JAMAICA PUBLIC SERVICE COMPANY LIMITED FINANCIAL ...

JAMAICA PUBLIC SERVICE COMPANY LIMITED FINANCIAL STATEMENTS DECEMBER 31, 2015

KPMG Chartered Accountants The Victoria Mutual Building 6 Duke Street Kingston Jamaica, W.I.

INDEPENDENT AUDITORS' REPORT

P.O. Box 76 Kingston Jamaica, W.I. Telephone Fax

e-Mail

+1(876) 922-6640 +1 (876) 922-7198 +1(876) 922-4500 firmmail@.jm

To the Members of JAMAICA PUBLIC SERVICE COMPANY LIMITED

Report on the Financial Statements

We have audited the financial statements of Jamaica Public Service Company Limited ("the Company"), set out on pages 3 to 59, which comprise the statement of financial position as at December 31, 2015, the statements of profit or loss and other comprehensive income, changes in shareholders' equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards and the Jamaican Companies Act, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors ' Responsibility

Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether or not the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence relating to the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including our assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity's preparation of the financial statements that give a true and fair view, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

KPMG, a Jamaican partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity

P. Tarun Hands Cynthia L. Lawrence Raian Trehan Norman 0, Rainford

Nigel R Chambers W Gihan C de Mel Nyssa A Johnson Wilbert A Spence

KPMG

2 INDEPENDENT AUDITORS' REPORT To the Members of JAMAICA PUBLIC SERVICE COMPANY LIMITED Report on the Financial Statements (continued) Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Company as at December 31, 2015, and of its financial performance and cash flows for the year then ended, in accordance with International Financial Reporting Standards and the Jamaican Companies Act. Report on additional matters as required by the Jamaican Companies Act We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. In our opinion, proper accounting records have been maintained, so far as appears from our examination of those records, and the financial statements, which are in agreement therewith, give the information required by the Jamaican Companies Act, in the manner required.

Chartered Accountants Kingston, Jamaica March 30, 2016

3 JAMAICA PUBLIC SERVICE COMPANY LIMITED

Statement of Financial Position December 31, 2015 (Expressed in United States Dollars)

ASSETS Non-current assets Property, plant and equipment Intangible assets Employee benefits asset Other asset Long-term receivables

Current assets Cash and cash equivalents Restricted cash Accounts receivable Due from related party Inventories

Total assets

Notes

5 6 7(a) 8 9

10 11 12 17(a)(i) 13

2015 $'000

692,881 20,065 27,652

616 252 741.466

5,558 31,043 124,967

30,710 192.278 933,744

2014 $'000

690,087 13,950 21,290 3,998 877

730.202

7,736 27,147 172,516

52 33.652

241.103

971,305

Shareholders' equity Share capital Capital reserve Retained earnings

Current liabilities Accounts payable and provisions Corporation tax payable Due to related parties Current portion of long-term loans

Non-current liabilities Customers' deposits Long-term loans Shareholder's loan Preference shares Deferred taxation Employee benefits obligation Deferred revenue

Total liabilities

Total shareholders' equity and liabilities

14 15

16

17(a)(ii) 19

18 19 20 21 22 7(b) 23

261,786 4,145

100.960

366.891

112,116 1,620 1,624

47.935

163.295

25,054 306,282

2,000 27,688 34,616

7,673 245

403,558

566.853

933,744

261,786 4,145

70.289

336.220

161,599 1,307 1,295

54.917

219.118

25,732 316,160

2,000 27,688 36,283

7,244 860

415.967

635.085

971,305

The financial statements on pages, 3 to 59, were approved by the Board of Directors on March 30, 2016, and signed on its behalf by:

Chang Sup Jo

Chairman

.

Seiji awamura

Director

The accompanying notes form an integral part of the financial statements.

JAMAICA PUBLIC SERVICE COMPANY LIMITED

Statement of Profit or Loss and Other Comprehensive Income Year ended December 31, 2015 (Expressed in United States Dollars)

Notes

Operating revenue Cost of sales

24 25(a)

Gross profit Operating expenses

25(b)

Operating profit

Finance income Finance costs

Net finance costs Other income Other expenses

25(c) 26(a) 26(b)

Profit before taxation

Taxation

27

Profit for the year

Other comprehensive income

Items that will never be reclassified to profit or loss:

Loss on revaluation of property, plant arid equipment 5

Remeasurement gains on defined benefit

plan

7(a)(v)

Tax on remeasurement gains on defined

benefit plan

22

Other comprehensive gain/(loss), net of tax

Total comprehensive income attributable to shareholders

Earnings per share

28

4

2015 $'000

759,819 (473,631)

286,188 (200,042)

86,146

2,430 ( 44,907)

( 42,477) 2,449

( 15,289)

30,829 ( 4,322)

26,507

2014 $'000

1,023,240 ( 750,166)

273,074 ( 191,140)

81,934

2,122 ( 57,320)

( 55,198) 7,114

( 11,692)

22,158 847

23,005

6,246 ( 2,082) 4,164

( 15,756) 327

( 109) ( 15,538)

30,671 0.120

7,467 0,110

The accompanying notes form an integral part of the financial statements.

