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2004/2005
Second Quarter Report
October 31, 2004
Caribbean Utilities Company, Ltd.
457 North Sound Road, P.O. Box 38 GT, Grand Cayman, Cayman Islands
Tel: (345) 949-5200 p Fax: (345) 949-4621
E-mail: [email protected] p Website: www.cuc-cayman.com
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2004/2005 SECOND QUARTER REPORT
2004/2005 SECOND QUARTER REPORT
To Our Shareholders
Power, FortisOntario, Maritime Electric Company, FortisAlberta,
FortisBC and Belize Electric Company.
We have also received assistance from MasTec, Inc. of North
Carolina, the Barbados Light and Power Company, Bermuda
Electric Light Company and Provo Power Company of the Turks
and Caicos. The Barbados, Bermuda and Turks and Caicos
contingents were deployed by the Caribbean Electric Utility
Services Corporation under CARILEC’s Hurricane Action Plan,
Dear Shareholder:
CUC completed today, November 30, the restoration of service
to all areas across the Island, well within the 90-day period that
was initially projected following the passing of Hurricane Ivan on
September 12. Of CUC’s total pre-Ivan customer base of 21,600,
an estimated 20% of electricity consumers cannot be
reconnected at this time as major repairs or rebuilding of their
premises is necessary. Sufficient generating capacity of 83
megaWatts (MW) is available to meet anticipated third quarter
demand of 50 MW.
Our successful restoration programme would not have been
possible without the commitment of our employees and the
assistance of our strategic partners. CUC’s largest shareholder,
Fortis Inc., an electrical utility holding company based in St.
John’s, Newfoundland, Canada, reacted quickly to our call for
help following the passage of Hurricane Ivan on September 12.
Three rotations of Fortis personnel have occurred since
September 18 to assist with the rebuilding effort. In total, 130
Fortis employees have contributed to the restoration,
representing six of Fortis’ operating companies: Newfoundland
Caribbean Utilities Company, Ltd.
Financial Highlights
The restoration efforts following the passing of Hurricane Ivan have remained
on schedule because of the presence of crews from Fortis Inc. of Canada,
MasTec, Inc. of the United States and Caribbean crews under CARILEC’s
Hurricane Action Plan, which include Bermuda, Barbados and the Turks &
Caicos Islands.
Six months ended October 31
2004
2003
Change
Change %
Operating Revenues
51,218,357
56,652,791
(5,434,434)
-9.6%
Cash Flow from Operations *
11,031,521
18,654,844
(7,623,323)
-40.9%
Earnings Applicable to Common Shares
(6,557,976)
11,433,029
(17,991,005)
-157.4%
Basic Earnings per Common Share
(0.26)
0.46
(0.72)
-156.5%
Diluted Earnings per Common Share
(0.26)
0.46
(0.72)
-156.5%
* Before working capital adjustments
1.
C ARIBBEAN UTILITIES COMPANY, LTD.
C ARIBBEAN UTILITIES COMPANY, LTD.
2.
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2004/2005 SECOND QUARTER REPORT
2004/2005 SECOND QUARTER REPORT
To Our Shareholders
which provides assistance to member utilities following the
aftermath of a hurricane strike.
We are very grateful to the crews from Fortis, MasTec, Barbados
Light and Power, Bermuda Electric and Provo Power for their
generous support and dedication to restoring customer service.
CUC began an extensive hurricane risk assessment process
following the passing of Hurricane Gilbert in 1988. This led the
Company to strengthen its infrastructure over the years to
enable it to recover quickly from an event as devastating as a
category-five hurricane such as Hurricane Ivan. We established
hurricane-grade construction standards in the early 1990s that
continue to be met for any new capital investment, whether it be
for generation, transmission and distribution (T&D) or
otherwise. These standards proved to be critical during
Hurricane Ivan, and the decisions made over the past 16 years
have paid off in the wake of the storm.
The Company has US$100 million insurance in place that
includes property coverage for its North Sound Road plant,
remote substations and all T&D equipment within 1,000 feet of
the main plant and substations; and includes US$55 million in
business interruption insurance per annum with a 24-month
indemnity period. Terms and coverages also include a maximum
US$4 million deductible on property insurance and a 45-day
deductible on business interruption insurance. T&D insurance
outside of 1,000 feet from the boundaries of the main plant and
substations is excluded, as the Company was unable to obtain
T&D coverage at economic rates.
