Treasury and Resources
Ministerial Decision Report
Jersey Electricity plc 2017 Annual General Meeting voting instructions
- Purpose of Report
To consider the resolutions put forward for the Jersey Electricity plc (“JEC”) Annual General Meeting (“AGM”) on Thursday 2nd March 20176.
- Background
The States of Jersey is holder of all of the Ordinary 5p shares which amounts to 62% of the ordinary share capital of the JEC. This represents 86.4% of the total voting rights. The Directors of the company have proposed 6 Ordinary resolutions to be considered at the AGM. These are outlined below and in the Notice of Annual General Meeting (Appendix A) and Form of Proxy (Appendix B).
- Resolutions
The following resolutions have been put forward for consideration at the AGM.
Ordinary Resolution 1 – To receive the accounts and the reports of the Directors and the Auditors thereon for the year ended 30 September 2016.
The company’s annual report and accounts contains the full Directors’ Report, Accounts and Auditors Report. The following paragraphs summarise the key financial matters.
Group revenue for the year to 30th September 20165 was £103.4 million, this being 3% higher than the previous financial year. Pre-tax profits, pre-exceptional items rose 6% to £13.1 million from £12.4 million. The rise was primarily generated from improved performance in the non-Energy business units. Profit before tax, post exceptional items rose from £13.2 million to £14.8 million. There was an exceptional credit of £1.7 million in 2016 in respect of the release of a rent accrual that had been accumulated over many years for the La Collette Power Station site.
Unit sales volumes of electricity were marginally down from 627m to 625m kilowatt hours after another relatively mild winter. Profits in the Energy business rose from £11.5 million to £11.6 million. A lower cost of sales resulted in a higher margin but this was offset by higher pension costs, mainly arising from a £0.7 million charge of a non-recurring nature associated with the granting of an ex-gratia rise in pensions in service.
Turnover (external only) in other business segments was as follows:-
- Retail: £11.9 million – an increase of 8%, linked to a reduction in the floor space utilised by the business. Profit was £0.5 million compared to £0.3 million in the previous year.
- Property: £2.1 million - which was the same as the previous year. Profit excluding the impact of investment property revaluation at £1.7 million, rose by £0.1 million from the £1.4 million in the previous year.
- Building services (JEBS): £5.1 million - an increase of 23%. A profit of £0.1 million was produced compared with marginal loss in 2015.
- Other businesses: £3 million, up £0.5 million on 2015.
Cost of sales rose by £0.6 million to £3.9 million to £65.2 million, due mainly to additional costs in the non-Energy business. Operating expenses at £23.5 million rose by £1.6 million from their 2015 level with an increase in IAS19 pension costs of £0.4 million and a £0.7 million ex-gratia award for current pensioners being the main items.
Interest paid in 2016 was £1.1 million against £1.5 million in 2015 with capitalisation of interest associated with the new N1 subsea cable being the primary reason for the reduction.
Tax paid at £3.2 million was £0.8 million higher than 2015 due to the higher level of profitability.
Dividends paid in the year, net of tax, rose by 5% from 12.45p in 2015 to 13.10p in 2016. The proposed final dividend for the year is 8.00p, a 5% rise on the previous year.
Capital expenditure for the year was £32.4 million compared to £16.8 million in the previous year, principally as a result of the N1 project.
Net debt at the financial year end was £29.0 million which was £11.5 million higher than the previous year principally because of the N1 project.
Defined benefit pension scheme deficit under IAS 19 “Employee Benefits” rules was £9.2 million, net of deferred tax, compared with a deficit of £5.8 million as at 30th September 2015. The defined benefits pension scheme is identified as an area of risk that continues to require careful monitoring. The final salary scheme was closed to new members in 2013. The last triennial actuarial valuation of the defined benefit scheme was as at 31st December 2015. The Jersey Electricity Pension Scheme is not funded to pay mandatory annual rises on retirement. The Pension Scheme Trustees recommended an ex-gratia award be made to pensioners in the light of the surplus and the Board approved this recommendation. The next funding valuation is due no later than 31st December 2018.
Key performance indicators are attached as Appendix C.
Ordinary Resolution 2 – To declare a dividend
62% of the ordinary share capital of the Company is owned by the States of Jersey with the remaining 38% held by around 600 shareholders via a full listing on the London Stock exchange.
A final dividend of 8.00 pence on the Ordinary and “A” shares for the year ended 30th September 2016 is recommended for payment by the Directors. If approved, this will be paid on 30th March 2017.
A participating dividend of 1.5 per cent per annum less Income Tax on the Cumulative Participating Preference Share Capital for the period ended 30th September 2016 will also become payable, 3rd July 2017, to Shareholders on the Register on 2nd June 2017.
Ordinary resolutions 3 to 5 – Re-election of Directors
In accordance with the requirements of the UK Corporate Governance Code, Directors should offer themselves for re-election no less frequently than every three years. There are no Directors due for re-election in this regard.
Furthermore, Directors with more than 9 years’ service should offer themselves for re-election on an annual basis. Accordingly Mr Geoffrey Grime will retire and being eligible, will offer themselves for re-election.
The Board appointed Mr Philip Austin and Mrs Wendy Dorman as non-executive Director’s during the year. In accordance with Article 115 of the Company’s Articles of Association they are offering themselves for re-election.
Resolution 3 – To re-elect P J Austin as a Director of the Company
Joined the Board on 12th May 2016. Age 67. Sits on Remuneration Committee. CV as per Report and Accounts (page 45).
Resolution 4 – To re-elect W J Dorman as a Director of the Company
Joined the Board on 1st July 2016. Age 55. Sits on the Audit and Risk and Nomination Committees. CV as per Report and Accounts (page 45).
Resolution 5 – To re-elect Mr G J Grime as a Director of the Company.
Joined the board in 2003. Age 69. Sits on the Remuneration and Nominations Committee. CV as per Report and Accounts (page 44).
Resolution 6 – To re-appoint the Auditors and authorise the Directors to agree their remuneration.
In the 2014 Annual Report and Accounts it was reported that consideration was likely to be given to conducting a competitive tender to select an external auditor for the year ending 30th September 2016. This was on the basis that this coincided with the rotation of the Deloitte LLP partner and also because they have been incumbent since 2003. A tender did take place and Deloitte LLP were reappointed.
It should be noted that the Directors have delegated the responsibility of setting the auditors’ remuneration to the Board’s Audit & Risk Committee.
- Recommendation
The Treasurer of the States and the Greffier of the States are recommended to vote by proxy in favour of the resolutions to be put before the Annual General Meeting of Jersey Electricity plc on the 2nd March 20176. Audit fee for 2016 was £80,000, the same as for 2015.
- Reason for Decision
To fulfil the States’ role as shareholder of the Jersey Electricity plc by exercising voting rights at the Annual General Meeting.
The States of Jersey is holder of all of the Ordinary 5p shares which amounts to 62% of the ordinary share capital of Jersey Electricity plc. This represents 86.4% of the total voting rights. The Directors of the Company have proposed 6 Ordinary resolutions to be considered at the AGM. These are outlined in the report and in the Notice of Annual General Meeting (Appendix A) and Form of Proxy (Appendix B).
- Resource Implications
The financial implications are as detailed in the report.
Report author : Head of Shareholder Relations | Document date: 20th February 2017. |
Quality Assurance / Review : Head of Decision Support | File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DS, WR and SD\2017-0023 - JEC AGM 2017 Voting Instructions |
MD sponsor : |
gov.je