Caribbean Utilities Company, Ltd. 2017 First Quarter Report (CNW Group/Caribbean Utilities Company, Ltd.)
Caribbean Utilities Company, Ltd. is listed for trading in United States dollars on the Toronto Stock Exchange.
GRAND CAYMAN, Cayman Islands, May 2, 2017 /CNW/ - Caribbean Utilities Company, Ltd. (TSX: CUP.U) ("CUC" or "the Company") announced today its unaudited results for the three months ended March 31st 2017 ("First Quarter 2017"). (All figures in United States dollars).
Operating income for First Quarter 2017 totalled $5.4 million, an increase of $0.3 million when compared to operating income of $5.1 million for the three months ended March 31st, 2016 ("First Quarter 2016"). The increase is attributable to a 1% increase in kilowatt hour ("kWh") sales and lower maintenance expenses resulting from lower overtime costs in First Quarter 2017. Overtime costs in 2016 were impacted by a series of system outages that occurred prior to the completion of the Company's 40 MW power plant in June 2016. These items were partially offset by higher depreciation costs.
Despite the factors positively impacting operating income, net earnings decreased $0.5 million from $5.0 million in First Quarter 2016 to $4.5 million in First Quarter 2017. This was due primarily to a $1.0 million increase in Finance charges in First Quarter 2017. This increase in Finance charges was as a result of a reduction in Allowance for Funds Used During Construction ("AFUDC") upon completion of the 40 MW power plant in June 2016. AFUDC is the capitalisation of Financing Cost which is calculated by multiplying the Company's Cost of Capital rate by the average construction work in progress for each month.
During 2014-2016 the Company invested $79 million to provide this new world class power plant. The new engine room houses two 18.5 MW diesel generating units, one 2.7 MW waste heat recovery steam turbine, and associated auxiliary equipment. While the financing costs and depreciation associated with this investment has negatively impacted the First Quarter 2017 earnings when compared to First Quarter 2016, customers have been benefitting from the improved reliability and fuel efficiency which comes with the new engines.
After the adjustment for dividends on the preference shares of the Company, earnings on Class A Ordinary Shares for the First Quarter 2017 were $4.3 million, or $0.13 per Class A Ordinary Share, compared to earnings on Class A Ordinary Shares of $4.9 million or $0.15 per Class A Ordinary Share for the First Quarter 2016.
Sales for First Quarter 2017 totalled 136.6 million kWh, an increase of 1.0 million kWh in comparison to 135.6 million kWh for First Quarter 2016. This 1% increase in sales growth was driven by an increase in customer numbers.
For the period under review, total customers were 28,764, an increase of 432 customers, or 2%, compared to 28,332 customers as at March 31, 2016.
President and CEO, Mr. Richard Hew states, "I am pleased with the positive results we have seen during First Quarter 2017 including increased sales, customer numbers and operating income, and the celebration of 730 days without a Lost Time Injury. The Company's earnings results are in-line with expectations due to the additional costs associated with the new generation plant. We will remain focused on delivering strong performances so that our customers and shareholders can benefit. Our teams continue to work hard to ensure that we remain focused on safety, efficiency and productivity. We will also continue to invest in our employees and our infrastructure so that customers can be provided with a safe and reliable electricity service at good value for money."
Capital expenditures for the First Quarter 2017 totalled $9.4 million consisting primarily of additions and upgrades to CUC's generation and transmission and distribution system to meet customer growth on Grand Cayman.
During the First Quarter 2017 the Company closed on the first tranche of a debt offering in the amount of US$40 million of an aggregate US$60 million private placement at favourable rates. The second tranche of US$20 million is scheduled to close in May 2017. The debt offering was privately placed with institutional investors in the United States. Proceeds from the offering will be used to repay short-term indebtedness and to finance ongoing capital expenditures.