Estimates for CUC’s damage claims caused by Hurricane Ivan are
US$27 million for property and US$42 million in business
For example, our two-story Hurricane Centre at our North
Sound Plant was built to withstand 200-mph winds, and it
sheltered many of our employees during the most recent storm
and served as a command center following the hurricane. Our
new integrated control room and indoor North Sound, South
Sound and Frank Sound gas-insulated substations, the backbone
of our electrical T&D infrastructure, were constructed to
withstand a category-five hurricane and were largely unaffected
by Ivan. Our 36 MW engine room commissioned in 2000 was
operational within days of the storm’s passage due to the
superior building and civil engineering design recommended by
our strategic alliance partner MAN B&W in 1998.
In addition, our recently commissioned North Sound submarine
cable enabled us to reconnect customers in West Bay within four
weeks, or two months earlier than if we had not installed the
cable. Furthermore, we only lost six out of 226 concrete
transmission poles throughout the Island, a further testament to
their quality design and construction.
These examples illustrate in hindsight that we made the right
decisions in the building of our plant and T&D facilities, and to
have done otherwise would have been catastrophic for Grand
Cayman. To quote a well-known adage, you truly get what you
pay for, and anyone who may have claimed that we overbuilt our
system has now been proven wrong. While Ivan has affected
25% of our T&D system, we must continue to design and build
our electrical and generation infrastructure to withstand such
storms as Hurricane Ivan. To do otherwise would jeopardise our
ability to provide a world-class, reliable service to our customers.
3.
C ARIBBEAN UTILITIES COMPANY, LTD.
In recent years, CUC has strengthened its infrastructure to enable it to recover
quickly from an event as devastating as Hurricane Ivan. Although the
Company suffered damage to 25% of its T&D system, only six out of 226
concrete transmission poles were lost as a result of the storm. The poles were
designed by management consulting and engineering firm R.W. Beck, Inc. of
the United States and constructed by MasTec, Inc. also of the United States.
C ARIBBEAN UTILITIES COMPANY, LTD.
4.
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To Our Shareholders
The non-binding Heads of Agreement signed by CUC and the
Cayman Islands Government in June 2004 has expired following
the passing of Hurricane Ivan. The Company will meet with
Government at the appropriate time to assess the status of the
Licence renewal negotiations, but it is important to note that the
circumstances and the context under which the negotiations
took place prior to the hurricane have been substantially altered
by the storm and its aftermath. Future public updates on this
particular matter will be given as and when appropriate to do
so. We continue to operate under our existing Licence, which
expires in 2011.
We would like to thank our employees, many of whom suffered
personal losses from Hurricane Ivan, for their hard work,
dedication and commitment to restoring service to our
customers. CUC is grateful for your continued support, and we
would also like to extend our best wishes for a happy and
prosperous New Year.
CUC’s state-of-the-art integrated control system facilitated the safe
energisation of distribution feeders across Grand Cayman during the
restoration effort. All employees worked tirelessly since the passing of
Hurricane Ivan to complete the restoration of service to our customer base of
over 21,000.
interruption over the 24-month indemnity period. The net book
value of T&D assets written off was US$7.5 million. The
Company had in place a Hurricane Fund with over US$4 million
invested in high-quality securities to cover deductibles and
uninsured risks, as well as a US$5.5 million line of credit and a
US$10 million bridging loan facility with the Royal Bank of
Canada for capital expenditures.
Peter A. Thomson
President & Chief Executive Officer
November 30, 2004
Cash flow this quarter has been severely impacted due to loss of
revenues during the 45-day deductible period, interruption to
our billing and collections procedures, and outlays for the
restoration of T&D services. We are still incurring capital
expenditures in connection with the restoration process. In
addition, we will be unable to determine our final Hurricane
Ivan-related claim until the restoration process is completed.
Given these uncertainties, the Board of Directors elected not to
declare a dividend at this time. We would like to assure
shareholders that the financial integrity of the Company is
secure. The terms of our existing Licence permit the Company to
recover Hurricane Ivan-related costs through rate adjustments.
At the opportune time, the Company will make proposals to
Government on how best to implement rate adjustments and
recover costs that will result from Hurricane Ivan.
5.
C ARIBBEAN UTILITIES COMPANY, LTD.
C ARIBBEAN UTILITIES COMPANY, LTD.
6.
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2004/2005 SECOND QUARTER REPORT
2004/2005 SECOND QUARTER REPORT
Management’s Discussion & Analysis
(expressed in United States Dollars)
The following material, which is unaudited, should be read in
conjunction with management’s discussion and analysis of financial
condition and results of operations, and the financial statements and
notes thereto, of Caribbean Utilities Company, Ltd. (CUC or the
Company) for the six months ended October 31, 2004.
The material that follows contains forward-looking statements. By their
very nature, forward-looking statements are subject to certain risks and
uncertainties that may cause actual results to vary from plans, targets
Caribbean Utilities Company, Ltd.
