Preliminary Announcement of Annual Results

JERSEY ELECTRICITY plc Preliminary Announcement of Annual Results

Year Ended 30 September 2015

At a meeting of the Board of Directors held on 17 December 2015, the final accounts for the Group for the year to 30 September 2015 were approved, details of which are attached.

The financial information set out in the announcement does not constitute the Group's statutory accounts for the year ended 30 September 2015 or 2014, but is derived from those accounts. Statutory accounts for 2014 have been delivered to the Jersey Registrar of Companies and those for 2015 will be delivered in early 2016. The auditor has reported on those accounts and their reports were unmodified.

A final dividend of 7.60p on the Ordinary and 'A' Ordinary shares in respect of the year ended 30 September 2015 was recommended (2014: 7.20p). Together with the interim dividend of 5.25p the proposed total dividend declared for the year was 12.85p on each share (2014: 12.20p)

The final dividend will be paid on 29 March 2016 to those shareholders registered in the books of the Company on 19 February 2016. A dividend on the 5% cumulative participating preference shares of 1.5% (2014: 1.5%) payable on 1 July 2016 was also recommended.

The Annual General Meeting of the Company will be held on 3 March 2016.

M.P. Magee P.J. Routier

Finance Director Company Secretary

Direct telephone number : 01534 505321 Direct telephone number : 01534 505253

Direct fax number : 01534 505466 Direct fax number : 01534 505515

Email : [email protected] Email : [email protected]

17 December 2015

The Powerhouse

PO Box 45

Queens Road

St Helier

Jersey JE4 8NY

JERSEY ELECTRICITY plc

Preliminary Announcement of Annual Results

Year ended 30 September 2015

The Chairman, Geoffrey Grime, comments :

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

Group revenue for the year to 30 September 2015 at £100.5m was 2% higher than in the previous financial year. Unit sales volumes of electricity were 1.0% higher than last year with Energy revenues rising 1.6% to £80.7m. Turnover in Powerhouse.je, our retail business, decreased by 3% from £11.4m to £11.1m as the floor space utilised by the business was reduced following the leasing of floor space to a new external tenant from May 2014. Revenue in the Property business rose from £2.0m to £2.1m linked to changes in tenancy arrangements during the last two financial years. Revenue from JEBS, our building services business, including internal sales, rose 18% from levels experienced in 2014 to £5.0m. Turnover in our Other Businesses, including internal sales, remained at £3.2m.

Cost of sales fell by £3.9m to £64.6m associated mainly with a higher level of importation displacing oil purchases in our Energy business. Operating expenses, at £22.0m, rose by £1.9m from their 2014 level with a £1.7m rise in depreciation, associated with our recent material infrastructure spend, being the main item.

Profit before tax, pre-exceptional items, for the year to 30 September 2015, rose 24% to £12.4m, from £10.0m in 2014, reflecting a strong performance in our Energy business, and a recovery in our retail business, Powerhouse.je. Profit before tax post-exceptional items, rose from £6.5m last year to £13.2m in 2015 reflecting material one-off items. Exceptional items have had a material impact on profits in the last 2 years and a narrative detailing the background to such items is contained within this document below.

Unit sales in our Energy business increased by 1%, rising from 621m to 627m kWh. The first quarter of the financial year was milder than the corresponding period in the previous year but there was a reversal in the second quarter. However both the overall winter periods in the last two years have seen temperatures above the long-term average and therefore milder than anticipated. Profits in our Energy business rose from £8.0m to £11.5m. Two main factors contributed to this increase in profit; firstly lower levels of more costly generation and secondly, the rising asset base (on which we apply a return) reflecting the heavier investment in infrastructure over recent years. As reported previously, until the new interconnector to France was commissioned in September 2014, we had been capacity constrained on importation and reliant on a heavier mix of more expensive on-island oil-fired generation, particularly in winter, when volumes are higher. In the financial year we imported 94% of our requirements from France (up from 80% in 2014) and only generated 1% of our electricity on-island (compared to 15% last year). The remaining 5% of our electricity came from the local Energy from Waste plant being at the same level as in 2014. There were no customer tariff movements during 2015 and our tariffs continue to remain competitive with other jurisdictions.

Profits in our Property division, excluding the impact of investment property revaluation, rose by £0.1m from £1.4m last year with changes in occupancy levels being the main driver. Our investment property portfolio was marginally revalued downwards this year whereas it moved up by £0.1m in 2014. Our retailing business, Powerhouse.je, showed good signs of recovery post a rationalisation of floor space, a restructuring and re-branding of the business during the 2014 financial year. This was reflected in the movement from a loss of £0.1m last year to a profit of £0.3m in 2015. JEBs, our contracting and business services unit produced a marginal loss due to continued competitive pressures on margin. Our other business units - Jersey Energy, Jendev and Jersey Deep Freeze all had a profitable year.

Interest paid in 2015 was £1.5m whereas in 2014 it was negligible as most of this cost was capitalised up to the date of commissioning of our new N3 subsea cable. The taxation charge at £2.4m was materially higher than the 2014 figure of £1.5m due to higher profits including the taxation of exceptional items.

Group earnings per share, pre-exceptional items, increased 36% to 32.94p compared to 24.26p in 2014 due mainly to an increase in profitability. Earnings per share, after exceptional items, rose from 16.10p in 2014 to 35.00p in 2015.

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

Net cash inflow from operating activities at £23.4m was £3.3m higher than in 2014 with increased profitability being the primary driver. Capital expenditure, at £16.8m fell from £33.0m last year as the Normandie 3 project spend dominated last year albeit there was the settlement of £5.5m of residual project cost in quarter 1 of this financial year. Net debt at the year-end of £17.5m was £2.7m lower than last year.

Our defined benefits pension scheme, which had a £1.1m deficit, net of deferred tax, at the 2014 year end increased to a £5.8m deficit as at 30 September 2015. Scheme assets rose 2% since the last year end but liabilities increased 7% due to a reduction in the discount rate applied reflecting sentiments in financial markets.

Exceptional Items

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

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

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

Notes to the accounts

Year ended 30 September 2015

1. Basis of Preparation

The consolidated financial statements of Jersey Electricity plc, for the year ended 30 September 2015 have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU), including International Accounting Standards and Interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC).

While the financial information included in this preliminary announcement has been prepared in accordance with the appropriate recognition and measurement criteria, this announcement does not itself contain sufficient information to comply with IFRS. The Group expects to publish full financial statements that comply with IFRS in early 2016.

The Group has considerable financial resources and as a consequence, the directors believe that the Group is well placed to manage its business risks successfully. The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.