Listed for trading in United States Funds on the Toronto Stock
Exchange/Trading Symbol: CUP.U
GRAND CAYMAN, Cayman Islands, July 21 /CNW/ - Caribbean Utilities
Company, Ltd. ("CUC" or "the Company") announced today its audited financial
results for the year ended April 30, 2005.
Final Return
CUC submitted to the Cayman Islands Government ("Government") today its
Final Return containing its year-end 2005 audited results indicating that the
Company is entitled to a 9.5% rate increase effective August 1, 2005 under its
current Licence. This shortfall on Return On Capital Employed is primarily as
a result of costs and loss of revenue and reconstruction related to the impact
of Hurricane Ivan, which passed Grand Cayman in September 2004.
CUC and Government jointly announced earlier today that they have agreed
on a cost recovery surcharge (CRS) to be implemented by the Company for
purposes of recovering some of its uninsured hurricane-related losses. The CRS
will commence with CUC's August 2005 billings. A flat charge of CI$0.00749
(US$0.0089) will be applied to all customers, which equates to a 4.7% average
rate increase.
The agreement to forego a part of the permitted 9.5% rate increase is
without prejudice to CUC's rights and privileges under its Licence, and is
specific to the Company's Hurricane Ivan-related costs and losses only. Any
costs or losses resulting from any future catastrophic event would be subject
to recovery under the terms of either the existing or any future Licence or
upon terms to be agreed at that time.
The CRS is expected to appear on CUC's customer bills for approximately
three years, but this period may be shorter if growth in demand for
electricity exceeds present projections, and as a result of which the total
CRS charges are recovered more quickly.
During the three-year CRS period, CUC has agreed with Government that
there will be a freeze on basic billing rates until July 31, 2008. There will
be no retroactive increase in basic billing rates after the full recovery of
the CRS.
The total insured property losses incurred by CUC as a result of
Hurricane Ivan approximated US$24 million. CUC's business interruption
insurance (BI) losses are estimated at US$17.3 million over the 24-month
indemnity period. After claims to its insurers, CUC has direct uninsured
losses of US$14.0 million as follows:
<<
-------------------------------------------------------------------------
US$ millions
-------------------------------------------------------------------------
Transmission and distribution (T&D) Property, Plant
and Equipment 7.0
-------------------------------------------------------------------------
Other Property, Plant and Equipment 2.0
-------------------------------------------------------------------------
Revenue losses during insurance deductible period 5.0
-------------------------------------------------------------------------
Total 14.0
-------------------------------------------------------------------------
After discussions with Government, CUC agreed to absorb a further
US$595,000 of these losses, leaving US$13.5 million to be recovered through
the CRS. In total, CUC has agreed to absorb some US$3.6 million of additional
costs associated with Hurricane Ivan, which will not be passed on to
consumers.
"Hurricane Ivan was an extraordinary event that severely impacted the
Company and the island community we serve," commented Richard Hew, CUC
President and Chief Executive Officer (Designate). "The Cost Recovery
Surcharge, implemented as an alternative to the rate-setting mechanism in the
Licence, will reduce the financial impact to our consumers while ensuring that
the Company returns to the strong financial position required to continue
providing reliable service into the future."
Licence
CUC and Government have agreed to recommence Licence extension
discussions by September 2005. The establishment of a disaster recovery fund
or alternate catastrophic insurance to mitigate the financial impact of any
future natural disasters will also be discussed at that time.
The Company's present Licence expires in January 2011. A draft Heads of
Agreement (HOA) was agreed between CUC and Government in June 2004, outlining
the terms of any new licence or licences that may be issued to the Company.
The HOA, which was extended to September 2004 but lapsed as a result of
Hurricane Ivan, is anticipated to form the basis of discussions when they
resume.
Financial and Operational Highlights for the Year Ended April 30, 2005
(all figures in US dollars)
-------------------------------------------------------------------------
Caribbean Utilities Company, Ltd.
Audited Financial and Operating Highlights for the Year Ended
April 30, 2005
-------------------------------------------------------------------------
Fourth Quarter Annual
-------------------------------------------------------------------------
%
2005 2004 2005 2004 Change
-------------------------------------------------------------------------
Operating
Revenue 21,078,942 24,938,682 92,871,026 106,643,155 (12.9)
-------------------------------------------------------------------------
Electricity
Sales 14,734,630 19,817,286 68,892,949 85,710,182 (19.6)
-------------------------------------------------------------------------
Fuel Factor
Revenue 6,344,312 5,121,396 23,978,077 20,932,973 14.5
-------------------------------------------------------------------------
Business
Interruption
Insurance 3,552,848 0 8,148,086 0 -
-------------------------------------------------------------------------
Earnings for
the Period 4,356,618 3,960,486 4,224,302 19,986,779 (78.9)
-------------------------------------------------------------------------
Earnings per
Ordinary Share 0.17 0.15 0.13 0.77 (83.1)
-------------------------------------------------------------------------
Dividends Paid
per Ordinary
Share 0.165 0.165 0.495 0.655 (24.4)
-------------------------------------------------------------------------
Net Generation
(kWh) 95,992,483 116,578,843 393,507,643 485,625,055 (19.0)
-------------------------------------------------------------------------
Kilowatt-Hour
Sales (kWh) 87,860,344 104,584,849 375,736,364 450,266,751 (16.6)
-------------------------------------------------------------------------
Peak Load
Gross (MW) 68.57 78.77 85.03 79.06 7.6
-------------------------------------------------------------------------
Total Customers 19,011 21,127 19,011 21,127 (10.0)
-------------------------------------------------------------------------
Earnings
Earnings for the year ended April 30, 2005 were US$4.2 million compared
with US$20.0 million in fiscal year-end 2004, a US$15.8 million, or 79%,
decrease. The earnings decline was due to the effects of Hurricane Ivan on
operating revenue, the writeoff of uninsured T&D degraded assets, an allowance
for the net deductible on insured assets, and loss of revenue during the
business interruption (BI) insurance deductible period.
Year-end earnings per share (EPS) were US$0.13, a US$0.64, or 83.1%,
reduction from US$0.77 in fiscal 2004.
Operating Revenues
Year-end operating revenues were US$92.9 million compared with
US$106.6 million in 2004, a US$13.7 million, or 12.9% reduction due to the
effects of Hurricane Ivan.
Electricity sales revenue fell 19.6% from US$85.7 million in fiscal 2004
to US$68.9 million in fiscal 2005, due primarily to Hurricane Ivan. This
decrease was partially offset by a BI insurance claim of US$8.1 million
recorded for the period from October 26, 2004 (end of the 45-day BI deductible
period) to April 30, 2005. Year-end kilowatt-hour (KWH) sales growth declined
by 16.6%, and peak load for April 2005 reached approximately 90% of where it
was in April 2004.
