London, UK, 6 July 2022

Jersey Electricity (JEL): Updated modelling of net zero implications

Jersey Electricity (JEL) has consistently delivered a 5% increase in its DPS, which we expect to continue. Its cautious approach to financial risks means its wholesale electricity market-based exposure is materially hedged until FY25, which helps maintain relative price stability for its customers. It has a strong balance sheet, with cash of £43.1m, and its grid infrastructure is well invested. Electrification of Jersey’s heating and transport systems to achieve the government’s net zero ambitions provides an opportunity for growth. Based on our detailed modelling and the government of Jersey’s (GoJ’s) consultation draft of the Carbon Neutral Roadmap, we estimate full electrification of these two areas could increase electricity demand by 454GWh pa (454m units of electricity), representing a 71% increase on the 639m units sold by JEL in FY21.

JEL trades at a discount to our asset-based sum-of-the-parts and discounted cashflow (DCF) valuations. Our overall valuation analysis (based on sum-of-the-parts and DCF) suggests a share valuation of 800p. We cross-check this with a peer valuation of 817p. The current share price appears modest for a company that offers the prospect of consistent increases in DPS, possesses balance sheet flexibility and is well positioned to benefit from decarbonisation initiatives.  

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