Warm weather boosts CUC profits

| 05/08/2010

(CNS): A few more customers but mostly warmer weather have helped CUC to an increase in earnings, according to its latest financial report. Grand Cayman’s only power provider, Caribbean Utilities Company, is reporting an increase of 5 percent in sales for the second quarter of this year over the second quarter in 2009. According to the firm’s unaudited results, sales were "significantly impacted by hotter than average temperatures" in the Second Quarter 2010 compared to the cooler than average temperatures the year before. Net earnings for the Second Quarter 2010 were $6.2 million, giving the CUC an increase in profits of $1.2 million compared to last year and a boost to shareholders.

CUC also said it recorded a new system peak load of 102.1 Megawatts in June 2010 up 8.2% from the peak load of 94.4 MW recorded in June 2009. According to a release, the firm said that sales growth was due to higher temperatures and that modest growth in customer connections, partially offset by increased depreciation expense have contributed to this increase.
 
As a result of what it described as its “deliberate efforts to improve productivity” and cost control efforts, including “recruitment and salary freezes”, CUC has made a profit despite the challenging economic times.
 
President and CEO of CUC, Richard Hew, acknowledged the profit was down to people running their air conditioning units more than usual. “Although we have seen a relatively good first half of 2010 in respect of revenues and earnings, our analysis confirms that it is largely due to increased air conditioning loads in response to higher temperatures,” he said. “June in particular was a very hot month with average temperatures of 86 degrees Fahrenheit recorded, compared to 82 degrees Fahrenheit in June 2009.”
 
Hew added that real underlying growth has slowed considerably. “We remain conservative with respect to the outlay of capital or other discretionary expenditures in advance of a sustained recovery of the Cayman Islands economy. However, we will continue our efforts to deliver reliable service to our customers.”
 
During the quarter, the company reached a new reliability peak Average System Availability Index rating of 99.99%, as compared to 99.91% in the Second Quarter 2009.
 
After the adjustment for dividends on the Class B Preference Shares of the company, CUC said earnings on Class A Ordinary Shares for the Second Quarter 2010 were $6.1 million, or $0.21 per Class A Ordinary Share, as compared to $4.9 million, or $0.18 per Class A Ordinary Share for the Second Quarter 2009. Earnings on Class A Ordinary Shares for the First Half of 2010 were $8.4 million, or $0.29 per Class A Ordinary Share, as compared to $7.3 million, or $0.26 per Class A Ordinary Share for the First Half of 2009.
 
CUC connected 749 new customers between June 30, 2009 and June 30, 2010. Of these, 678 customers were added to the residential category and 71 customers were added to the commercial category. Total customers as at June 30, 2010 were 25,817, an increase of 3% over the 25,068 customers as at June 30, 2009.
Print Friendly, PDF & Email

Category: Business

Comments (18)

Trackback URL | Comments RSS Feed

  1. Anonymous says:

    CUC has done a wonderful job getting their PR people to comment on this article. Those who know business know that CUC IS a monopoly because they have the lines. In most places the government owns the lines and the electrical/phone companies have to lease them. It is also NOT the standard to pass on things such as being under insured to your clients. I own a construction company and if I didnt have one of my vehicles insured and crashed it while building a house i cant than pass this on to the client. That being said their is othing we can do about it so whats the point of complaining.

    On a side note the Average price per KW hour in the US and Canada is less than 50 cents. In Cayman it is 6 times that. (I am Caymanian born and raised so I dont want to hear the go back to your country bit) The profit margin made in Cayman is 400% higher than the norm for a company of its nature. Not bad for a company that gives NOTHING to our government.

    • Anonymous says:

      False again.

      Disaster Recovery Surcharges are common in the industry. Jamaica Public Service and Florida Power & Light both added surcharges to their bills in the wake of hurricanes.  

      There is no point making comparisons about thecost of power in Canada and the U.S. They have access to cheap sources of power, e.g. hydroelectricity (ever hear of Niagara Falls?) and nuclear power. You are comparing apples and oranges. 

      Your statement about 400% the profit for a company of its nature is also false. CUC’s return on rate base is less than 10%. There is no viable utility anywhere that makes a return of 2.5% per annum. 

      Actually CUC gives a lot to govt in duty and licence fees and as a major employer of Caymanians.  Like any other business its costs are passed on to its customers.   

      • Anonymous says:

        Another nice piece by a employee of CUC….I have two houses in Florida and their was nor surcharge for damages after hurricanes in Florida. CUC’s profit is NOT only 10% that is  false statement and a documented one. WE THE PEOPLE PAY ALL THE DUTIES TO GOVT. CUC doesnt pay a dime of it. I will agree they supply jobs.

        We are more than capable of producing electricity in other ways but no one will do it because CUC refuses to pay a FAIR price for the power.

      • O'Really says:

        As another poster has pointed out, virtually every cent in duty and fees incurred by CUC is passed onto the public. I’m not sure if they still do but they even used to be able to claim charitable donations and sponsorships up to a certain level in the rate base calculations, so that the public paid for much of CUC’s PR efforts to convince us that they are damn fine fellows! 

        And while CUC is an important employer of Caymanians, the other side of this coin is that they contribute little by way of work permit fees.