With the 30 cents per imperial gallon Government reduction in fuel duty which took effect in 2016 and improved fuel efficiency from the new plant, customers have benefited from significantly reduced electricity costs during the First Quarter 2017. The residential consumer who used 1,000 kWh per month would have seen their monthly bills decline by approximately CI$15 during the First Quarter 2017 when compared to the same period in 2016.
On a monthly basis, CUC submits information regarding its fuel costs and its calculation of the per kWh rate used to recover those fuel costs to the Utility Regulation and Competition Office ("OfReg") to be reviewed in advance of billing customers. The fuel costs are recovered from electricity consumers two months in arrears in order to allow for a thorough review process by OfReg. For example, fuel costs incurred in March are billed to consumers in May.
The Company's average price per Imperial Gallon of fuel for the First Quarter 2017 increased 21% to $2.57, compared to $2.13 for the First Quarter 2016. The Company's average price per IG of lubricating oil for the First Quarter 2017 decreased to $9.36 when compared to $11.49 for the First Quarter 2016. However, the average Fuel Cost Charge rate billed to consumers for the First Quarter 2017 declined 13% to $0.13 per kWh, compared to the average Fuel Cost Charge rate of $0.15 per kWh for the First Quarter 2016.
While current fuel prices remain reasonably low, historically, the world fuel market has been volatile and the Company remains committed to connecting other stable and competitively priced energy options to the grid.
During First Quarter 2017 the Customer Owned Renewable Energy Generation ("CORE") programme's limit of 6 megawatts ("MW") was reached. CUC and OfReg are currently in discussions to agree the appropriate way forward for the CORE programme.
Work also continues on the 5 MW Solar Project at Bodden Town. CUC has completed the interconnection facilities for the project including a new 13 Kilovolts ("kV") line. The developer, Entropy Cayman Solar Limited, anticipates that this project will be completed by the Second Quarter 2017.
CUC's First Quarter results and related Management's Discussion and Analysis ("MD&A") for the period ended March 31st 2017 are attached to this release and incorporated by reference and can be accessed by clicking the link at the end of this release.
The MD&A section of this report contains a discussion of CUC's unaudited 2017 First Quarter results, the Cayman Islands economy, liquidity and capital resources, capital expenditures and the business risks facing the Company. The release and First Quarter MD&A can be accessed at www.cuc-cayman.com (Investor Relations/Press Releases) and at www.sedar.com.
CUC provides electricity to Grand Cayman, Cayman Islands, under an Electricity Generation Licence expiring in 2039 and an exclusive Electricity Transmission and Distribution Licence expiring in 2028. Further information is available at www.cuc-cayman.com.
Certain statements in the MD&A, other than statements of historical fact, are forward-looking statements concerning anticipated future events, results, circumstances, performance or expectations with respect to the Company and its operations, including its strategy and financial performance and condition.
Forward looking statements include statements that are predictive in nature, depend upon future events or conditions, or include words such as "expects", "anticipates", "plan", "believes", "estimates", "intends", "targets", "projects", "forecasts", "schedule", or negative versions thereof and other similar expressions, or future or conditional verbs such as "may", "will", "should", "would" and "could". Forward looking statements are based on underlying assumptions and management's beliefs, estimates and opinions, and are subject to inherent risks and uncertainties surrounding future expectations generally that may cause actual results to vary from plans, targets and estimates. Some of the important risks and uncertainties that could affect forward looking statements are described in the MD&A in the section labeled "Business Risks" and include but are not limited to operational, general economic, market and business conditions, regulatory developments and weather. CUC cautions readers that actual results may vary significantly from those expected should certain risks or uncertainties materialize, or should underlying assumptions prove incorrect. Forward-looking statements are provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that such information may not be appropriate for other purposes. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise except as required by law.
PDF available at: http://files.newswire.ca/520/Q1-2017-MDA_FS.pdf
SOURCE Caribbean Utilities Company, Ltd.
For further information: Letitia Lawrence, Vice President Finance and Chief Financial Officer, Phone: (345) 914-1124, E-Mail: firstname.lastname@example.org