Jersey Electricity: Report and Accounts 2017 – Powering a Clean Low Carbon Future

R.36/2018

COCNOTNENTETNSTS

CONTENTS DIRECTORS, OFFICERS AND

PROFESSIONAL ADVISERS

NON-EXECUTIVE DIRECTORS Geoffrey Grime FCA (Chairman) Aaron Le Cornu BSc, ACA

Alan Bryce MSc, CEng, FIET

Phil Austin MBE, FCIB, FCMI

8Wendy Dorman BA (Hons), ACA

Tony Taylor BSc

CTRICITY

10EXECUTIVE DIRECTORS

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

Martin Magee CA (Finance)

ION S SECRETARY

Peter Routier BSc, FCIS

REGISTERED OFFICE

T Queen s Road, St. Helier , Jersey S

PLACE OF INCORPORATION Jersey

AUDITORS

23 Deloitte LLP, PO Box 403, 66-72 The Esplanade, St. Helier , Jersey NITY U BROKERS

BANKERS

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

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

40

CHAIRMAN S STATEMENT

CHAIRMAN'S STATEMENT

I am delighted to report another excellent performance from Jersey Electricity for 2016/17. Group revenue for the year to 30 September 2017 was £102m and profit before tax, and exceptional items, at £13.5m, was 2.5% higher than the £13.1m achieved in 2016. This was supported

by strong underlying performance in the Energy business as well as across our non-Energy businesses, especially

our retail business, Powerhouse.je, which has had another particularly strong year. Overall, this has led to the Group s best ever financial performance, an outcome that is good for all stakeholders, for our ongoing investment programme and for a sustainable electricity service. I am therefore pleased to report a proposed final dividend for this year

of 8.40p, a 5% rise on the previous year, payable on 29 March 2018.

Our first almost full year operating with three undersea supply cables to France has not only resulted in improved financial performance, but has also driven exceptional supply reliability, attractive pricing for customers and a virtually fully decarbonised electricity system. Our tariffs remain very competitive compared with other jurisdictions, including other islands and even the EU and UK which benefit from significant economies of scale. In addition, with the last tariff rise of 1.5% on 1 April 2014, Jersey Electricity is approaching four years without an

increase a notable achievement given the very

significant rises over that period elsewhere.

As the sole supplier of over a third of Jersey s energy requirements, the Company has a huge responsibility to our customers and it is one all colleagues take very seriously. I am therefore pleased that our customer satisfaction ratings have improved further across the four key service areas leading to an increase in an overall rating which is independently assessed as excellent when compared with other service providers.

Our Board renewal programme, which began in 2015, continued with the appointment of Tony Taylor as non- Executive Director in September 2017. He has vast experience in the marketing, communications and customer service arena having worked for several leading global advertising agencies, most recently as a Regional Director of J. Walter Thompson, part of WPP.plc.

My thanks, as always, go to our Executive and non- Executive Directors and colleagues throughout the business for their commitment, hard work and loyalty that have made Jersey Electricity the great success it is today and positions us well for future challenges.

13 December 2017

CHIEF EXECUTIVE'S REVIEW

Group results have surpassed last year s and I am delighted to again report that we have delivered our best ever financial performance. Profit, before exceptional items, increased 2.5% to £13.5m on turnover of £102.3m, reflecting an overall improved performance in our business units.

Importantly, unit sales of electricity were only marginally down on last year at 621 million kilowatt hours despite the ongoing and inevitable impact on demand due to energy efficiency. This strong unit sales position is mainly a reflection of our success in fuel switching customers from gas and

oil to electric heating and part due to a colder winter in 2016/17 relative to the previous year. Energy revenues

at £80.5m were 1% lower than in 2016 but profitability

was maintained at the same level as last year at £11.7m.

As indicated in previous years, maintaining profitability, consistent with a regulatory return, is of central importance given the last five years or so of heavy investment in infrastructure.

Our retail success story continues with turnover in Powerhouse.je up 9% to £13.0m and growth in profit to £0.7m being at the highest level of profitability in its history. This is a huge credit to the team in Powerhouse.je in driving performance in a sector that is very competitive both in Jersey and via the internet. Elsewhere, our Property business maintained profit at £1.6m and JEBS, our contracting and building services business, saw profit levels at £0.1m being on par with 2016 again a respectable performance in a challenging and highly competitive sector. Our other business units, Jersey Energy, Jendev and Jersey Deep Freeze were £0.2m behind last year due to profits in Jersey Deep Freeze having been at a much higher level than normal in 2016.

After five years of intense investment in new assets, our focus is now shifting to asset optimisation and using demand-side measures to yield higher performance. Almost a full year operating with three undersea supply cables to France, importing lower cost, low carbon power, has not only resulted in improved financial performance but also improved supply reliability and lower carbon emissions.

We measure supply reliability using Customer Minutes Lost (CMLs) which is the average duration of interrupted supplies experienced by each customer. This year, our CMLs were down to a level of just eight - around ten times better than the latest available UK average*. Our average carbon intensity of distributed electricity reduced from 47g CO2e/kWh last year to just 35g CO2e/kWh for this financial year, reflecting enhanced importation capacity and we expect further reductions going forward.

*Source: Ofgem RIIO ED1 Annual Report 2015-16

The commissioning of Diesel 5, our 5.5MW black start Sulzer Diesel Generator, procured in 2016 and completely overhauled, refurbished and installed this year, has also further enhanced our emergency on-Island generation capabilities. It enables us to restore full electrical supplies to La Collette Power Station and all its ancillary controls in the event of a complete blackout without itself being reliant on electrical power for start-up.

Although our latest French link, Normandie 1, enables us

to meet Jersey s full electricity requirements with low carbon imports, we are contractually obliged to purchase power from the States-owned Energy from Waste plant (EfW) when the plant is available. This year we imported 93% of our supplies from France, generated just 1% on Island and obtained 6% from the EfW plant.

In May, we renegotiated our supply agreement with EDF by five years, extending our importation framework from 2022 to 2027, to help maintain a stable importation regime over a potentially uncertain Brexit period and take advantage

of lower wholesale prices in the market. This contract also provides surety over the low carbon credentials of imported power, authenticating hydro-electric and nuclear sources we use in a manner which prevents this energy being sold elsewhere.

Providing affordable electricity is, according to our customers, the single most important factor in the provision

of our service and I am pleased we have been able to

maintain our tariffs at the same level for nearly four years. This is a particularly important achievement given that the UK has seen the Big Six increase retail electricity prices by an average of 14% in 2017 alone. At year end, our standard domestic tariff was 14% below the UK average benchmark and 15% below the EU average outperforming our target

of keeping within +/-10% of the EU15.

Understanding and meeting our customers needs is vitally important to us and has been a significant focus over recent years. We use several channels for gaining such insights. Price is one of four main supply attributes, along with supply security, technical support and environmental performance, in which our customer satisfaction rating has improved

this year. Together this has led to an an overall rating of

 excellent in these areas which our customers value most.

All this has been possible while continuing major investment projects. Our £17m St Helier West primary substation project has made progress with complex civil works completed in September and French contractors Engie INEO beginning a one-year main build. The facility is expected to be commissioned by November 2018.

 ENERGY CHIEF EXECUTIVE S REVIEW

Our SmartSwitch project has now seen around 75% to date of the Island s premises fitted with Smart Meters and the customer facing online portal, Smart Account that runs in tandem with Smart Meters, made live. This gives customers more information than ever before on their electricity consumption through a user-friendly interface.

Our biggest and most complex project of the year, however, has been the Navision enterprise system upgrade. Led by in-house developer Jendev, the project touched virtually every part of our business. A programme of further development promises to improve business processes, improving service levels and efficiencies. Regarding our growth agenda, we have maintained fuel switching rates at twice the underlying baseline rate for another year and electricity continues to achieve over 95% penetration of new build heating, cooling and cooking applications.

Investment in our people continued with the first cohort completing our HOW TO Management Development Programme and the new Cornerstone employee portal and appraisal system JE Connect launched. We have also welcomed a new Operations Director and new Director of Human Resources, both of whom come with many years experience in their respective fields. Both promise to bring new perspectives and deep insight and have already identified great opportunities for improvement.

GROUP PURPOSE CHIEF EXECUTIVE S REVIEW

Our corporate 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 . Our vision is to

 responsibly and sustainably deliver value to customers . In the absence of competition in the electricity supply market or formal regulation, we let our customers drive everything we do. We must understand our customers and serve them fairly and efficiently while striving to understand and meet their changing needs and demands.

To do this our workforce must be aligned and every employee must know the part they have to play. They must understand our purpose why what they do is so important to our customers and how it helps us achieve our vision. Our

six values help explain who we are and how we perform

our roles. They are: Safety, Customer focus, Teamwork, Responsibility, Excellence and Reliability.

To build on the foundations of the Purpose, Vision and Values (PVV) work instigated in 2013 and further embed our values in our culture, we have sought to build these into our core processes to make them real and consequential. For example, we have now incorporated our values into the Performance Management and Learning module of our new employee portal and appraisal system JE Connect. From now on managers will be able to set objectives clearly aligned to our Purpose, Vision and Values and accurately measure our progress and performance against them. Employees will also be able to browse a catalogue of training events and learning materials aligned to our values.

 Sustainably serving our community means not only protecting the environment and conserving resources, it means providing secure and reliable services, fair pricing to customers in a way that ensures the business is economically viable, and it means protecting the safety and health of all the people touched by our business.

Our vision

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 or provide value added services to customers.

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

 Strengthening our relationships with customers by better

understanding and meeting their needs.

Our priorities

 Grow electricity s market share using resources in Energy

Solutions, JEBS and Energy in a more efficient and coordinated 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 customer.

 Keep our major St Helier West primary substation project

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

 Design and develop our new Queen s Road infrastructure,

securing final Board consent for the investment.

 Optimise the operation of La Collette Power Station to

robustly protect supplies in the most efficient way.

 Continue the development of our non-Energy businesses

so that they are sustainable and provide support to the core electricity business.

 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.

16,862 total customers customers

49,894 tonarifdiscounftesd

ENERGY GROWTH

When we remove the effects of weather from electricity demand, unit sales volumes have remained broadly fl at despite the ever-increasing downward pressure of energy effi ciency. Although we actively encourage our customers to become more energy effi cient, we strive to counter the impact by developing propositions that encourage fuel switching from gas and oil to electricity in both the domestic and commercial markets. The team dedicated to load growth by fuel switching is Energy Solutions.

Energy solutions  

Now in its third full year of operation, the team has again made progress ahead of target, achieving over 170 fuel switches in the domestic market and accounting for a projected new load of 1.7 million units which helped us to achieve unit sales for the year of 621 million, marginally below last year s 625 million, but maintaining a very respectable level when compared with power utilities in

other jurisdictions. Using traditional and new technologies in heating, cooling, cooking, lighting and transportation, the team has also made signifi cant progress in the commercial sector, with professional kitchens, in particular, continuing to switch to all electric solutions using energy effi cient induction cooking technology as well as commercial scale, ultra-

effi cient heating and cooling heat pump technology.

As well as improved fi nance packages and a streamlined customer journey from quotation to installation, the team has done much work this year to strengthen our relationship with the trade at large. This has included enhancing the trade section

of our corporate website, promoting electric solutions in trade merchants and hosting seminars and other trade events in conjunction with some of the top manufacturers such as Dimplex and Mitsubishi.

