Jersey Electricity plc Interim Management Statement
Jersey Electricity plc publishes an Interim Management Statement as required by the UK Listing Authority's Disclosure and Transparency rules, relating to the period from 1 October 2012 to the date of issue of this announcement.
In the 13-week period, since the beginning of the financial year to the end of December, unit sales of electricity rose by 6%, compared with the same period in the prior year. This rise resulted from an unusually warm winter in 2011/12, although the temperature in the first quarter of our 2012/13 financial year was still marginally higher than the long-term average for this period.
Revenues in our Energy Division rose in line with the rise in unit sales. In the period from 1 January 2013 to the date of issue of this statement, electricity unit sales were at a higher level than last year, as expected, because January 2012 was again mild.
In our Year End Preliminary Announcement, issued in December 2012, we explained that Jersey Electricity would be generating electricity more heavily on-Island during the coming two Winters due to the reduced importation capacity resulting from the permanent loss of one of our interconnectors to France in June 2012.
In that context, the operating regime in the last quarter has reflected these circumstances and we imported 71% of our electricity from France (2011: 95%), generated 25% of our requirements in Jersey (2011: less than 1%) and imported 4% from the local Energy from Waste plant (2011: 5%). This change has materially increased our cost base as the use of oil-fired generation is more expensive than importation and as a result we unfortunately recently announced an average rise of 9% in customer tariffs effective from 1 January 2013.
One consequence is that there will be a shift in profitability from the first half to the second half of our financial year. We expect the second half to show lower costs (as unit sales fall and we generate less) combined with the full impact of the tariff rise.
Our power purchase, foreign exchange and oil requirements are materially hedged for the remainder of this financial year. In addition, a substantial proportion of the forward imported power and foreign exchange requirements for 2014 and 2015 have been hedged.
The combined trading performance of our other business units was behind the corresponding period in the last financial year due mainly to the continued challenging trading conditions for our Retail business.
In December, tenders were accepted for the project to build a new subsea interconnector (Normandie 3) to France. This also includes land cabling in Jersey and France and associated equipment. The total cost of the project is estimated at £70m and the expected commissioning date is in 2015. Financing arrangements are in place for the project subject to finalisation in the next month. A substantial proportion of the project cost is denominated in Euro and forward contracts have been put in place to hedge this liability.
The project to import and refurbish two second hand diesel engines commenced in 2012 and as previously disclosed, this project is scheduled to be completed during this coming quarter at a cost of around £10m. The engines replace two units within our existing generating fleet that have recently come to the end of their useful lives and will provide additional on-island flexibility and resilience.
The cash balance at the end of December 2012 was £6m against £14m at the last financial year end but as indicated above, the Normandie 3 capital expenditure will move the Company into an expected debt position during 2013. The incidencing of the capital expenditure is subject to change but a higher proportion of the outflows are expected in the next financial year. Our balance sheet remains in a healthy condition, and there have been no significant changes in the overall financial position of Jersey Electricity plc since we issued our Preliminary Announcement on 21 December 2012 for the year ended 30 September 2012, other than stated above.
The principal risks and uncertainties identified in our last Annual Report, which has just been issued in advance of our AGM on 4 March, have not materially altered in the interim period.