CUC Announces Unaudited First Quarter Results for the Period Ended March 31, 2015

Caribbean Utilities Company, Ltd. is listed for trading in United States dollars on the Toronto Stock Exchange

Grand Cayman, Cayman Islands, May 5, 2015 /CNW/ – Caribbean Utilities Company, Ltd. (TSX: CUP.U) (“CUC” or “the Company”) announced today its unaudited results for the First Quarter ended March 31, 2015 (all figures in United States dollars).

Net earnings for the three months ended March 31, 2015 (“First Quarter 2015”) totalled $3.3 million, a decrease of $0.1 million when compared to net earnings of $3.4 million for the three months ended March 31, 2014 (“First Quarter 2014”). This decrease was due mainly to higher depreciation and transmission and distribution costs. These items were partially offset by lower consumer services costs and higher other income.

After the adjustment for dividends on the preference shares of the Company, earnings on Class A Ordinary Shares for the First Quarter 2015 were $3.2 million, or $0.11 per Class A Ordinary Share, compared to earnings on Class A Ordinary Shares of $3.3 million or $0.11 per Class A Ordinary Share for the First Quarter 2014.

Sales for the First Quarter 2015 totalled 129.0 million kWh, a decrease of 1.7 million kWh in comparison to 130.7 million kWh for the First Quarter 2014. The average monthly temperature for the First Quarter 2015 was 79.5 degrees Fahrenheit as compared to average monthly temperature of 80.0 degrees for First Quarter 2014. Cooler temperatures reduce air conditioning load which can negatively impact the Company’s sales.

During the First Quarter 2015, there was an increase in the number of customers connected to the CUC grid. The total number of customers as at March 31, 2015 was 27,873, an increase of 435 customers, or 2%, compared to 27,438 customers as at March 31, 2014.

President and CEO, Mr. Richard Hew, stated that, “The Cayman Islands economy continues to show positive signs of growth with tourism air arrivals increasing 5.7% during the First Quarter 2015 over the same period last year and Gross Domestic Product growth for 2015 projected at 2%. There were also a number of positive developments recorded by the Company during the period under review. Most significantly, on March 5, 2015 the groundbreaking event took place to commence the installation of two new 18.5 megawatt (MW) 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 unit s and allow CUC to continue to provide customers with cost effective, safe and reliable electricity service. The new Plant will be one of the most efficient in the region and is anticipated to improve CUC’s current fuel efficiency by approximately 6%. The approximate cost of the Generation Expansion Project is US$85 million.

On May 4, 2015, the Company announced that it had successfully completed its previously announced rights offering (the “Offering”) which had commenced in March 2015. Under the Offering and related stand-by agreement, CUC raised gross proceeds of US$31,563,639 through the issue of 2,930,700 Class A Ordinary Shares at a price of US$10.77 per Class A Ordinary Share. After giving effect to the Offering, CUC has an aggregate of 32,237,709 Class A Ordinary Shares outstanding. Fortis Energy (Bermuda) Ltd. (“FEBL”), an existing shareholder of CUC, purchased an aggregate of 2,169,682 Class A Ordinary Shares under the Offering and a stand-by agreement with the Company. FEBL now holds 19,460,326 Class A Ordinary Shares, representing approximately 60.4% of the outstanding Class A Ordinary Shares of CUC, which percentage holding increased approximately 1.5% as a result of the Offering. FEBL is a wholly owned subsidiary of Fortis Inc. of St. John’s, Newfoundland and Labrador, Canada.

The Company intends to use the proceeds of the Offering to partially finance the Generation Expansion Project and for other on-going capital expenditures.

Customers saw a reduction in their bills during the First Quarter 2015, reflecting the fact that the Company’s average price per Imperial Gallon of fuel for the First Quarter 2015 decreased 32% to $3.24, compared to $4.75 for the First Quarter 2014. This reduction is the result of declining market prices, which began in late 2014, as well as the Cayman Islands Government’s reduction of import duty, which went into effect on January 1, 2015. The fuel factor mechanism passes 100% of the fuel costs through to customers who are now receiving the full benefit of these reductions.

During the First Quarter 2015, the Company and the Electricity Regulatory Authority (“ERA”) agreed on revisions to the Feed In Tariffs programme which now allows for 4 MW of Consumer- Owned Renewable Energy (“CORE”) Generation. These changes went into effect on April 1,
2015.

Mr. Hew added, “We are very pleased with the uptake for CORE, which currently has a subscribed capacity of approximately 2.6 MW. We believe the programme, 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 on our small island grid.”

The Company believes that reliability of service is critical to the island’s continued growth and development. Therefore, the Company continues to focus on investing to maintain or improving the level of service offered to customers. Reliability of service as measured by the average service availability index was 99.95% for the First Quarter 2015 and capital expenditures for the First Quarter 2015 were $7.1 million.

