Cayman’s electricity provider Caribbean Utilities Company (CUC) saw 3% higher sales and $4.2 million higher earnings last year compared to 2020, when the business was negatively impacted by the COVID-19 pandemic and the resulting shutdown of the Cayman Islands’ economy.
Operating income for the fiscal year grew by $1.3 million to $30.2 million, following higher electricity sales revenues that were partially offset by higher general and administration, transmission and distribution and depreciation costs.
Sales for the year increased by 16.2 million kWh to 660.5 million kWh in response to greater demand across residential and commercial customer groups.
Net earnings for 2021 rose to $30.3 million, from $26.1 million in the previous year, due to higher operating income and lower finance charges, the company said.
The number of CUC’s customers climbed to a total of 32,185 as of 31 Dec. 2021. This is 2.85% more than 12 months earlier.
CUC President and CEO, Richard Hew, said during the past two years the company had invested more than $100 million in infrastructure and made good progress on several projects despite the COVID-19 challenges.
Capital expenditures for 2021 were $60.2 million, a 13% increase from $53.4 million in 2020.
“The Cayman Islands’ economy continued to be impacted in 2021 by the COVID-19 pandemic as the tourism industry remained closed for most of the year. However, the economy proved to be resilient, showing growth in the financial services sector and in the construction sector with new condominiums, commercial buildings and single-family homes driving the company’s 3% kWh sales growth,” he said.
Concern over fuel costs
The utility provider said it continues to monitor the impact of rising fuel costs on customer bills and is engaging with regulator OfReg on the issue.
During the year, the fuel cost element of the rate charged to customers almost doubled from $0.076 per kWh in January 2021 to $0.13 in December 2021.
Today, the fuel cost element makes up $0.154 per kWh, reflecting a global increase in energy costs. The cost of crude oil, such as West Texas Intermediate, for instance has jumped from $48 per barrel at the end of 2020 to $93 on 11 Feb 2021.
Because liquefied natural gas (LNG) causes fewer emissions and is typically much less volatile in price than the diesel fuel used to generate electricity by CUC generators, the utility provider is contemplating replacing diesel fuel with natural gas in the future.
Gas prices saw an even more unusual spike in cost in 2021. Although natural gas is subject to very different demand and supply factors than oil, liquefied natural gas prices surged in 2021, with a massive fivefold increase by October.
While industry analysts believe there is no reason the natural gas shortage should remain in the medium to long term, switching to natural gas would require significant infrastructure investments to land LNG from ships and distribute it to CUC’s facilities.
CUC could generate some energy cost savings from its 20-megawatt utility-scale battery project for which it issued a request for proposal last year. The battery will be used to provide a spinning reserve that kicks in instantaneously during a sudden loss of power generation.
As such, it can replace diesel generators that currently provide this capacity and reduce the amount of fuel needed for electricity production. CUC said it expects annual savings of $1 million but the project will not come online before 2023.
The increased grid stability from battery storage will also allow for more renewable energy capacity.
Last year, CUC spent $5.8 million, $800,000 more than in 2020, to buy renewable energy from the solar plant in Bodden Town and through its Customer Owned Renewable Energy and Distributed Energy Resources programmes, which generate electricity from rooftop solar panels.
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