The Ritz-Carlton, Grand Cayman has already become Caribbean Utility Company’s largest customer, the electric company said in a press release concerning its 2006 year-end unaudited financial results.
CUC reported record earnings in the fiscal year ending 30 April, 2006. A significant increase in operating revenue in the fourth quarter of fiscal 2006 – from US$21.1 million in the year before to US$33.2 million – was attributed partially to the Ritz-Carlton.
‘The increase is due to post-hurricane (Ivan) sales recovery and new growth from projects such as the 365-room Ritz-Carlton, which opened in December 2005 and has already become the company’s largest customer,’ the press release stated.
A spokesperson at the Ritz-Carlton said that during the month of April, the hotel used 1,232,723 kilowatt hours and received a bill for $369,817.
Ritz-Carlton developer Mike Ryan said he was not surprised to hear of the hotel’s status with CUC.
‘We are pleased to see that the Ritz-Carlton Grand Cayman Resort is continuing to deliver on its promise to bring economic benefit to a broad spectrum of the Cayman economy,’ Mr. Ryan said. ‘We see it every day in many smaller ways as well, (with) individual Caymanian-owned businesses telling us what a positive impact we have had.
‘It is something we are very proud of.’
The Ritz-Carlton management said that during the month of April, the hotel used 1,232,723 kilowatt hours, and received a bill for $369,817.
In addition to the strong fourth quarter of fiscal 2006 and higher electricity sales, CUC’s record earnings for the year were also buoyed by continued business interruption insurance payments with regard to Hurricane Ivan, the Cost Recovery Surcharge granted by the Government to allow CUC to recoup Hurricane Ivan losses, and fuel factors revenue that was nearly double the previous fiscal year.
The US$23 million fuel factor revenue increase over fiscal 2005, however, is basically a flow-through amount to cover increased fuel costs, as allowed in CUC’s licence agreement. The company’s fuel costs to generate electricity went up $27.8 million over the previous year.
CUC announced it had collected US$31.1 million in insurance settlement payments since Hurricane Ivan, including US$16.3 million in property claims and US$14.8 million in business interruption claims, of which US$6.1 million was collected during fiscal 2006.
The Cost Recovery Surcharge of CI$0.0075 per kWh added to customers’ electricity bills from 1 August 2005 brought in a little more than US$3 million. The surcharge is expected to remain in effect through 2008 to allow CUC to recoup approximately $13.4 million of Hurricane Ivan losses. In consideration for the Government granting the surcharge, however, CUC has agreed not to raise its basic billing rates while the surcharge is in effect.
If not for that agreement, CUC would have been entitled to raise its rates by two per cent on 1 August 2006 to meet the shortfall of its 15 per cent return on capital employed allowed by its licence agreement.
Despite its record earnings, CUC said it nevertheless fell short of its original earnings forecast by US$1.2 million.
Still, CUC’s strong fourth quarter sales bode well for the future.
‘Monthly electricity sales are now consistently ahead of those before the hurricane in September 2004, reflecting Grand Cayman and the company’s successful recovery to date,’ said Richard Hew, CUC’s president and CEO in the press release. ‘We have approximately 350 fewer total customers than those connected just prior to the hurricane, but we are currently connecting more than 100 new customers per month.’
Mr. Hew explained on Tuesday that the reason CUC has more electricity sales now than before Hurricane Ivan despite having fewer customers has to do with changes in its customer base.
‘We have a different mix of customers,’ he said, noting that many new commercial developments like the Ritz-Carlton and new, large residences have come on line in the past year.
CUC made very little comment in its press release about the ongoing negotiations with the Government negotiating team to renew its licence agreement, which runs through 2011, other than to say steady progress continues to be made.
Minster of Works Arden McLean also said the licence renewal negotiations, which began last November, were going well in Finance Committee last week.
‘We hope they’ll be concluded in a very short time,’ he said.
CUC also commented on agreement in early May to purchase a new 16 megawatt generator from Germany, which will be commissioned in June 2007.
The addition of the new generator will allow CUC to meet projected electricity demands on Grand Cayman through 2010, Mr. Hew said.
With projects like the restoration of the Ocean Club condominiums and Hyatt Regency Hotel, the Camana Bay development, the Mandarin Oriental Hotel all expected to come on line in the future, average electricity demand is expected to grow five to six per cent per year, Mr. Hew said in February 2006.