Financial Highlights
Three months ended
2004
Operating Revenues
Electricity Sales
Fuel Factor
Power Generation Expenses
General and Administration
Consumer Service and Promotion
Transmission and Distribution
Depreciation and Amortisation
Maintenance
Interest Expense and Preference Dividends
Earnings Year-to-Date
Earnings per Ordinary Share
Dividends paid per Ordinary Share
Net Generation (kWh)
Peak Load Gross (MW)
KiloWatt-hour Sales (kWh)
Total Customers
2003
20,675,767
28,265,346
15,670,766
23,342,966
5,005,001
4,922,380
13,033,361
12,551,188
2,333,596
2,164,549
361,581
346,472
7,765,743
502,877
3,427,656
3,247,311
4,891,161
1,473,631
(2,051,213) (2,023,884)
(12,202,332)
6,461,153
(0.49)
0.26
0.165
0.160
81,561,743 127,500,993
85.03
79.06
83,492,166 120,462,696
20,404
20,643
Earnings
Due to the impact of Hurricane Ivan, earnings applicable to Class
A Ordinary Shares for the second quarter were negative US$12.3
million as compared to positive earnings of US$6.3 million for
the second quarter last year. On a year-to-date basis, earnings
applicable to Class A Ordinary Shares fell to negative US$6.6
million, versus positive earnings of US$11.4 million for the first
six months of last year. Earnings for the second half of the
current year are projected to move positive as the customer
service restoration (expected to reach 75% of pre-Ivan load by
year-end) continues, and proceeds from business interruption
insurance claims are received.
7.
C ARIBBEAN UTILITIES COMPANY, LTD.
and estimates. Such risks and uncertainties include, but are not limited
to, general economic, market and business conditions, regulatory
developments, weather, competition, etc. CUC cautions readers that
should certain risks or uncertainties materialise, or should underlying
assumptions prove incorrect, actual results may vary significantly from
those expected. 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.
October 31
Change
(7,589,579)
(7,672,200)
82,621
482,173
169,047
15,109
7,262,866
180,345
3,417,530
(27,329)
(18,663,485)
(0.75)
0.005
(45,939,250)
5.97
(39,970,530)
(239)
Six months ended October 31
2004
51,218,357
39,491,922
11,726,435
27,110,612
5,020,509
697,690
8,373,669
6,886,670
6,388,499
(4,185,765)
(5,857,976)
(0.26)
0.330
218,695,714
85.03
209,928,078
20,404
2003
56,652,791
45,498,682
11,154,109
26,128,719
4,172,736
655,232
1,075,365
6,549,778
3,358,446
(3,850,850)
12,113,029
0.46
0.320
254,523,873
79.06
237,892,383
20,643
Change
(5,434,434)
(6,006,760)
572,326
981,893
847,773
42,458
7,298,304
336,892
3,030,053
(334,915)
(17,971,005)
(0.72)
0.01
(35,828,159)
5.97
(27,964,305)
(239)
Revenues
Basic electricity sales (which prior to Hurricane Ivan were
growing year-over-year by more than 6%) declined 32.9% in the
second quarter to US$15.7 million from US$23.3 million. For the
six months ending October 31, 2004, basic revenue sales
declined 13.2%. The decline in revenues in the second quarter is
due to the impact of Hurricane Ivan.
Power Generation
Power generation expenses grew by 3.8% in the second quarter.
The primary reason is the write-off of US$2.8 million in deferred
fuel costs to earnings. Unrecovered fuel factor-related fuel costs
are deferred on a two-month basis and matched against the
collection of related fuel factor revenues. Hurricane Ivan resulted
C ARIBBEAN UTILITIES COMPANY, LTD.
8.
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Management’s Discussion & Analysis
in lower sales and lower fuel factor revenues, which led to a
commensurate reduction of the fuel costs deferred on the
balance sheet. This trend is expected to reverse as sales and fuel
factor revenues increase in the second half of the year.
Additionally, any unrecovered fuel costs will be recovered
through the adjustment to basic rates at year-end.
General and Administration
General and administration expenses include a US$144,000
expense relating to the liquidation of the Hurricane Fund. This is
the difference between the liquidated value of the Hurricane
Fund and the value of the fund carried on the balance sheet at
cost.
Transmission and Distribution
Transmission and distribution (T&D) expenses include a charge
of US$7.5 million for the write-off of impaired T&D assets
damaged by Hurricane Ivan. The storm affected 25% of the
Company’s T&D system.
Depreciation
Depreciation and amortisation expense increased by 5.6% this
quarter over the second quarter of 2004 as a result of increased
depreciation from the completion of various capital projects. We
expect depreciation and amortisation expense to increase
approximately 9% in fiscal 2005 over 2004 and will be
unaffected by Hurricane Ivan.
