: 3i Infrastructure plc, City Merchants High Yield Trust Ltd, Blackstone/ GSO Loan Financing Ltd.

Wendy is a Chartered Accountant who began her career as an auditor and went on to specialise in financial services taxation. In 2001 she moved from London to Jersey and she led the Channel Islands tax practice of PwC until June 2015. Wendy has over twenty five years experience in taxation gained both in the UK and the offshore environment, working both in practice and in industry. Wendy was Chairman of

the Jersey branch of the Institute of Directors from 2014 to 2016 and is a former President of the Jersey Society of Chartered and Certified Accountants. She is a non-Executive Director of 3i Infrastructure plc, Jersey Finance Limited and CQS New City High Yield Fund Limited.

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 2016

The Directors present their annual report and the audited financial statements of Jersey Electricity plc for the year ended 30 September 2016.

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 2016:

2016  2015 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 5.50p net of tax for the year ended 30 September 2016 (2015: 5.25p net of tax)  1,685,200  1,608,600 Final proposed at 8.00p net of tax for the year ended 30 September 2016 (2015: 7.60p net of tax)  2,451,200  2,328,640 4,145,373  3,946,213

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, Philip Austin and Wendy Dorman will retire and, being eligible, offer themselves for re- election. Furthermore, Directors with more than 9 years service should offer themselves for re-election on an annual basis. Accordingly, Geoffrey Grime will retire and, being eligible, will offer himself for re-election.

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 12 days (2015: 19 days).

Directors Report

for the year ended 30 September 2016

Substantial shareholdings

As at 13 December 2016 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 5,410,429 A Ordinary shares which represent 4.9% 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

13 December 2016

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 and in note 11e.

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 2016 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 Nominations Committee should be independent non-Executive Directors. For a portion of the year, until the composition of the Nominations Committee was altered with the arrival of new independent non- Executive directors, this Committee comprised Mike Liston, Geoffrey Grime, Chris Ambler and Clive Chaplin. Whilst the Board acknowledges that Mike Liston cannot be considered independent as he was formally the Company s Chief Executive and 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 was considered eminently qualified to Chair the company s Nominations Committee until Alan Bryce assumed this role in July 2016.

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 Code (Provision D.2.1.) states that the Board should establish a Remuneration Committee of independent non-executive directors. During the year the Company s Remuneration Committee has comprised Mike Liston, Geoffrey Grime, Aaron Le Cornu, Alan Bryce, Clive Chaplin and Phil Austin. The Board acknowledges that Mike Liston cannot be considered independent.

The Board

The Board provides effective leadership and currently comprises six 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. Aaron Le Cornu succeeded Clive Chaplin, who retired at the AGM, as 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 and is in receipt of a company pension. The Board have determined that Geoffrey Grime and Clive Chaplin until his retirement remained independent notwithstanding that they have served on the Board for more than fourteen years. In making this determination, the Board took into account their breadth of experience, their financial independence and their other business interests.

Alan Bryce, Phil Austin and Wendy Dorman were appointed during the financial year and Clive Chaplin retired at the AGM. 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. Mike Liston will retire from the Board on 31 December 2016.

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  4  2  1

* attendees by invitation

1  Appointed 12 May 2016

2  Appointed 17 December 2015 3  Appointed 1 July 2016

4  Retired 3 March 2016

Performance Evaluation

The effectiveness of the Board is vital to the success of the Company. An external evaluation took place during the course of the previous financial year and an internal evaluation was undertaken by the Chairman in 2016.

Nominations Committee

The Nominations Committee members are currently Alan Bryce (Chairman), Mike Liston, Geoffrey Grime, Wendy Dorman and Chris Ambler. 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.

Board diversity

Gender  Tenure  Age  Sector

Male  7  <1 year  3  46-50  2  Utilities  4 Female  1  1-3 years  0  51-56  3  Financial Services  3

4-9 years  2  64+  3  Taxation  1 >9 years  3

The Terms of Reference for the Nominations Committee and the Terms and Conditions of the Appointment of non-Executive Directors are available on request from the Company Secretary.

During 2015 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 and this began to be implemented during 2016.

GOVERNANCE

Corporate Governance

Audit and Risk Committee

The Audit and Risk Committee s members are Aaron Le Cornu (Chairman), Alan Bryce and Wendy Dorman. 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.

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 from the Company Secretary.

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. 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.

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 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 risk management processes within the organisation. 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 64.

