Infrastructure Investment in Jersey Telecom Group Limited and Reduction in Dividends: Gigabit Jersey (PtP)

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A decision made on 09 December 2011:

Decision Reference: MD-TR-2011-0139
Decision Summary Title:	Infrastructure Investment in JT and reduction in dividends – Gigabit Jersey (PtP)		Date of Decision Summary:	7 December 2011
Decision Summary Author:	Treasurer of the States		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	Infrastructure Investment in JT and reduction in dividends – Gigabit Jersey (PtP)		Date of Written Report:	7 December 2011
Written Report Author:	Treasurer of the States		Written Report : Public or Exempt?	Public Appendix D Exempt 3.2.1 (a) (x)
Subject: States of Jersey Currency Fund Infrastructure Investment in Jersey Telecom Group Limited (JT) and agreement to offer a £3 million reduction for each of 2013-2015 financial years to JT to assist in the financing of Gigabit Jersey Point-to-Point (PtP).
Decision(s): The Minister decided to:- approve in line with the current Investment Strategy for the Currency Fund, a £10 million, Infrastructure Investment in JT to provide financing for the Gigabit Jersey project subject to the agreed conditions as detailed in the report. The infrastructure investment to take the form of a 2.5% Redeemable Preference Share instrument. agree to a dividend reduction of £3m for each of the 2013 to 2015 financial years (inclusive) subject to review at the AGM and the half yearly review for each of the financial years.
Reason(s) for decision: The Public Finances (Jersey) Law 2005, Article 6 (paragraph 1(a) and 3) relates to the investment of monies of the Currency Fund being carried out in accordance with the Regulations. Under the Public Finances (Transitional Provisions) (No.2) (Jersey) Regulations 2005, Regulation 4, the Minister is responsible for presenting the Investment Strategies and any review of them to the States, as soon as practical. Furthermore that monies may be invested in the extent and manner set out in the last Investment Strategy presented to the States. Therefore the proposal for the Currency Fund’s Infrastructure Investment in JT is made in line with the most recent Investment Strategy presented to the States on 31st October 2011 (R132/2011). The Public Finances (Jersey) Law 2005, Article 68 (2) relates to the Minister being responsible for the States for financial Interests in the Strategic Investment companies, including JT. The Minister for Treasury and Resources commissioned Oxera, the States of Jersey’s external economic consultants, to evaluate JT’s proposal to replace the existing copper network with a complete island wide point-to-point (PtP) Fibre-optic network. The report made comparison between the PtP and the Very high bitrate Digital Subscriber Line (VDSL) alternative options. Oxera recommended that in the interests of the shareholder, JT should adopt the PtP strategy rather than VDSL as it was a sound investment, thus protecting shareholder value. Officers of Treasury and Resources Department have also reviewed the business case in detail. Further, Gigabit Jersey is a project which is acknowledged would provide an initial stimulus to the economy and overarching longer term benefits to the Island of Jersey. JT made a presentation to the Council of Ministers on 27th October 2011 where they considered the project and the proposed financing for the project.
Resource Implications: This decision will see the transfer of £10 million from the Currency Fund during 2012 and a £3 million dividend reduction for each of JT’s 2013 to 2015 financial years (inclusive), impacting the Consolidated Fund Investment returns.
Action required: Head of Shareholder Relations to arrange for the Treasurer and a Director of States of Jersey Investments Limited to approve and sign the JT Special Resolutions (Appendices B and C). Head of Shareholder Relations to notify JT Group of the decision to give a dividend reduction for three financial years, subject to the conditions set out in the attached report.
Signature:		Position: Senator P F C Ozouf, Minister for Treasury and Resources
Date Signed:		Date of Decision: