Treasury and Resources
Ministerial Decision Report
Jersey Electricity plc 2018 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 1st March 2018.
- 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 2017.
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 2017 was £102.3 million, which was 1% lower than the previous financial year.
Pre-tax profits, pre-exceptional items rose 2.5% to £13.5 million from £13.1 million in 2016. Profit before tax post-exceptional items, fell from £14.8 million in 2016 to £13.5 million in 2017 as there was an exceptional credit of £1.7 million in 2016 associated with the release of a rent accrual that had been accumulated over many years for La Collette Power Station site post the settlement of a long-running rent review which was settled by an arbiter in JEC’s favour.
Unit sales volumes of electricity were marginally down from 625m to 621m kilowatt hours. Energy revenues were £80.5 million against £81.2 million in 2016. Profits in the Energy business rose marginally from £11.6 million to £11.7 million. A lower cost of sales resulted in a higher margin but this was offset by increased depreciation and pension costs.
Turnover (external only) in other business segments was as follows:-
- Retail: £13.0 million – an increase of 9%, from £11.9 million in 2016 linked to a reduction in the floor space utilised by the business. Profit was £0.7 million compared to £0.5 million in the previous year.
- Property: £2.2 million - which was marginally above the previous year. Profit was maintained at £1.6 million.
- Building services (JEBS): £4.0 million – a decrease of £1.1 million on 2016. Profit of £0.1 million was however the same as 2016.
- Other businesses (Jersey Energy, Jendev and Jersey Deep Freeze): £2.6 million, down £0.3 million on 2016. Profits were £0.2 million down on 2016 due to profits in Jersey Deep Freeze having been at a much higher level than normal in 2016.
Cost of sales decreased by £2.1 million to £63.2 million, due mainly to a reduction in import costs in the Energy business. Operating expenses at £24.4 million rose by £0.9 million from their 2016 level with an increase in depreciation charges, post the continued investment in infrastructure, and IAS 19 pension costs being the main drivers.
Interest paid in 2017 was £1.3 million against £1.1 million in 2016 with a lower level of average debt and a higher level of capitalisation of interest in 2016 associated with the new N1 subsea cable being the primary reason for the rise.
The taxation charge at £2.8 million was £0.3 million higher than 2016 due mainly to the exceptional credit last year being a taxable item.
Dividends paid in the year, net of tax, rose by 5% from 13.1p in 2016 to 13.8p in 2017. The proposed final dividend for the year is 8.4p, a 5% rise on the previous year.
Capital expenditure for the year was £15.1 million compared to £32.4 million in the previous year, principally as most of the cash in the N1 project was spent in 2016 in advance of the cable being commissioned during the 2017 financial year.
Net debt at the financial year end was £21.9 million which was £7.1 million lower than 2016.
Defined benefit pension scheme deficit under IAS 19 “Employee Benefits” rules was £3.4 million, net of deferred tax, compared with a deficit of £9.2 million as at 30th September 2016. 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 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 8.40 pence on the Ordinary and “A” shares for the year ended 30th September 2017 is recommended for payment by the Directors. If approved, this will be paid on 29th March 2018.
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 2018 will also become payable, 2nd July 2017, to Shareholders on the Register on 1st June 2017.
Ordinary resolutions 3 to 6 – Re-election of Directors
The Board appointed Mr Tony Taylor as non-executive Director’s during the year. In accordance with Article 115 of the Company’s Articles of Association he is offering himself for re-election.
In accordance with Article 127, Mr Aaron Le Cornu and Mr Alan Bryce will retire and, being eligible, offer themselves for re-election. Article 127 requires that at each AGM, one third of the Directors shall retire from Office. Article 128 states that a retiring Director shall be eligible for re-appointment.
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 himself for re-election.
Resolution 3 – To re-elect T Taylor as a Director of the Company
Joined the Board in November 2017. Age 59. Sits on Remuneration Committee and Nominations Committee. CV as per Report and Accounts (page 41).
Resolution 4 – To re-elect A D Le Cornu as a Director of the Company
Joined the Board in January 2011. Age 47. Sits on the Audit and Risk and Remuneration Committees. CV as per Report and Accounts (page 41).
Resolution 5 – To re-elect Mr A A Bryce as a Director of the Company.
Joined the board in December 2015. Age 57. Sits on the Audit and Risk Committee and Remuneration Committee. CV as per Report and Accounts (page 41).
Resolution 6 – To re-elect G J Grime as a Director of the Company
Joined the Board in 2003. Age 70. Sits on the Remuneration Committee and the Nomination Committee. CV as per Report and Accounts (page 40).
Resolution 7 – 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. The Audit fee for 2017 was £94,000 compared with £80,000 for 2016.
- Recommendation
The Assistant Minister for Treasury and Resources is recommended to instruct the Treasurer of the States and the Greffier of the States to vote by proxy in favour of the resolutions to be put before the Annual General Meeting of Jersey Electricity plc on the 1st March 2018.
- 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 7 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 above.
Report author : Head of Shareholder Relations | Document date: 13th February 2018. |
Quality Assurance / Review : Head of Decision Support | File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DS, WR and SD\2018-0024 - JEC Voting Instructions for AGM |
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