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 13 December 2016

M.P. MAGEE Finance Director 13 December 2016

Remuneration Report

Remuneration Committee

The Remuneration Committee (the Committee) is now chaired by Phil Austin, following the retirement of Clive Chaplin at the last AGM, and its membership includes three of the other non-executive directors. The Committee operates within terms of reference agreed by the Board and such terms are regularly reviewed and are available on request.

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 1 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 UK/EU, as this defines the relevant labour market for the skills required. 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 taking account of their individual responsibilities within the Company and is dependent on the results of the group against expectations across a wide range of performance criteria.

The remuneration of individual Directors for the year ended 30 September 2016 was as follows:

Basic  Benefits  Total  Total salary/fees  Bonus  in kind  2016  2015

£  £  £  £  £

EXECUTIVE DIRECTORS

C.J. Ambler  212,310  80,402  14,474  307,186  406,654 M.P. Magee  176,007  51,632  12,242  239,881  308,448

NON-EXECUTIVE DIRECTORS

G.J. Grime  36,500  -  3,412  39,912  34,904 M.J. Liston  20,000  -  1,712  21,712  19,552 A.D. Le Cornu  23,000  -  1,706  24,706  21,231 A.A. Bryce (appointed 17 December 2015)  18,187  -  1,350  19,537  - P.J. Austin (appointed 12 May 2016)  6,973  -  663  7,636  - W. Dorman (appointed 1 July 2016)  4,500  -  428  4,928  - C.A.C. Chaplin (retired 3 March 2016)  9,350  -  720  10,070  21,552 J.B. Stares (retired 5 March 2015)  -  -  -  -  9,749 Total  506,827  132,034  36,707  675,568  822,090

.

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  30.9.20162 30.9.20163 30.9.20153 during year  less Directors during the year1  contributions4

C.J. Ambler  £4,122  £38,657  £694,350  £471,932  -  £222,418 M.P. Magee5 £4,490  £77,515   £1,670,530  £1,294,971  £10,555  £365,004

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. The transfer values include any accrued Additional Voluntary Contributions (AVC) pensions.
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 AVC s to the Scheme to purchase additional final salary benefits. AVC s paid by the Directors during the year were nil.

All-Employee Share Scheme

At the 2011 Annual General Meeting approval was granted to launch an all-employee share scheme. During the 2015 and 2016 financial years 100 A Ordinary Shares were issued to all staff (subject to Scheme Rules) including the Executive Directors and these shares vest in February 2018 and February 2019 respectively.

There are no other share-based incentives such as option schemes or long-term incentive plans operated by the Company.

Non-Executive Directors Remuneration

The remuneration of the non-Executive Directors is determined by the Board with the assistance of independent advice concerning comparable organisations and appointments and also taking into account the particular Committees in which they are involved. A small premium is paid to those who chair Committees (Audit and Risk: £5,000; Nominations/Remuneration: £2,000) for additional responsibility, and to Directors based off-Island (£5,000) for travelling time.

External Appointments

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

C.J. Ambler

Foresight Solar Fund Limited and Apax Global Alpha Limited. The total non-Executive Director fees for such appointments were £97,100 of which £77,680 was retained, and the remainder paid to the Company, by the individual. The fees received also include those from a previous directorship with Abbey National International Limited (which ceased on 15 September 2015).

M.P. Magee

Standard Life Wealth Offshore Strategy Fund Limited and Stanley Gibbons Group plc (retired 27 October 2016). The total non-Executive Director fees for such appointments were £50,000 of which £40,000 was retained, and the remainder paid to the Company, by the individual.

Remuneration Report

Directors Loans

The Company provides secured loans to the Executive Directors which bear interest at base rate. The balances on such loans were:

30.9.2016  30.9.2015

C. J. Ambler  £407,997  £440,157

M. P. Magee  £239,571  £290,571

Directors Share Interests

The Directors beneficial interests in the shares of the Company at 30 September 2016 are:

5% and 3.5% A Ordinary Shares  Preference Shares

2016  2015  2016  2015

C.J. Ambler*  5,005  5,005  -  - M.P. Magee*  10,500  8,984  960  960 G.J. Grime  10,000  10,000  -  - M.J. Liston  2,000  2,000  -  - C.A.C. Chaplin  

(retired from the  

Board on

3 March 2016)  -**  6,000  -  - A.A. Bryce  4,500  -  -  -

32,005  31,989  960  960

*Both C.J. Ambler and M.P. Magee have a beneficial interest in a further 200 A Ordinary Shares that are due to vest in equal quantities on February 2018 and February 2019.