Teamwork: Employees from FortisOntario, Newfoundland Power,
FortisAlberta and CUC pull their resources together as they work to re-fit a
transmission pole outside the Governor’s Residence on West Bay Road.
9.
C ARIBBEAN UTILITIES COMPANY, LTD.
Significant Changes in Balance Sheet
From April 30, 2004 to October 31, 2004
(Unaudited)
Balance Sheet Account
Increase
(Decrease)
(millions)
Explanation
Cash and Due from
Banks
(16.3)
The decrease in cash is
primarily due to the
Company’s payments for
property, plant and
equipment in the
reconstruction of assets
following the passage of
Hurricane Ivan and the
payment of dividends of
$9 million.
Accounts Receivable Trade
5.4
The accounts receivable
increase is due to postIvan reduction in bill
collections.
Other Receivable Insurance
24.9
The insurance receivable
increase is due to the
business interruption and
property insurance claims
related to Ivan that
management considers
should be accrued at the
reporting date.
Property, Plant and
Equipment
(20.0)
The decrease in net property,
plant and equipment is
comprised of capital
expenditures of $20.2 million
less (i) depreciation expense
of $6.9 million and (ii) the
net book value of assets written
down and disposed of $33.3
million primarily due to Ivan.
Accounts Payable and
Accrued Expenses
6.0
This accounts payable and
accrued expenses increase is
due to higher payables as a
result of the reconstruction
following Ivan.
Retained Earnings
(10.7)
The decrease in retained
earnings is due to a net loss
for the period of $5.9 million,
first quarter Class A
dividends of $4.1 million
and Class B preference
dividends of $700,000.
Long-Term Investments
(4.1)
The decrease in investments
is due to the liquidation of
the Hurricane Fund
Investment following Ivan to
meet cash flow requirements.
C ARIBBEAN UTILITIES COMPANY, LTD.
10.
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Management’s Discussion & Analysis
Maintenance
Maintenance expense increased by 231.9% in the second
quarter of fiscal 2005 when compared to last year’s second
quarter. This is due to a charge of US$2.4 million for the
insurance deductible net of indemnification for pre-1990 assets
damaged during Hurricane Ivan.
Interest Expense
The 1.35% increase in financing expense is due to the increased
expenses associated with the expensing of interest that was
being capitalised during construction. These projects are now
completed and capitalisation of interest to these projects has
ceased.
Stock Options
As outlined in Note 2 to the Financial Statements, the Company
has adopted a policy of recording compensation expense upon
the issuance of employee stock options under its Executive Stock
Option Plan. Under the fair value method, compensation
expense amortised for the quarter ended October 31, 2004 is
US$15,644.
Hurricane Ivan
The following summary outlines the costs and losses associated
with Hurricane Ivan as reflected in these unaudited financial
statements. Also summarised are amounts recorded as
receivables under insurance claims. Negotiations with insurance
adjusters and underwriters with respect to certain claims are
ongoing. However, management only recognises insurance
receivables when claims are agreed or negotiations are
sufficiently advanced for them to be reasonably assured as to the
recovery of the associated claims.
Costs Associated with Hurricane Ivan
Loss or
Cost
Insurance
Recoveries
Net
US$ millions
US$ millions
US$ millions
Inventories
1.0
1.0
0
T&D Property, Plant
and Equipment
7.5
0
7.5
Other Property, Plant
and Equipment
25.7
23.3
2.4
Revenue Losses associated with Hurricane Ivan
Business Interruption
5.6
0.6
5.0*
* The $5 million net loss relates to the lost revenue during the
deductible period which ended October 25, 2004.
Teamwork: Members of CUC line crews have forged stronger bonds with their
fellow employees as the long, arduous hours spent in the field restoring
service to customers has strengthened their reliance on each other.
11.
C ARIBBEAN UTILITIES COMPANY, LTD.
Business Interruption Insurance
The Company has made a claim for business interruption loss.
Typically, the ultimate recovery under a business interruption
policy is highly judgmental and subject to substantial
negotiations between the insured and the insurance
company. Given the subjectivity of the ultimate settlement
C ARIBBEAN UTILITIES COMPANY, LTD.
12.
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Management’s Discussion & Analysis
Gross Generation by Day in 2004 compared with 2003
and the lengthy claim coverage period,
many contingencies may exist in the
ultimate settlement.
2004
1,400,000
1,200,000
1,000,000
0,800,000
0,600,000
0,400,000
0,200,000
24/11/04
17/11/04
10/11/04
03/11/04
27/10/04
20/10/04
13/10/04
06/10/04
29/09/04
22/09/04
Date
Capital Structure
The Company’s balance sheet remains very
strong. We do not plan to undertake any
additional borrowings or Ordinary Share
offerings during the 2005 fiscal year.