Our new Economy 20 Plus (E20+) tariff, launched last year off the back of our Smart Metering programme and which offers 24- hour uninterrupted low price heating with a mix of off-peak rate and normal rate for approved heating systems, has also proved a good leverage for fuel switches. Encouraging customers to use lower cost off-peak heating when supplies from France are cheaper means we can offer better value while fl attening peak demand, which is a signifi cant driver of infrastructure costs.

Though we have made progress in the commercial sector,

we still believe there are huge opportunities to reduce both carbon emissions and costs within the States of Jersey property portfolio and we continue our efforts to persuade it of the signifi cant fi nancial and carbon reduction opportunities across its building stock and its transportation needs. We believe there is a signifi cant opportunity for the States of Jersey to take a leadership role in promoting low carbon solutions that are fully compatible with the States approved Energy Plan.

 CURREE NL TLE YC OT NR JI EC R  SV EYE H REI GC ISL TE ES R165 52

ENERGY GROWTH CHIEF EXECUTIVE S REVIEW

New build  

Electricity remains the fi rst choice for developers seeking energy effi cient building designs. Building standards today mean

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 95% of new build choosing effi cient electric solutions for heating and cooling.

Electric transportation  

There were a total of 271 all-electric vehicles registered in Jersey at year end,

up from last year s total of 215. Advances in technology and the increased range of models from all major car manufacturers are encouraging more drivers to make the switch. Though uptake in private ownership is still slow without the purchase incentives we see in other jurisdictions, more and more commercial businesses are realising the environmental and fi nancial advantages of electrifying their transport.

As the gap in price between electric and traditional vehicles narrows and an increasing choice of models become available, we hope to see continued growth in this area. Given the commitments of the major vehicle marques and an industry move away from diesel, we expect choice and demand for electric vehicles to increase signifi cantly over the next few years.

Jersey Electricity has already helped reduce the Island s carbon emissions by over a third in the last three decades and with transportation comprising around a third of current total emissions, uptake of electric vehicles could have a signifi cant favourable impact on carbon emissions.

Jersey Post has continued the de- carbonisation of its 110-vehicle fl eet  following the success of last year s trial  of 15 Nissan ENV200s which Jersey  Electricity helped to facilitate. Jersey Post  this year added a further 15 ENV200s  when their diesel predecessors came out  of warranty. We have also seen several  smaller businesses start the move to electric  as refl ected in the increased number of vans  registered from 29 to 52.  

15 39 TOTAL271 A3 S0   AS TEPT 2017

Energy usage Source: UK Energy Saving Trust

MAINTAINING AFFORDABLE ELECTRICITY AND PRICE STABILITY

Providing affordable electricity is the single most important factor  tariffs. Our new Economy 20 Plus (E20+) tariff is now to our customers in the provision of our service and I am pleased  in its second year and this 24-hour, uninterrupted

we have been able to maintain our tariffs at the same level since  heating tariff offering a mix of off-peak rate and normal April 2014. rate for approved heating systems, is proving popular

with customers and supports our fuel switch strategy. This is a particularly important achievement given the scale

This year over 370 new domestic customers joined our of our investment in infrastructure over the last fi ve years and

discounted space and water heating tariffs bringing when compared with the UK that has seen the Big Six increase

the total number of customers now on our off-peak retail electricity prices by an average of 14% in 2017 alone. At

tariffs to 16,862. As part of our on-going strategy, we year end, our standard domestic tariff was 14% below the UK

continue to explore innovative tariffs that work for new average benchmark levels and 15% below the EU average

technology applications and customer segments. outperforming our target of keeping within +/-10% of the EU15.

In May, we renegotiated our supply agreement with EDF,

extending our importation framework by a further fi ve years from  % of Jers 2022 to 2027 to help maintain a stable importation regime over  0

a potentially uncertain Brexit period which has already seen  4

Sterling deteriorate against most currencies, including the Euro,

g

the currency in which we procure from France. in

d

This agreement combines a fi xed price component with the  vi

ability to price fi x future purchases over a rolling three-year  o

period ahead based on a market related mechanism linked to  r

P

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 the energy

and foreign exchange markets.

While striving to ensure our main tariff is competitive, we also invest in developing more innovative, customer focused heating

SJersey Electricity UPPLY SECURITYs system is STANDARD  ENSURING SECURITY AND designed to meet an adapted N-1 security standard as follows:peak demand RELIABILITY OF SUPPLY

A one-in-eight year winter

All normal load in the event

of the loss of the single  Supply security is rated as the second most  a record demand of 161MW in February largest interconnector with  important element of our service by our  2012, our margin is around 20% even without France (N minus 1) plus a  customers behind price stability. It is also  taking account of our on-Island generation simultaneous failure of the  crucial to our reputation as an essential service  assets at La Collette Power Station and

largest: utility company and we invest heavily in  Queen s Road.

o Diesel generator; and excelling in this area. We have enhanced security this year with the

o Gas turbine We measure our reliability in Customer Minutes  commissioning of the black start 5.5MW

Lost (CMLs). This is the average minutes of  Diesel 5 Sulzer generator at La Collette and

75% of peak winter load

service disconnection time per customer in a  we have also carried out further works on the for 48 hours from on-Island

generation (no simultaneous  year. This year our CMLs were just eight. This  Channel Islands Electricity Grid (CIEG) System loss of on-Island capacity) is around ten times better than the Big Six  Integrity Protection Scheme (SIPS), which

UK electricity distributers which in 2015-2016  provides cover and balance to the transmission

No coincidence of the  averaged 74 CMLs.* network at times of stress.

above

Our supply margin (plant capacity v peak  We work to an adapted N minus 1 standard.

demand), an important consideration for  This means, we seek to maintain supplies

supply security, is also greater than the UK s  during the failure of the largest component *Source: Ofgem RIIO ED1

Annual Report 2015-16 which aims for a margin of around 10% above  in the system (see panel) and we strive to

peak demand. Here, with three supply links to  minimise the risk of such an asset failure and France, across two diverse routes, giving us  we ensure we are well prepared to restore access to 190MW of imported power against  supplies quickly when a failure does occur.

616 GWh

Imported from EDF

Hydro 36% Nuclear 64%

39 GWh Generated by EfW plant

10 GWh

JE locally generated

ELECTRICITY SOURCES 2016/2017 IN %

+0.3% +1% 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% 2016-17 1.5% 5.8% 92.6%

-1.4%

Despite the successful integration into our transmission network of our 100MW Normandie 1 third French undersea link,

our investment in on-Island generation assets - and their maintenance - continued this year. We completed the £2m project began in 2016 to add a 5.5MW Sulzer Diesel 5 generator to our existing four 11MW Sulzers at La Collette Power Station. This latest addition to our standby generation plant has a black start capability and uses air driven and on- engine pumps for auxiliary systems and will restore full supplies to the Power Station without the need for electrical power to energise the start-up in the unlikely event of complete blackout.

The reconditioned, 78-tonne engine was sourced by Swiss main contractors MIE from Lisbon, Portugal. It is an eight- cylinder version of our four existing 11MW Sulzers and was installed by Madeiran sub-contractors Vapour Ilhas and UK based Gynnwood Electrical contractors who installed two of the existing Sulzers in 2012.

Since its arrival in March 2016, 350 tonnes of concrete that formed the bed for one of the original GEC 30MW Steam Turbines, installed in 1965 and scrapped in 2011, were removed and recycled, and a new bed laid for the Sulzer. This was carried out by Geomarine during a 12-hour continuous pour when 426 tonnes of new concrete was laid.

In addition, six tonnes of reinforcing steel and almost four tonnes of post tensioning bars were used.

After a complete refurbishment, Diesel 5 was successfully started for the fi rst time in February and fully commissioned in June following a 100-hour endurance run. As well as a vital back-up asset, Diesel 5 also enables us to meet our published Security of Supply Standard by adding another 5.5MW

of generation.

Our three interconnectors are by far our most valuable infrastructure assets. On-going investment in maintenance

of this 90kV transmission network is vital to supply security and 2016/17 has been a busy year with a number of important activities being performed which necessitated several carefully planned outages. The Normandie 3 (N3) regulator at South Hill Switching Station was tapped to improve load sharing across all three submarine cables. N3

was also switched off for a period in May to allow us to carry out further improvements to the Channel Islands Electricity Grid (CIEG) System Integrity Protection System (SIPS), started last year. In addition, GJ1, the cable between Jersey and Guernsey, was switched off for 19 days to allow a repaired regulator to be reinstalled at Barkers Quarry substation, Guernsey. In parallel with this work, two lengths of the GJ1 cable that had previously been repaired were reburied in the seabed.

Normandie 2 (N2) was switched out for six weeks to allow planned replacement of the Protection and Control to take place which had reached the end of its useful life. At the same time, reburying work was undertaken on the N2 circuit where the protective layer of cement bound sand had become partially exposed on the beach at Surville in France.

As part of our ongoing asset replacement programme, we replaced our Supervisory Control and Data Acquisition (SCADA) system which we use to monitor, operate and control the 90kV network to bring it up to the latest standards. Improvements in our testing regime also revealed an issue with the insulation of the switchgear at our Queen s Road 90kV substation which was successfully resolved by our

own teams.

Distribution

We have made excellent progress on our biggest infrastructure  investment project of the year, the new £17m St Helier West primary  substation. After protracted investigations of the site in a former  coastal quarry throughout 2015, local fi rm Jayen Ltd completed  

the highly complex civil works in September 2017 and the site was  handed over to French specialist contractors Engie INEO to begin  the build which is expected to take a year.

This is the fourth time we have  used Engie INEO on such a project  following Rue des Pres and Western  Primary Substations and South Hill  Switching Station. On the mainland,  substations of this size would normally be built outdoors. These  installations are not aesthetically pleasing, plus, wind-borne salt  contamination can be a problem on islands. The Engie INEO design  uses simple air insulated components integrated into the structure  of the building. Crucially, using this technology allows Jersey  Electricity to carry out its own maintenance and repairs without  

the expense and delay in using off-Island assistance in the event  

of plant failure. The use of a building also means an aesthetically  pleasing appearance can be achieved that better blends into the  environment.

We acquired the 10,000 sq ft, steeply sloping site from the Parish of  St Helier in September 2014. Once a quarry dating back over 100  

years, it is a relatively small site resulting in considerable constraints  on design and subsequent construction works. Over 27,000 tonnes  2 014 of material, including 5,000 tonnes of rock, were removed during

excavations which reached over 20m deep at the rear of the site.

A retaining wall was then constructed to form and protect the

site. The area in front of the wall was piled and a concrete slab

formed to accommodate the substation building. When fi nished,

the fa ade and retaining wall will be clad in granite to blend into

the surrounding landscape and a public viewing platform created

overlooking St Aubin s Bay looking south of the substation.

Once in service, late next year, the new substation will give relief  to around 70-80% of St Helier s network and will provide future  proofi ng to meet the increasing demand for electricity. Landscaping  around the facility is expected to be complete in early 2019.

Signing the contract with Engie INEO

This year we installed around 35km of new cable, six new substations and 660 new services. We also refurbished 18 substations and maintained 159 substations and 10km of overhead line. Substations on the network now total 780.