**C.A.C. Chaplin still holds 6,000 A Ordinary Shares as at 30 September 2016 but was no longer a Director at that date.

During the financial year Martin Magee and Alan Bryce purchased 1,516 and 4,500 A Ordinary shares respectively. There have been no other changes in the interests set out above between 30 September 2016 and 13 December 2016.

On behalf of the Board P. AUSTIN Chairman

13 December 2016

GOVERNANCE

Independent Auditor s Report

to the Shareholders of Jersey Electricity plc

Opinion on financial statements of Jersey Electricity plc

In our opinion the financial statements:

 give a true and fair view of the state of the group s affairs as at 30 September 2016 and of the group s profit for the year then ended;

 have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union;

and

 have been properly prepared in accordance with the Companies (Jersey) Law, 1991.

The financial statements comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, the Consolidated Statement of Changes in Equity, the Consolidated Cash Flow Statement and the related notes 1 to 23. The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European Union.

Going concern and the Directors assessment of the principal risks that would threaten the solvency or liquidity of the group We have reviewed the Directors statement regarding the appropriateness of the going concern basis of accounting contained within note 1 to the financial statements and the directors statement on the longer-term viability of the group contained within the Financial Review.

We have nothing material to add or draw attention to in relation to:

 the Directors confirmation on page 42 that they have carried out a robust assessment of the principal risks facing the group, including

those that would threaten its business model, future performance, solvency or liquidity;

 the disclosures on pages 42-43 that describe those risks and explain how they are being managed or mitigated;

 the Directors statement in note 1 to the financial statements about whether they considered it appropriate to adopt the going concern

basis of accounting in preparing them and their identification of any material uncertainties to the group s ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements;

 the Directors explanation on page 43 as to how they have assessed the prospects of the group, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the group

will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

We agreed with the Directors adoption of the going concern basis of accounting and we did not identify any such material uncertainties. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group s ability to continue as a going concern.

Independence

We are required to comply with the Financial Reporting Council s Ethical Standards for Auditors and we confirm that we are independent of the Group and we have fulfilled our other ethical responsibilities in accordance with those standards. We also confirm we have not provided any of the prohibited non-audit services referred to in those standards.

Our assessment of risks of material misstatement

The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team.

Independent Auditor s Report

to the Shareholders of Jersey Electricity plc

Risk How the scope of our audit responded to the risk Hedge accounting, valuation of contracts and related disclosures

The fair value of derivative financial instruments held at the year-end is an asset of £8.7m (2015: a liability of £5.1m). The accounting for the hedging of forward foreign exchange contracts entered into by the group is considered a significant risk due to the complexity of the accounting treatment required for such transactions, the level of complexity involved in the valuation of such contracts

and the detailed disclosure requirements in the financial statements. Further details about this risk are given in note 22.

We engaged internal financial instrument specialists to challenge the accounting and hedging treatment applied to the forward foreign exchange contracts which included a review of the hedge effectiveness testing and

the hedging documentation for a sample of contracts. The specialists also independently challenged the valuation of contracts through using data from an independent source. We obtained and agreed external confirmations for contracts at the year end to the accounting records.

We performed a review of the hedging and financial instrument related disclosures in the financial statements to assess whether the disclosures presented comply with IFRS.

Defined benefit pension scheme assumptions

The group has a retirement benefit deficit at the year-end of £11.5m (2015: £7.3m). The defined benefit pension scheme assumptions are considered a significant risk

due to the level of judgement required in determining the assumptions most appropriate to the circumstances of the entity.

IFRIC 14, which addresses the interaction between minimum funding requirements and the measurement of the defined benefit liability, is also considered a significant risk due to the scheme being in deficit and the complexity in assessing whether or not the arrangements of the pension scheme include a minimum funding requirement.

We considered the appropriateness of management s assumptions used in the determination of the defined pension scheme balances and disclosures, detailed in note 17 to the financial statements. We did this through comparison of the key assumptions to third party data for reasonableness and assessment of the competence and independence of management s actuarial expert who derived the balances and disclosures. We also assessed the basis for concluding that no additional liability was required in respect of IFRIC

14 through reviewing the minutes of meetings of the Trustees of the pension scheme and method by which it is intended to manage any existing deficit and corroborating with management s actuarial expert.

