Wednesday 09 April 2025
General Update
Most Presidents' statements provide a snapshot of current projects and issues affecting their committee's mandate, which are either occupying that committee's attention at the time or will be over the months ahead. With only weeks of this term to go that approach is no longer really meaningful. So I will focus instead on the legacy we will leave to the next STSB. But it is also worth reflecting on where we have come from over the last four and half years.
At the start of this term, the island was still in the midst of the Covid pandemic, which was nothing short of a disaster for Guernsey Ports. Its impact on travel slashed their revenues and wiped out all of their cash reserves.
Passenger numbers - the driver of critical income streams - have picked up again since but remain some way short of pre-Covid levels. So regrettably, Guernsey Ports has had to rely on taxpayer funding.
Financial recovery has been a challenge, but it is essential. There is a good argument that Guernsey Airport should receive some amount of central funding, to reflect the fact that it is a key economic enabler, which could be undermined if it is having to rely solely on user charges. But beyond that Guernsey Ports should be able to be largely financially self-sufficient.
We have therefore implemented a plan to return Guernsey Ports to a sustainable self-funding position, including £1.3 million in cost savings through 2025 and 2026, and growing non-aeronautical and non-maritime revenues. These steps, alongside the well-publicised, phased, increases in user charges over a three year timescale, should eliminate the need for taxpayer funding by 2026, save for the possible airport PSO I just mentioned, plus any specific funding which might be agreed for one off, very large, strategically focused, capital projects essential for the whole island.
Addressing historic underinvestment in the current Ports infrastructure, particularly at the harbours, remains a challenge. Considerable progress is however being made, with capital expenditure in 2024 of £4.4 million, and Guernsey Ports is aiming to increase this to £6 million by 2026. This progress is in part thanks to our investment in more in-house project management resources.
This not only allows us to tackle the significant portfolio of work that is either in train or in the pipeline, but it also reduces our reliance on costly external consultancy support.
The STSB is pleased that the Development & Planning Authority has published the draft Local Planning Brief for the Harbour Action Areas in St Peter Port, St Sampson's and Vale. That has been long-awaited, and will hopefully remove some of the obstacles to development within the current harbours and surrounding areas, which the absence of these detailed plans has made more difficult.
In July 2021, we presented a detailed policy letter setting out the island's future harbour requirements, and options for delivering those. Regrettably that debate did not result in any clear direction. But one positive was the subsequent formation of the Guernsey Development Agency, which is tasked with unlocking development potential along the island's eastern seaboard - something that successive States have so far failed to progress. However nearly four years on from that debate, we are no closer to agreeing a future harbour strategy, which is going to be absolutely key to delivering development on the east coast. That now will be left to the next Assembly.
One infrastructure decision which we can resolve is the future use of Les Vardes Quarry, which we have a chance to debate later this month. And it is critical. In the event of a severe drought occurring, the island's current water storage reservoirs would be unable to meet demand, with an estimated supply deficit of nearly 3 million litres per day. That would necessitate strict water rationing measures, with potentially significant social, economic and health consequences.
That is the situation today, before allowing for anticipated population increases and potential changes in future rainfall patterns. Demand management measures, such as compulsory metering, and supply improvements, such as PFAS treatment, will go some way to reducing the deficit, but it can only be fully addressed by investment in a major new water resource, which will be a multi-year project.
The STSB therefore fully supports the Committee for the Environment & Infrastructure's recommendation for a new reservoir as the preferred option for Les Vardes, as well as the proposal for a new land reclamation project at Black Rock. The latter will provide a medium term solution for inert waste, which we are having to temporarily stockpile at Longue Hougue. That is another issue that this States, so far, has failed to address, but we have an opportunity to correct that before the end of this term. There is still a great deal of work to be done, but if States Members give the go ahead we will work closely with the Guernsey Development Agency to deliver that new land reclamation project, which has a lot of potential benefits for the Bridge area.
Continuing on the infrastructure theme, and to give this Assembly credit, both the Energy Policy and Electricity Strategy have been agreed in this term. The latter provides clear direction for Guernsey Electricity to develop strategic investment plans which will support the island's energy transition.
Key to this will be additional interconnection with the European grid, and appropriate reinvestment in the transmission network to meet future requirements. It will facilitate the integration of larger scale renewable generation, with imported electricity and mean GEL can retire end-of-life diesel generators. A key focus of the next Assembly will therefore be to finalise these long-term plans and agree how they should be funded.
