CUC earnings down, looks to wind

(CNS): CUC’sfirst quarter 2009 earnings declined significantly over the same quarter last year due to the reduction in consumer rates given as part of the negotiations for new licences, according to Richard Hew, CUC President and CEO. Grand Cayman’s power company also affirmed its earlier announcement that it is seeking expressions of interest from qualified developers to construct up to 10 MW of wind generation.

In a release Hew said, “The recent escalation in fuel costs means that wind generation may now be economically viable. With the recent execution of our new licences, we now have a basis on which to pursue both non-firm alternate energy options such as wind and solar as well as continue our quest for firm alternate energy options that may have a meaningful impact on consumer rates.”

Net earnings for the three months ended 31 July 2008 were $5.3 million compared to $7.8 million for the same period last year. Earnings on Class A Ordinary Shares for the quarter were $4.7 million, or $0.19 per Class A Ordinary Share, compared to $7.2 million, or $0.29 per Class A Ordinary Share, for first quarter fiscal 2008. The 32% decline in net earnings was principally due to the January 2008 removal of the Hurricane Ivan Cost Recovery Surcharge (CRS) to customers as agreed with the Cayman Islands Government in December 2007.

The CRS had been scheduled to be fully recovered inAugust 2008. The 3.25% rate reduction, implemented in January of 2008, and increased depreciation and maintenance expenses of $0.4 million each, were also contributing factors. General and administrative expenses were down $0.5 million over the same quarter in fiscal 2008. Total operating expenses increased 41% to $47 million, driven by increased fuel costs.

Total electricity sales for the quarter increased 5% to 149.1 million kiloWatt hour (“kWh”) from 141.8 million kWh for the same period last year. Total customers as at July 31, 2008 were 24,167, an increase of 5% over last year.

“System demand peaked in June at 92.9 megaWatts (“MW”), and was reliably met by our 136.6 MW of installed generating capacity,” said Hew. “In September of 2009, we will add an additional 16 MW of capacity to meet the continued growth on the island.”

During the quarter, the Company provided recommendations to the Electricity Regulatory Authority (ERA) regarding Customer Owned Renewable Energy purchase rates and renewable energy policy and submitted its Capital Investment Plan which forecasts additional investments of $255.0 million over the next five years including $80.0 million of generation investment which will be subject to competitive bid and will only be expended by CUC if it is the successful bidder.

In the release, CUC reminded shareholders that the Annual General and Special Meeting which was adjourned on Friday, 29 August due to the threat from Hurricane Gustav would be held this Friday, 5 September, at the Marriott Beach Resort Hotel. The meeting will start at noon.

CUC also wishes to provide local shareholders with its unaudited results for the first quarter ended 31 July 2008 (all figures in United States dollars) for the benefit of those who were pre-occupied with preparations for Hurricane Gustav.

The Company also announced that it would change its year-end from 30 April to 31 December, with the first full fiscal period under that change being the calendar year ending 31 December 2009. In 2008, the Company will report interim results for the six months ending 31 October 2008 based on the 30 April fiscal year end with the transitional eight-month period being1 May to 31 December 2008. The change in year end will align CUC’s financial reporting periods with industry peers to better allow interested parties to compare financial results with those of other companies in the same industry.