St Helier West Oct 2017

2 016 2 016 2 016

Queens RQ oad Queens RQ oad

(Primary) (Primary) BEFORE AFTER

Kensington Place NEW Kensington Place

St. Helier West

(Primary))

Marina Court Marina Court

Esplanade Esplanade (P( rimary) (P( rimary)

Bay VViieeww West Park Esplanade Bay VViieeww West Park

Esplanade Waterfront Waterfront

SMARTSWITCHhome/

business

Following the signifi cant progress last year, our Smart Metering  

programme, SmartSwitch, has continued apace this year. Our  

dedicated team of installers working on the roll-out, combined  Exisiting cable with our Metering Technicians carrying out business as usual

meter changes, have now installed Smart-enabled meters in

around 75% of Island homes. At year end 36,000 (2016:

25,000) Smart Meters had been installed across the 12  Substation

parishes from a customer base of around 50,000, bringing

multiple benefi ts to both customers and the business.

Our dedicated microsite www.smartthinking.je that provides  

customers with all they need to know about Smart Meters went  

live in September and the customer facing online portal, Smart  

Account, developed for Jersey Electricity by Swiss Post Solutions  

(SPS) and which enables us to present consumption profi ling  

data to customers, was also launched to the public. Our  

Metering Technicians have now also made live 635 Local Data  Wireless signal Collectors (LDCs) on the network.

The new meters are capable of automated control, enabling  

swift change of tariff from credit to Pay As You Go (PAYG)  

functionality, plus remote reading. As well as avoiding the  

cost and inconvenience of Meter Readers visiting premises,  

estimated bills and self reads, customers with Smart Meters are  JE now benefi ting from Post Code Billing. This means they receive

four equal quarterly bills each for a standard 90-day period,

reducing the number of billing queries we receive.

The remaining 25% of meters still to be replaced are generally  either PAYG or 3 Phase. The roll-out of both is expected to  start in March 2018 when the new 3 Phase meter becomes  available and the technical systems around PAYG have been  fi nalised between Meterlink International Ltd, our remote  communication system provider, Payzone, our transaction  provider and Jendev, our own in-house software developer.

SmartSwitch is now expected to be completed early in 2019.  

As well as being in line with our strategy to build for a Smart  future, SmartSwitch strengthens our relationships with customers  and provides opportunities to develop new products and  services.

36,000

SMART METERS INSTALLED SO FAR

JERSEY LPG

241G CO2e /KWH*

2JER9SEY8 HEGATI NCGO 2Oe  I/ LKWH*

UK ELECTRICITY 352G CO2e /KWH**

*Building Bye-Laws (Jersey) Technical Guidance Document 11.1B 2016

** Department for Business, Energy and Industrial Strategy Greenhouse Gas Reporting - Conversion Factors 2017

ENVIRONMENT | RENEWABLES CHIEF EXECUTIVE S REVIEW

As a signatory to the Kyoto Protocol, adopted in 1997 and entered into force in 2005, Jersey committed to reducing its carbon emissions. The States of Jersey Energy Plan Pathway 2050 , approved in 2014, set a target of an 80% reduction on 1990 levels by 2050. Jersey Electricity s importation strategy

has helped the Island make significant strides towards that

goal. Our achievement was acknowledged in this year s States document Future Jersey 2017-2037 which stated: Between 1990 and 2014 Jersey achieved a 36% reduction in emissions (measured in tonnes of carbon dioxide equivalent, CO2e), mainly due to the one-off switch from local electricity production to importation from France.

We are proud of the progress we have made on our decarbonisation agenda which continued last year with the installation of our £30m Normandie 1(N1) cable. This gives

us three live links to France and provides the Channel Islands with access to 245MW of low carbon imported power of

which Jersey has 190MW enabling us to meet the Island s full power requirements with low carbon supplies even during the winter peak. Our supply agreement with EDF guarantees that

our imports are from certified low carbon sources, and in May this year we extended our importation framework by five years from 2022 to 2027. 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 2016/17 at a level of 35g CO2e/kWh, more than10 times cleaner than UK s electricity system, calculated at 352g CO2e/kWh. Our five-year average is 103g CO2e/kWh and we expect further reductions going forward.

We also encourage our customers to become more energy efficient through various self-help measures coupled with advisory services and we aim to lead from the front in this

area. Following the installation of LED lighting in the La Collette Power Station offices, we have now completed the installation

in the main Powerhouse offices which are also supplemented

by our own photovoltaic array. Next year we plan to invest £1.2m in a new, more energy efficient heating, ventilation and air conditioning system and expand our solar installation. We have also introduced companywide environmental awareness training and are revising and improving all our systems in preparation of our next British Safety Council (BSC) Five Star Environmental Audit in 2018.

Renewables

Although Jersey Electricity has in effect already decarbonised its electricity system and has already secured access to hydro-electric electricity from EDF in France under our long-term contract, it has for some years been exploring commercial opportunities to develop renewable energy in its home territory. Given the relatively high cost of production from renewable sources and low priced electricity supplied by the Company, this has proven challenging to achieve

without a costly subsidy that would have to be borne by other customers, in the form of higher prices, or tax-payers, if funded by the States of Jersey.

Despite the strong currents and high tidal range, large

scale tidal power generation requires significant capital

and carries a high development risk. Large scale offshore wind power is closer to economic viability although it still requires subsidy. Our research has revealed that European subsidies may be accessible by exporting renewable electricity into the European power market but this is unlikely to be straightforward. Onshore wind is also difficult due

to planning and noise issues and land price constraints. A smaller, localised test development may be possible in the industrial zone at La Collette. We have constructed proposals to work with the States of Jersey in many of these areas but all require some up-front investment in establishing a regulatory and consenting regime that is necessary to attract the inward investment needed. Despite Jersey Electricity being willing to provide some level of financial support, such schemes have proven difficult for the States to commit to given the current public finances situation.

With relatively good daylight levels and what we believe could be a sympathetic planning approach, we believe large scale, ground based solar PV is closer to grid parity and

has some potential in Jersey. We have explored how this technology can be used in a way that might allow Jersey to at least partially generate some of its own power, minimising the risk of subsidy and allowing the benefits to be socialised across all islanders. We are close to launching a scheme that we believe would allow this in an economically viable and socially desirable manner.

Jersey Electricity remains committed to connecting smaller scale generators to its network as it has done for many years

including embedded renewable generators. Our general view, however, which is consistent with our user pays for an efficient service philosophy, is that this should be done on

 fair terms that allow the Company to apply a charge for the grid backup services enjoyed by these commercial facilities. Without levying this charge, other customers including many from low income social groups who do not have the funding, type of property or knowledge would pick up an increasing proportion of grid costs in the form of higher retail prices and in a manner that is socially inequitable. Indeed, this is already happening in many jurisdictions, leading to higher retail prices.

We previously reviewed our existing Standby Charges for

all smaller scale generators that rely on backup power from the grid. In November 2016, we gave one year s notice of

our intention to extend Standby Charges. This was further extended by five months following a Proposition lodged in the States by a Deputy . Our proposals are now under review by

a third party adviser to the States. If the Company is required to provide free backup services, then this is likely to lead to higher electricity prices for other, non-generating customers.

CUSTOMER SERVICE STANDARDS

As the sole supplier of over a third of the Island s energy requirements, Jersey Electricity has a huge responsibility to customers for all the services it provides and in our interactions dealing with their day-to-day needs. We seek to put our customers at the heart of everything we do and constantly strive to exceed their expectations.

To gain insights into those expectations we have engaged with our customers in numerous ways in recent years to obtain essential feedback on our services and products as well as sounding out their views and opinions on future energy related issues. We believe that demonstrating that we meet customers needs is one of the most important ways of protecting our monopoly franchise in the community.

Regularly garnering customers feedback is not only important for measuring our performance against their expectations but also provides vital insights for our business strategy.

We have four main channels for capturing feedback  Our annual customer surveys, conducted by an

independent analytics company

 Customer focus groups, which seek to tease out insights on

specific issues and opportunities

 Web-based customer feedback forms that feed into and

are recorded on our call logging software Microsoft Dynamics Customer Relationship Management System (CRM)

 Letters, emails and phone calls into our Customer Care Centre which are also logged and recorded on CRM

 Feedback/ complaints cards used by all customer facing

teams

By far the most commonly-used channel on a day-to-day basis is provided via email and phone calls to Customer Care.

Now in its third year, our CRM system logs and helps us track every customer interaction against our Customer Charter and Standards of Service.

Customer Care receive on average 1,300 calls or emails

and around 250 customer visits each week. The vast majority of these are business as usual interactions such as change

of tenancy and payments and therefore do not need to be logged on CRM. Approximately 350 CRM cases related to our Customer Charter and Standards of Service are raised each month, including complaints and compliments. Complaints are dealt with by the appropriate department and staff are responsible for resolving the case in the time frame set out in Standard of Service 5.

Our annual customer surveys, conducted by an external specialist analytics company Island Global Research (IGR), enable us to benchmark our overall customer offer year-on- year. This provides the Company with key insights for future

planning. Customers are asked to weight out of 100 the importance of four electricity supply functions then rate our performance against four elements as follows:

Running costs and price stability

Security and quality of supply

Customer and technical service support Environmental performance

I am pleased to report that our ratings showed improvement

on 2016 in all these areas, including the most important attribute of our service, running costs and price stability which customers weighted at 37/100 in level of importance. As we have held prices for almost four years, it is not surprising our rating in this area increased slightly from 54% to 58%.

Price is followed by security and quality of supply at 27/100 in degree of importance. And again customer satisfaction

levels improved from 82% to 85%. Environmental performance is gradually becoming more important, with customers giving it 19/100 and I am pleased to see our actual rating going up in this area to 68% compared with 54% in 2011 (2016: 64%).

Finally, according to our customers, customer/technical support remains the least important (17/100) to respondents probably because of the limited interactions that the vast majority of households have with the Company during the year. Our rating however also showed improvement from 72% to 76%.

When combined into an overall average rating over the four functions, our rating for 2016/17 was 70%, a slight increase on last year s 69%. IGR considers any score above 70% as

 excellent .

As in previous years, we also seek an overall customer service rating that encompasses:

 Technical problem resolution - speed of response  Clarity of electricity bills

 Helpfulness in dealing with telephone enquiries  Helpfulness of showroom staff

 Support in electricity bill payments

 Regular advice on energy efficiency

Although slightly down on last year, this again was rated excellent at 74% (2016: 77%). This dip could again be explained by the limited number of households who experience the direct contact/ support being measured. Going forward,

we have plans to further enhance how we assess our customer performance using new tools and techniques. We are

delighted, however, to have continued the progress we have made in recent years. We are advised by research agencies that Jersey Electricity scores extremely well compared with other utilities and across other sectors.

CUSTOMER SERVICE STANDARDS CHIEF EXECUTIVE S REVIEW One of our six core Values

is: Customer focus -

 We listen to our customers and seek to understand

and respond to their needs,

" We have improved our  would wish to be treated, treating them the way we

rating in the four electricity

with respect and honesty . supply functions."

2017

70%

2016

69%

2015

67%

2014

67%

2013

66% 2012

65%

2011

66%

Previous years have been restated due to a change in the underlying calculation methodology that takes a total overall weighted rating from all four electricity supply function ratings.

Powerhouse.je

Our retail business, the Powerhouse and its online arm powerhouse.je, delivered its best financial result ever continuing a period of year-on-year profit growth since 2014. Revenues were up 9% from £11.9m to £13.0m, taking the business from a loss of £0.1m in 2014 to a profit of £0.7m this year. This is a significant achievement given the intense competition in the local marketplace and from online UK retailers.