Guernsey Electricity has also benefited from the decision by this Assembly to end the previous dysfunctional regulatory system, which left base tariffs unchanged for a decade. Investment in the island's electricity infrastructure had fallen well below what is necessary, but thankfully that is now being addressed.
Regrettably it has required significant price rises in the short term, but that will ensure Guernsey Electricity is generating sufficient revenues to properly maintain the existing network. The need for future bill increases will be mitigated by efficiency savings of £1.65 million over four years, which the STSB set as a requirement in the 2024 tariff application review.
Returning to matters still be resolved, we have the future of Guernsey Dairy. We are very encouraged by the clear vote of support the Assembly gave to local dairy farming in February, which also acknowledged the important role of the Guernsey Dairy. We do now need to move ahead and replace the current ageing facility, with a more modern, efficient, and fit for purpose Dairy. We therefore hope this will be included in the next Capital Portfolio. In the meantime, we are investing around £2 million on priority maintenance to maintain safe and compliant operations on the current site.
On a very positive note, I can report that Waitrose has agreed to stock Guernsey Dairy butter in their stores throughout the UK - around 240 in total. It was previously available in a more limited range of its UK supermarkets, because regular supplies could not be guaranteed. However the Dairy is able to increase production by utilising the milk and cream that would previously have been used to produce cheese, which will provide a much better return. This is expected to boost Guernsey Dairy butter sales by around 15%.
The STSB regrettably will not be able to present to this Assembly the findings of its investigations into a new marina development in St Peter Port. This would be something of a premier offering compared to the facilities we currently provide for local and visiting boats. And as we have previously highlighted, our work indicates it is a genuine economic development opportunity, with the potential to provide a real boost to a number of sectors. However if does come with a considerable price tag, and that presents a funding challenge. We hope P&RC can complete their work on that soon because the policy letter is otherwise ready to go.
Which brings us to Aurigny. We are all only too familiar with its significant problems during 2024, which will no doubt weigh heavily on its financial results for the year. However it should be remembered that our airline had very good results in both 2022 and 2023 and therefore it is not envisaged that any losses in 2024 will require further recapitalisation.
Of course the sub-par performance during about 7 - 8 months of 2024 not only damaged Aurigny but also the island as a whole. The STSB always takes its role as an active shareholder very seriously but we were particularly keen to ensure Aurigny was held accountable during this period of unacceptable performance and that it was corrected as quickly as possible. That is why we commissioned an expert external report both on the events of last year and Aurigny's wider business model.
Thankfully, I can report that we have seen a return to the reliability levels seen before last year's, so called, black swan event, with reliability now ahead of industry comparators. But I have warned Aurigny that it will take a very long period of reliable operations before its reputational damage is fully repaired.
On a happier note. The Paris link launched last year has proved a great success, as have the regular Dublin services. These provide further onward connections to and from hundreds of international destinations, as well as through London.
The PA Consulting report last year identified a number of challenges that the airline will need to address. But overall it concluded Aurigny was well placed to deliver its route network. Given the experience of last year, it is going to take some time to restore islanders' trust and confidence. It can only do that by continuing to deliver better reliability and resilience.
I started this statement reflecting on the impact that Covid had on the Ports. The pandemic also provided a reminder of why it is that we own an airline. The aviation industry is continually challenging, and we have seen various operators come and go over the years. However we absolutely know the Bailiwick's vital air connectivity will be maintained, even in the most challenging of circumstances.
Staying with aviation, to our Alderney colleagues, I am sorry we have not been able to deliver the runway refurbishment that we have worked so hard on this term. That too was affected by covid, first in delaying this and other airfield projects, and then as we discovered through tendering, resulting in a backlog of simpler, more attractive projects being out there for contractors. That timing has been most unfortunate, but we hope the debate this month can help find a resolution and the STSB remains ready to support that in whatever way we can.
In closing, the Trading Group businesses are responsible for some of the island's most important infrastructure, which is vital to the provision of various essential service. That is capital-intensive and requires long-term planning - both technical and financial. That is one of the benefits that we hope can be brought about through incorporation of Guernsey Water and Guernsey Ports, as well as States Works, which Members agreed to in principle last month.
By loosening the direct political control over these businesses, and instead focussing on setting high level priorities and objectives, they can in turn focus beyond each individual States term. The work around incorporation has been a significant undertaking for the current STSB, and is something now that the next STSB will be tasked with progressing. We do not underestimate how much there is for them still to do.
They will also have to continue tackling the legacy of historic underinvestment in infrastructure over previous terms. That has been a key focus for STSB throughout this term, and the next STSB is going to need the political support of the next Assembly if it is going to continue addressing this challenge.