CUC’s First Quarter results and related Management’s Discussion and Analysis (“MD&A”) for the period ended March 31, 2015 are attached to this release and incorporated by reference and can be accessed by clicking the link at the end of this release or on SEDAR at www.sedar.com

The MD&A section of this report contains a discussion of CUC’s unaudited 2015 First Quarter results, the Cayman Islands economy, liquidity and capital resources, capital expenditures and the business risks facing the Company. The release and First Quarter MD&A can be accessed at www.cuc-cayman.com (Investor Relations/Press Releases) and at www.sedar.com.

CUC provides electricity to Grand Cayman, Cayman Islands, under an Electricity Generation Licence expiring in 2039 and an exclusive Electricity Transmission and Distribution Licence expiring in 2028. Further information is available at www.cuc-cayman.com.

Certain statements in this release, other than statements of historical fact, are forward-looking statements concerning anticipated future events, results, circumstances, performance or expectations with respect to the Company and its operations, including its strategy and financial performance and condition.

Forward looking statements include statements that are predictive in nature, depend upon future events or conditions, or include words such as “expects”, “anticipates”, “plan”, “believes”, “estimates”, “intends”, “targets”, “projects”, “forecasts”, “schedule”, or negative versions thereof and other similar expressions, or future or conditional verbs such as “may”, “will”, “should”, “would” and “could”. Forward looking statements are based on underlying assumptions and management’s beliefs, estimates and opinions, and are subject to inherent risks and uncertainties surrounding future expectations generally that may cause actual results to vary from plans, targets and estimates. Some of the important risks and uncertainties that could affect forward looking statements are described in the MD&A in the section labeled “Business Risks” and include but are not limited to operational, general economic, market and business conditions, regulatory developments and weather. CUC cautions readers that actual results may vary significantly from those expressed in forward-looking statements should certain risks or uncertainties materialize, or should underlying assumptions prove incorrect. Forward-looking statements are provided for the purpose of providing information about management’s current expectations and plans relating to the future. Readers are cautioned that such information may not be appropriate for other purposes. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise except as required by law.

About the Company

Caribbean Utilities Company, Ltd., (“CUC” or “the Company”) commenced operations as the only electric utility in Grand Cayman on May 10, 1966.

The Company currently has an installed generating capacity of 131.65 megawatts (MW), in addition to 8.25MW of temporary generation and the record peak load of 102.086 MW was experienced on June 3, 2010.

CUC is committed to providing a safe and reliable supply of electricity to over 27,000 customers. The Company has been through many challenging and exciting periods but has kept pace with Grand Cayman’s development for over 45 years.

The Company’s registered office address is 457 North Sound Road, P.O Box 38, Grand Cayman KY1-1101 and employs 198 employees.

About the Cayman Islands

The Cayman Islands, a United Kingdom Overseas Territory with a population of approximately 54,000, are comprised of three islands: Grand Cayman, Cayman Brac and Little Cayman. Located approximately 150 miles south of Cuba, 460 miles south of Miami and 167 miles northwest of Jamaica, the largest island is Grand Cayman with an area of 76 square miles.

A Governor, presently Her Excellency Mrs. Helen Kilpatrick, is appointed by her Majesty the Queen. A democratic society, the Cayman Islands have a Legislative Assembly comprised of representatives elected from each of Grand Cayman’s five districts as well as representatives from the Sister Islands of Cayman Brac and Little Cayman.

Letter to shareholders

Fellow Shareholders,

Higher depreciation and transmission and distribution costs as well as cooler temperatures during the three months ended March 31, 2015 resulted in a decrease in earnings and sales when compared to the same period for 2014. However, the Company also recorded an increase in customer numbers for the period under review.

Net earnings for the three months ended March 31, 2015 (“First Quarter 2015”) totaled $3.3 million, a decrease of $0.1 million when compared to net earnings of $3.4 million for the three months ended March 31, 2014 (“First Quarter 2014”). This decrease was due mainly to higher depreciation and transmission and distribution costs. These items were partially offset by lower consumer services costs and higher other income.

After the adjustment for dividends on the preference shares of the Company, earnings on Class A Ordinary Shares for the First Quarter 2015 were $3.2 million, or $0.11 per Class A Ordinary Share, compared to earnings on Class A Ordinary Shares of $3.3 million or $0.11 per Class A Ordinary Share for the First Quarter 2014.

Sales for the First Quarter 2015 totalled 129.0 million kilowatt hours (kWh), a decrease of 1.7 million kWh in comparison to 130.7 million kWh for the First Quarter 2014. The average monthly temperature for the First Quarter 2015 was 79.5 degrees Fahrenheit as compared to an average monthly temperature of 80.0 degrees for First Quarter 2014. Cooler temperatures reduce air conditioning load which can negatively impact the Company’s sales.

