“BELCO and our non-utility businesses performed well in the first half of this year – evidence that our strategic plan is bearing fruit,” Ascendant Group President and CEO Sean Durfy said today as he announced the company’s results for the first half of 2018.
Mr. Durfy said: “The Company’s performance reflects continued, solid growth in our non-utility businesses.
“While results from BELCO reflect seasonally lower revenue and increased depreciation due in part to our aged engines scheduled for shut-down in 2020, we are optimistic that BELCO will meet last year’s $23.2 million in net earnings by the end of this year.
” We are extremely pleased that our share price is starting to reflect the significant underlying value of our business.”
“Year-to-date core earnings from operations, before corporate expenses, were $11.1 million compared to $13.6 million for the same period in 2017. The year over year changes for the first six months of 2018 include the following:
- “Bermuda Electric Light Company Limited [“BELCO”] experienced $1.8 million higher depreciation costs associated with engines scheduled to retire in 2020 as well as capital additions, $0.6 million from the prior year reversal of regulatory fees from 2016, and $0.8 million lower base tariff revenue year over year.
- “Ascendant’s non-utility businesses continued to grow, contributing $0.6 million, or 39%, more to core earnings year over year.
“Year-to-date core earnings in 2018 were $3.1 million, or $0.32 per share compared to $9.5 million, or $0.96 per share, for the same period in 2017. In addition to the changes to core earnings from operations described above, these results were impacted by two unusual corporate charges: $1.0 million in advisory fees related to an unsolicited expression of interest to purchase the Company, as well as an increase of
“$1.9 million in long term incentive compensation costs, driven partly by the 63% share price increase over the first half of 2018.
“Year-to-date reported earnings in 2018 were $3.1 million, or $0.32 per share compared to $10.2 million, or $1.03 per share, for the same period in 2017. Reported earnings were impacted by the same changes to core earnings described above as well as $1.0 million in non-core earnings included in 2017 from the equity pick-up of earnings in AIRCARE LTD.’s Cayman Islands affiliates, Otis Air-Conditioning Ltd. and O Property Holdings Ltd.
Cash flow and capital spending
“Cash flow from operations [excluding the effect of working capital changes] totaled $14.1 million for the first half of 2018 compared to $16.6 million in the same period of 2017. This change in cash flow from operations reflects the changes to core earnings from operations described above. Capital expenditures for the first half of 2018 were $36.5 million compared to $9.2 million for the same period of 2017, reflecting the start of the Company’s capital plan.
“The Company’s share price increased 63% from $9.79 to $16.00 over the six months ended 30 June 2018. Management believesthat the execution of the Company’s strategic plan will continue to unlock the underlying value of its businesses and therefore share repurchases represent the most efficient way to return capital to shareholders.
“Accordingly, the Company renewed and increased its share repurchase program in May, 2018 authorizing the repurchase of 1 million shares. During the six month period ended 30 June 2018, the Company repurchased 196,488 shares at an average cost of $15.63.
“The Company’s Board of Directors declared a quarterly dividend of 11.25 cents per common share. Year-to-date, the Company has declared dividends per share totaling 22.50 cents per common share.
Executing Ascendant’s Strategic Plan
“The Company made significant progress on its strategic plan during the first half of 2018.
“In April, the Company approved $55 million of its five-year $124 million transmission and distribution capital plan.
“In June, the Company completed the final steps required to proceed with its $120 million replacement generation and battery storage project. Following Regulatory Authority approval of the project in March, 2018, the Company closed on the contracts for the engineering, procurement and construction as well as the $107.5 million financing for the project. Construction will begin shortly and is expected to take 18 months.
Mr. Durfy said: “Our capital plan will modernize Bermuda’s power system and will bring significant new investment and jobs to Bermuda. We’re installing four new 14 megawatt generators to provide a more reliable and fuel-efficient power supply which will comply with the most stringent environmental and noise regulations.
“They will replace nine old engines that will be retired between now and 2020 [out of 17 total]. The new engines will have the capacity to operate on either fuel oil or natural gas, but will continue to use fuel oil until the National Fuel Policy has been implemented for Bermuda.
“In addition, BELCO is replacing its underground transmission cabling network to provide more reliable delivery of electricity. This will help reduce outages, enable easier maintenance to reduce costs and provide the system improvements necessary to support the addition of renewable energy and the demands of new developments in Bermuda.
“Our capital plan also includes the replacement of all existing electricity meters with advanced meters. These meters enable daily monitoring of energy usage to help customers understand and manage their electricity consumption, reduce the need for manual meter reading and reduce outage restoration time through automatic notifications to BELCO.”
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