Last year our report included two other risks which are not included in our report this year: the Normandie 1 contract and the La Collette site rental provision. The first matter was concluded in the prior year and the La Collette matter was concluded prior to year-end so there was little judgement or complexity involved in testing this. Therefore these two risks did not have a significant effect on our current year audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team and are not included in our report in the current year.

The description of risks above should be read in conjunction with the significant issues considered by the Audit & Risk Committee discussed on page 51.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Our application of materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.

We determined materiality for the Group to be £900,000 (2015: £915,000), which is below 7.5% (2015: 7.5%) of adjusted pre-tax profit, and below 1% (2015: 1%) of equity. Pre-tax profit has been adjusted by removing the exceptional credit of £1.7m in relation to the La Collette site rental. In the prior year an adjustment was also made to the pre-tax profits in order to determine materiality through removing the £789,000 exceptional credits recognised in relation to compensation received from RTE and the reversal of the remaining EDF 1 provision as these were considered to be one-off events.

GOVERNANCE

Independent Auditor s Report

to the Shareholders of Jersey Electricity plc

We agreed with the Audit & Risk Committee that we would report to the Committee all audit differences in excess of £18,000 (2015: £18,300), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit & Risk Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

An overview of the scope of our audit

Our Group audit was scoped by obtaining an understanding of the group and its environment, including internal control, and assessing the risks of material misstatement at the group level. Audit work to respond to the risks of material misstatement was performed directly by the audit engagement team.

Consistent with the prior year, our Group audit scope focused primarily on the audit of the parent company as the balances of the subsidiary were not considered to be significant except for the revenue balance. The parent company represents the principal business unit within the Group and accounts for 100% (2015: 100%) of the Group s net assets, 99% (2015: 99%) of the group s revenue and 99% (2015: 99%) of the Group s profit before tax. We have only tested revenue of the other component as other balances were not considered to be significant. Our audit work on the Group was executed at the levels of materiality detailed above.

At the parent entity level we also tested the consolidation process and carried out analytical procedures to confirm our conclusion that there were no significant risks of material misstatement of the financial information of the subsidiary not subject to audit or audit of specified account balances.

Matters on which we are required to report by exception

Adequacy of explanations received and accounting records

Under the Companies (Jersey) Law, 1991 we are required to report to you if, in our opinion:

 we have not received all the information and explanations we require for our audit; or

 proper accounting records have not been kept by the parent company, or proper returns adequate for our audit have not been received from

branches not visited by us; or

 the financial statements are not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

Corporate Governance Statement

Under the Listing Rules we are also required to review part of the Corporate Governance Statement relating to the company s compliance with certain provisions of the UK Corporate Governance Code. We have nothing to report arising from our review.

Our duty to read other information in the Annual Report

Under International Standards on Auditing (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is:  materially inconsistent with the information in the audited financial statements; or

 apparently materially incorrect based on, or materially inconsistent with, our knowledge of the group acquired in the course of performing our

audit; or

 otherwise misleading

In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the directors statement that they consider the annual report is fair, balanced and understandable and whether the annual report appropriately discloses those matters that we communicated to the Audit & Risk Committee which we consider should have been disclosed. We confirm that we have not identified any such inconsistencies or misleading statements.

Respective responsibilities of directors and auditor

As explained more fully in the Directors Responsibilities Statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). We also comply with International Standard on Quality Control 1 (UK and Ireland). Our audit methodology and tools aim to ensure that our quality control procedures are effective, understood and applied. Our quality controls and systems include our dedicated professional standards review team and independent partner reviews.

This report is made solely to the company s members, as a body, in accordance with Article 113A of the Companies (Jersey) Law, 1991. Our audit work has been undertaken so that we might state to the company s members those matters we are required to state to them in an auditor s report and/or those further matters we have expressly agreed to report to them on in our engagement letter and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company s members as a body, for our audit work, for this report, or for the opinions we have formed.

Independent Auditor s Report

to the Shareholders of Jersey Electricity plc

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that

the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

ANDREW ISHAM

for and on behalf of

Deloitte LLP

Chartered Accountants and Recognized Auditor Jersey, Channel Islands

13 December 2016

FINANCIAL STATEMENTS

Consolidated Income Statement

for the year ended 30 September 2016

Consolidated Statement of Comprehensive Income

for the year ended 30 September 2016

All results in the year have been derived from continuing operations.

The notes on pages 64 to 87 form an integral part of these accounts. The independent auditor s report is on pages 56 to 59.

Consolidated Balance Sheet

as at 30 September 2016