CUC increases profits after rate increase kicks in

(CNS): Although 2009 has not been as profitable for CUC as 2008, the most recent quarter has seen an increase in earnings for the local monopoly power provider. According to its unaudited results for the third quarter, which ended 30 September, net earnings for the third quarter of 2009 were $6.6 million — a 22% increase compared to thecomparative period for 2008. The three month earnings were positively affected by higher sales compared to 2008 and the 2.4% rate increase in June 2009, CUC stated. However, with the economic slowdown the company president and CEO Richard Hew said he was not expecting much growth over the next year.

“We expect to see weak or no growth in sales through 2009 and into 2010. The company has reduced capital and other expenditures to mitigate the impact of flat sales on future financial results,” he said.

Net earnings for the nine months ending September 30, 2009 were still down $1.0 million or 7% compared to the net earnings of $15.1 million for the first nine months of 2008. The firm said this was due to a contraction in sales due to cooler and wetter than usual weather during the first six months of 2009 as well as slowed economic growth on the island.

Electricity sales for the third quarter of 2009 totalled 153.3 million kiloWatt hours in comparison to 145.8 million kWh for the three months ended October 31 an increase of 5% which was down to higher temperatures during July and August when a new peak load of 97.5 MegaWatts (MW) was recorded the firm said. It also stated that the sales variance was affected by the comparison of two slightly different time periods in reporting and as a result of slower economic growth on the island.

During this nine month period, which ended 30 September, CUC said there was a favourable fuel cost recovery of $2.5 million due to timing in 2008 partially offset by lower maintenance and finance costs. The introduction of a fuel tracker mechanism in the Company’s 2008 Transmission and Distribution Licence has eliminated favourable or adverse timing differences in fuel cost recovery for the financial reporting quarters subsequent to April 2008.

In response to the anticipated slower than historical growth on the island, CUC said that in September of 2009 it had told the Cayman Islands Electricity Regulatory Authority (ERA) that it no longer need to proceed with the previously announced bid for a 32 MW generation capacity expansion because of revised lower growth forecasts and the ERA has since cancelled the solicitation.

During the third quarter of 2009, the Company closed the second tranche, in the amount of $10 million, of a private placement of 7.50% Senior Unsecured Notes in the total amount of $40 million. Hew explained that with the availability of this capital and the delay of additional generation capacity, the company was positioned to weather the current economic circumstances.”

“The addition of 16 MW of MAN Diesel generation in September 2009, on schedule and below budget, also enhances our operating efficiency,” he added. While the company continues to examine ways to reduce expenditures, he said it remains focused on reliability which is measured by the Average System Availability Index. CUC says it scored 99.95% which exceeded its Company targets and it said it would strive to maintain this performance through projects such as the Rum Point to Frank Sound transmission line completion and other operational improvements. “While the slowed economy on the island presents challenges to our business, we remain confident that we will be able to meet those challenges and preserve shareholder value,” Hew added.

After the adjustment for dividends on the Class B Preference Shares of the Company, earnings on Class A Ordinary Shares for the third quarter of 2009 were $6.1 million, or $0.21 per Class A Ordinary Share, as compared to $5.3 million, or $0.18 per Class A Ordinary Share for the three months ended October 31, 2008. After adjustment for dividends on Class B Preference Shares, earnings on Class A Ordinary Shares for the nine months ended September 30, 2009 were $13.3 million, or $0.47 per Class A Ordinary Share, as compared to $14.3 million, or $0.54 per Class A Ordinary Share for the nine months ended October 31, 2008.