Actual fuel factor revenue of US$24.0 million exceeded budget by
US$2.2 million due to rising fuel prices. Fuel factor revenue also grew by
US$3.1 million (14.5%) over the same period last year. The Company's Licence
with Government provides for adjustments to be made to the charges billed to
customers to reflect variations in the cost of diesel fuel used in the
generation of electricity.
Business Interruption Insurance
CUC filed a claim for the BI loss for fourth quarter 2005 for
US$3.6 million (US$8.1 million year-end). The Company now has an agreed BI
methodology with the insurance adjustors that will facilitate the monthly
calculation of the BI claim. Typically, the ultimate recovery under a BI
policy is highly judgmental and subject to substantial negotiations between
the insured and the insurer. Given the subjectivity of the ultimate settlement
and the lengthy claim coverage period (24 months), many contingencies may
exist in the ultimate settlement.
Operating Expenses
Power Generation Expenses
-------------------------
Year-end power generation expenses totaled US$48.3 million, compared with
US$50.2 million in fiscal 2004 (a 3.9% decrease). The decrease is due to lower
generation following Hurricane Ivan and the deferral of US$1.7 million in fuel
costs in the fourth quarter, which primarily resulted from rising fuel prices.
Fuel costs related to the fuel factor are deferred on a two-month basis and
matched against the future collection of fuel factor revenues.
Total Operating Expenses
------------------------
Year-end operating expenses increased 11.1% from US$81.2 million in 2004
to US$90.2 million in 2005 due primarily to losses associated with Hurricane
Ivan. Storm-related losses included in these expenses totaled US$9.0 million
as of April 30, 2005 (US$7.0 million in T&D losses and US$2.0 million for the
insurance deductible, net of indemnification for pre-1990 assets damaged
during Hurricane Ivan).
Hurricane Expenses
------------------
The following summary outlines the direct costs and losses associated
with Hurricane Ivan as at April 30, 2005 as reflected in the audited financial
statements. Also summarised are amounts recorded as receivables under
insurance claims. Negotiations with insurance adjusters and underwriters with
respect to certain claims are ongoing. However, management only recognises
insurance receivables when claims are agreed or negotiations are sufficiently
advanced for them to be reasonably assured as to the recovery of the
associated claims.
-------------------------------------------------------------------------
Loss or Cost Insurance Net EPS Impact
Recoveries
-------------------------------------------------------------------------
US$ US$ US$
(millions) (millions) (millions) US$
-------------------------------------------------------------------------
Inventories 1.3 1.3 0 0.00
-------------------------------------------------------------------------
T&D Property, Plant
and Equipment 7.0 0 7.0 (0.28)
-------------------------------------------------------------------------
Other Property,
Plant and Equipment 17.3 15.3 2.0 (0.08)
-------------------------------------------------------------------------
Revenue Losses Associated with Hurricane Ivan
-------------------------------------------------------------------------
US$ US$ US$
(millions) (millions) (millions)
-------------------------------------------------------------------------
Business Interruption 5.6 0.6 5.0(x) (0.20)
-------------------------------------------------------------------------
(x) The $5 million net loss relates to the lost revenue during the
deductible period, which ended October 25, 2004.
Financial Position
The following is a summary of significant changes to the Company's
balance sheet from April 30, 2004 to April 30, 2005 (audited):
-------------------------------------------------------------------------
Balance Sheet Account Increase Explanation
(Decrease)
(US$ millions)
-------------------------------------------------------------------------
Cash and Due from
Banks (17.0) 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 US$13.4 million.
-------------------------------------------------------------------------
Other Receivable - Insurance 15.9 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,
partially offset by an advance
from the insurance companies of
US$10 million.
-------------------------------------------------------------------------
Long-Term Investments (4.1) The decrease in investments is
due to the liquidation of the
Hurricane Fund investment
following Hurricane Ivan to meet
cash flow requirements.
-------------------------------------------------------------------------
Current Portion of Long-Term
Debt 10.6 The increase in the current
portion of long-term debt is due
to the drawdown of an
US$8.0 million short-term loan
from the Company's principal
bankers, the Royal Bank of
Canada, for the reconstruction of
assets following Hurricane Ivan.
-------------------------------------------------------------------------
Accounts Payable and Accrued
Expenses 4.8 The increase in the accounts
payable and accrued expenses is
due to an increase in fuel
payables for March and April 2005
as a result of higher fuel prices
and an increase in other payables
due to post-hurricane rebuilding.
-------------------------------------------------------------------------
Dividends Payable (4.2) The decrease is due to no
dividend being declared in the
fourth quarter this year.
-------------------------------------------------------------------------
Retained Earnings (5.0) The decrease in retained earnings
is due to a net profit for the
period of US$4.2 million, less
(1) Class A dividends of
US$8.4 million and (2) Class B
preference dividends of
US$925,000.
-------------------------------------------------------------------------
Capital Structure
CUC's capital structure as of April 30, 2005 is summarized below:
-------------------------------------------------------------------------
Year Ended April 30
2005 % 2004 %
-------------------------------------------------------------------------
Total Debt 141,520,997 53.0 138,394,964 51.8
-------------------------------------------------------------------------
Shareholders'
Equity 125,724,438 47.0 128,924,611(x) 48.2
-------------------------------------------------------------------------
(x) Restated (see Note 2)
Debt Financing
--------------
CUC has restructured its credit facilities with Royal Bank of Canada
under the following terms:
-------------------------------------------------------------------------
Description Details
-------------------------------------------------------------------------
Term Loan US$12 million-US$8 million of this
loan will be used to repay the
Hurricane Ivan recovery drawdown.
-------------------------------------------------------------------------
Capital Expenditures Line of Credit US$10 million
------------------------------------------------------------------------
Operating Line of Credit US$5 million
-------------------------------------------------------------------------
Emergency Line of Credit US$5 million
-------------------------------------------------------------------------
Standby Letters of Credit US$2.6 million
-------------------------------------------------------------------------
Total US$34.6 million
-------------------------------------------------------------------------
Outlook
Peak Load
---------
CUC anticipates a summer 2005 peak demand of 80 megaWatts (MW) based on
the rate of recovery to date. The Company expects to return to its pre-Ivan
peak load of 85 MW in summer 2006.
Generating Capacity
-------------------
A total of 95.43 MW of generating capacity was fully recovered as of June
2005, or over 77% of pre-Ivan capacity. CUC has leased 5.7 MW of capacity for
six months beginning in June 2005, with an additional 5.7 MW of capacity being
leased and scheduled to arrive on Island by the end of July 2005, to ensure
reliability during the peak summer season. The Company has also issued
contracts to recover an additional 16.8 MW, representing four Caterpillar
engines that were damaged by Ivan, by December 15, 2005.
In addition, CUC has contracted for the addition of an 8.4 MW gas turbine
unit for standby purposes to replace the approximately 12.6 MW of Mirrlees
capacity that was written off from the storm. These will return the Company to
a total capacity of approximately 120 MW by summer 2006, as compared to 123 MW
before Ivan.