15/09/04
0,000,000
08/09/04
kWh
Licence
The non-binding Heads of Agreement
signed by CUC and the Cayman Islands
Government in June 2004 has expired
following the passing of Hurricane Ivan. The
Company will meet with Government at
the appropriate time to assess the status of
the Licence renewal negotiations, but it is
important to note that the circumstances
and the context under which the
negotiations took place prior to the
hurricane have been substantially altered by
the storm and its aftermath. Future public
updates on this particular matter will be
given as and when appropriate to do so. We
continue to operate under our existing
Licence, which expires in 2011.
2003
1,600,000
The above table represents a comparison of the daily gross generation
between September 8 and November 24, 2003 with the same period in
2004. Hurricane Ivan moved over Grand Cayman on September 11 and
September 12, 2004.
Capital Structure
Six months ended October 31
Total debt
Shareholders’
Equity
2004
%
133,963,939
53.4%
116,733,605
46.6%
2003
%
Total debt
138,864,952
52.5%
Shareholders’
Equity
125,839,560
47.5%
Capital Expenditures
27,731,945
30,000,000
25,000,000
20,193,245
20,041,232
20,000,000
15,000,000
10,000,000
9,949,666
US$
05,000,000
Six months
ended
Oct. 2003
13.
C ARIBBEAN UTILITIES COMPANY, LTD.
Six months
ended
Oct. 2004
Year
ended
April 2003
Year
ended
April 2004
C ARIBBEAN UTILITIES COMPANY, LTD.
14.
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2004/2005 SECOND QUARTER REPORT
Balance Sheet (Unaudited)
(expressed in United States Dollars)
Assets
Current Assets
Cash and due from banks
Accounts receivable - trade
Other receivable - insurance
Inventories
Prepayments
Long-term investments
Property, plant and equipment
Other assets
(Note 10)
(Note 7)
Total Assets
Liabilities and Shareholders’ Equity
Current Liabilities
Current portion of long-term debt
Accounts payable and accrued expenses
Consumers’ deposits and advances for construction
Dividends declared
(Note 8)
Long-term debt
Shareholders’ Equity
Share capital
Share premium
Redetermination surplus
Contributed surplus
Retained earnings
Total Liabilities and Shareholders’ Equity
15.
C ARIBBEAN UTILITIES COMPANY, LTD.
(Note 2)
As of
Oct. 31, 2004
US$
As of
Oct. 31, 2003
US$
As of
April 30, 2004
US$
1,691,640
13,264,971
24,916,667
1,835,210
1,166,748
20,156,561
8,473,146
2,747,404
1,302,557
18,004,208
7,878,761
2,818,277
651,449
42,875,236
32,679,668
29,352,695
226,982,274
3,842,326
4,029,897
242,707,024
5,726,505
4,077,640
246,909,500
5,761,016
273,699,836
285,143,094
286,100,851
4,682,446
20,159,862
2,842,433
-
4,903,724
13,292,356
3,089,377
4,056,849
4,873,967
14,124,150
2,956,004
4,182,655
27,684,741
25,342,306
26,136,776
129,281,490
133,961,228
133,520,997
156,966,231
159,303,534
159,657,773
1,734,898
38,257,824
67,787
76,673,096
1,724,534
44,640,664
93,243
79,381,119
1,730,058
37,328,408
36,500
87,348,112
116,733,605
125,839,560
126,443,078
273,699,836
285,143,094
286,100,851
C ARIBBEAN UTILITIES COMPANY, LTD.