After an intense period of restructure and reinvestment

the last two years have provided an opportunity for consolidation and further enhancement. We chose to exit the lower margin, bulky, toy category preferring instead to build out our home electricals and technology offering which has a better fit with our strategy. We have continued to expand the range of heating products and smart technology, including subcategories wearables and rideables such as electric cycles. We have also seen some encouraging improvements in trading levels in our St Helier town store, where we have revised our proposition to focus more on high tech consumer electricals, including TVs in which we are particularly competitively priced.

This year we have started to use technology extensively in the way we run the business - assisting us with category management, ranging, pricing and margin analysis. Also crucial to our success, we have maintained our investment in people development and staff training by introducing a new training programme aimed at further enhancing customer service skills and product knowledge among our key customer-facing staff. Whilst customer feedback on pricing is very positive, we believe staff engagement and customer service remain critical to differentiating our offer in the local market and in particular against the UK online threat.

We are continuing to embrace significant new opportunities in electrical retailing in an increasingly smart future and rise of the interconnected home.

Jendev

Jendev, our in-house software developer has maintained its position as a strategically important asset in the Group s portfolio serving external clients as well as Jersey Electricity with high value enterprise system consultancy services.

A Microsoftfi partner in Dynamics NAVTM, Jendev specialises in software development and confi guration for the utility industry with a focus on billing. First established in 1998,

the business is now well-placed to target sustainable growth through its fl agship product Jenworks Billing .

This year, this small team of highly experienced utility industry developers successfully led the implementation of the biggest IT upgrade in Jersey Electricity in over a decade. In addition, Jendev continued to support a number of other business critical projects including the Smart Metering project, SmartSwitch, a project with enormous implication for accurate and timely billing and for customer service.

The NAV project involved a full system upgrade to the latest version of Microsoft Dynamics NAVTM, the enterprise system at the heart of our business, being a single, central data repository and management system serving the majority of our business units.

The project delivered new or enhanced functionality in many areas of the business including Energy, JEBS, the Powerhouse and Procurement. The upgraded version of Microsoft

Dynamics NAVTM was launched successfully and with a seamless customer transition. Something of a rarity in the utility industry where upgraded billing systems can be fraught with customer issues and the threat of reputational harm.

The latest iteration of NAV is easier to use and more

fl exible than before with signifi cantly enhanced reporting and integration capabilities. The application provides

the foundation for further process engineering, effi ciency improvement and enhanced data management. It can also be easily and fl exibly developed to take advantage of new opportunities right across the business.

Owing to the diversity of Jersey Electricity s business units and activities, the upgrade was complex and involved

a sustained and broad commitment from all parts of the business. The scale of the project was signifi cant involving over 200 users and 55 super user/trainers. Effective teamwork was a key enabler of the project s success and was a credit to all involved.

The project was an important milestone in Jendev s business renewal programme.

Property

Our Property portfolio includes a B&Q store and Medical Centre situated on our Powerhouse retail and administration office site at Queen s Road as well as 29 private houses

and flats which are rented on the open market. We were pleased to become the Island s first Rent Safe landlord to

be awarded Five Stars for all our domestic rental properties under the new States of Jersey Environmental Health Department s Rent Safe Scheme. Each of our domestic dwellings was given its own Five-Star certificate of excellence following a week-long inspection of every property by Environmental Health officials. To attain five stars the

scheme states: The property exceeds the minimum Rent Safe standard and has achieved accreditation through compliance with legal standards. Energy efficiency measures are also in place.

Building Services (JEBS)

JEBS is our contracting and building services business that provides electrical, mechanical and plumbing installation

and maintenance services, including air-conditioning,

heating and refrigeration, to domestic and commercial customers. JEBS continues to develop into a more commercial and customer-focused business unit, delivering trade services that support the core electricity business. Now with a Contracts and Operations Manager, working under the

Head of Commercial Services, to improve contract tendering and delivery, JEBS has built further on last year s restructuring foundation by again winning several major contracts in

a highly competitive marketplace. These have included

the electrical, mechanical and air conditioning services installation at Eaton House, a four-storey office block in

St Helier, and the installation of lighting and air conditioning at First Tower School. JEBS has also started work on the refurbishment of La Moye Golf Club clubhouse where the team is providing all the electrical, plumbing, heating, ventilation and air conditioning services for this

prestigious project.

The new team, launched last year to provide a wider range of Amenity Lighting Services, has also had success, providing the external LED lighting of the car parks of the Channel Islands Co-operative Society s Grand Marche at St Peter and B&Q, St Helier, reducing light pollution and saving energy.

Commercial tenants leasing parts of the Powerhouse building are SportsDirect, which shares the ground floor with our own retail business Powerhouse.je, and telecoms operator Sure, which occupies the middle floor. We also lease mobile aerial sites and fibre optics to telecoms operators.

Revenue in the Property business rose £0.1m to £2.2m

due to higher income from inflationary rental increases from residential properties and an additional space taken

by Sure. This was offset by higher maintenance costs resulting in profits remaining the same as last year at £1.6m. Our investment property portfolio was revalued upwards marginally this year to £20.2m by the external consultants who review the position annually.

The business continues to support our Energy Solutions team in its load growth strategy by installing electric heating systems for customers switching from gas and oil-fired systems. The Maintenance and Services team continues to thrive and this year launched a domestic home maintenance proposition, CosyCare, providing a three-tiered maintenance and repair service for home electric heating systems.

JEBS operates in a very competitive marketplace where competition for skilled staff is as tough as winning customer contracts and I am pleased to see the business continuing to move toward a more commercial and sustainable footing. Total revenues including internal sales, at around £5m, are £1m lower than in 2016 as the previous year was impacted by one particular large project but profit remained on a par with last year at £0.1m.

Jersey Energy and its Guernsey office, Channel Design Consultants, provides premium environmental and building services advisory, detail design and site administration services to end user clients, architects, the States of

Jersey and Guernsey, Parish Town Hall s and developers

predominantly in the healthcare, retail, commercial and residential sectors.

As a leading pan-Channel Islands consultancy, the team

is continually developing skill sets, intellectual knowledge and services offered to meet increasing client expectations. They have been rewarded with a consistent work stream

of repeat business from satisfied clients and, significantly, winning high value, long-term contracts. These have included Jersey Energy winning the new States of Jersey central administration building, Grainville School Music School extension, Future Hospital Project Westaway Court Outpatients/Administration High Rise Tower and Future Hospital Project Temporary Modular Building Ward s.

The Guernsey office has also had a full order book

this year. Its projects have included the refurbishment

of Guernsey Grammar School and fit-out of Dorey

Court Office Development. The construction industry

is particularly active in Jersey and we are hopeful of continued strong performance into next year, reflecting the

business s respected and elevated position within the sector. We are continuing to develop the business by forming strategic alliances with UK consultancies that enable Jersey Energy and Channel Design Consultants

to increase their capacity as and when required to

secure bigger commissions on a more cost effective, flexible basis. We have also been very successful this year by forming on-Island multi-disciplinary consortiums to win work with high capital expenditure clients. Although Jersey Energy is fuel neutral, the business has successfully broadened Jersey Electricity s services and solutions offer into the marketplace and its knowledge compliments Energy Solutions and JEBS.

Turnover in the year at £0.6m was at a similar level to 2016 and the business remains at a breakeven level.

HEALTH AND SAFETY

inspections to closely monitor all our project teams, raise  

values: We do everything safely and responsibly or not at awareness of health and safety matters and then discusses  

all nothing is more important than the safety of the public, any fi ndings and learnings.

our customers and our staff . My thanks go to everyone for

The appointment of a new Operations Director has brought  upholding this value by contributing to ensuring that Jersey

fresh insight and challenge to our HSE programme. He is  Electricity and all the people the Company touches stay safe already building on the solid foundations we have in place  and healthy.

in this area by increasing further our focus on proactive

measures such as enhanced safety plans, site inspections and

incident investigation and reporting procedures.

HEALTH AND SAFETY CHIEF EXECUTIVE S REVIEW

2013 2014 2015 2016 2017

LOST TIME ACCIDENTS (RIDDOR)

RIDDOR (Reporting of Injuries, Diseases and Dangerous Occurrence Regulations) is the UK standard for reporting Accidents and Near Misses. In the UK, an LTA is defi ned as an accident that results in the injured person being away

from work or unable to do their normal work for more than seven days. Jersey Electricity applies the more stringent  standard of more than three days. This enables us to benchmark against other peer group  

entities and allows us better oversight on risk trends.  

DAYS LOST (RIDDOR)

0 39 37 7 0

2013 2014 2015 2016 2017

"

"

SUSTAINABILITY

IN THE COMMUNITYOwmbyhauekrfunetnimcadoiehnmugabgnaiednn eidemdxcppwaaeircrtrhttyi. s icenWogcre paooanur rtbaewet  et ohafier knrpseaof onotencrneiaa t dl f noeseurlicwpgeph aotfeolrldr-te,  glt weooc eoht rdacic ava enn d

pledged support for the Jersey Cheshire Home Big Build

As a public utility providing a vital service to every household  staff block that forms part of improvements to Jersey s

only residential home for disabled adults. We will also be

asnodc iablu sreinsepsosnisnib thiliety I s ltahnadt ,gJoeerssebyeEyloencdtr itchiety  t hraadsi taio snpael cCiaSlR  enabling Acorn, which provides employment training and activities. In fact, we don t really think of CSR as an initiative  support for people with disabilities and enduring health

it is embedded in who we are as a business and transcends  conditions, to extend its operation by providing the electrical all our activities. It is our purpose and responsibility to  works for a new, larger Reuse Centre and Shop.

 sustainably serve our community with affordable, secure,  We continue to recognise and reward others who are

low carbon energy, today and long into the future to enable  passionate about the environment with our sponsorship of the quality of life and economic prosperity. As a company with  Jersey Evening Post-organised Pride of Jersey Environmentalist a long history in the Island we are very much part of the  Award and Jersey Construction Council s (JeCC)

community we serve, supporting charities, schools, volunteer  Sustainability Award. The former was this year won by Jersey groups and our own staff, in fund raising and activities that  Beekeepers Association with the Sustainability Award going benefit worthwhile local causes. to the States Recycling Centre.

Following the success of last year s trial Sustainability in the Community Event that married our corporate support for Jersey Zoo with a staff volunteer day, cleaning and weeding a moat at the zoo, we formed a similar marriage this year in support of the National Trust for Jersey. By funding the Trust s elm tree and hedge planting projects we joined up our strategic objective of moving customers to paperless ebilling with corporate sponsorship and another Sustainability in the Community Event.

A donation of £5 for every customer who switched to ebilling in autumn 2016/17 funded the Trust s 80th anniversary

project to plant 80 elms across the Island and helped launch the Wildlife Hedge Planting Project in which staff themselves volunteered to plant 300 hawthorns and blackthorns around

a large Trust-owned farm. This successful initiative, which also earned considerable publicity, brought together volunteers from Production, Distribution, Finance and Planning.

As is often the case, it doesn t always take lots of money to make a difference in the community as our Linesmen showed with some community spirit of their own in March, salvaging several telegraph poles, removed as part of our strategy to move overhead supplies underground for added security, and delivering them to Jersey Zoo to create aerial pathways for howler monkeys.

