Rating agency lowers outlook for CUC

| 12/11/2009

(CNS): Following the announcement from Caribbean Utilities Company (CUC) that it had seen improved earnings in the most recent quarter of 2009, the ratings agency Standard & Poor lowered its outlook on the firm to "negative" from "stable" on Tuesday. Citing the weak Cayman economy, S&P said this spelt further trouble for the vertically integrated utility. The agency did, however, affirm its long-term corporate credit and senior unsecured debt ratings on the company.

S&P said the economic recession has hit the Cayman Islands financial and tourist sectors, prompting a government forecast for a 5.7% GDP contraction in the economy for 2009. The economic pressure on CUC could trigger a downgrade, the analysts warned. On the other hand, a quick economic rebound would translate into a "stable" outlook. “The ratings on the utility reflect its market dominance and generally strong financial risk profile. However, the region’s susceptibility to hurricanes and its concentrated economy partially mitigate these positives,” S&P said.

Following the third quarter results, CEO of CUC 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, adding that while the slower economy presented challenges he was confident CUC would meet them and preserve shareholder value.

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  1. Anonymous says:

    CUC will always make money as long as our government allows them to be guaranteed a profit.

    Why cant they be like any other company? I heard recently in the USA the govt. in Florida forced FP&L to refund every single customer for some issue or other. I thought wow … our govt. would never do that.

    I’m tired of being raped by CUC.

    • Anonymous says:

      I wonder why I have a feeling that I can expect an increase in my electricity bill again this Christmas, even though I do not decorate with Christmas lights or use any kind of decoration that is dependant on electricity? When I questioned the large increase in my bill last year Christmas decorations were used as the excuse – of course, as I said, I had none that were electronic. We will see how it works this year!

  2. Anonymous says:

    Does this have anything to do with why i did have electricity for three hours last night?

  3. Anonymous says:

    "CUC will never lose money. They have a monopoly and will simply raise rates or fuel surcharges to turn a profit".

    That is not how it works.

    1. CUC is a monopoly, but it is a regulated monopoly. CUC is not entitled to raise rates at will. It is dependent upon the application of the Rate Cap and Adjustment Mechanism which in trun depends upon the rate of inflation and CUC’s rate of return. It is not in anyone’s interest for CUC to make losses. If they are unable to invest as necessary we all suffer with lower quality service. Do you think that is likely to attract businesses here? The bottom line is that businesses are in business to make a profit. They are not a charity. No one will invest in them if they do not make profits and they will therefore not have the necessary capital to invest in infrastructure. Got it?

    2. CUC makes no profit from fuel surcharges. These are simply pass-throughs of what it is charged by the oil companies. It is not in CUC’s interest for fuel surcharges to be high since people then generally consume less. This was CUC’s experience last year when oil prices skyrocketed.

    3. Under the new licence CUC has been forced to become more efficient and has made significant cost cuts. 

    4. Cut costs by using cheaper fossil fuels. What would those be? Coal (more pollution)? Natural Gas (less efficient)? Do you understand that in order to use completely different fuels CUC would need to purchase new Generators and may not be able to sell its existing generators at favourable prices, and that since these costs would have to be passed on to consumers this would actually have the effect of increasing the cost of electricity?         

    • Anonymous says:

      I guess you think everyone in this country is stupid.

      In order to burn cheap fuel oil CUC only needs to put in the equipment needed to process this fuel for consumpytion.

      With the exception of the American Caterpillar engines every european plant at CUC is already designed for consuming fuel oil at fairly poor quality.

      CUC failed to acquire and install the necessary purifiers, clarifiers and heating equipment necessary for fuel oil consumption because they have no interest in how much their fuel cost. This can simply be passed on to the consumer at will.

      So! Before you try pulling the wool over anyone eyes, educate yourself to the facts first.


      • Anonymous says:

        Cheaper quality fuel = more pollution. There is no "special equipment" that will eliminate that.

        I have already explained why it is not in CUC’s interest to have high fuel costs. It is about price elasticity of demand for electricity. CUC does not benefit if fuel prices are high since consumers consume less electricity.  


        • Animosity says:

          You are just not making any sense with anything you say, except that you are enlightening me to CUC way of thinking.

          Do you believe that any of the ships coming in to the Cayman Islands ports are burning expensive distillate diesel fuel.

          Show me what pollution they are causing. Anything that goes up the chimney at CUC is long gone before it returns to cause any local pollution.

          Since you dont know, let me enlighten you to something, Purifiers and Clarifiers can treat fuel oil and remove heavy metals and chemicals including sulpher.

          • Mozzie Fodder says:

            Show me what pollution they are causing. Anything that goes up the chimney at CUC is long gone before it returns to cause any local pollution.


            Well that opens another can of worms – seeing as there is little to no emissions monitoring on island, proving that CUC pollutes or not is difficult. One thing is certain, what goes up (a chimney stack), must come down.

            • Animosity says:

              In our case by the time it comes down it is too far offshore to be of any relevance.

              Facts are: Every Caribbean Island is looking for ways to lower the cost of producing electricity except the Cayman Islands. "END OF STORY"

  4. Anonymous says:

    Thank god I can’t short CUC shares on the open market. I would have been rich a longtime ago. I predicted CUC fall from 2 1/2 years ago. Can anyone say alternative energy, finally people are catching on.

    This is just the beginning for this monster, I precidict now and write it down CUC shares on the Toronto Stock Exchange will be valued at 2.00 per share in 3 years, if they don’t make a bigger push to Alternatives.


    • Anonymous says:

      The issue has nothing to do with alternative forms of energy. It is a reflection of the economic downturn. CUC’s stock price is unlikely to see any surges in the next couple of years but it is also very unlikely to tank to $2.00. If it does we are all in a great deal of trouble.  

      • Anonymous says:

        The value of CUC shares are manipulated to suit theinterest of a few of its major shareholders. It is only the little man with a few shares that will lose at CUC.

        • Anonymous says:

          That makes no sense. The value of a share is the same whether it is held by major shareholders or the "little man with a few shares".    

  5. Animosity says:

    CUC will never lose money. They have a monopoly and will simply raise rates or fuel surcharges to turn a profit.

    No one will even attempt to control what they do because they always have their man in any government in office.

    Just as they fail to risk manage their transmission and distribution system and can simply charge the customers for their losses, or throw in a charge for their Licence fees, they will simply add something else and no one will try to stop them.

    Simply put. times are hard on the electricity consumers but that means nothing to CUC. The only thing they are concerned about is a profit for their shareholders. Attempting to cut operating cost by using cheaper fossil fuels is not on their agenda.