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2004/2005 SECOND QUARTER REPORT
Statement of Earnings (Unaudited)
(expressed in United States Dollars)
Three months ended October 31
Operating Revenues
Electricity sales
Fuel factor
Operating Expenses
Power generation
General and administration
Consumer service and promotion
Transmission and distribution
Depreciation and amortisation
Maintenance
Six months ended October 31
2004
US$
2003
US$
2004
US$
2003
US$
15,670,766
5,005,001
23,342,966
4,922,380
39,491,922
11,726,435
45,498,682
11,154,109
20,675,767
28,265,346
51,218,357
56,652,791
13,033,361
2,333,596
361,581
7,765,743
3,427,656
4,891,161
12,551,188
2,164,549
346,472
502,877
3,247,311
1,473,631
27,110,612
5,020,509
697,690
8,373,669
6,886,670
6,388,499
26,128,719
4,172,736
655,232
1,075,365
6,549,778
3,358,446
31,813,098
20,286,028
54,477,649
41,940,276
Operating Income
(11,137,331)
7,979,318
(3,259,292)
14,712,515
Other Income/(Expenses)
Interest expense and preference dividends
Foreign exchange gain
Other income
(2,051,213)
157,506
828,706
(2,023,884)
172,617
333,102
(4,185,765)
432,706
1,154,375
(3,850,850)
642,017
609,347
(1,065,001)
(1,518,165)
(2,598,684)
(2,599,486)
(12,202,332)
(112,500)
6,461,153
(112,500)
(5,857,976)
(700,000)
12,113,029
(680,000)
Earnings on Class A Ordinary Shares
(12,314,832)
6,348,653
(6,557,976)
11,433,029
Weighted average number of Class A Ordinary
Shares issued and fully paid
Earnings per Class A Ordinary Share
Fully diluted earnings per Class A Ordinary Share
Dividends declared per Class A Ordinary Share
24,920,565
(0.49)
(0.49)
0.000
24,735,125
0.26
0.26
0.165
24,922,877
(0.26)
(0.26)
0.165
24,732,065
0.46
0.46
0.325
89,002,705
(12,202,332)
(127,277)
-
72,828,312
6,461,153
91,654
87,348,112
(5,857,976)
(4,817,040)
-
67,084,782
12,113,029
183,308
76,673,096
79,381,119
76,673,096
79,381,119
(Note 10)
(Net Loss)/Earnings for the Period
Preference dividends paid - Class B
Statement of Retained Earnings (Unaudited)
(expressed in United States Dollars)
Balance at Beginning of Period
(Net Loss)/Earnings for the Period
Dividends
Transfer from Redetermination Surplus
Balance at End of Period
17.
C ARIBBEAN UTILITIES COMPANY, LTD.
C ARIBBEAN UTILITIES COMPANY, LTD.
18.
19.
C ARIBBEAN UTILITIES COMPANY, LTD.
-
Stock-based compensation
-
Stock-based compensation
24,946,285
-
(Net Loss)/Earnings
for the period
Balance at
October 31, 2004
-
37,318
1,484,898
-
-
-
2,221
1,482,677
-
-
-
2,619
250,000
-
-
-
-
250,000
-
-
-
-
250,000
250,000
-
-
-
-
250,000
-
-
-
-
250,000
Amount
$
(127,277)
-
89,002,705
-
6,344,357
(4,689,764)
-
87,348,112
38,257,824
-
76,673,096
-
67,787
15,644
-
-
-
52,143
15,643
-
-
-
36,500
Retained Contributed
Earnings
Surplus
$
$
- (12,202,332)
-
416,746
37,841,078
-
-
-
512,670
37,328,408
Share
Premium
$
116,733,605
15,644
(12,202,332)
(127,277)
418,967
128,628,603
15,643
6,344,357
(4,689,764)
515,289
126,443,078
Total
Shareholders’
Equity
2004/2005 SECOND QUARTER REPORT
Dividends
Issue of Ordinary
Shares (net)
24,908,967
-
Earnings for the period
Balance at
July 31, 2004
-
43,992
1,480,058
Number
of Shares
11:50 AM
Dividends
24,864,975
Issue of Ordinary
Shares (net)
Amount
$
12/1/2004
Balance at
April 30, 2004
Number of
Shares
9% Cumulative Participating
Class B Preference Shares
Share Capital
Class A Ordinary Shares
(expressed in United States Dollars)
Statement of Changes in Shareholders’ Equity (Unaudited)
qroctober04.qxd
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2004/2005 SECOND QUARTER REPORT
C ARIBBEAN UTILITIES COMPANY, LTD.
20.
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Page 12
2004/2005 SECOND QUARTER REPORT
2004/2005 SECOND QUARTER REPORT
Cash Flow Statement (Unaudited)
(expressed in United States Dollars)
Three months ended October 31
2004
US$
Operating Activities
(Net loss)/ earnings
Depreciation and amortisation
Stock-based compensation
Loss/(Profit) on disposal of fixed assets
Net increase in non-cash working
capital balances related to operations
Financing Activities
Proceeds from the issue of debt
Proceeds of share issues
Repayment of debt
Redemption of preference shares
Dividends paid
Investing Activities
Sale/(purchase) of investments
Proceeds of sale of fixed assets
Purchase of property, plant and equipment
Interest capitalised during construction
(Decrease)/Increase in Net Cash
Net Cash Beginning of Period
Net Cash End of Period
21.
C ARIBBEAN UTILITIES COMPANY, LTD.
