Mr. Richard Hew reports

CUC ANNOUNCES SECOND QUARTER RESULTS FOR THE PERIOD ENDED JUNE 30, 2016

Caribbean Utilities Co. Ltd. has released its unaudited results for the second quarter ended June 30, 2016 (all figures are in U.S. dollars).

Sales for the three months ended June 30, 2016, totalled 156.2 million kilowatt-hours, an increase of 10.2 million kwh in comparison with 146.0 million kwh for the three months ended June 30, 2015. This 7-per-cent sales growth was driven by warmer weather conditions and an increase in customer numbers.

Operating income for second quarter 2016 totalled $7.2-million, an increase of $800,000 when compared with operating income of $6.4-million for second quarter 2015. The increase is primarily attributable to the 7-per-cent kwh sales growth, partially offset by higher depreciation and general and administration costs.

In addition to the factors positively impacting operating income, net earnings increased as a result of higher capitalization of interest expenses through the allowance for funds used during construction (AFUDC) of $1.7-million in second quarter 2016 when compared with $1.0-million in second quarter 2015. The increase in AFUDC, and resulting reduction in finance charges, is due primarily to the company's 39.7-megawatt (mw) generation project. AFUDC is the capitalization of financing cost, which is calculated by multiplying the company's cost of capital rate by the average construction work in progress for each month.

The company anticipates a reduction in AFUDC and an increase in depreciation costs commencing with the completion of the generation project.

Net earnings for the second quarter 2016 totalled $7.5-million, an increase of $2.0-million when compared with net earnings of $5.5-million for the three months ended June 30, 2015.

After the adjustment for dividends on the preference shares of the company, earnings on Class A ordinary shares for the second quarter 2016 were $7.4-million, or 23 cents per Class A ordinary share, compared with earnings on Class A ordinary shares of $5.4-million or 17 cents per Class A ordinary share for the second quarter 2015.

Sales for the six months ended June 30, 2016, totalled 291.7 million kwh, an increase of 16.7 million kwh in comparison with 275.0 million kwh for the six months ended June 30, 2015. The average monthly temperature for the first six months of 2016 was 82.1 F as compared with an average monthly temperature of 81.3 F for the first six months of 2015. Warmer temperatures increase air conditioning load and can positively impact the company's sales.

Net earnings for the six months ended June 30, 2016, totalled $12.5-million, an increase of $3.7-million when compared with net earnings of $8.8-million for the six months ended June 30, 2015. The increase is attributable to the 6-per-cent increase in kwh sales, higher other income and lower interest costs. These items were partially offset by higher depreciation and transmission and distribution costs.

After the adjustment for dividends on the preference shares of the company, earnings on Class A ordinary shares for the six months ended June 30, 2016, were $12.3-million, or 38 cents per Class A ordinary share, compared with earnings on Class A ordinary shares of $8.6-million or 28 cents per Class A ordinary share for the six months ended June 30, 2015.

The continued reduction in world market fuel prices, as well as the 30-cent government reduction in fuel duty, has resulted in customers benefiting from significantly reduced electricity costs during the second quarter 2016. Residential customers who used an average of 1,000 kwh per month would have seen their monthly bills decline by approximately $49 during the second quarter 2016 when compared with the same period in 2015.

However, historically, the world fuel market has been volatile, and the company continues to seek ways to connect other stable and competitively priced energy options to the grid to ensure that its commitment to provide a safe and reliable electricity service at least cost remains attainable.

The groundbreaking event for the five-megawatt solar project at Bodden Town took place in May, 2016. The project, which is being developed by Entropy Cayman Solar Ltd., is progressing as planned and is expected to be operational by the end of 2016. The company anticipates further renewable energy sources connected to the grid with a request for proposal for renewable energy being conducted by the Electricity Regulatory Authority (ERA) in the near future.

The consumer-owned renewable energy generation (core) program, which allows consumers to generate energy from renewable sources and be compensated through stable, long-term rates, continues to attract participants. At June 30, 2016, 146 customers were connected with 2,080 kilowatts (kw) of renewable capacity. The core program allows customers to connect small-scale solar systems or wind turbines to the company's distribution system and to reduce their monthly energy bills by generating their own electricity while remaining connected to the company's grid.

The company's new Power House building was completed, and the new engine room handed over during the second quarter 2016. On June 21, 2016, the official commissioning ceremony was held. The company now has an additional 39.7 megawatts of diesel power, which includes a 2.7-megawatt waste heat recovery steam turbine.

The company is committed to providing reliable electric service to its customers. During the second quarter 2016, some customers were affected by a communication systems problem around the commissioning of the new engines, which caused the generating unit to disconnect for short periods of time, triggering outages. The company and its partner MAN have put all of the necessary resources in place to address these issues, and the company is confident it they have now been resolved.

The company's system average service availability index was 99.89 per cent for the six months ended June 30, 2016, compared with 99.96 per cent for the six months ended June 30, 2015.

President and chief executive officer, Richard Hew, said: "The quarter was mainly positive as we had strong demand for electricity, which we were able to meet with the successful completion of the 39.7-megawatt power plant. Unfortunately, some of our customers were impacted by frequent, short-duration outages in June, and our usual high-reliability standard was not met. However, we are confident that the longer-term reliability outlook is very positive with the addition of the new units."

The advanced metering infrastructure (AMI) project will soon be completed. At the end of June, 2016, over 23,000 new meters were installed to residential properties and businesses across Grand Cayman. The project, which is expected to be completed at the end of July, 2016, provides real-time electricity consumption information and brings efficiencies in meter reading. Customers who have the new AMI meters are now able to monitor their consumption through the company's website and better manage their usage.

Mr. Hew added: "I am also pleased to report that during the quarter, another Caymanian, Mr. Sacha Tibbetts, was promoted to the executive level as vice-president, customer service and technology. Sacha's appointment to this new role solidifies our executive team structure and will better position our company to deliver on our key strategic initiatives, which include reliability, new business and technology, human capital, and brand. These are very exciting times for the energy business, and our team is ready to deliver positive results to all of our stakeholders."

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