Jersey Electricity Regulatory News (JEL)

JERSEY ELECTRICITY PLC

 5 October 2012

Update on submarine cable issues highlighted in our last Interim Management Statement issued on 6 July 2012

We previously indicated in our Interim Management Report issued in May 2012 that an electrical fault occurred on 29 April 2012 on a section of the Channel Islands Electricity Grid between Guernsey and Jersey. Thanks to close cooperation and collaboration with our partners, Guernsey Electricity and after considerable hard work to complete the project before winter weather hampered undersea cable repairs, we can report that the inter-island submarine cable between Jersey and Guernsey has now been repaired, which will allow the reinstatement of importation of electricity to Guernsey from France (via Jersey). It is anticipated the insurance arrangements in place for such events, will cover the majority of costs involved, however there will be an estimated unrecoverable cost in the range of £0.5m to £1m attributable to Jersey Electricity.

In addition, it was also highlighted in July that on 17 June an unrelated incident occurred with the two submarine cables that connect Jersey with France. The older of the two cables, which was installed in 1984, remains out of service. After examination by the manufacturers, we have concluded, as suspected, that it is not technically possible nor economically viable to repair this cable and the intention is to de-commission it in due course. De-commissioning costs are not yet certain but are presently estimated around £1m, we intend to provide for this in the financial statements for the year.

It had been anticipated the older cable was nearing the end of its life and as indicated in our previous Annual Reports, we are eight years into a major project to install a third submarine cable from Jersey to France. Formal planning permission from the French authorities is expected in Q4 of this calendar year, which, with the present estimates of equipment delivery and installation lead-times, should lead to a 2015 in-service date.

The impact of this unexpected incident will necessitate more on-island, oil-fired generation until importation capacity is restored in 2015. At current oil prices, this is considerably more expensive than imported power. However, we still expect to fulfil the majority of the Island's electricity needs from lower cost, low-carbon sources from France. The incremental cost associated with the increased on-island generation in this financial year is estimated to be in the region of £1m-£2m. 

The above incidents are of a 'one-off' nature and the Board is satisfied the Company's balance sheet is sufficiently strong to manage the financial impact of these issues.