2003
US$
Six months ended October 31
2004
US$
2003
US$
(12,202,332)
6,461,153
(5,857,976)
12,113,029
3,427,656
15,644
9,991,056
3,247,311
(1,368)
6,886,670
31,287
9,971,540
6,549,778
(7,963)
1,232,024
9,707,096
11,031,521
4,935,354
1,053,295
1,234,658
6,167,378
10,760,391
12,266,179
11,377,698
418,968
(198,292)
(4,221,482)
732,799
(118,884)
(4,065,189)
934,256
(4,431,028)
(8,999,696)
20,000,000
2,032,163
(1,838,812)
(6,007,500)
(8,565,565)
(4,000,806)
(3,451,274)
(12,496,468)
5,620,286
4,097,152
13,810
(16,573,648)
(152,041)
(28,203)
1,368
(5,290,127)
(300,306)
4,077,640
33,326
(19,940,291)
(252,954)
(29,490)
7,963
(9,183,651)
(766,015)
(12,614,727)
(5,617,268)
(16,082,279)
(9,971,193)
18,654,844
(7,277,146)
(10,448,155)
12,139,795
1,691,849
18,464,712
(16,312,568)
18,004,208
7,026,791
13,129,770
1,691,640
20,156,561
1,691,640
20,156,561
C ARIBBEAN UTILITIES COMPANY, LTD.
22.
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2004/2005 SECOND QUARTER REPORT
2004/2005 SECOND QUARTER REPORT
Notes to Financial Statements (Unaudited)
(expressed in United States Dollars)
1.
Financial Statement Presentation
These unaudited financial statements include all of the adjustments
that, in management’s opinion, are necessary for a fair presentation.
These interim financial statements have been prepared using the same
accounting policies as those used in preparing the most recent annual
financial statements. These interim financial statements do not include
all of the disclosures normally found in the annual financial statements
and should be read in conjunction with the Company’s financial
statements for the year ended April 30, 2004.
2.
The Company accounts for its executive stock option grants using the
fair value method where any compensation expense is amortised over
the vesting period of the options.
The Company also maintains defined benefit and defined contribution
pension plans for its employees. The pension costs of the defined
benefit plan are actuarialy determined using the projected benefits
method prorated on service and best estimate assumptions. Past
service costs from plan initiation are amortised on a straight-line basis
over the remaining service period of the employee active at the date of
initiation. Actuarial gains or losses are recognised in income in the year
in which they occur. The cost of the defined contribution pension plan
is expensed as incurred.
Hurricane Ivan, a catastrophic category five hurricane, hit Grand
Cayman on September 12, 2004. Under Canadian GAAP, the Company
is required to recognise the cost associated with the storm in the period
in which the event took place. The amount represents a fair estimate of
the cost at this time. Amounts associated with the insurance claims are
recognised as receivable when recovery becomes reasonably assured.
The final amount is to be determined before the end of the fiscal year
(Note 10).
Balance beginning of period
Customer Share Purchase and
Dividend Reinvestment Plans
Employee Share Purchase Plan
Executive Stock Option Plan
C ARIBBEAN UTILITIES COMPANY, LTD.
Number of
Shares
Amount
US$
24,908,967
1,482,677
23,718
13,600
1,411
810
24,946,285
1,484,898
Year-to-Date October 31, 2004
Balance beginning of period
Customer Share Purchase and
Dividend Reinvestment Plans
Employee Share Purchase Plan
Executive Stock Option Plan
4.
Number of
Shares
Amount
US$
24,864,975
1,480,058
61,910
19,400
3,685
1,155
24,946,285
1,484,898
Share Options
The shareholders of the Company approved an Executive Stock Option
Plan on October 24, 1991, under which certain employees, officers and
Directors may be granted options to purchase Class A Ordinary Shares
of the Company.
The exercise price per share in respect of options is equal to the fair
market value of the Class A Ordinary Shares on the date of grant. Each
option is for a term not exceeding 10 years and will become exercisable
on a cumulative basis at the end of each year following the date of
grant. The maximum number of Class A Ordinary Shares under option
shall be fixed and approved by the shareholders of the Company from
time to time and is currently set at 1,051,677. Options are forfeited if
they are not exercised prior to their respective expiry date or upon
termination of employment prior to the completion of the vesting
period.
Capital Stock
Authorised:
a) 60,000,000 (2003: 60,000,000) Class A Ordinary Shares of
CI$0.05 each
b) 250,000 (2003: 250,000) 9% Cumulative, Participating Class B
Preference Shares of $1.00 each (non-voting)
c) 1 Cumulative, Participating, Class D Preference Share of
CI$0.56 (non-voting)
23.
Quarter ended October 31, 2004
Significant Accounting Policies
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
3.
Common Shares were issued during the period for cash as follows:
Quarter Ended
Oct. 31, 2004
Year-to-Date
Oct. 31, 2004
Outstanding at beginning
of period
Granted
Exercised
Forfeited
950,821
(13,600)
-
961,021
(19,400)
(4,400)
Outstanding at end of period
937,221
937,221
C ARIBBEAN UTILITIES COMPANY, LTD.