Capital Expenditures
--------------------
Year-end fiscal 2005 capital expenditures totaled US$39.8 million,
compared with US$20 million in 2004. This increase was mainly related to the
reconstruction of written-off T&D assets.
Fiscal 2006 planned capital expenditures will decline to US$20 million.
Major capital projects for fiscal 2006 include a new gas turbine
(US$4.5 million), upgrade of Engine Room One (US$2.1 million), closing of 69KV
loop to Frank Sound (US$1.3 million), and general T&D works (US$3.9 million).
Hydesville Substation
---------------------
The Hydesville substation commissioning was completed in April 2005. The
west transmission loop is in full service, significantly increasing
reliability to the West Bay and northern Seven Mile Beach areas.
Rum Point Submarine Cable Repair
--------------------------------
CUC has completed repairs to its high-voltage Rum Point submarine cable,
which was damaged by a wayward vessel during Hurricane Ivan. ABB Sweden was
contracted to perform the repairs, which will cost approximately $1 million.
The repairs allow electricity to flow from either direction in the event of a
power outage, thus improving reliability in the eastern districts.
Standard & Poor's/DBRS Ratings
Standard & Poor's Rating
------------------------
CUC is covered by Standard & Poor's (S&P) and continues to receive an 'A'
rating. S&P placed the 'A' rating on CreditWatch with negative implications in
March 2005. This reflects the potential for the rating to be lowered as a
consequence of increased uncertainty in the Company's regulatory environment
and the potential delay in the Cayman Islands economic recovery following the
hurricane.
DBRS Rating
-----------
CUC is covered by Dominion Bond Rating Service and maintains an 'A' (low)
rating for its long-term debt and a 'Pfd-2' (low) rating for its preferred
shares.
Annual Report and Annual General and Special Meeting
The Company's 2005 Annual Report containing the audited financial
statements will be sent to shareholders in August 2005. The Annual General and
Special Meeting of shareholders is scheduled for August 25, 2005 in Grand
Cayman, Cayman Islands. CUC's Class A Ordinary Shares are listed for trading
in United States funds on The Toronto Stock Exchange (trading symbol: CUP.U).
The Company encourages its stakeholders to visit its website
(www.cuc-cayman.com) for more information.
Company Overview
CUC is the sole provider of electricity to Grand Cayman, Cayman Islands
and operates under a 25-year exclusive Licence with the Government of the
Cayman Islands, which expires in January 2011.
Caribbean Utilities Company, Ltd. ("CUC" or "the Company"), on occasion,
may include forward-looking statements in its media releases, Canadian
securities regulatory authorities filings, shareholder reports and other
communications. Forward-looking statements are based on certain assumptions by
their very nature and are subject to certain risks and uncertainties that may
cause actual results to vary from plans, objectives 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 actual results may vary significantly from those
expected should certain risks or uncertainties materialize or should
underlying assumptions prove incorrect. 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.
-------------------------------------------------------------------------
Caribbean Utilities Company, Ltd.
Statement of Earnings (audited) for the Year Ended April 30, 2005
(expressed in United States dollars)
-------------------------------------------------------------------------
Fourth Quarter Annual
-------------------------------------------------------------------------
2005 2004 2005 2004
-------------------------------------------------------------------------
US$ US$ US$ US$
-------------------------------------------------------------------------
OPERATING REVENUES
-------------------------------------------------------------------------
Electricity
Sales (Note 2) 14,734,630 19,817,286 68,892,949 85,710,182
-------------------------------------------------------------------------
Fuel Factor 6,344,312 5,121,396 23,978,077 20,932,973
--------- --------- ---------- ----------
-------------------------------------------------------------------------
21,078,942 24,938,682 92,871,026 106,643,155
-------------------------------------------------------------------------
-------------------------------------------------------------------------
OPERATING EXPENSES
-------------------------------------------------------------------------
Power Generation 11,747,934 12,110,861 48,284,330 50,175,784
-------------------------------------------------------------------------
General and
Administration 2,466,778 2,279,219 9,818,393 8,658,231
-------------------------------------------------------------------------
Consumer Service
and Promotion 430,824 287,362 1,437,168 1,283,828
-------------------------------------------------------------------------
Distribution
(Note 6) (587,763) 484,951 8,371,105 2,166,136
-------------------------------------------------------------------------
Depreciation and
Amortisation 2,949,341 2,819,049 13,263,704 12,507,896
-------------------------------------------------------------------------
Maintenance
(Note 6) 1,586,182 1,549,549 9,015,194 6,431,360
--------- --------- --------- ---------
-------------------------------------------------------------------------
18,593,296 19,530,991 90,189,894 81,223,235
---------- ---------- ---------- ----------
-------------------------------------------------------------------------
OPERATING INCOME 2,485,646 5,407,691 2,681,132 25,419,920
-------------------------------------------------------------------------
-------------------------------------------------------------------------
OTHER INCOME/
(EXPENSES)
-------------------------------------------------------------------------
Interest Expense
and Preference
Dividends (2,180,714) (1,907,573) (8,498,195) (7,708,623)
-------------------------------------------------------------------------
Foreign Exchange
Gain 205,222 159,215 867,967 1,105,625
-------------------------------------------------------------------------
Business
Interruption
Insurance
(Note 15) 3,552,848 - 8,148,086 -
-------------------------------------------------------------------------
Other Income 293,616 301,153 1,025,312 1,169,857
------- ------- --------- ---------
-------------------------------------------------------------------------
1,870,972 (1,447,205) 1,543,170 (5,433,141)
-------------------------------------------------------------------------
Earnings for the
Period (Note 12) 4,356,618 3,960,486 4,224,302 19,986,779
-------------------------------------------------------------------------
Class B Preference
Dividends Paid
(Note 12) (112,500) (112,500) (925,000) (905,000)
--------- --------- --------- ---------
-------------------------------------------------------------------------
Earnings on Class A
Ordinary Shares 4,244,118 3,847,986 3,299,302 19,081,779
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted-Average
Number of Issued
and Fully-Paid
Class A Ordinary
Shares (Note 12) 24,953,000 25,653,240 24,924,793 24,750,820
-------------------------------------------------------------------------
Earnings per
Class A Ordinary
Share (Note 12) 0.17 0.15 0.13 0.77
-------------------------------------------------------------------------
Fully-Diluted
Earnings per
Class A Ordinary
Share 0.17 0.16 0.13 0.77
-------------------------------------------------------------------------
Dividends Declared
per Class A
Ordinary Share 0.00 0.165 0.33 0.655
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Caribbean Utilities Company, Ltd.
