Jersey Electricity Regulatory News (JEL)

Jersey Electricity plc

 Interim Management Report

for the six months ended 31 March 2013

The Board approved the Interim Management Report for the Group for the six months ended 31 March 2013 and declared an interim dividend of 4.75p compared to 4.50p for 2012. The dividend will be paid on 28 June 2013 to those shareholders registered in the books of the Company on 7 June 2013.

The Interim Management Report is attached and will be available to the public on the Company's website www.jec.co.uk/investor-relations/financial-reports.aspx

The Interim Management Report for 2013 has not been audited or reviewed by our external auditors nor have the results for the equivalent period in 2012. The results for the year ended 30 September 2012 have been extracted from the statutory accounts which had an unqualified audit opinion.

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 : mmagee@jec.co.uk Email : proutier@jec.co.uk

16 May 2013

The Powerhouse,

PO Box 45,

Queens Road,

St Helier,

Jersey JE4 8NY

Jersey Electricity plc

Unaudited Interim Management Report

for the six months to 31 March 2013

* paid on 4 April 2013

Trading update

As indicated in our last Interim Management Statement in January 2013, the change in operating regime, due to the reduced ability to import electricity from France, will result in a swing in profitability from the first half to the second half of the financial year when compared to financial results reported in prior years. We expect the second half of our financial year to benefit from a lower cost base as the proportion of imports increase and it will also be aided by the customer tariff rise implemented on 1 January 2013.

Group turnover, at £56.8m, was 5% higher for the first half year 2013 than the same period in 2012 but profit before tax in the first half of 2013 was £1.4m against £6.4m in the equivalent period last year. Cost of sales increased by £7.5m due mainly to the increased use of oil for on-island generation than in the previous year in our Energy business. Operating expenses at £9.7m were at the same level as last year. Earnings per share fell by 78% in line with profit movements.

Electricity revenues in the first half of 2013 were 14% higher than in 2012 at £46.0m. Unit sales volumes were up 7% due to a combination of the temperatures being below the seasonal norm this winter and the corresponding period last year being particularly mild. Each of the six winter months in this financial year experienced lower temperatures than its corresponding month in 2011/12 and were at, or below, the long-term average level. The remainder of the increase in turnover was due to average tariff increases of 3% in May 2012 and 9% in January 2013. In spite of these price rises, our tariffs continue to remain competitive with other jurisdictions.

Drivers of trading performance

Despite the rise in revenues there was an anticipated fall in Energy profits from £4.5m last year to £0.1m in 2013 due to the change in the winter operating regime, with less importation and more oil usage, following the failure of our oldest subsea interconnector cable in June 2012. As reported previously, until we install a new interconnector to France, which is scheduled for 2015, we are 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. The result was that in the last six months we generated 31% of our electricity on-island (compared to only 1% last year) and only imported 66% of our requirements from France (down from 93% in 2012). The remaining 3% of our electricity came from the Energy from Waste plant, owned by the States of Jersey, against 6% in the same period in 2012.

Forward hedging of electricity, oil and foreign exchange

Our power purchase requirements are materially hedged for the period 2013-16 and foreign exchange to a lesser extent out to 2015. We have also hedged a proportion of our estimated oil requirements for the winter period 2013/14. Our goal continues to be the delivery of competitive and stable customer tariffs, secure electricity supplies whilst maintaining an appropriate return for our shareholders.

Non-energy performance

Tough trading conditions continue to prevail in markets for our other business units and we saw our Retailing business year-on-year revenues for the first half of the financial year fall 5% on a like for like basis to £6.5m. The overall reduction was 30% due to the closure of our internet retailer, day2dayshop.com, in the second half of the last financial year. Profits in Retail fell by £0.2m to £0.1m.

Turnover rose 3% in our Property portfolio with profit rising 7% to £0.9m. Our Building Services business saw a 12% reduction in turnover with profit falling to £0.1m. Our remaining business units produced profits of £0.2m being £0.1m less than in 2012. Interest received fell from £0.2m last year to a much lower level due to the reduction in cash.

Cash/Debt

A £60m Revolving Credit Facility was established in February 2013 to fund the new interconnector to Europe. This is a two year facility which will be re-financed post the delivery of this major capital project.

As anticipated cash and cash equivalents, including short-term investments, fell from £14.3m at the last financial year end to £9.2m as at 31 March 2013. The net cash position, after deducting the bank loan of £8m drawn down from the aforementioned facility was £1.2m. During the last six months, the operating cash produced, before working capital movements, was £4.7m against £10.0m for the corresponding period last year with the lower level of profit being the main reason. Working capital requirements were high at the end of March 2013 with our unbilled units debtors figure at £10.2m against £8.3m at March 2012 (and £5.6m at 30 September 2012) with the cold last quarter being the primary reason.

Investment

Capital expenditure was £11.9m, with £4.4m being the first stage payments to the main contractor for our project to install a second interconnector to France which is still on schedule to be commissioned by 2015. The project to import and refurbish two used diesel engines was successfully completed since the last financial year end, with the final £1.4m of cost in the period, taking the overall project spend to £9.8m. The engines replace two units within our existing generating fleet, which have recently come to the end of their useful lives, and provide additional on-island flexibility and resilience.