5

JAMAICA PUBLIC SERVICE COMPANY LIMITED

Statement of Changes in Shareholders' Equity Year ended December 31, 2015 (Expressed in United States Dollars)

Share capital $'000 (Note 14)

Balance at December 31, 2013

Total comprehensive income for the year: Profit for the year

Other comprehensive loss: Loss on revaluation of property, plant and equipment Remeasurement gain on defined benefit plan, net of tax

261,786

Total comprehensive income for the year

Balance at December 31, 2014

Total comprehensive income for the year: Profit for the year

Other comprehensive income: Remeasurement gain on defined benefit plan, net of tax

Total comprehensive income for the year

Balance at December 31, 2015

261,786 261,786

Capital reserve $'000 (Note 15)

19.901

Retained earnings $'000

47,066

23,005

Total $'000

328,753

23,005

(15,756)

(15,756) (15,756)

4,145

218 218 23,223 70,289

( 15,756)

218 ( 15,538)

7,467 336,220

26,507

26,507

4,145

4,164 30,671 100 960

4,164 30,671 366 891

The accompanying notes form an integral part of the financial statements.

JAMAICA PUBLIC SERVICE COMPANY LIMITED

Statement of Cash Flows Year ended December 31, 2015 (Expressed in United States Dollars)

Notes

CASH FLOWS FROM OPERATING ACTIVITIES

Profit for the year

Adjustments for:

Depreciation and amortisation

5,6

Loss/(gain) on disposal of property, plant and equipment

Amortisation of debt issuance costs

Amortisation of other asset

Unrealised foreign exchange (gains)/losses

Interest expense

Interest income

25(c)

Interest capitalised

25(c)

Taxation expense

Deferred tax

22

Employee benefits asset/obligation, net

Long term receivables and deferred revenue, net

Cash generated before changes in working capital

Restricted cash Accounts receivable Inventories Accounts payable and provisions Due from/to related parties Customers' deposits and advances

Cash generated from operations Taxation paid

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of property, plant and equipment

Purchase of property, plant and equipment

5

Purchase of intangible assets

6

Other asset disposal/(addition)

Interest received

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES Long-term loans received Repayment of long-term loans Interest paid

Net cash used in financing activities

Net (decrease)/increase in cash and cash equivalents Net cash and cash equivalents at beginning of year

NET CASH AND CASH EQUIVALENTS AT END OF YEAR

6

2015 $'000

26,507

57,949 1,854 1,665 619

( 3,273) 38,317

( 1,062) ( 1,368)

8,071 ( 3,749) ( 404)

10

125,136

( 3,896) 50,031 4,310

( 49,557) 381 650

127,055 ( 7,758)

119.297

( 66,309) ( 2,403)

2,763 1,042

( 64,907)

36,675 ( 54,715) ( 38 528)

( 56 568)

( 2,178) 7,736

5,558

2014 $'000

23,005

54,090 ( 21)

1,515 894

5,239 42,462 ( 1,598) ( 524) 2,896 ( 3,743) ( 2,518) ( 229)

121,468

( 5,505) 11,001 7,886

( 28,408) 616

( 736)

106,322 ( 21)

106,301

42 ( 60,023) ( 5,433) ( 286)

1,652

( 64,048)

61,104 ( 55,229) ( 42 308)

( 36,433)

5,820 1.916

7,736

The accompanying notes form an integral part of the financial statements.

7

JAMAICA PUBLIC SERVICE COMPANY LIMITED

Notes to the Financial Statements Year ended December 31, 2015 (Expressed in United States Dollars)

I. Identification, Regulation and Licence

(a) Identification:

Jamaica Public Service Company Limited ("the Company") is incorporated and domiciled in Jamaica as a limited liability company. The company is owned by MaruEnergy JPSCO 1 SRL and EWP (Barbados) 1 SRL, each holding 40% interest in the Company's shares, with the Government of Jamaica (GOJ) holding 19.9% and private individuals 0.1%.

MaruEnergy JPSCO 1 SRL is incorporated in Barbados and is ultimately owned by Marubeni Corporation, which is incorporated in Japan. EWP (Barbados) 1 SRL is incorporated in Barbados and is ultimately owned by the Korea Electric Power Corporation, which is incorporated in South Korea. The Government of Jamaica's ownership in the Company is held collectively through the Accountant General's Department and the Development Bank of Jamaica Limited.

In accordance with a Shareholder's Agreement, the majority shareholders have the right to appoint six members of the Board of Directors while GOJ has the right to appoint three. Additionally, certain significant decisions of the Board of Directors require a unanimous vote of the appointed directors.

The principal activities of the Company are generating, transmitting, distributing and supplying electricity in accordance with the terms of the Amended and Restated All-Island Electric Licence, 2011 (the Licence), granted on August 19, 2011, by the Minister of Energy and Mining.

The registered office of the Company is situated at 6 Knutsford Boulevard, Kingston 5, Jamaica, W. I., and its preference shares are listed on the Jamaica Stock Exchange.

(b) Regulatory arrangements and tariff structure:

The Licence authorises the Company to supply electricity for public and private purposes within the Island of Jamaica, subject to regulation by the Office of Utilities Regulation (OUR). The OUR is established pursuant to the Office of Utility Regulation Act, 1995, and as subsequently amended, with power and authority to require observance and performance by the Company of its obligations under the Licence, and to regulate the rates charged by the Company.

Under the provisions of the Licence, the Company is granted the exclusive right to transmit, distribute and supply electricity throughout the Island of Jamaica for a period of twenty years and to develop new generation capacity within the first three years from the effective date of the Licence. Since the expiration of this initial three year period, the Company has the right, together with other persons, to compete for the right to develop new generation capacity. The Licence was extended in August 2007 for an additional period of six years through to 2027 upon the sale of the Company by Mirant Corporation to Marubeni Corporation.

Schedule 3 of the Licence defines the rates for electricity and the mechanism for rate adjustments.

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