Statement of Retained Earnings (audited) for the Year Ended
April 30, 2005
(expressed in United States dollars)
-------------------------------------------------------------------------
2005 2004 2005 2004
-------------------------------------------------------------------------
US$ US$ US$ US$
-------------------------------------------------------------------------
Restated Restated
-------------------------------------------------------------------------
(Note 2) (Note 2)
-------------------------------------------------------------------------
Balance at
Beginning of
Period as
previously
reported 84,767,788 83,386,037 89,829,643 67,084,782
-------------------------------------------------------------------------
Retroactive
restatement of
change in the
application of an
accounting policy
for revenue
recognition - 2,481,531 - 2,481,531
-------------------------------------------------------------------------
Earnings for the
Period 4,356,618 3,960,486 4,224,302 19,986,779
-------------------------------------------------------------------------
Dividends (4,261,004) (9,190,543)
-------------------------------------------------------------------------
Transfer from
Redetermination
Surplus - 1,589 - 276,551
- ----- - -------
-------------------------------------------------------------------------
Balance at End of
Period 84,863,402 89,829,643 84,863,402 89,829,643
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Caribbean Utilities Company, Ltd.
Balance Sheet (audited) as of April 30, 2005
(expressed in United States dollars)
-------------------------------------------------------------------------
2005 2004
-------------------------------------------------------------------------
US$ US$
-------------------------------------------------------------------------
Restated
-------------------------------------------------------------------------
(Note 2)
-------------------------------------------------------------------------
ASSETS
-------------------------------------------------------------------------
Current Assets
-------------------------------------------------------------------------
Cash and Due from Banks (Note 9) 962,965 18,004,208
-------------------------------------------------------------------------
Accounts Receivable- Trade (Note 3) 11,480,885 10,360,292
-------------------------------------------------------------------------
Other Receivable- Insurance (Notes 4) 15,881,941 -
-------------------------------------------------------------------------
Inventories (Note 5) 5,330,363 2,818,277
-------------------------------------------------------------------------
Prepayments 580,698 651,449
------- -------
-------------------------------------------------------------------------
34,236,852 31,834,226
-------------------------------------------------------------------------
Long-Term Investments (Note 7) - 4,077,640
-------------------------------------------------------------------------
Property, Plant and Equipment (Note 6) 248,231,244 246,909,500
-------------------------------------------------------------------------
Other Assets (Note 8) 7,690,752 5,761,016
--------- ---------
-------------------------------------------------------------------------
TOTAL ASSETS 290,158,848 288,582,382
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
-------------------------------------------------------------------------
Current Liabilities
-------------------------------------------------------------------------
Bank overdraft (Note 9) 1,429,889 -
-------------------------------------------------------------------------
Current Portion of Long-Term Debt and
Short-Term Loan (Note 9) 15,482,822 4,873,967
-------------------------------------------------------------------------
Accounts Payable and Accrued Expenses
(Note 16) 18,917,183 14,124,150
-------------------------------------------------------------------------
Consumers' Deposits and Construction Advances 2,566,341 2,956,004
-------------------------------------------------------------------------
Dividends Declared - 4,182,655
---------
-------------------------------------------------------------------------
38,396,235 26,136,776
---------- ----------
-------------------------------------------------------------------------
Long-Term Debt (Note 9) 126,038,175 133,520,997
----------- -----------
-------------------------------------------------------------------------
164,434,410 159,657,773
----------- -----------
-------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
-------------------------------------------------------------------------
Share Capital (Note 10) 1,739,545 1,730,058
-------------------------------------------------------------------------
Share Premium 39,022,418 37,328,408
-------------------------------------------------------------------------
Redetermination Surplus - -
-------------------------------------------------------------------------
Contributed Surplus 99,073 36,500
-------------------------------------------------------------------------
Retained Earnings 84,863,402 89,829,643
---------- ----------
-------------------------------------------------------------------------
125,724,438 128,924,609
-------------------------------------------------------------------------
-------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 290,158,848 288,582,382
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Caribbean Utilities Company, Ltd.
Cash Flow Statement (audited) for the Year Ended April 30, 2005
(expressed in United States dollars)
-------------------------------------------------------------------------
Fourth Quarter Annual
-------------------------------------------------------------------------
2005 2004 2005 2004
-------------------------------------------------------------------------
US$ US$ US$ US$
-------------------------------------------------------------------------
OPERATING ACTIVITIES
-------------------------------------------------------------------------
Earnings for the
Period 4,356,618 3,960,486 4,224,302 19,986,779
-------------------------------------------------------------------------
Depreciation and
Amortisation 2,949,341 2,819,049 13,263,704 12,507,896
-------------------------------------------------------------------------
Stock-Based
Compensation 15,643 23,723 62,573 36,500
-------------------------------------------------------------------------
(Profit)/Loss on
Disposal of Fixed
Assets (Note 6) (1,348,927) 34,890 9,263,169 25,377
----------- ------ --------- ------
-------------------------------------------------------------------------
5,972,674 6,838,148 26,813,748 32,556,552
-------------------------------------------------------------------------
Net Decrease/
(Increase) in
Non-Cash Working
Capital Balances
Related to
Operations 3,629,076 4,453,666 (1,075,433) (5,546,281)
--------- --------- ----------- -----------
-------------------------------------------------------------------------
9,601,751 11,291,814 25,738,315 27,010,271
-------------------------------------------------------------------------
-------------------------------------------------------------------------
FINANCING ACTIVITIES
-------------------------------------------------------------------------
Proceeds from the
Issue of Debt - - 8,000,000 20,000,000
-------------------------------------------------------------------------
Proceeds of Share
Issues 731,858 623,372 1,703,497 3,142,129
-------------------------------------------------------------------------
Repayment of Debt (206,817) (188,837) (4,873,967) (2,308,800)
-------------------------------------------------------------------------
Increase in bank
overdraft 1,429,889 - 1,429,889 -
-------------------------------------------------------------------------
Redemption of
Preference Shares - - - (6,007,500)
-------------------------------------------------------------------------
Dividends Paid (4,261,002) (4,088,487) (13,373,198) (16,856,458)
----------- ----------- ------------ ------------
-------------------------------------------------------------------------
(2,306,072) (3,653,952) (7,113,779) (2,030,629)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
INVESTING ACTIVITIES
-------------------------------------------------------------------------
(Purchase)/Sale of
Investments - (30,873) 4,077,640 (77,233)
-------------------------------------------------------------------------
Proceeds on Sale of
Fixed Assets 5,852 3,748 44,790 13,261
-------------------------------------------------------------------------
Purchase of
Property, Plant
and Equipment (9,613,153) (3,888,457) (39,251,681) (18,559,473)
-------------------------------------------------------------------------
Interest
Capitalized
During
Construction (121,635) (376,657) (536,528) (1,481,759)
--------- --------- --------- -----------
-------------------------------------------------------------------------
(9,728,936) (4,292,239) (35,665,779) (20,105,204)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(DECREASE)/INCREASE
IN NET CASH (2,433,257) 3,345,623 (17,041,243) 4,874,438
-------------------------------------------------------------------------
NET CASH- BEGINNING
OF PERIOD 3,396,222 14,658,585 18,004,208 13,129,770
--------- ---------- ---------- ----------
-------------------------------------------------------------------------
NET CASH- END OF
PERIOD 962,965 18,004,208 962,965 18,004,208
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NOTES (expressed in United States dollars):
1. Incorporation, Activity and Licence
The Company was incorporated on April 30, 1966 under the laws of the
Cayman Islands. Fortis Energy-Bermuda Ltd. (the "Fortis group") owns
37.17% (2004: 37.41%) of the issued Class A Ordinary Shares of the
Company and International Power Holding Ltd. owns 14.94% (2004: 15.03%)
of the issued Class A Ordinary Shares of the Company (Note 22).
