JOINT MEDIA RELEASE BY THE GOVERNMENT OF THE CAYMAN ISLANDS AND CARIBBEAN
UTILITIES COMPANY, LTD. (CUC).
THE CLASS A ORDINARY SHARES OF CARIBBEAN UTILITIES COMPANY, LTD. ARE
LISTED FOR TRADING IN UNITED STATES FUNDS ON THE TORONTO STOCK
EXCHANGE/TRADING SYMBOL: CUP.U
GRAND CAYMAN, Cayman Islands, April 3 /CNW/ - The Cayman Islands Government ("Government") and Caribbean Utilities Company, Ltd. ("CUC") announced today, the signing of an exclusive Electricity Transmission and Distribution Licence (the "T&D Licence") and a non-exclusive Electricity Generation Licence (the "Generation Licence") for operations in Grand Cayman. The terms of the licences were outlined in an Agreement in Principle ("AIP") dated and announced December 20, 2007 and remain substantially the same.
The non-exclusive Generation Licence is for a term of 21.5 years. The recently amended Electricity Regulatory Authority Law (2005 Revision) provides for the conduct of a competitive bid process to be managed by the Electricity Regulatory Authority ("ERA") for new generating capacity and for the replacement of retired generating capacity. The first such competitive process under this licence is expected to begin later this year with the filing of the Certificate of Need by CUC for the calendar years 2011 and 2012.
The exclusive T&D Licence is for an initial term of 20 years with a provision for automatic renewal unless either party gives notice to terminate.
The December 20, 2007 AIP announcement outlined the Rate Cap Adjustment Mechanism ("RCAM") which is designed to maintain the CUC Return On Rate Base ("RORB") in the target 9 to 11% range. Under the RCAM, base rate adjustments will be considered annually based on a combination of Cayman Islands and US consumer price index ("CPI") movements defined as the Price Level Index. As a refinement to the previously announced RCAM, the parties have further agreed that, in the year following a natural disaster such as a hurricane where the Governor has declared a state of emergency and the Cayman Islands CPI doubles, CUC's base rate adjustments will be limited to 60% of the Price Level Index. Any residual base rate adjustment for that year that would otherwise be permitted by the full application of RCAM would be carried over and applied in addition to the normal RCAM adjustment in either of the next two years if CUC's RORB is below the target RORB range.
Upon the execution of the new licences, the Government nominated directors on the CUC Board of Directors will resign and those vacancies will not be filled with Government nominated directors at the next CUC shareholders' meeting.
On behalf of Government, the Minister of Infrastructure and Communications, the Honourable Arden McLean, stated that "This is an historic day in the provision of electric power for Grand Cayman Island. Consumer rates for power have already come down substantially as of January of this year and the hurricane recovery surcharge was removed completely. Working with CUC, we have provided in these documents for a solid long-term framework for the further benefit of consumers, in which we will control rate increases; maintain reliability; introduce competition in generation; require performance standards; strongly encourage renewables; ensure proper regulatory oversight; enhance environmental protection; and encourage efficiency. This will all be done while also providing for CUC's continued financial health. I would like to express my appreciation for the continued support of the Leader of Government Business, the Cabinet and the hard work of the negotiating teams that have brought us to this point."
CUC President and Chief Executive Officer Mr. Richard Hew said, "I am pleased to be a part of the achievement of this important milestone in CUC and Grand Cayman's history. The new licences and regulatory structure provide the level of certainty required for CUC to execute the long-term plans and make financial commitments necessary to ensure that residents and businesses in Grand Cayman can continue to look forward to a highly reliable and efficient electricity service. I would like to thank our resigning directors, Philip Barnes, Sheree Ebanks and Anna Rose Washburn, for their dedication and input throughout their tenure as company directors. Finally, I would like to thank the many persons who have contributed significant time and effort to realize the positive outcome of the negotiations."
Caribbean Utilities Company, Ltd., on occasion, includes forward-looking statements in its media releases, Canadian securities regulatory authorities filings, shareholder reports and other communications. Forward-looking statements include statements that are predictive in nature, depend on future events or conditions, or include words such as "expects", "anticipates", "plan", "believes", "estimates", "intends", "targets", "projects", "forecasts", "schedule", or negative versions thereof and other similar expressions, or future or conditional verbs such as "may", "should", "would" and "could". Forward-looking statements are based on underlying assumptions by their very nature and are subject to certain risks and uncertainties that may cause actual results to vary from plans, targets and estimates. Such risks and uncertainties include but are not limited to general economic, market and business conditions, regulatory developments and weather conditions. 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.
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