As well as supporting many charities at corporate level,

we also support staff in charity events, including this year the Lions Club Swimarathon, the Dragon Boats Festival for Jersey Hospice Care, the Silkworth Round Island Extreme Challenge, the Jersey Marathon, Sand Storm and charity football matches. One staff initiative this year raised almost £3,500 for Cystic Fibrosis Channel Islands.

Our Monthly Staff Number Charity Draw, now in its fourth year, raises funds for staff-nominated charities which this year included Caring Cooks of Jersey, Channel Islands Air Search, Jersken Little Angels Home, Jersey Deaf Society, Diabetes Jersey, British Heart Foundation Appeal and After Breast Cancer Support Group, the Grace Trust, Eyecan, RNLI,

Age Concern and BeachAbility. Even staff of our

main contractor on the Normandie 1 subsea

cable installation, Dutch company VBMS,

raised 2,500 euros, which Jersey Electricity

matched, to donate £5,000 to St Catherine

RNLI Station as part of a safety initiative

during the project.

I am immensely proud of the hard work and commitment from all colleagues investing in  charity and community work much of which is done in staff s own time.

SUSTAINABILITY IN THE COMMUNITYCHIEF EXECUTIVE S REVIEW

OUR PEOPLE

Jersey Electricity is a capital intensive, asset driven business,  As the system develops, we will see the addition of new

but it is nothing without its people. To assist with a heavy  modules on Succession Management, Absence Management programme of activity across the people agenda, we have  and eRecruitment modules made available to employees and this year appointed an experienced HR Director who will build  managers to deliver a fully integrated HR system. Functionality further on the cultural change programme we have initiated.  currently available in the system includes:

 Performance objective planning and appraisal

Waceq uhiarevde tmhea nsyki lllos nagn-sde revxipnger,i ednecdeicnaetecdesesamrpyl otoy edeesl iwvehroahfiarvset    Ongoing task monitoring and progress tracking

class service over many years. To meet future challenges we    Enrolment on classroom learning events

must invest in our staff to ensure we continue to maintain a    Updating employee training records

highly skilled, fl exible and dedicated workforce.    Feedback requests

 Employee bio and information regarding skills and This year we have focused on succession which recognises  interests

that over the next 10 years we expect to see almost half of our

workforce retire. This presents a challenge in lost knowledge  The system will eventually track employee career aspirations and people risk management but equally a huge opportunity  ensuring we can better align development planning to

for the talent that remains. It has led to a signifi cant programme  individual employees and the future needs of the business.

of management training and staff development to give a new  This fi nancial year a number of employees took up

generation the best opportunity for promotion.  professional qualifi cations, with many completing City &

We see great opportunity for the business in developing  Guilds certifi cates, Higher National Certifi cates or function-

specifi c qualifi cations such as Marketing or HR qualifi cations. mHOanWagTeOme nMt caanpaagbeilmitye n at t  Daell v lee vlo eplsm. e Tn ht  ips r yo eg ar ra wm em pe, i  loa ti em de td h  e  Completion of professional qualifi cations ensures a depth

at providing a consistent approach to management across the  of industry-specifi c knowledge as we continue to develop Company. The programme, designed in collaboration with  our employees to support future skills needs and manage Cybele Offshore, was trialled with 11 managers to ensure the  succession.

topics are suitable and will address the needs of the business.  The new HR System will help us to track these skill sets across Making use of 360 degree feedback and psychometric  the business and ensure that we maintain the necessary level tools to highlight strengths and development areas of  of competence across the roles we employ. We will also

each participant, the eight-session programme covered  offer training and development on a continuing basis through subjects from performance management, team building and  the portal, allowing employees to seek out and complete the infl uencing to effective presentations and communication. The  training they require. Through these innovations, and many second programme began in September.  others, we aim to make our colleagues and Jersey Electricity Throughout the year, the HR team and Talent Manager have  fi t for the future.

also implemented the fi rst stage of a new HR Enterprise System  Jersey Electricity has great strengths in its people. Compared JE Connect . The system, developed with HR software  with UK utilities, we have made great progress in developing specialists Cornerstone, is designed to give employees access  a fl exible workforce with a tremendous can do attitude.

to a range of HR processes; including performance appraisals,  I would like to offer my thanks to all colleagues who have learning events, discussion boards and feedback requests. worked so hard to get the Company to where it is today.

OUR PEOPLE CHIEF EXECUTIVE S REVIEW

OUTLOOK

OUTLOOK CHIEF EXECUTIVE S REVIEW

"We have enjoyed the strong

operation of our new Normandie 1 interconnector. This has led to world class reliability and a near fully decarbonised system."

Over the last five years Jersey Electricity has made considerable progress with its investment programme.

In 2012, the Company faced multiple infrastructure challenges but by 2017 these have largely been resolved, with the Company enjoying supplies from three resilient interconnectors between Jersey and France, which have themselves benefited from further technical enhancements during the year. This robust importation system is further supported by an optimal mix of fast start generation to support our supply security standard.

Over the next five years, the Company will shift its focus from asset deployment to asset optimisation , enhancing and extending our services to customers and building on further demand-side measures such as fuel switching. This is so important to maintaining unit volumes which, in turn, helps us to deliver more competitively priced electricity.

We also focus strongly on the potential risks facing our business. As far as electricity supply is concerned, we

have achieved a strong hedge book that is substantially

secure over the short term but faces some uncertainty over the longer term with Brexit risk driving a weak Pound/

Euro rate, coupled with some energy price uncertainty in

UK and Europe. In an effort to respond to this and provide some transitionary certainty through the Brexit period, we extended our contract with EDF for a further five years to 2027. While this framework does not guarantee continued low prices, it offers ability for the Company to better manage risk through regular price fixing. This contract also secures the composition of our electricity from certificated low carbon sources which is important to maintaining the Island s strong carbon position.

The Company faces new risks but also opportunities in the form of new distributed technology such as solar PV, storage, heat pump and the smart home/business. We are embracing these technologies and have developed a strategy that

should allow the Island to benefit from them in a way that will minimise risk and cost, strengthening the Company but continuing to provide value for money, comfort and control to consumers and businesses alike.

The Company has reached an important stage in its development. The network is well invested and extremely well positioned for the future. We have enjoyed the strong operation of our new Normandie 1 interconnector. This has led to world class reliability and a near fully decarbonised system. Crucially, this has been done while keeping

prices stable and competitive when compared with peer jurisdictions, including large European economies.

Going forward, we look to build resilience in people succession. Over the next 10 years we will lose almost half of our talent and experience. This represents a risk due to the loss of skill and experience, but on the other hand a great opportunity to further develop our remaining talent, by building flexible skills, reshaping roles to drive efficiencies and improvements, coupled with more extensive use of modern technology. We are investing considerably in talent development that will give our people the very best possible opportunities to succeed and perform well for the Company, ensuring it stays on course for a great future.

Chris Ambler Chief Executive 13 December 2017

FINANCIAL REVIEW

Group Financial Results

Key Financial Information  2017  2016 Revenue   £102.3m  £103.4m

Profit before tax pre-exceptional items  £13.5m  £13.1m Earnings per share pre-exceptional items  34.59p  33.31p Dividend paid per share  13.80p  13.10p Final proposed dividend per share  8.40p  8.00p Net debt  £21.9m  £29.0m

Group revenue for the year to 30 September 2017 at £102.3m was 1% lower than in the previous financial year. Unit sales volumes of electricity were marginally behind last year with Energy revenues at £80.5m against £81.2m in 2016. Turnover in Powerhouse.je,

our retail business, increased by 9% from £11.9m to £13.0m. Revenue in the Property business rose marginally to £2.2m due

to higher rental income. Revenue from JEBS, our contracting and building services business, fell £1.1m from levels experienced in 2016 to £4.0m. Turnover in our other businesses fell £0.3m to £2.6m.

Overall cost of sales decreased by £2.1m to £63.2m mainly due to a reduction in import costs in our Energy business. Operating expenses, at £24.4m, rose by £0.9m from their

2016 level with an increase in depreciation charges, post our continued investment in infrastructure, and IAS 19 pension costs being the main drivers.

Profit before tax, pre-exceptional items, for the year to 30 September 2017, at £13.5m, increased by 2.5% from £13.1m in 2016. Profit before tax post-exceptional items, fell from £14.8m last year to £13.5m in 2017 as we had an exceptional credit of £1.7m in 2016 associated with the release of a rent accrual that had been accumulated over many years for our La Collette Power Station site post the settlement of a long-running rent review which was settled by an arbiter in our favour.

Our Energy business unit sales saw volumes falling 0.6% from 625m to 621m kilowatt hours. Profits in our Energy business moved up marginally against last year to £11.7m. A lower cost of sales resulted in a higher margin but this was offset by increased depreciation and pension costs.

In the financial year we imported 93% of our requirements from France (2016: 92%) and generated 1% of our electricity on-island at La Collette Power Station (2016: 3%). Additional staff training on plant was the main reason for the higher level of generation in 2016 compared to this year. The remaining 6% of our electricity came from the local Energy from Waste plant being marginally above that seen in 2016. Customer tariffs have remained at

the same level over the last three years. There were no changes during 2017 and our prices continue to remain competitive

with other jurisdictions. The UK saw material increases in retail

electricity prices for their customers during 2017 with an average rise of 14% across the Big 6 . Our last tariff movement was over three years ago by an average 1.5% increase in April 2014.

Profits in our Property division, excluding the impact of investment property revaluation, at £1.6m, were at the same level as last

year with a higher rental level offset by increased maintenance costs. Our investment property portfolio was marginally revalued upwards this year to £20.2m by the external consultants who review the position annually. Our retailing business, Powerhouse. je, saw continued strong growth with profits moving £0.3m upwards to £0.7m in 2017. JEBS, our contracting and business services unit produced a profit of £0.1m on a par with that achieved in 2016 in a challenging industry with high competition for staff. Our other business units (Jersey Energy, Jendev and Jersey Deep Freeze) were £0.2m behind last year as Jersey Deep Freeze had an exceptional year in 2016 which was not repeated

in 2017.

Interest paid in 2017 was £1.3m against £1.1m in 2016 with a lower level of average debt, and a higher level of capitalisation of interest in 2016 associated with the new N1 subsea cable, being the primary reasons for the rise. The taxation charge at £2.8m was £0.3m lower than 2016 due mainly to the exceptional credit last year being a taxable item.

Group earnings per share, pre-exceptional items, rose to 34.59p compared to 33.31p in 2016 due mainly to the increase in profits. Earnings per share, before adjusting for exceptional items stood at 37.69p in 2016 whilst there were no exceptional items to adjust for in 2017.  

Dividends paid in the year, net of tax, rose by 5%, from 13.1p in 2016 to 13.8p in 2017. The proposed final dividend for this year is 8.4p, a 5% rise on the previous year. Dividend cover, pre- exceptional items, at 2.5 times was at a similar level to 2016. If exceptional items are included, dividend cover fell from 2.9 times last year to 2.5 times in this financial year.

Ordinary Dividends

2017  2016

Dividend proposed  - final for current year  8.40p  8.00p

Net cash inflow from operating activities at £26.5m was £1.3m higher than in 2016 with an increase in profit, prior to IAS 19 pension accounting, being the primary driver. Capital expenditure, at £15.1m fell from £32.4m last year as most of the cash in the N1 project was spent in 2016 in advance of the cable being commissioned during this financial year. Net debt at the year-end was £21.9m, being £7.1m lower than last year.