The principal activity of the Company is to generate and distribute
electricity in their exclusive licence area of Grand Cayman, Cayman
Islands, under a licence from the Government of the Cayman Islands
("Government") originally dated May 10, 1966, amended November 1, 1979
and renewed for a further twenty-five years on January 17, 1986.
Amendments to the twenty-five year licence dated January 17, 1986, as
amended by a Supplementary Licence dated October 16, 1989, have been
negotiated and incorporated into a further Supplementary Licence executed
on November 15, 1994 (collectively, the "Licence").
There is a provision in the Licence for subscribers' tariffs to be
adjusted each year to provide the Company with a rate of return of 15% on
capital employed as defined in the Licence. The 15% rate of return is
fixed for the term of the Licence and does not take into consideration
actual interest charges, unless they are in excess of 15% per annum, and
costs of capital incurred by the Company.
Within 21 days of the end of each financial year, the Company is obliged
to furnish the Government with an Interim Return setting out the results
of the operations for that financial year. Not later than three months
after the end of such financial year the Company is under an obligation
to submit to the Government audited accounts together either with a
certificate by the auditors certifying that the particulars in the
Interim Return accord with the audited accounts or alternatively, with a
Final Return which does so accord with the audited accounts (Note 21).
Additionally, the Licence provides for adjustments to be made to the
rates billed to consumers to reflect variations in the cost to the
Company of diesel fuel used in the generation of electricity. Such
adjustments are made on a monthly basis.
The Licence also requires the Company to pay duty on all foreign
purchases at the rate of 10%, to pay duty on fuel at the rate of $0.60
per imperial gallon and to pay a turnover fee of 5/8 of 1% per annum
based on the previous year's revenue, payable quarterly in arrears.
The Electricity Regulatory Authority Law came into effect on April 12,
2005. The new law provides for a new body, the Electricity Regulatory
Authority, to govern the generation, transmission and distribution of
electricity in the Cayman Islands.
2. Accounting Changes
During the year ended April 30, 2005, the Company improved the processes
surrounding consumer billing which has resulted in a change to the
application of the Company's accounting policy for revenue recognition.
The change was as a direct result of improved technology in the meter
reading process, which has allowed meters to be read closer to month-end,
thereby changing the accounting practice previously used by the Company
to record unbilled revenue. Specifically, there is a prior period impact
of the change in accounting practice, and accordingly the Company has
restated its 2004 balance sheet to increase Accounts receivable - Trade
and Retained earnings by $2,481,531 in the 2005 financial statements. The
restatement relates to the catch-up effect of not accruing for unbilled
revenue in prior periods. Prior period statements of earnings have not
been restated as the impact is immaterial. The "as-billed" basis of
revenue recognition applied in prior periods was in all material respects
equivalent to the accruals basis.
3. Accounts Receivable - Trade
2005 2004
---- ----
Restated
Billings to consumers 11,035,648 $10,081,010(x)
Employee share purchase plan 9,145 22,672
Other receivables 436,092 256,610
------------- --------------
$11,480,885 $10,360,292
------------- --------------
------------- --------------
(x) As discussed in Note 2, billings to consumers at April 30, 2004 were
increased by $2,481,531 to reflect the catch-up effect of not
accruing for unbilled revenue in prior periods.
Employee Share Purchase Plan
----------------------------
The Company provides interest free advances to employees to purchase
Class A Ordinary Shares, with such advances recovered through payroll
deductions over the next 12 months. The maximum semi annual participation
is 1,000 Class A Ordinary Shares per employee. The plan is
non-compensatory as shares purchased by the employee are obtained at the
prevailing market value at the time of purchase.
4. Other Receivable - Insurance
On September 12, 2004, hurricane Ivan (the "hurricane"), a catastrophic
category five hurricane hit Grand Cayman. Under Canadian GAAP, the
Company is required to recognize costs associated with the hurricane in
the period in which the event occurred. The most significant impact as a
result of the hurricane is the recognition of a write down in respect of
damaged property, plant and equipment, which is further discussed in
Note 6. A significant portion of these costs will be reimbursed under the
Company's insurance policy. These amounts are only recognized as
receivable when recovery becomes reasonably assured. In addition, there
has been an effect on revenue earned during the year due to business
interruption as discussed further in Note 15. The Other Receivable-
Insurance balance represents both business interruption and property
insurance claims relating to the hurricane. The Company's insurers made a
$10 million general advance in December 2004, which has been applied
against the insurance, receivable. Subsequent to year-end the Company's
insurers made an additional $5 million payment (Note 21).
5. Inventory
The Company increased its inventory stock following the hurricane. These
higher stock levels will be maintained in the future to prevent delays in
necessary repairs in the event of another major hurricane. As a result of
the hurricane, the Company recognized a write-down of its inventory of
$1,386,430, which will be reimbursed under the Company's insurance policy
(Note 15).
6. Property, Plant and Equipment
Adjusted Cost
/Appraised Accumulated
Value Depreciation Net
------------- ------------- -------------
As at April 30, 2005:
Transmission and
distribution $166,422,545 $ 33,397,015 $133,025,530
------------- ------------- -------------
Generation 147,516,533 53,243,021 94,273,512
------------- ------------- -------------
Other:
Land 1,170,193 - 1,170,193
Buildings 17,328,926 4,611,065 12,717,861
Equipment, motor vehicles
and computers 16,575,577 9,531,429 7,044,148
------------- ------------- -------------
Total other 35,074,696 14,142,494 20,932,202
------------- ------------- -------------
Property, plant and
equipment $349,013,774 $100,782,530 $248,231,244
------------- ------------- -------------
------------- ------------- -------------
As at April 30, 2004:
Transmission and
distribution $149,033,244 $ 36,580,209 $112,453,035
------------- ------------- -------------
Generation 165,124,846 52,792,689 112,332,157
------------- ------------- -------------
Other:
Land 1,170,193 - 1,170,193
Buildings 16,954,671 4,203,514 12,751,157
Equipment, motor vehicles
and computers 17,127,055 8,924,097 8,202,958
------------- ------------- -------------
Total other 35,251,919 13,127,611 22,124,308
------------- ------------- -------------
Property, plant and
equipment $349,410,009 $102,500,509 $246,909,500
------------- ------------- -------------
------------- ------------- -------------
Included in property, plant and equipment are a number of capital
projects in progress with a total cost to date of $4,720,070 (2004:
$7,959,334). These projects primarily relate to an 8.4MW Gas Turbine and
continuing upgrades to the Company's transmission and distribution
system.