        After Ivan they were able to recoup infrastructure costs not covered by insurance. CUC is a corporate citizen of Cayman so it would have been appropriate for the shareholders of CUC to bear some of these costs and suffered along with the rest of us. I assume this did not happen because I don’t recall CUC trumpeting about this, as per their standard procedure whenever a dollar is somehow put into the community.

        Although I don’t support Tim Ridley’s call for a property tax it would at least bring CUC and all the other locally operating companies into the tax net, assuming government had the nerve to do this. In this way the owners of these companies would actually be contributing out of their pockets to the Government coffers and not out of the publics, assuming of course they did not find another way to pass this on!  

        Referring to the rate base calculation as yielding a 10% return or less also muddies the water. My understanding is that the rate base calculation’s objective is to determine changes in electricity rates in future periods  and this is not the same as GAAP based profits which drive dividend levels and share price. If you really want to understand how well CUC shareholders have done out of Cayman, look up the share split history over the last 30 years or so. Add this capital gain to the dividend yield and you will definitely wish you had invested in CUC. 

         

  2. Tim Ridley says:

    It is perfectly possible for the public to own a piece of CUC. The shares are readily available and trade on the Toronto Stock Exchange. The current share price (US$8.36 +/-) is well below its highs of over US$12.00 a few years ago, and now generates a dividend return of around 7.8%. In the present investment environment with low interest rates, that is very reasonable and seems pretty secure. And a good hedge against anyone’s electricity bill too.

  3. Anonymous says:

    THE HEADLINES

     

    CNS: "WARM WEATHER BOOST CUC PROFITS"

    next fiscal year…

     

    Caymanian Compass: "COLD WEATHER BOOST CUC PROFITS"

    following fiscal year…

     

    CNN: "STORMY WEATHER BOOST CUC PROFITS"

    fiscal year around the corner…

     

    Cayman Rooster 101: "GOOD WEATHER BOOST CUC PROFITS"

    meanwhile…

     

    "Hey Mike!" : )  

    "What is it Mould?"

    "Has it ever dawn on you that our bills keep increasing each fiscal year?"

  4. Anonymous says:

    Power went out 2x this morning in Newlands – great service? I disagree! But last time they blamed it on a frog so I wonder what it could be this time?

  5. Anonymous says:

    I bet our electrical bills won’t reflect this. (shaking my head)

  6. Anonymous says:

    Now thats a good one Warm weather Boosts CUC profits. I think CUC in the only compnay on this Island that continues to make any sort of  profit. My Question is to the Government when is it that you guys going to allow competion  to come in regarding power povider because honestly cuc is getting away with murder i dont care what you do to cut cost on  your electric bill nothen works.

    • Ray says:

      Their current license allows for competition in the production of electricity as it is my understanding that the last Govt. ensured that was included. So if you, or anyone else, has the millions of dollars needed to start up an electricity production facility using whatever fuel (wind, sun, garbage, thermal, diesel, etc.) feel free to put your proposal forward and get to work. The only monolopy that exists is the distribution of electricity. So CUC must purchase your electricity (wholesale) and distribute it (retail). Assuming that you can produce it cheaper then those "savings" would be passed on and the overall cost to the consumer would be less.

      • Anonymous says:

        Good point Ray.

        They tried to bring in some new generating companies last year but CUC said there wasn’t enough demand.  

        People don’t understand the way this thing works.  A new company will have to spend a lot of money to buy generators, lease land, set up a plant and pay staff. They are in this to a make a profit and so their charges are going to cover their costs plus profit. Fat chance that they are going to be able to do it cheaper than CUC, but you can’t tell people that. Just watch the thumbs down.  

        • KY says:

          Interesting point who did actually buy the infrastructure?

          After all thanks to keeping costs down they were under insured after Ivan, but that didn’t matter did it?

          For all the consumers had an extra charge on their bills for 3 years to rebuild the infrastructure.

          Personally as all those replacement infrastructer wasn’t bought by CUC (it didn’t come out of their profits) but by you and me directly on our bills then we the public should own it or part of it.

           

          • Anonymous says:

            Obviously the cost of infrastructure is ultimately paid for by consumers. That is the case in any utility anwhere.  

            Hopefully you will see that your argument is preposterous by the following example. It would be like saying the supermarket has increased the prices of goods to cover the costs of their insurance deductible and repair the building therefore that the customers now own the supermarket and should not have to pay for groceries going forward.

                

            • Anonymous says:

              Capital improvements are usually considered to be the stockholders’ risk (since they indirectly own the property). It’s up to the company to decide whether to insure against catastrophic loss. Most utilities don’t but they also don’t usually get to foist capital investment costs onto the customer except by means of long term ROI. If they need capital for infrastructure they should go to the capital markets.

    • Anonymous says:

      Turning off your lights one time doesn’t cut costs.  It has to be a concerted effort that is consistant.  I think CUC provides a great service.

    • Man says:

      Are you upset because CUC is making a profit or because you are having difficulty paying your monthly bill? If it’s your bill, try raising the ac thermostat from 70 to 79 and putting aside those comforters at night you use to stay "warm" after freezing your room!!