FINANCIAL REVIEW

Cash Flows

Summary cash flow data  2017  2016

Decrease/(Increase) in net debt  £7.1m  £(11.5)m

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 electricity purchases during the financial year, as a result of the hedging program, was 1.24 /£. The average applicable spot rate

during this financial year was 1.15 /£, having fallen from the average level of 1.28 in 2016 with the UK decision to leave the EU continuing to bring volatility to foreign exchange markets. 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 all of our borrowings at present.

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

In the last financial year Jersey Electricity imported 93% of

the electricity requirements of Jersey from Europe. It jointly purchased this power, with Guernsey Electricity, through the Channel Islands Electricity Grid, from EDF in France. The supply contract allows power prices to be fixed in Euros in advance

of decisions being made on customer tariffs. A ten year power purchase agreement with EDF, which commenced in 2013, was extended by a further five years to 2027 during this financial

year. This 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 2017 the scheme deficit, under IAS 19

 Employee Benefits , was £3.4m, net of deferred tax, compared with a deficit of £9.2m at 30 September 2016. Scheme liabilities decreased 4% from £139.2m to £133.5m since the last year end with the discount rate assumption, which heavily influences the calculation of liabilities, rising from 2.3% in 2016 to 2.7% in 2017 to reflect sentiments in prevailing financial markets. In addition scheme assets rose 1% from £127.8m to £129.3m in the same period.

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 the discount rate applied to the liabilities had been either 0.5% lower or higher than the 2.7% under IAS 19 for 2017, the net deficit of £3.4m would have risen to around £13m, or moved to a surplus of £5m, respectively. In a bid to mitigate the impact of movements in interest rates and inflation the trustees of the scheme have recently adopted a Liability Driven Investment (LDI) approach with the goal of reducing funding volatility. It does this by reducing the risk that asset and liability values change at different rates, or even move in different directions.

The last triennial actuarial valuation as at 31 December 2015 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. In 2016 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 was £0.7m and was paid by the Scheme but generated a £0.7m charge against the income statement of the Company in 2016. No such award was granted during the 2017 financial year. 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 Limited owns 5.3m (46%) 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 13.10p net of tax to 13.80p. The proposed final dividend for 2017, at 8.40p, 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 chart below shows the evolution of dividend payments over the last 15 years.

Dividend paid per ordinary share 2002-2017

16 14 12 10 8 6

pence per 4 2

0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

The share price at 30 September 2017 was £4.53 against £4.25 at the 2016 year end. This gives a market capitalisation

of £139m as at 30 September 2017 compared with a balance sheet net assets position of £176m. 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. However we use Edison (an investment research firm) to produce regular research on our performance to aid the marketing of

our shares to a wider body of potential investors in the quest to improve our longer-term liquidity. The chart below shows the trending of our listed share price over the last 15 years.

 A Ordinary share price movements 2002-2017

5 4.5 4 3.5 3

2.5

£ per shar

2 1.5 1

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Our largest shareholder, the States of Jersey also owns holdings in other utilities in Jersey. It holds 100% of JT Group, Ports of Jersey, Andium Homes 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 (2016: £7.9m). A relatively small amount of corporation tax was paid in 2016 and 2017 due to capital allowances associated with our recent heavy investment spend in infrastructure.

2017  2016

The Company regularly communicates with its largest shareholders and details of discussions, including any concerns are reported to the Board. The Chairman meets once or twice a year with the States of Jersey, and ensures there is a direct communication between the non-Executives and our largest shareholder.

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 and Risk Committee and Board.

The output from this exercise forms the basis of the key principal risks.

FINANCIAL REVIEW

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.

Principal risks

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.

As noted in the Annual Report last year we continue to maintain a watching brief on Brexit developments. Although Jersey is not in the EU, the UK decision to exit has created a level of uncertainty for the Island. The most material individual trading relationship we have is our electricity importation arrangement with EDF in France. We received confirmation in 2016 that this long-term contractual agreement would not be impacted and that is still our understanding. In addition, we extended the current arrangements with EDF by a further five years, during 2017, to the end of 2027.

Risk  Description and possible impact  Mitigation activities

 Regulatory / Political or Legislative change

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

behaviours of a monopoly utility resulting in  Island but recognising our responsibilities to a wide number of stakeholders.

the introduction of sector specific regulation  Ensure transparency of objectives and regular communication with key stakeholders. with the attendant cost of compliance and

impact on public relations. 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 Energy

developments which cause a significant  Plan) and analyse the opportunities and threats to enable us to respond effectively. change to the operation of, or prospects for,  Develop proposals for approval by the Board to address any specific risks

the business. identified.

 Major capital project management

Project Unsuccessful delivery of our major projects  Project milestones, costs and risks are recorded and monitored and regular

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

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

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

of significant plant and/or importation assets. 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,  In principle the user pays model implies that if unit sales of electricity fell then

for example, energy efficiency or emerging  Jersey Electricity would raise tariffs to retain our target return on assets. However disruptive technologies and the corresponding  one of our prime defences to offset an expected continued focus on energy impact on the competitiveness of electricity in  efficiency is to migrate existing customers who use gas/oil as their primary

the heating marketplace.  heating source to all-electric solutions. A dedicated team work on initiatives in this

area and maintain a watching brief on developing technologies.

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

Benefit Pension Scheme position e.g.  impact that it is having on the Company. The Trustees have recently implemented liabilities increase due to market conditions  an LDI strategy to reduce the exposure to movements in the value of pension

or demographic changes and/or investments  liabilities.

underperform. The Defined Benefit scheme was closed to new members in 2013 and a triennial

valuation formally reports on performance and any required funding actions are instigated based on such results.

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

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

volatile power and foreign exchange markets.

 Security of Supply / Supply Chain / Asset & Plant Management

Business  Failure and/or unavailability of significant  A Security of Supply standard has been developed and published and we seek to Continuity plant and/or importation assets which cause  design the system to meet those standards.

disruption to our operations including major  A programme of maintenance is applied to optimise the life of assets. emergency, incident or 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 solution Management replacing legacy systems. As at 30 September 2017 around 75% of our customers

had such new meters installed. Contingency plans are under continuous development to enable the Company to mitigate the failure of the key systems.

Supply Chain Impact on ability to generate due to  Programme was completed during this year to ensure all fuel tank storage

availability, storage and transportation of  facilities were refurbished. Contract in place with Esso for supply of fuel to heavy fuel oil.  31 December 2018.

 Health, Safety & Environment

H, S & E Non-compliance with relevant legislation,  A Health, Safety and Environment team has been resourced to put in place

regulations and accepted codes of practice  standards and to monitor performance against those standards. A proactive safety resulting in unnecessary exposure to our staff,  culture has been nurtured throughout the organisation supported by a safety customer, member of the general public or  management structure, Safety Representatives, programmes of site inspections, our plant and equipment.  regular training and induction amongst other areas.

Use of British Safety Council for external benchmarking.

 People / Succession Planning

People The Group s strategy is largely dependent on  We have developed a long range HR Strategy. HR now has the resource and

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

Around half of the current work-force is  retired in 2017. In addition, a new HR Director was appointed in October 2017. anticipated to retire from the business in the

next 10 years.

 Cyber Security

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

systems systems may be a potential target for cyber

threats. We must protect our business assets,  CITysbyesrte amwsa arennde tshs e trrea iinsi nagphroags rbaememn ecaorfr ifeodll  oo wut -  uwpit hmaolnl istotarfifn wg iathn da ctcraesinsi ntog .c orporate infrastructure and sensitive customer data and  Following a review by external cybercrime security consultants, additional security

be prepared for any malicious attack. appliances with enhanced mitigation technologies are being installed.

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 2016 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 21 September 2017. 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.

Stress testing of the cost base of our Energy business was performed to establish the impact of material movements in both foreign exchange and wholesale electricity prices. However as we employ a user pays model the Board has comfort on the longer term consequences of a permanent weakening in Sterling or a material rise in European wholesale power prices (albeit we continue to strive to deliver price stability for our customer base).

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.

In making this statement the Directors have considered the resilience of the Company taking into account its current position, the principal risks facing the Company and the control measures in place to mitigate each of them. In particular,

the Directors recognise the significance of the strong Jersey Electricity plc balance sheet, and committed lending facilities that could be drawn down in most circumstances.

GOVERNANCE

Board of Directors

Geoffrey Grime Chairman (70) 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 2014 he

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

Chris Ambler Chief Executive (48) 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.

Martin Magee Finance Director (57)

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 (47) A/R

Aaron was appointed to the Board as a non-Executive Director in January

2011 and is currently

the Chief Operating

Officer of GLI Finance,

an alternative finance provider and strategic investor in numerous Fintech platforms. Aaron left his previous role as Chief Financial Officer of Elian, a Fiduciary Firm, headquartered in Jersey

and with operations in 17 countries, following the sale of the business to Intertrust Group in 2016. Prior to

this, Aaron held a number

of senior positions within HSBC, latterly as the Deputy CEO of HSBC International. During his 10 years with HSBC, he held a number of Board positions for HSBC subsidiaries and was also involved in acquisitions (such as the purchase of Marks and Spencer Money). Aaron is a Chartered Accountant having qualified with Andersen in London. He also has a First Class Honours Degree in European Management Science from Swansea University.

Alan Bryce Non-Executive Director (57) A/R

Alan was appointed to the Board as a non-Executive Director in December

2015 and is currently a non-Executive Director at Scott ish Water, Chair of the wind-farm developer Viking Energy and an advisor in

the utilities industry. He is

a former non-Executive Director of Infinis Energy plc and Iberdrola USA.

Prior to 2010, he held a number of senior positions at Scott ish Power, including Managing Director of Energy Networks, and Managing Director of Generation. He was also Strategy and Planning Director for Scott ish Power s UK Division, which included the company s Generation, Energy Management and Retail businesses. He is a Chartered Engineer and Fellow of the Institution

of Engineering and Technology.

Phil Austin MBE Non-Executive Director (68) R

Phil was appointed to the Board in May 2016 and spent most of his career

in banking with HSBC in London and, ultimately, Jersey where, from 1997

to 2001, he was Deputy Chief Executive of the Bank s business in the Offshore Islands. In 2001, he became the founding CEO 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. In 2009, he took on a portfolio of non-Executive directorships a portfolio consisting of both public and privately-owned businesses. Phil 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. Phil is currently a non-Executive Director of City Merchants High Yield Trust, a publicly quoted company.

Wendy Dorman Non-Executive Director (56) A/R

Wendy was appointed

to the Board as a non- Executive Director in

July 2016. 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. Wendy is a non-Executive Director of 3i Infrastructure plc and CQS New City High Yield Fund Limited, both listed companies, as well as Jersey Finance Limited.

Tony Taylor Non-Executive Director (59) R/N

Tony joined the Board as a non-Executive Director in September 2017.

His career spans over

35 years in marketing

and communications, having worked for three of the world s leading global advertising agency networks, in senior management roles. Most recently, Tony has been  a Regional Director at  

J Walter Thompson, part  of WPP plc.

Born in Jersey, Tony

has lived in the UK and Singapore and has worked with numerous blue-chip companies around the world.