Also included in generation and transmission and distribution is freehold
land with a cost of $4,672,305 (2004: $4,672,305). In addition, engine
spares with a net book value of $7,865,262 (2004: $9,150,982) are
included in generation.
During the year, the Company capitalized interest of $536,528 (2004:
$1,481,756).
As a result of the hurricane, the Company has recognized a write down of
its property, plant and equipment of $19,463,554 for assets that were
damaged during the hurricane. This amount approximates the estimated cost
to reconstruct these assets, which will be reimbursed under the Company's
insurance policy (Note 15). These estimated reconstruction costs are
based upon current market valuations. In addition, no depreciation charge
has been expensed since September 2004 for various insured assets with a
net book value of $17,843,761, consisting mainly of the generation plant
assets, requiring major reconstruction following the passage of the
hurricane. These assets are considered to be under reconstruction and
depreciation will commence when the asset is brought back into
production. The Company will determine whether the reconstructed asset's
useful life has increased at the time it is ready for production.
In addition to the above write down of its property, plant and equipment,
the Company has also recognized the following losses on disposal of
property, plant and equipment primarily as a result of the hurricane:
Distribution (in relation to transmission and
distribution assets) $ 7,035,672(a)
Maintenance (in relation to generation assets) 2,062,217(b)
Maintenance (in relation to motor vehicles and computers) 165,280
---------------
Total $ 9,263,169
---------------
---------------
(a) This amount is comprised of the net book value of transmission and
distribution assets damaged and written-off primarily as a result of
the hurricane. It is also comprised of $1,380,952 for the estimated
reconstruction costs of the Company's submarine and fibre optic
cables damaged during the hurricane and scheduled for reconstruction.
(b) This amount includes a $4 million charge for the insurance deductible
net of a $2 million gain on the indemnification for pre-1990 assets
damaged during the hurricane.
Fixed assets pledged as security are detailed in Note 9.
7. Long-Term Investments
Long-term investments were largely comprised of money market funds,
bonds, and US Government mortgage and asset backed securities with a
market value of $4,025,341 as at April 30, 2004. The Company liquidated
its long-term investments, which had a market value of $4,094,732 on the
date of liquidation to meet cash flow requirements in the aftermath of
the hurricane.
8. Other Assets
Other assets comprise:
2005 2004
---- ----
Sundry assets $ 73,396 $ 378,676
Deferred licence renewal costs 668,431 61,909
Deferred debt issue expense 1,387,472 1,538,973
Deferred fuel costs 5,561,453 3,781,458
------------- -------------
$ 7,690,752 $ 5,761,016
------------- -------------
------------- -------------
Deferred Licence Renewal Costs
------------------------------
Deferred licence renewal costs are related to the ongoing negotiations
with the Government for an extension to the Company's licence (Note 21).
9. Long-Term Debt
Long-term debt comprises:
2005 2004
---- ----
8.47% Senior Unsecured Loan Notes
due 2010 9,000,000 $ 10,500,000
6.47% Senior Unsecured Loan Notes
due 2013 22,500,000 25,000,000
7.64% Senior Unsecured Loan Notes
due 2014 30,000,000 30,000,000
6.67% Senior Unsecured Loan Notes
due 2016 30,000,000 30,000,000
5.09% Senior Unsecured Loan Notes
due 2018 40,000,000 40,000,000
6.20% European Investment Bank No. 2
due 2005 - 405,110
4.60% RBC US$8 Million Loan 8,000,000 -
3.00% European Investment Bank No. 3
due 2009 2,020,997 2,489,854
------------- -------------
141,520,997 138,394,964
Less: Current portion 15,482,822 4,873,967
------------- -------------
$126,038,175 $133,520,997
------------- -------------
------------- -------------
Long-term debt repayments per fiscal year are estimated as follows:
2006 $ 15,482,822
2007 7,497,632
2008 10,512,443
2009 10,528,100
2010 14,000,000
2011 and later 83,500,000
--------------
$141,520,997
--------------
--------------
All long-term debt is denominated in United States dollars.
The Company has credit financing facilities with Royal Bank of Canada
("RBC") comprising:
a. $5,000,000 Revolving overdraft line- Prime + 1/2%
b. $1,000,000 Term Loan - Prime + 1/2%
c. $1,500,000 Stand-by Term Loan - Prime + 1/2%
d. $2,100,000 Stand-by Letters of Credit
e. $10,000,000 demand loan facility for interim funding of expenditures.
$8,000,000 of this facility was drawn down for the reconstruction of
assets following the hurricane.
The Company also maintains letters of guarantee of $833,333 to the
Government for duties on the importation of materials.
Pursuant to the above facility agreements, RBC agreed to grant letters of
credit in favor of European Investment Bank ("EIB") up to the sum of
$2.1 million (2004: $3.1 million) (or the equivalent in other acceptable
currencies) to secure the obligations of the Company to EIB in respect of
finance contracts (dated April 18, 1990 and January 14, 1997) in the same
aggregate amount.
Subsequent to year-end, the Company renegotiated its credit financing
facilities with RBC which now comprise:
1. $5,000,000 Operating Line of Credit - Libor + 1.5%
2. $12,000,000 Term Loan - Libor + 1.5%
3. $5,000,000 Emergency Line of Credit - Libor + 1.5%
4. $2,600,000 Standby Letters of Credit
5. $10,000,000 Capital Expenditures Line of Credit - Libor + 1.5%
As security for the new facilities, RBC has been granted fixed and
floating charge debentures totaling $8.5 million (2004: $3.1 million)
over all assets of the Company (other than land on which the office
building is situated). The RBC debentures represent a first charge over
the Company's assets.
Pursuant to a finance contract with EIB dated January 14, 1997 for an
aggregate maximum facility of an amount equivalent to 4,000,000 European
Currency Units, the Company pays a subsidized interest at the greater of
3% or the average prevailing rate of comparable loans at the time of
drawdown less 3.25%. Under the agreement, notional interest equal to the
subsidy is paid into a restricted use funding account held by the
Company. These funds can only be used for certain projects mitigating the
effect of the Company's activities on the environment. Disbursement of
the funds is subject to the prior approval of EIB. As at April 30, 2005,
included within Cash and due from banks, is an amount totaling $252,815
(2004: $181,508), which represents the Company's contribution into the
restricted account.
Interest expense on the long-term debt amounted to $8,320,183 (2004:
$7,453,473).
