First quarter net earnings for the Caribbean Utilities Company totaled $3.3 million, a decrease of $0.1 million compared to the same period last year.
Higher depreciation and higher transmission and distribution costs lowered the earnings, but were partially offset by lower consumer services costs and higher other income, CUC reported.
Although the company had 435 more customers than in the first quarter last year, bringing the total number of customers to 27,873, sales during the period of 129 million kWh were down 1.7 million kWh year on year due to the cooler weather and a declining air conditioning load.
Richard Hew, the utility’s CEO, said the Cayman Islands economy continued to show positive signs of growth with increased tourism air arrivals and gross domestic product growth projected at 2 percent for 2015.
He noted positive developments for the utility, including, “most significantly,” groundbreaking on March 5 to begin installation of “two new 18.5 megawatt V48/60 medium-speed diesel generating units and one 2.7 MW waste heat recovery steam turbine.”
When completed next summer, this additional firm capacity will replace some of the company’s retiring generating units. CUC said the new plant is anticipated to improve the company’s current fuel efficiency by approximately 6 percent.
The approximate cost of the Generation Expansion Project is US$85 million.
On May 4, CUC announced that it had successfully completed its previously announced rights offering that commenced in March. Under the offering and a related stand-by agreement, CUC raised gross proceeds of US$31,563,639 through the issuance of 2,930,700 class A ordinary shares at a price of US$10.77 per share.
Following the offering, CUC has an aggregate of 32,237,709 class A ordinary shares outstanding. Fortis Energy (Bermuda) Ltd., an existing shareholder of CUC, purchased an aggregate of 2,169,682 shares under the offering and a stand-by agreement with the company. FEBL now holds 19,460,326 shares, representing approximately 60.4 percent of the outstanding shares of CUC. The percentage holding increased 1.5 percent as a result of the offering.
Fortis Energy is a wholly owned subsidiary of Fortis Inc. of St. John’s, Newfoundland and Labrador, Canada.
“We are pleased to complete this offering with the support of our existing class A ordinary shareholders, including the standby commitment made by [Fortis Energy],” Mr. Hew said. “This commitment by our shareholders provides the strong financial base necessary to carry out the Generation Expansion Project.”
CUC intends to use the proceeds of the offering to partially finance the Generation Expansion Project and for other ongoing capital expenditures.
CUC customers saw a reduction in their bills during the first quarter, reflecting a 32 percent decrease in the company’s average price per imperial gallon of fuel. The lower fuel costs of $3.24 per gallon resulted from both a drop in market prices and a reduction of the import duty for fuel which came into effect in 2015. The fuel factor mechanism passes on 100 percent of the cost changes to customers.
During the first quarter, CUC and the Electricity Regulatory Authority agreed on revisions to the Feed In Tariffs program, which now allows for 4 MW of consumer-owned renewable energy (CORE) generation.
Mr. Hew noted, “… We believe the program, along with the 5 MW solar project proposed by the company and currently under review by the ERA, will provide environmental benefits without negatively impacting cost and reliability of service …”