Caribbean Utilities Company, Ltd. (CUC) (TSX: CUP.U) today reported its audited full-year 2019 financial results.
For the period ending December 31, 2019 (“Fiscal 2019”), net earnings were USD$29.1 million and diluted earnings per Class A Ordinary shares were USD$28.1 million, or USD$0.84 per Class A Ordinary Share for the full year.
“I am pleased to report the positive overall results of the Company for 2019, including strong financial results which were primarily driven by the increased electricity consumption of residents and businesses participating in Grand Cayman’s growing economy,” said Mr. Richard Hew, Caribbean Utilities Company, President and CEO. “More importantly, during the year the Company engaged in activities that will ensure we successfully deliver safe, reliable, least-cost electricity in a sustainable manner to our customers well into the future. The Company made excellent progress on its Capital Investment Plan activities including building new substations, a control room and an upgrade of monitoring and controls technology, all to increase service capacity and reliability to our customers. The Company also received OfReg approval for a 20-megawatt (“MW”) Utility-scale Battery project which is presently in the tendering stage. Battery storage provides the grid stability necessary to integrate higher levels of intermittent renewables.”
According to CUC’s Fiscal 2019 Annual Report summary highlights
Sales for Fiscal 2019 were 667.7 million kWh, an increase of 38.9 million kWh or 6 percent year-over-year. Sales were positively impacted by an increase in average commercial consumption, warmer weather conditions and a 2 percent growth in overall customer base.
Operating income totaled $29.5 million, a 4 percent increase year-over-year, attributed to higher electricity sales revenues primarily driven by a 6 percent increase in kWh sales, and 1.8% and 0.9% base rate increases effective June 1, 2018 and June 1, 2019, respectively. Higher depreciation and transmission costs partially offset these items in Fiscal 2019.
Net earnings were $29.1 million, a 9 percent increase year-over-year, attributed to a higher operating income, lower finance charges and higher other income.
After the adjustment for dividends on the preference shares of the Company, a 7.7 percent increase in earnings per Class A Ordinary Share was recorded. The Company calculates earnings per share on the weighted average number of Class A Ordinary Shares outstanding. The weighted average number of Class A Ordinary Shares outstanding were 33,322,444 and 33,078,944 for the years ended December 31, 2019 and December 31, 2018, respectively.
Capital expenditures for Fiscal 2019 were $60.6 million, or a 5 percent increase from Fiscal 2018. During 2019, there was a significant amount of work carried out at the Company’s substations. Upgrades to the Bodden Town, South Sound, North Sound Road, and Rum Point substations were completed, increasing. The year 2019 was the second of the planned five-year project to replace the over 7,000 high pressure sodium (“HPS”) streetlights with light emitting diode (“LED”) technology. At the end of the year, over 4,200 lights had been replaced putting the Company ahead of schedule. The LED lights use significantly less energy than the older HPS technology providing environmental and financial benefits. the capacity and reliability of service to our customers in those areas.
Power generation costs for Fiscal 2019 totaled $115.9 million, 3% increase year-over-year. This increase was a result of higher fuel, renewables and generation costs.
In early 2019, OfReg accepted CUC’s Integrated Resource Plan and they continue to facilitate the connection of renewable energy sources to the grid. Renewable energy on the CUC grid for 2019 totaled 18.8 million kWh which amounts to 2.6% of the total energy supplied. CUC aims to have 25% of renewable energy on the grid by 2025 and to meet the objectives and targets of the National Energy Policy over the longer term.
The Customer Owned Renewable Energy (“CORE”) programme, which as at the end of 2019 was fully subscribed, allows residential and commercial customers to connect their solar panels or wind turbines to the CUC grid. At December 31, 2019, there were 432 CORE customers connected with total installed capacity of 5,611.2 kilowatts.
The Distributed Energy Resource (“DER”) programme was introduced in January 2018. This programme allows customers to consume electricity generated by their own renewable energy system without paying CUC for this energy under a type of net-metering arrangement. At December 31, 2019, there were 4 DER customers connected with total installed capacity of 494 kilowatts.
Plans for the future call for a significant increase in renewable energy projects over the next 10 years.
Future capital projects
The Company broke ground for the construction of the new Seven Mile Beach substation and work started on a new Prospect substation. Both substations are indoor type, designed to withstand major hurricanes and featuring all gas insulated switchgear manufactured by Siemens. The projects are scheduled for completion in the first and second quarter of 2020 respectively. The Frank Sound substation is scheduled for expansion and upgrade in 2021.
The Cayman Islands Utility Regulation and Competition Office (the “OfReg”) approved the Company’s request for a 20-megawatt Utility-Scale Battery for its Instantaneous Reserves project. The primary function of the utility-scale battery is to provide instantaneous or ‘spinning’ reserve in the event of a sudden loss in power generation. The utility-scale battery will instantly bridge the shortfall in energy until other generators can be brought online. By replacing the spinning reserve normally provided by CUC’s online generators, fewer generators will need to be online, significantly reducing the amount of fuel consumed for electricity production. As a direct result of this project, the Company expects that the initial magnitude of savings to the customers will be around $1 million per annum.
The project to replace the Supervisory Control and Data Acquisition (“SCADA”) system which controls both CUC’s generation and transmission and distribution (“T&D”) systems and to expand and upgrade the control room building is well advanced. The existing SCADA system was installed in 1999 and does not support the new data protocols that have emerged and that have become the new electrical utility industry standards. The new system will support current protocols and standards for continued reliable operations. It will improve integration, monitoring and automation of generation and T&D electrical devices. It will also support the anticipated growth in distributed renewable generation. The new control room and SCADA system is scheduled to be in operation by mid-2020.
There is also the continuation of the on-going five-year project to replace the over 7,000 high pressure sodium (“HPS”) streetlights with light emitting diode (“LED”) technology.
Shareholders are invited to attend the Annual General Meeting of the Company to be held on May 14, 2020 at noon at the Westin Grand Cayman Seven Mile Beach Resort & Spa on West Bay Road, Grand Cayman.
CUC’s 2019 Results and related Management’s Discussion and Analysis (“MD&A”) for the twelve-month period ended December 31, 2019 can be accessed at www.cuc-cayman.com (Investor Relations/Press Releases) and at www.sedar.com.