10. Share Capital
2005 2004
---- ----
Authorised:
60,000,000 (2004: 60,000,000) Class A
Ordinary Shares of CI$0.05 each 250,000
(2004: 250,000) 9% Cumulative,
Participating Class B Preference Shares
of $1.00 each (non voting) 1 Cumulative,
Participating, Class D Preference Share
of CI$0.56 (non voting)
Issued and fully paid:
25,024,351 (2004: 24,864,975) Class A
Ordinary Shares $ 1,489,545 $ 1,480,058
250,000 (2004: 250,000) 9% Cumulative,
Participating Class B
Preference Shares ($1.00 par value)
issued at a premium of $19.00 per share 250,000 250,000
------------- -------------
$ 1,739,545 $ 1,730,058
------------- -------------
------------- -------------
The Class B Preference Shares (the "Class B Shares") are entitled to
fixed cumulative preferential dividends at a rate of 9% per annum of the
par value and premium on such shares. In the event that the dividend
payable in any financial year on the Class A Ordinary Shares exceeds $.18
per share, the Class B Shares are entitled to an additional dividend, of
four times the amount of such excess. At the sole option of the
Directors, the Company is entitled to redeem all or any of the Class B
Shares at any time upon receipt by the Company of an application to
redeem such shares.
Share capital movements for the year are summarized as follows:
1) 57,231 (2004: 68,911) Class A Ordinary Shares were issued under
the Customer Share Purchase and Dividend Reinvestment Plans at
between $11.09 and $12.32 (2004: $12.85 and $13.72) per share.
2) 6,825 (2004: 12,925) Class A Ordinary Shares were issued under the
Employee Share Purchase and Employee Long Service Plans at prices
between $11.09 and $12.32 (2004: $12.85 and $13.45) per share.
3) 95,320 (2004: 199,279) Class A Ordinary Shares were issued under
the Executive Stock Option Plan (Note 11) at between $10.05 and
$11.46 (2004: $10.05 and $11.46) per share.
11. Share Options
On October 24, 1991, the shareholders of the Company approved an
Executive Stock Option Plan, 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 ten years, and will vest over a 4-year
period on each anniversary of the date of the 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.
2005 2004
---- ----
Weighted Weighted
average average
exercise exercise
Number price per Number price per
of options share of options share
Outstanding at
beginning of year 961,021 11.58 948,800 10.83
Granted - - 221,500 13.78
Exercised (95,320) 10.07 (199,279) 10.55
Forfeited (4,400) 12.73 (10,000) 10.05
--------- ------- --------- -------
Outstanding at end
of year 861,301 11.74 961,021 11.58
--------- ------- --------- -------
--------- ------- --------- -------
The following table summarizes the information about stock options
outstanding at April 30, 2005:
Options Outstanding Options Exercisable
------------------------------------ ----------------------
Weighted Number
Number average Weighted exercis- Weighted
Range of outstanding remaining average able at average
Exercise at April 30, contrac- exercise April 30, exercise
prices 2005 tual life price 2005 price
------------ ----------- ----------- ----------- ----------
$10.05-13.78 861,301 5.41 $11.74 648,292 $11.43
------------- --------- ------ -------- --------- ---------
------------- --------- ------ -------- --------- ---------
On September 22, 2003, the Company issued 221,500 options under the
Executive Stock Option Plan. These options vest over a 4-year period on
each anniversary of the date of the grant. The options expire 10 years
after the date of the grant. The fair value of each option granted was
calculated to be $1.13 per option. The fair value was estimated on the
date of the grant using the Black-Scholes fair value option pricing model
and the following assumptions:
Dividend Yield (%) 4.98
Expected volatility (%) 12.00
Risk-free interest rate (%) 4.64
The Company has a policy of recording compensation expense upon the
issuance of stock options. Using the fair value method, the compensation
expense is amortized over the 4-year vesting period of the options. Upon
exercise, the proceeds of the option are credited to capital stock at the
option price. Therefore, an exercise of options below the current market
price has a dilutive effect on capital stock and shareholder's equity.
Under the fair value method, compensation expense was $62,573 for the
year ended April 30, 2005, with an offsetting credit to contributed
surplus.
12. Earnings per Class A Ordinary Share
Basic earnings per Class A Ordinary Share are calculated using the
weighted daily average number of Class A Ordinary Shares in issue and
after adjustment for the dividends on Class B Preference Shares.
2005 2004
---- ----
Earnings for the year $ 4,224,302 $ 19,986,779
Less: Preferred dividends (925,000) (905,000)
------------- -------------
Earnings for the year for basic and
diluted earnings per share $ 3,299,302 $ 19,081,779
------------- -------------
------------- -------------
Weighted average number of Class A
Ordinary Shares 24,924,793 24,750,820
Plus: Potential dilutive effect of
unexercised options 36,257 157,464
------------- -------------
Weighted average number of Class A Ordinary
Shares used for determining diluted
earnings per share 24,961,050 24,908,284
------------- -------------
------------- -------------
Basic earnings per Class A Ordinary Share $ 0.13 $ 0.77
------------- -------------
------------- -------------
Diluted earnings per Class A Ordinary Share $ 0.13 $ 0.77
------------- -------------
------------- -------------
Diluted earnings per Class A Ordinary Share shows the effect on earnings
per Class A Ordinary Share, which would result if all dilutive stock
options outstanding for the year ended April 30, 2005 had been exercised
at the beginning of the year. The dilutive effect of stock options was
calculated using the treasury stock method. This method calculates the
number of incremental shares by assuming the outstanding stock options
are (i) exercised and (ii) then reduced by the number of shares assumed
to be repurchased from the issuance proceeds, using the average market
price of common shares for the year.
13. Directors' and Officers' Remuneration
During the year ended April 30, 2005, the Company had a total of seven
(2004: eight) executive officers of whom two (2004: two) were also
Directors. For the financial year of the Company ended April 30, 2005,
the aggregate cash compensation paid to such executive officers for
services during such year was $1,389,853 (2004: $1,588,458).
14. Capital Commitments
a) The Company has signed a 7-year Strategic Alliance with ABB Power T&D
Company, Inc. for major Transmission and Distribution System
Projects, which commenced in September 1998. The total commitments
outstanding under this agreement are $nil (2004: $5.7 million)
b) The Company also signed a 10-year agreement with MAN B&W for
Generation Projects that commenced in February 1999. During 2005, the
Company entered into a contract with MAN Turbo for the supply and
installation of a new gas turbine. The total commitments outstanding
under this agreement are $5.25 million (2004: $nil).
c) The Company has issued a letter of intent to ADCO Power Limited for
the Caterpillar Plant Rebuild project. This project commenced March
2005 and the total commitment outstanding under this agreement is
$5.0 million. An insurance claim of $3.8 has been submitted to
partially offset the cost of this project.
15. Insurance Coverage
As discussed in Note 1, the Company operates in the Caribbean, which is
susceptible to certain adverse weather conditions such as hurricanes. The
Company maintains business interruption, machinery breakdown and property
insurance (for the estimated replacement cost of buildings and generating
plant) with major international insurers.
Included in property, plant and equipment are certain transmission and
distribution (T&D) assets with an estimated replacement cost of
$119 million (2004: $109 million). This value excludes substations, which
are covered in the main property policies. All T&D outside of 1,000 feet
from the boundaries of the main plant and substations continue to be
excluded as the Company deemed it uneconomical to obtain T&D coverage at
prevailing rates. The Company maintains lines of credit totaling
$20 million with the Royal Bank of Canada (Note 9).