Tony is also a Director of Jersey Sport and Jersey Dairy. He has a BSc in Psychology from the City University, London.

Key to membership of committees

A  Audit and Risk Committee R  Remuneration Committee N  Nominations Committee

GOVERNANCE

Directors Report

for the year ended 30 September 2017

The Directors present their annual report and the audited financial statements of Jersey Electricity plc for the year ended 30 September 2017.

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 2017:

2017  2016 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 8,973  8,973

Ordinary dividends

Ordinary and A Ordinary Shares

Interim paid at 5.80p net of tax for the year ended 30 September 2017 (2016: 5.50p net of tax)  1,777,120  1,685,200 Final proposed at 8.40p net of tax for the year ended 30 September 2017 (2016: 8.00p net of tax)  2,573,760  2,451,200 4,350,880  4,136,400

Re-election of directors

In accordance with Article 115 of the Company s Articles of Association, Tony Taylor will retire at the Annual General Meeting and, being eligible, offers himself for re-election.

In accordance with Article 127, Aaron Le Cornu and Alan Bryce 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 16 days (2016: 12 days).

Directors Report

for the year ended 30 September 2017

Substantial shareholdings

As at 13 December 2017 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 (CI) Nominees Limited are the largest shareholder of our listed shares and hold 5,327,562 A Ordinary shares which represent 5% 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 2017

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 April 2016 ( the Code ), as incorporated within The Listing Rules, issued by the Financial Conduct Authority. The Listing Rules require the Company to set out how it has applied the main principles of the Code and to explain any instances of non-compliance.

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

Statement of Compliance

The Board considers that the Company is a smaller company for the purposes of the Code as it is not a member of the FTSE 350. Throughout the financial year ended 30 September 2017 the Board considers that it has complied with the Code, with the following exceptions:

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. Until 31 December 2016, when Mike Liston retired, the Board acknowledges that he could not be considered independent. However during the remainder of the year the Board considered the Remuneration Committee to be compliant.

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 is the Senior Independent Director.

Independence

The non-Executive Directors during the year were Geoffrey Grime, Wendy Dorman, Aaron Le Cornu, Alan Bryce, Phil Austin,Tony Taylor and Mike Liston and they were all considered independent with the exception of Mike Liston, who retired in December 2016, and was formerly the Company s Chief Executive. The Board have determined that Geoffrey Grime remained independent notwithstanding that he has served on the Board for more than fourteen years. In making this determination, the Board took into account his breadth of experience, his financial independence and his other business interests. In addition, he has also served less than nine years on the Board prior to his appointment as Chairman.

Tony Taylor was appointed during the financial year and Mike Liston retired in December 2016. On appointment to the Board the required time commitment is established and any significant changes to time commitments are notified to the Board. An induction process is in place for all newly appointed Directors.

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, perform a robust assessment of the principal risks that could threaten the business model, future performance, solvency or liquidity (see Principal Risks section on pages 38 and 39), examine business plans and capital and revenue budgets, formulate policy on key issues and review the 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  5  3  4  2

* attendees by invitation

1  Appointed 21 September 2017 2  Retired 31 December 2016

During the last year there were not any significant changes to the commitments of the Chairman.

Performance Evaluation

The effectiveness of the Board is vital to the success of the Company. An external evaluation took place during the course of 2015 and internal evaluations were undertaken by the Chairman in both 2016 and 2017.

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

 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. There was also an externally facilitated session with all members of the Board in March 2017 to review, rate and clarify risks.

 Contracts approval of

Major capital projects. Major contracts. Major investments.

GOVERNANCE

Corporate Governance

 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 annual evaluation 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 risk based internal audit s plans are discussed and approved. Following its most recent review our Internal Audit was given the highest rating Generally Conforms by the IIA on Standards and Code of Ethics. During the previous financial year an independent review was performed of the risk management processes within the organisation. This was largely positive with some recommendations for improvement, the majority of which have been 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 (see the Principal Risks section on pages 38 and 39).

Nominations Committee Report

The Nominations Committee (the Committee) is chaired by Alan Bryce with Geoffrey Grime, Wendy Dorman, Tony Taylor and Chris Ambler being the other members, a majority of whom are independent non-Executive Directors. During the last financial year the Committee formally met twice.

The principle responsibilities of the Committee are to:

 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 for both the Board and for senior positions in the wider organisation; and

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

specified term of office.

The Committee recognises the benefits of diversity and will continue to appoint Executive and non-Executive Directors to ensure diversity of background based on attributes including gender, age, industry experience, background and race. During the year the Board diversity policy has been refreshed. The current profile of the Board is as follows:

Gender  Tenure  Age  Sector

During 2015 a plan was formulated for a controlled change in the constitution of non-Executive Directors going forward in line with good practice and corporate governance requirements on independence. The plan s implementation progressed further during 2017 when, as part of this strategy, Mike Liston retired from the Board in December 2016 and Tony Taylor was appointed in September 2017. Four of the six non-Executive directors now have a tenure of less than three years and all have been deemed by the Board to be independent. The Committee believes that the Board has a strong pipeline in place to manage its near and medium-term succession requirements.

For the appointment of the new non-Executive director during this year, the Committee appointed Hassell Blampied, an external recruitment consultancy firm which has no direct connection with the Company. As part of the open process, adverts were run in a local newspaper and on selected web channels. A strong emphasis was placed on enhancing diversity of experience on the Board, and Mr Taylor s background in international marketing, advertising and customer-focussed brands brings a new set of skills to the Board.

The Committee is also involved in succession planning for Executive Directors and the wider management team within Jersey Electricity, and at the July Board meeting the Board received a presentation on the Company s talent management and succession planning processes. In addition, during the year the Committee was actively involved in the recruitment process for two senior roles within the Company. In February 2017 Mark Preece was appointed as Operations Director within our Energy business and in October 2017 Andrew Welsby joined us as Human Resources Director.

The Terms of Reference for the Nominations Committee and the Terms and Conditions of the Appointment of non-Executive Directors are available on our website (www.jec.co.uk).

On behalf of the Committee

A. BRYCE Chairman

13 December 2017

GOVERNANCE

Audit and Risk Committee Report

The Audit and Risk Committee (the Committee) is chaired by Aaron Le Cornu supported by Wendy Dorman and Alan Bryce as members. Both Aaron and Wendy are Chartered Accountants with recent experience in both commerce and private practice. Alan is a Chartered Engineer with extensive experience of the utility sector and experience of serving on Audit Committees elsewhere. Full biographies of all members are provided on pages 40 and 41. The meetings provide a forum for discussions with both Company staff and 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 Committee is responsible for protecting the interests of shareholders and this includes reviewing the Annual and Interim Financial 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 Committee reviews the likely significant issues in advance of the preparation, and subsequent publication, of the external financial statements and in particular any critical accounting judgements identified by both the Company and the external auditor, 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 as an example a review was performed of the likely life of subsea cables by benchmarking our depreciation policy against other operators. The conclusion was that the existing policy of using an assumed thirty year life was still appropriate. In addition the Committee was made aware of some potential IT control issues associated with the successful upgrade of the Microsoft NAV system during 2017. We are satisfied that management reacted to this issue to ensure the control environment is improved for this coming financial year. 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 formally met three times in the last financial year (aligned to the financial timetable) 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. In addition a further meeting was facilitated by the Committee, inclusive of the wider Board members and an external consultant, to review in detail the key risks across the business to ensure they were appropriately captured, documented and being properly monitored. The Committee also considers reports from the internal and external auditors and from management and provides comment on salient issues to the Board. In addition, the 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 our website (www.jec.co.uk).

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 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 position and performance, business model and strategy. This requires the Committee to consider consistency of messaging, including comparison to prior years, reporting by the external auditor on potential inconsistencies and a verification exercise on statements made. The Committee requested internal audit to conduct a review of the various non-financial KPI s included in the Annual Report and no issues were identified as a result of their work. The Committee has concluded that this is the case and has reported this to the Board.

Audit and Risk Committee Report

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 Committee.

The Committee members have regular meetings with Internal Audit to evaluate both performance, and any impediments that might exist, which would constrain their work. The Committee also approve the plan of work for the Internal Audit function in advance of the following year. In addition independent reviews are undertaken on a regular basis. In 2015 a benchmarking exercise was performed, and in 2016 a review of the risk management process was undertaken by an external consultant. Such exercises provide further comfort to the Committee on the effectiveness of Internal Audit.

On behalf of the Committee

A. LE CORNU Chairman

13 December 2017

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 Group 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 existence 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 63.

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 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 2017

M.P. MAGEE Finance Director 13 December 2017

Remuneration Committee Report

Remuneration Committee

The Remuneration Committee (the Committee) is chaired by Phil Austin who was supported throughout the year by members Geoffrey Grime and Aaron Le Cornu. Mike Liston was a member until his retirement date and Tony Taylor was appointed in September 2017. The Committee operates within terms of reference agreed by the Board which are regularly reviewed and are available on our website (www.jec.co.uk). Four Committee meetings took place during the last financial year.

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 were advised during the year by Mercer, as external remuneration consultants, who used locally focussed benchmarking data, as well as assessing the remuneration of the executive team by reference to comparable companies within the UK, as this defines the relevant labour market for the skills required. It is confirmed that Mercer have no connection to the Company other than as a provider of such services. 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. It included recognition of the delivery of the strategically important Normandie 1 subsea cable, which was successfully commissioned during the year.

The remuneration paid to individual Directors during the year ended 30 September 2017 was as follows:

Basic  Benefits  Total  Total salary/fees  Bonus  in kind  2017  2016

£ £  £  £  £

EXECUTIVE DIRECTORS

C.J. Ambler  223,323  140,206  15,041  378,570  307,186 M.P. Magee  179,299  93,728  12,249  285,276  239,881

NON-EXECUTIVE DIRECTORS

G.J. Grime  36,500  -  3,446  39,946  39,912 A.D. Le Cornu  23,000  -  1,726  24,726  24,706 A.A. Bryce  25,429  -  1,726  27,155  19,537 P.J. Austin  20,429  -  1,726  22,155  7,636 W. Dorman  18,000  -  1,726  19,726  4,928 T. Taylor (appointed 21 September 2017)  -*  -  -  -  - M.J. Liston (retired 31 December 2016)  4,500  -  -  4,500  21,712 C.A.C. Chaplin (retired 3 March 2016)  -  -  -  -  10,070 Total  530,480  233,934  37,640  802,054  675,568

*Fees payable quarterly in arrears .

GOVERNANCE

Remuneration Committee Report

Service Contracts

The Executive Directors service contracts provide for a notice period of six months. The 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/(decrease) in accrued  pension at  value at  value at  contributions  in transfer value

pension  30.9.20172 30.9.20173 30.9.20163 during year  less Directors during the year1  contributions4

C.J. Ambler  £5,943  £44,600  £699,966  £694,350  -  £5,616 M.P. Magee5 £4,439  £81,954  £1,653,966  £1,670,530  £11,238  £(28,639)

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 Executive directors with the assistance of independent advice concerning comparable organisations and appointments and also taking into account the particular Committees in which they are involved. As with executive pay, Mercer was used to provide such advice. A small premium was paid in the financial year to those who chaired Committees (Audit and Risk: £5,000; Nomination/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 £92,500 of which £74,000 was retained, and the remainder paid to the Company, by the individual.