During the First Quarter 2015, there was an increase in the number of customers connected to the CUC grid. The total number of customers as at March 31, 2015 was 27,873, an increase of 435 customers, or 2%, compared to 27,438 customers as at March 31, 2014.

With the fall in global oil prices, the Company’s average price per IG of fuel for the First Quarter 2015 decreased 32% to $3.24, compared to $4.75 for the First Quarter 2014. The Company’s average price per IG of lubricating oil for the First Quarter 2015 increased to $12.88 when compared to $12.30 for the First Quarter 2014.

During the First Quarter 2015, the economy showed continued signs of recovery. According to the 2014 Third Quarter Economic Report from the Cayman Islands Economics and Statistics Office (“ESO”) which was released in March 2015, overall economic activity in the Cayman Islands grew by an estimated 2.3% in the first nine months of 2014 compared to 2013. Hotels and restaurants led the growth, with growth indicated for a number of other sectors including wholesale and retail trade, transport storage and communication, real estate, renting and business activities, electricity and water supply and agriculture and fishing. Gross Domestic Product growth for 2014 is forecasted by the ESO at 2.1% and
2.0% for 2015.

In March 2015, the Cayman Islands Government released the 2014 Consumer Price Index Report (“CPI”). The average CPI for 2014 increased 1.3% from the average CPI in 2013. This increase was the result of increasing inflation in all quarters of 2014, the highest being in the first quarter at 2.3%.

The tourism sector remains a key contributor to the local economy. First Quarter 2015 air arrivals were up 5.7% when compared to 2014 and cruise arrivals increased marginally by
0.2% when compared to 2014. According to the Department of Tourism, March 2015 saw the highest number of tourists arriving by air in a single month. Air arrivals have a direct

impact on the Company’s sales growth as these visitors are stay-over visitors who occupy local accommodation services. Cruise arrivals have an indirect impact as they affect the opening hours of the establishments operating for that market.

During the period under review, the Company broke ground to officially commence the construction of the largest capital expenditure project undertaken by our Company to date.

The Company has entered into an agreement with Burmeister & Wain Scandinavian Contractor A/S (“BWSC”) of Denmark and MAN Diesel & Turbo SE (“MAN”) of Germany. This agreement covers the purchase and turnkey installation of a new 39.7 MW power plant which is comprised of two 18.5 megawatt (“MW”) V48/60 medium-speed diesel generating units, one 2.7 MW waste heat steam turbine, and the associated auxiliary equipment. The project will require a significant, long-term financial undertaking by CUC to deliver the benefits of safe, reliable, and highly efficient production of electricity for consumers in Grand Cayman. The approximate cost of the Generation Expansion Project is US$85 million. As a result, in March 2015, the Company announced the commencement of a rights offering (the “Offering”). The Offering was successfully completed on May 4, 2015. Under the Offering and related stand-by agreement, the Company raised gross proceeds of US$31,563,639 through the issue of 2,930,700 Class A Ordinary Shares at a price of US$10.77 per Class A Ordinary Share. The Company intends to use all of the proceeds of the Offering to finance a portion of the development of its new 39.7 MW diesel power plant, as part of the Generation Expansion Project, and other on-going capital expenditures.

The Company remains engaged and focussed on bringing renewable energy to Grand Cayman. During the First Quarter 2015, the Company and the Electricity Regulatory Authority (“ERA”) agreed on revisions to the Feed -In Tariff (“FIT”) programme which now allows for 4 MW of Consumer-Owned Renewable Energy (“CORE”) Generation. These changes went into effect on April 1st.

The ERA has also agreed that under the FIT programme, the rates paid to customers for all renewable energy generated will be CI 32 cents per kWh for residential customers and CI 28 cents per kWh for commercial customers. These rates apply to new CORE contracts submitted after April 1st, 2015. The rates paid to existing CORE customers (submitted prior to April 1st, 2015) will remain unchanged.

To date, there has been a significant uptake of CORE customers who are providing electricity through renewable energy means, while having the opportunity to interconnect with and benefit from the reliability of CUC’s electricity distribution system.

In addition, one of the renewable energy providers currently working with the Company has applied for and received permission from the Planning Department of the Cayman Islands Government to start the development of a 5 MW solar facility in the district of Bodden Town. A Power Purchase Agreement between CUC and the renewable energy provider has been submitted to the ERA for review. The Company believes that there are environmental and economic benefits to be derived from renewable energy sources. These renewable energy sources will replace some of the diesel fuel presently used in the Company’s generators and reduce the reliance on and the emissions from fossil fuels.

The Company remains focused on providing its customers with a high level of customer service in a safe, reliable and efficient manner while meeting stakeholder expectations.

J.F. Richard Hew
President & Chief Executive Officer

May 4, 2015

See attached financial statements and tables. Click to enlarge

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