The Company's insurance policy covers losses resulting from the necessary
interruption of business caused by direct physical loss or damage to
covered property. During the year ended April 30, 2005, the Company
recorded $8,148,086 in the Statement of Earnings under the terms of such
policy.
16. Pension Plan
All employees of the Company are members of a defined contribution
pension plan (the "Pension Plan") established for the exclusive benefit
of employees of the Company and which complies with the provisions of the
National Pensions Law. As a term of employment, the Company contributes
7.5% of wages or salary in respect of employees that have completed
fifteen years of continuous service and have attained the age of
fifty-five years and 5% of wages or salary for all other employees. All
contributions, income and expenses of the plan are accrued to, and
deducted from, the members' accounts. The total expense recorded in
respect of employer contributions to the plan for the year amounted to
$717,160 (2004: $763,920). An independent trustee administers the Pension
Plan.
During 2003, the Company established a defined benefit plan for a
Director of the Company. The pension cost of the defined benefit plan is
actuarially determined using the projected benefits method. An
independent actuary performs a valuation of the obligations under the
defined benefit plan at least every three years. The latest actuarial
valuation was in April 2003 and the next actuarial valuation will be
during fiscal year 2006. An accrued benefit liability of $531,689 (2004:
$240,000) is included within accounts payable and accrued expenses in the
Balance Sheet.
Pension Benefit Plan
--------------------
2005 2004
---- ----
------------- -------------
Accrued Benefit Obligation
Balance Beginning of Year $ 1,243,436 $ 1,164,811
Interest cost 83,931 78,625
Past service costs - -
Actuarial gains (losses) - -
------------- -------------
Balance, end of year 1,327,367 1,243,436
------------- -------------
Plan assets
Fair value, beginning of year 193,360 168,198
Expected return on plan assets 13,712 8,410
Contributions to plan - 10,775
Actuarial gains (losses) - 5,977
------------- -------------
Fair value, end of year 207,072 193,360
------------- -------------
Funded Status - deficit (1,120,295) (1,050,076)
Unamortized past service costs 588,606 810,076
------------- -------------
Accrued benefit liability $ 531,689 $ 240,000
------------- -------------
------------- -------------
The Company's defined benefit pension plan asset allocation was as
follows:
Equities 64%
Fixed income 24%
Cash 12%
------
100%
------
------
During the year ended April 30, 2005, $291,689 was recorded as
compensation expense, which comprises the following:
Interest cost $ 83,931
Return on plan assets (13,712)
Amortization of past service costs 221,470
-----------
$ 291,689
-----------
-----------
Significant assumptions used
Discount rate at year end (%) 6.75
Expected long-term rate of return on plan assets (%) 5.00
Average remaining service period (months) 30
See Note 21 for defined benefit pension plan approved subsequent to
year-end.
17. Interest Rate Risk
Long-term debt is issued at fixed interest rates thereby minimizing cash
flow and interest rate exposure. The Company is primarily subject to
risks associated with fluctuating interest rates on its short-term
borrowings.
18. Concentration of Credit Risk
Credit risk represents the potential loss that the Company would incur if
the contract counterparties fail to perform pursuant to the terms of
their obligations to the Company. The Company does not believe it is
subject to any significant concentrations of credit risk, except for
Other receivable - Insurance. At April 30, 2005, the amount receivable is
due from one reputable insurer. Management does not expect any losses as
a result of this concentration.
Cash balances are largely in place with major financial institutions.
Accounts receivable - Trade are largely derived from sales of electricity
supplied to consumers throughout Grand Cayman. In addition, the Company
holds consumer deposits of $2,510,219 (2004: $2,935,108) by way of
security.
19. Fair Value of Financial Assets and Liabilities
The carrying amounts reported in the balance sheets at April 30, 2005 and
2004 for cash, accounts receivable and accounts payable approximate fair
values due to the immediate or short-term maturities of these financial
instruments.
The fair value of the long-term debt is approximately $150.1 million
(2004: $148.2 million).
The fair value of long-term investments is $nil (2004: $4,025,341).
20. Taxation
Under current laws of the Cayman Islands, there are no income, estate,
corporation, capital gains or other taxes payable by the Company.
The Company is levied customs duties of $0.60 per imperial gallon of
diesel fuel it imports. In addition, the Company pays customs duties of
10% on all other imports.
21. Subsequent Events
a) The Company submitted to the Government on May 25, 2005 its Interim
Return containing its year-end 2005 unaudited results indicating
that, subject to final audit and review by Government, CUC under its
Licence, would be entitled to a 9.0% rate increase effective
August 1, 2005. This 9.0% rate increase is primarily as a result of
costs and loss of revenue related to the impact of the hurricane.
b) On June 6, 2005, the Company's Board of Directors declared a regular
quarterly dividend of $0.165 per Class A Ordinary Share, or an
annualized dividend of $0.66 per share. The dividend was paid
June 27, 2005 to shareholders of record on June 15, 2005.
c) The Company received an additional $5.0 million in June 2005 from its
insurers against its business interruption and property claims
related to the hurricane.
d) At its May 2005 meeting, the Company's Board of Directors approved
the establishment of a defined benefit pension plan for its retiring
CEO. An independent actuary completed an actuarial report in October
2003 to determine the accrued benefit obligation for this plan. At
that time, the estimated fund deficit was calculated at $1.6 million.
The next valuation will be completed during fiscal year 2006.
e) The Company's $10.05 options granted under the Executive Stock Option
Plan on June 8, 2000, expired on June 8, 2005. 191,601 of these
options were exercised for the period commencing on May 1, 2005 and
ending on the expiry date.
22. Related Party Transactions
At April 30, 2005, 17.12% of the Class A Ordinary Shares (2004: 17.03%)
and 7.5% of the Class B shares (2004: 7.5%) were owned either directly or
through entities controlled by Directors or officers of the Company.
The Fortis group, the largest shareholder of the Company, owns 37.17% of
the issued Class A Ordinary shares. Fortis accounts for the investment in
CUC shares under the equity method. A contingent of employees from
various Fortis operating subsidiaries assisted with the reconstruction of
the Company's transmission and distribution assets following the passage
of the hurricane. These financial statements include an amount of
$2.9 million for the cost of the Fortis group's labour in the
construction of fixed assets at standard market rates. This amount was
fully paid as at April 30, 2005.
23. Measurement Uncertainty
Measurement uncertainty is uncertainty in the determination of the amount
at which an item is recognized in financial statements. Due to the
hurricane, the property, plant and equipment write down, the estimated
costs to reconstruct, and the related insurance receivable relating to
the estimates of reconstruction are measured using management's best
estimates based on assumptions that reflect the most probable set of
economic conditions and planned course of action. Actual results could
differ from those estimated.
24. Comparative Figures
Certain comparative figures have been reclassified to conform with
current year disclosure.
>>
%SEDAR: 00002251E
Powered by 
Google Übersetzer
Google Übersetzer