M.P. Magee

Standard Life Wealth Offshore Strategy Fund Limited.

The total non-Executive Director fees for this appointment was £20,000 of which £16,000 was retained, and the remainder paid to the Company, by the individual.

Remuneration Committee Report

Directors Loans

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

30.9.2017  30.9.2016

C. J. Ambler  £372,365  £407,997

M. P. Magee  £188,571  £239,571

Directors Share Interests

The Directors beneficial interests in the shares of the Company at 30 September 2017 are:

5% and 3.5% A Ordinary Shares  Preference Shares

2017  2016  2017  2016

C.J. Ambler*  7,420  5,005  -  - M.P. Magee*  13,500  10,500  960  960 G.J. Grime  10,000  10,000  -  - M.J. Liston  -**  2,000  -  - A.A. Bryce  4,500  4,500  -  - P.J. Austin  5,000  -  -  -

40,420  32,005  960  960

*Both C.J. Ambler and M.P. Magee each have a beneficial interest in a further 200 A Ordinary Shares that are due to vest in equal quantities in February 2018 and February 2019. **M.J. Liston still held 2,000 A Ordinary Shares as at 30 September 2017 but was no longer a Director at that date.

During the financial year the following Directors purchased A Ordinary shares: C.J. Ambler  2,415

M.P. Magee  3,000

P.J. Austin  5,000

There have been no other changes in the interests set out above between 30 September 2017 and 13 December 2017. On behalf of the Committee

P. AUSTIN Chairman

13 December 2017

GOVERNANCE

Independent Auditor s Report

to the Shareholders of Jersey Electricity plc Report on the audit of the financial statements

Opinion

In our opinion the financial statements:

 give a true and fair view of the state of the group s affairs as at 30 September 2017 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 that we have audited comprise:

 the Consolidated Income Statement;

 the Consolidated Statement of Comprehensive Income;  the Consolidated Balance Sheet;

 the Consolidated Statement of Changes in Equity;

 the Consolidated Statement of Cash Flows; 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.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor s responsibilities for the audit of the financial statements section of our report.

We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that the non-audit services prohibited by the FRC s Ethical Standard were not provided to the Group company.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Summary of our audit approach

Independent Auditor s Report

to the Shareholders of Jersey Electricity plc

Conclusions relating to principal risks, going concern and viability statement

We have reviewed the directors statement regarding the appropriateness of the going concern basis  We confirm that we have nothing of accounting contained within note 1 to the financial statements and the directors statement on the  material to add or draw attention longer-term viability of the Group contained within the Financial Review on pages 35 to 39. to in respect of these matters.

We are required to state whether we have anything material to add or draw attention to in relation to: We agreed with the directors

the disclosures on pages 38 to 39 that describe the principal risks and explain how they are  adoption of the going concern being managed or mitigated; basis of accounting and we did

 the directors confirmation on page 39 that they have carried out a robust assessment of the  not identify any such material

principal risks facing the group, including those that would threaten its business model, future  uncertainties. However, because performance, solvency or liquidity; not all future events or conditions the directors statement in note 1 to the financial statements about whether they considered  can be predicted, this statement is it appropriate to adopt the going concern basis of accounting in preparing them and their  not a guarantee as to the group s identification of any material uncertainties to the Group s ability to continue to do so over a  ability to continue as a going period of at least twelve months from the date of approval of the financial statements; concern.

the directors explanation on page 39 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; or

whether the directors statements relating to going concern and the prospects of the company

required in accordance with Listing Rule 9.8.6R(3) are materially inconsistent with our knowledge

obtained in the audit.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.

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.

Accrual for unbilled electricity units

Key audit matter  Total revenue for the Group is impacted by the year end process of calculating the number of unbilled units of description electricity and the value of these units £5,099k (2016: £5,950k). The calculation is based on a model which

uses historical customer and tariff data and uses automated calculations to generate the overall figure. There is significant judgement required by management when determining what historical data is appropriate to use to reflect unit usage and cost in the unbilled period. We therefore identified inappropriate recognition

of accrued revenue as a significant risk and an area of potential fraud. Further details of the considerations around revenue recognition are set out in the critical accounting judgements in note 2 and in the Audit and Risk Committee report on page 48.

How the scope of our audit responded to the key audit matter

We have reviewed the design and implementation of key controls relating to the unbilled units process.

We engaged our data analytics specialists to build a model to estimate the unbilled units accrual which approximates the model used by Jersey Electricity plc. The historical data used in the model such as billed units data and tariff information was tested for completeness and accuracy through agreement to billing records and historical tariff data.

To assess whether the historical data appropriately reflected consumption in the unbilled period we challenged the judgements applied by management, for example through assessing consideration of seasonality adjustments and any significant changes in the customer base or the nature of properties.

We also reviewed the accuracy of previous judgements applied by management through reviewing the adequacy of previous unbilled units accruals compared to subsequent billings.

Key observations As a result of our audit procedures we concluded that the assumptions in the revenue accrual were reasonable

and that the amount recognised in revenue and trade debtors at the reporting date was appropriate and in accordance with the requirements of IAS 18.

GOVERNANCE

Independent Auditor s Report

to the Shareholders of Jersey Electricity plc

Discount rate assumption in the defined benefit pension scheme

Key audit matter  The group has a gross retirement benefit deficit at the year end of £4.2m (2016: £11.5m). There is inherent description uncertainty over the assumptions used by actuaries in assessing the present value of scheme liabilities due to

those assumptions being long-term. We identified the most significant assumption and key audit matter to be the discount rate used of 2.7% (2016: 2.3%), as is disclosed in note 17.

The assumption applied in determining the pension balances is subject to significant judgement and has the ability to materially impact the current deficit recognised on the balance sheet.

How the scope of our  We have performed a review of the design and implementation of key controls relating to the review of the audit responded to the  assumptions used by management in determining the value of the scheme s obligations.

key audit matter We have assessed the independence, objectivity and qualifications of the expert which management engaged

to support them in determining the pension assumption, balances and related disclosures.

We have reviewed and challenged the discount rate used by the expert and approved by management, against independent data and consulted with our own internal experts to benchmark and rationalise the assumption.

Key observations Through the performance of our review of the design and implementation of key controls relating to the

pension assumptions, we did not identify any material deficiencies.

As a result of our audit procedures we concluded that the discount rate used was reasonable.

NAV upgrade project

Key audit matter  The group uses Microsoft NAV as their accounting and operating software package.

description As referred to on page 23, the group underwent a significant IT upgrade to its NAV installation during the current financial year. This was to improve performance, efficiency of use and the IT control environment.

How the scope of our  We have engaged our internal IT specialists to assess the change management process and consider the audit responded to the  change management controls in place.

key audit matter Our IT Specialists have performed testing on the before and after instances of NAV and specific procedures

over the data migration process.

We have also understood and challenged the upgrade process and assessed the design and implementation of the key controls within group s information systems that are relevant to the financial reporting process and other operating activities.

Key observations We have identified certain user accounts with master IT access rights, created as part of the upgrade project for

the use of appropriate IT personnel, but for which user activity was not tracked or logged. We considered this to be failure in the general IT control environment.

Where the control failure affected applications and databases within the scope of our audit, we extended the scope of our substantive audit procedures.

At the point of issuance of this report management have addressed the observations made by the audit team.

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.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: Group materiality £1,000,000 (2016: £900,000)

Basis for determining  Approximately 7.5% of pre-tax profit (2016: 7.5% of adjusted pre-tax profit). materiality

Rationale for the  Given that this is a trading group we have considered profit before tax to be the most suitable benchmark to benchmark applied use as it is one of the key performance indicators used by investors.

Independent Auditor s Report

to the Shareholders of Jersey Electricity plc

PBT £13.5m Group materiality £1m

PBT

Group materiality Audit & Risk Committee reporting threshold £0.05m

We agreed with the Committee that we would report to them all audit differences in excess of £50,000 (2016: £18,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the 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.

Jersey Electricity plc as a stand-alone entity contributes approximately 99% of the revenue and profit before tax presented within the Consolidated Income Statement and a similar proportion of the net assets presented on the Consolidated Balance Sheet.

At the group level we also tested the consolidation process and carried out analytical procedures to conclude that there were no significant risks of material misstatement of the financial information of the parent company s subsidiary, Jersey Deep Freeze Limited, and the parent company s joint arrangement, Channel Islands Electricity Grid Limited, which were not subject to a separate audit.

Other information

The directors are responsible for the other information. The other information comprises the information  We have nothing to report included in the annual report other than the financial statements and our auditor s report thereon. in respect of these matters. Our opinion on the financial statements does not cover the other information and we do not express any form

of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and,

in doing so, consider whether the other information is materially inconsistent with the financial statements or

our knowledge obtained in the audit or otherwise appears to be materially misstated.

If we identify such material inconsistencies or apparent material misstatements, we are required to determine

whether there is a material misstatement in the financial statements or a material misstatement of the other

information. If, based on the work we have performed, we conclude that there is a material misstatement of

this other information, we are required to report that fact.

In this context, matters that we are specifically required to report to you as uncorrected material misstatements

of the other information include where we conclude that:

Fair, balanced and understandable the statement given by the directors that they consider the annual

report and financial statements taken as a whole is fair, balanced and understandable and provides the

information necessary for shareholders to assess the group s performance, business model and strategy, is

materially inconsistent with our knowledge obtained in the audit; or

Audit committee reporting the section describing the work of the audit committee does not appropriately

address matters communicated by us to the audit committee; or

Directors statement of compliance with the UK Corporate Governance Code the parts of the directors

statement required under the Listing Rules relating to the company s compliance with the UK Corporate

Governance Code containing provisions specified for review by the auditor in accordance with Listing

Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate

Governance Code.

Responsibilities of directors

As explained more fully in the statement of 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, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

GOVERNANCE

Independent Auditor s Report

to the Shareholders of Jersey Electricity plc

Auditor s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor s report.

Use of our report

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 those 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.

Report on other legal and regulatory requirements

Matters on which we are required to report by exception

Adequacy of explanations received and accounting records We have nothing to report Under the Companies (Jersey) Law, 1991 we are required to report to you if, in our opinion: in respect of these matters.  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.

Other matters

Auditor tenure

Following the recommendation of the Audit and Risk committee, we were appointed by the Board of Directors on 2 March 2017 to audit the financial statements for the year ending 30 September 2017 and subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments of the firm is 15 years, covering the years ending 30 September 2003 to today s date.

Consistency of the audit report with the additional report to the audit committee

Our audit opinion is consistent with the additional report to the audit committee we are required to provide in accordance with ISAs (UK).

ANDREW ISHAM, BA, FCA for and on behalf of

Deloitte LLP

Recognised Auditor

St Helier, Jersey

13 December 2017

FINANCIAL STATEMENTS

Consolidated Income Statement

for the year ended 30 September 2017

Consolidated Statement of Comprehensive Income

for the year ended 30 September 2017

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

The notes on pages 63 to 86 form an integral part of these accounts. The independent auditor s report is on pages 54 to 58.

FINANCIAL STATEMENTS

Consolidated Balance Sheet

as at 30 September 2017

Approved by the Board on 13 December 2017

G.J. GRIME  M.P. MAGEE Director  Director

The notes on pages 63 to 86 form an integral part of these accounts. The independent auditor s report is on pages 54 to 58.

Consolidated Statement of Changes in Equity

for the year ended 30 September 2017