24.
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2004/2005 SECOND QUARTER REPORT
Notes to Financial Statements (Unaudited)
(expressed in United States Dollars)
The position with respect to outstanding unexercised options as at
October 31, 2004 was as follows:
Date of
Number of Class
Exercise
Term of
Grant
A Ordinary Shares
Price
Option
under Option
$
June 8, 2000
266,921
10.05
5 years
July 18, 2001
451,200
11.46
10 years
September 22, 2003
219,100
13.78
10 years
5. Foreign Exchange
The closing rate of exchange on October 31, 2004 as reported by the
Bank of Canada for the conversion of U.S. dollars into Canadian dollars
was Cdn.$1.2180 per US$1.00. The official exchange rate for the
conversion of Cayman Islands dollars into U.S. dollars as determined by
the Cayman Islands Monetary Authority is fixed at CI$1.00 per
US$1.20. Thus, the rate of exchange as of October 31, 2004 for
conversion of Cayman Islands dollars into Canadian dollars was
$1.4616 per CI$1.00.
6. Interim Results
Interim results will fluctuate due to the seasonal nature of electricity. In
Grand Cayman, demand is highest in the summer months due to airconditioning load. Consequently, interim results are not necessarily
indicative of annual results.
7. Long-term Investments
To meet cash flow requirements in the aftermath of Hurricane Ivan, the
Company liquidated its long-term investments, which had a market
value of $4,094,732 on the date of liquidation.
8. Payment of Dividends
In view of the immediate cash flow needed to restore service
requirements following the passage of Hurricane Ivan in September
2004 and the 45-day deductible period associated with business
interruption insurance, the Board of Directors did not declare a
dividend for the second quarter of fiscal year 2005.
9. Comparative Figures
Certain comparative figures have been reclassified to conform with
current year disclosure.
10. Other Receivable - Insurance
The other receivable balance represents business interruption and
property insurance claims relating to Hurricane Ivan. The business
interruption policy has a 45-day deductible and therefore only
US$595,238 has been recorded as receivable in the financial
statements.
11. Related Party Transactions
Fortis Energy-Bermuda, the majority shareholder of CUC, owns 37.29%
of the issued Class A Ordinary shares. Fortis accounts for the
investment in CUC shares under the equity method. A contingent of
Fortis employees have been contracted for the reconstruction of the
Company’s T&D assets following the passage of Hurricane Ivan. These
financial statements include an amount accrued and payable of US$1.3
million for the cost of Fortis labour in the construction of assets at
standard market rates.
25.
C ARIBBEAN UTILITIES COMPANY, LTD.
2004/2005 SECOND QUARTER REPORT
Shareholder Plans
CUC offers its shareholders a Dividend Reinvestment Plan. Please
contact one of CUC’s Registrar and Transfer Agents or write to
CUC’s Company Secretary if you would like to receive information
about the plan or obtain an enrolment form.
CUC also has a Customer Share Purchase Plan for customers
resident in Grand Cayman. Please contact our Customer Service
Department (tel: (345) 949-4300) if you are interested in receiving
details.
Shareholder Information
Duplicate Quarterly Reports
While every effort is made to avoid duplications, some shareholders
may receive extra reports as a result of multiple share registrations.
Shareholders wishing to consolidate these accounts should contact
the Registrar and Transfer Agents.
Our Registrar and Transfer Agents are as follows:
CIBC Mellon Trust Company
P.O. Box 7010
Adelaide St. Postal Station
Toronto, Ontario M5C 2W9, Canada
E-mail: [email protected]
Caribbean Utilities Company, Ltd.
Assistant to the Company Secretary
P.O. Box 38 GT
Grand Cayman, Cayman Islands
Website: www.cuc-cayman.com
E-mail: [email protected]
Tel: (416) 813-4600
Fax: (416) 643-5501
Tel: (345) 949-5200
Fax: (345) 949-4621
This Quarterly Report highlights certain, but not all, events that
may be of interest to you. If you require further information or have
any questions regarding CUC’s Class A Ordinary Shares (listed in
U.S. funds on The Toronto Stock Exchange), please contact:
Caribbean Utilities Company, Ltd.
Robert D. Imparato
Company Secretary
P.O. Box 38 GT
Grand Cayman, Cayman Islands
Tel: (345) 949-5200
Fax: (345) 949-4621
CUC’s Toronto Stock Exchange symbol is:
Class A Ordinary Shares
CUP.U
C ARIBBEAN UTILITIES COMPANY, LTD.
26.