Pension scheme

The pension scheme deficit at 31 March 2013 was £1.0m against a deficit of £6.1m at 30 September 2012, as a result of an increase in asset values in the last quarter. Although this reduction is positive, it merely reinforces the volatility in financial markets, and how the pension scheme is impacted. In that context a decision has been made to close the existing final salary scheme to new members, with new employees in future, being offered defined contribution pension arrangements.

Dividend

Your Board proposes to pay an interim net dividend of 4.75p (2012: 4.50p). We continue to aim to deliver sustained real growth each year. This decision was made on the basis that financial results for the second half of this financial year are expected to materially improve from the first half. The final dividend for 2012 of 6.5p, paid in early April in respect of the last financial year, was maintained at the same level as 2011. 

Risk and outlook

The principal risks and uncertainties identified in our last Annual Report have not materially altered in the interim period.

Your Board is satisfied that Jersey Electricity plc has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, we continue to adopt the going concern basis in preparing the condensed financial statements.

Responsibility statement

We confirm to the best of our knowledge:

(a) the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';

(b) the Interim Management Report includes a fair review of the information required by the Disclosure and Transparency Rule DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c) the Interim Management Report includes a fair review of the information required by the Disclosure and Transparency Rule DTR 4.2.8R (disclosure of related party transactions and changes therein); and

(d) this half yearly financial report contains certain forward-looking statements with respect to the operations, performance and financial condition of the Company. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this half yearly financial report and the Company undertakes no obligation to update these forward-looking statements. Nothing in this half yearly financial report should be construed as a profit forecast.

G.J. GRIME - Chairman C.J.AMBLER - Chief Executive 16 May 2013

INVESTOR TIMETABLE FOR 2013

Condensed Consolidated Income Statement (Unaudited)

Condensed Consolidated Statement of Comprehensive Income (Unaudited)

Condensed Consolidated Statement of Changes in Equity (Unaudited)

Condensed Consolidated Balance Sheet (Unaudited)

Condensed Consolidated Cash Flow Statement (Unaudited)

Notes to the Condensed Interim Accounts (Unaudited)

1. Accounting policies

Basis of preparation

The interim accounts for the six months ended 31 March 2013 have been prepared on the basis of the accounting policies set out in the 30 September 2012 annual report and accounts using accounting policies consistent with International Financial Reporting Standards (IFRS) and in accordance with IAS 34 'Interim Financial Reporting'.

Jersey Electricity plc has considerable financial resources and, as a consequence, the directors believe that it is well placed to manage its business risks successfully despite the current uncertain economic outlook. The directors have a reasonable expectation that the Company 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.

2. Turnover and profit

The contributions of the various activities of the Group to turnover and profit are listed below:

Six months ended Year ended

Materially, all the Group's operations are conducted within the Channel Islands. All transfers between divisions are at an arm's-length basis.

The assets and liabilities of the Group are not reported on as there has been no significant movement in the values in the six months to 31 March 2013.

Notes to the Condensed Interim Accounts (Unaudited)

3. Income tax

For the period ended 31 March 2013 and subsequent periods, the Company is taxable at the rate applicable to utility companies of 20%.

4. Dividends

The distribution to equity holders in respect of the final dividend for 2012 of £1,991,600 (6.50p net of tax per share) was paid on 4 April 2013 and therefore is not included as a cash outflow in the 6 months to 31 March 2013. Dividends of £63,324 were paid by subsidiaries to minority interests for the six months to 31 March 2013.

The Directors have declared an interim dividend of 4.75p per share, net of tax (2012 - 4.50p) for the six months ended 31 March 2013 to shareholders on the register at the close of business on 7 June 2013. This dividend was approved by the Board on 16 May 2013 and has not been included as a liability at 31 March 2013.

5. Pensions

In consultation with the independent actuaries to the scheme, the valuation of the pension scheme assets and liabilities has been updated to reflect current market discount rates, current market values of investments and actual investment returns applicable under IAS 19 'Employee Benefits', and also consideration given as to whether there have been any other events that would significantly affect the pension liabilities. The latest triennial valuation was performed as at 31 December 2012 but the results have not yet been finalised.

Notes to the Condensed Interim Accounts (Unaudited)

6. Related party transactions

The Company currently leases the La Collette Power Station site from its largest shareholder, the States of Jersey, for a peppercorn rent of £1,000 per annum. This lease was subject to a rent review as at June 2006 and the Company is in dispute with its landlord. The information usually required by IAS 37 Provisions, 'Contingent liabilities and contingent assets', is not disclosed on the grounds that it may prejudice the outcome of the dispute.

The States of Jersey is the Company's majority and controlling shareholder. Jersey New Waterworks is majority owned by the States of Jersey. JT Group Limited and Jersey Post International Limited are both wholly owned by the States of Jersey. All transactions are undertaken at an arm's length basis.

As at the 31 March 2013 Foreshore Limited had a long-term loan, to the value of £400,000 (2012: £400,000) due to Jersey Electricity plc.