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Chair’s Statement
Resilience in a turbulent year
Chair of the Board, Phil Austin MBE, leads a highly experienced team of Executive and independent Non-Executive directors providing strategic leadership and robust corporate governance to promote the long-term success of the Company.
The turmoil that beset international energy markets in late 2021 has intensified further due to the escalating conflict between Russia and Ukraine, leading to a previously unthinkable global energy crisis. This has presented major new challenges to energy companies post the pandemic, sending wholesale prices soaring and threatening supply security throughout Europe. Jersey Electricity is not immune to these challenges, but we have shown resilience, returning a strong Group performance and protecting our customers from the huge retail price rises seen elsewhere, without Government intervention.
Performance
Group revenue for the year at £117.4m was 1% lower than last year and profit before tax was £10.6m against £19.1m in 2021. If the non-cash upside from the revaluation of investment properties is excluded in both years, the underlying year-on-year profit before tax is £9.6m against £13.0m in 2021, a fall of 26%. This year’s financial performance reflects the effects of COVID-19 post the pandemic. Coupled with a mild winter, a return to more normal patterns of work and behaviour has reduced demand, with both unit volume sales in Energy, and
Retail revenues, down on last year as electricity consumption and Powerhouse product sales returned to historical levels. The Board has recommended a final dividend for the year of 10.80p, a 6% rise on the previous year, payable on 23 March 2023. Our target return on assets continues to be 6%-7% over the long term and was 4.2% this year, but 6.2% on a rolling five-year basis.
£117.4m
Group revenue 2022 Energy markets
Elsewhere, the scale of the energy crisis has prompted Governments across Europe to intervene, each in their own way, to mitigate the impact of the rising prices on their citizens. In the UK, such Government intervention averted a proposed 80% year-on-year increase in energy prices in October when Ofgem was due to raise the regulated price cap to £3,549. The new Energy Price Guarantee now limits this cap to £2,500 a year until April 2023 when the cap will be increased to £3,000, prompting a further 20% price rise. Although our hedging and risk mitigation policies have so far sheltered Jersey customers from such material price increases, we are not immune to these market forces. We therefore implemented a 4% tariff rise from 1 January 2022 and a further 5% increase from 1 July 2022, at which time we announced a further 5% tariff increase effective from 1 January 2023 to give our customers some degree of certainty for the coming winter period.
Climate change
Despite the current challenges presented by the global energy crisis, climate change remains the biggest challenge we all face. We remain optimistic about the future, however, and the opportunities a net-zero Jersey will bring. Our low-carbon, Smart-enabled grid provides a strong platform to support the Government of Jersey’s net-zero 2050 carbon ambitions. In addition, increased digitalisation of our systems is enabling us to map scenarios and calculate the investment needed in the network. Publication of the Government’s Carbon Neutral Roadmap in May gives us confidenceandcertaintytomakethese
investments and ensure we are wellplaced to meet future challenges. InApril2022,theUKbecamethefirst G20 country to introduce legislation making it mandatory for large businesses to disclose climate-related financialinformationinlinewiththe Taskforce on Climate-related Financial Disclosures (TCFD) recommendations. Jersey Electricity supports these recommendations and is working towards full compliance. Details of our progress and how we are supporting the Government’s Carbon Neutral Roadmap for net-zero 2050 are set out on pages 24-27, 66-73 and throughout this report.
Energy security
Althoughlastyear’sFrenchfishing dispute, which raised questions about energy sovereignty and the security of imported power supplies, has been resolved, the global energy crisis has kept us focused on the issue. To mitigate the supply security threats the energy crisis is causing in Europe, from where we imported 95% of our power this year, we have modelled various scenarios and evaluated our mitigations for technical failures to the submarine cables and other disruptions to supply. We have also established contingency plans to implement increased local emergency generation if required. To increase energy sovereignty longer term, we are reviewing our energy sourcing strategies, with more detailed investigations into the viabilityofoffshorewindgeneration whichhasfallensignificantlyincost. Details on this work stream, and our solar PV progress, can be found on pages 16 and 28.
Corporate Governance
In line with the UK Corporate Governance Code 2018, the Board sets out areas of focus for the year which in 2022 included:
• Progressing stakeholder engagement • Extending workforce diversity • Developing our culture and employee engagement, and • Exploring energy sourcing strategies to facilitate Jersey’s net-zero carbon 2050 aims and increase energy sovereignty. I am pleased to report substantial progress in all these areas and detailed commentaries on each are presented later in this report. Stakeholder engagement, p48-49 workforce diversity, p42-45; culture and engagement, p46-47; and energy sourcing strategies, p16. Furthermore, in accordance with the Code’s principles and provisions, details of the activities of the Nominations Committee, Audit & Risk Committee and the Remuneration Committee are contained in their respective reports on pages, 81, 84, and 87. The Board has determined its key areas of focus for 2023 to be as follows:
• Progressing stakeholder engagement. • Building on our cultural values of employee engagement, diversity, and inclusion.
• Addressing affordability by helping customers use energy efficiently, and deploying smart technology to drive our own efficiency. • Investing in a resilient network and developing energy sourcing options, to facilitate Jersey’s netzero goal and to increase energy sovereignty. The Board welcomed Kayte O’Neill as a Non-Executive Director in March. Kayte brings a wealth of experience to our team as Executive Director of the National Grid Electricity System Operator (ESO), where she designs and facilitates markets to enable future operation of the UK’s electricity system on the path to net-zero.
In conclusion
I would like to thank our entire ‘JE family’ for their hard work, commitment and dedication this past year which has presented renewed challenges post COVID-19. I am immensely proud of what we have achieved together and the progress we have made on the course we have set.
I also thank my fellow Board members for their hard work and commitment, and our shareholders fortheirsupport.Iremainconfident the Company and its people can take advantage of the opportunities the future holds and meet the challenges it will demand of us all.
