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BELCO Holdings Limited Releases Six Month Results
Electric energy revenue, which represents the primary contributor to Holding's bottom line, increased slightly, 1.26%, compared with the previous year. The increase is due to greater sales to the residential and small commercial sectors, as well as an increase in fuel adjustment revenue. Fuel prices remained high and increased a further 0.26% to an average price of $53.33 per barrel of fuel used, compared to $53.19 in 2003. The increase in fuel adjustment revenue is offset by an identical increase in fuel cost. Revenue from sales, net of fuel adjustment revenue, was up slightly, 0.96%, over 2003.
Total kilowatt hour sales for the first six months of 2004 were 0.54% ahead of 2003. Sales to residential and commercial customers were up 3.39% and 4.74% respectively, compared to 2003. However, sales to Demand (large commercial) customers declined 4.13%, due largely to hotel closures for hurricane damage repairs and renovations.
Overall operating expenses for the period were 2.59% higher than the first six months of 2003, primarily due to the timing and extent of major generation overhauls in 2004. Issues with two of our base load engines caused us to rely more heavily on less efficient plant during the first quarter of the year, resulting in a decrease in fuel efficiency to 654 kWhs per barrel of fuel for the first six months of 2004, compared with 670 kWhs during the same period in 2003. Additionally, resource and overtime expenses increased as we moved into an accelerated maintenance program in the first half of the year to ensure adequate generation plant would be available for the summer months.
As would be expected, our margin of generating capacity is most vulnerable just prior to the installation of new plant. Two new 14.5 MW medium speed diesel engines arrived on the Island, as scheduled, in early August with commissioning due to take place in Spring 2005. The timing of this addition to our power station was planned based on a load projection forecast averaging 3% annual growth. However, in 2003 peak demand on our system increased 6.1% to 114.6 MW, so as a precaution, to avoid possible rotating outages in the event of failure of more than one of our larger generating units, we launched a conservation campaign in June.
To date, the daily peak demand has yet to exceed 109 MW. We attribute the reduction in peak demand to a combination of conservation and cooler temperatures brought about by more frequent rain showers.
Bermuda Gas & Utility Company Limited's (Bermuda Gas) results for the first six months of the 2004 also reflect the lingering effects Hurricane Fabian has had on tourism related businesses. Net operating profit was $458,000 for the first six months of 2004, compared to $515,000 in 2003. Year-to-date gas sales are ahead of last year, however, related costs have also increased leading to a net decrease in profit from the prior year of 0.42%. A 2.52% decrease in appliance sales profit is attributed to the timing of sales promotions, while, revenue from service and parts sales also decreased 4.92% in the first six months of 2004 compared to 2003.
Holdings sold 49% of its interest in BELCO Energy Services Company Limited (BESCO) to New Venture Holdings Limited. The remaining 51% is held by Holdings' wholly owned subsidiary BTS Limited, and this remaining interest has been accounted for as a joint venture. Profits associated with these inter-company transactions have been eliminated in the six month financial statements.
Holdings share price increased 14.71% from $34.00 at June 30, 2003 to $39.00 at June 30, 2004. This capital appreciation in our share price results in a dividend yield of 3.95%.
"Notwithstanding the residual effects of Hurricane Fabian, resulting in lower tourism related sales, high fuel prices and unforeseen issues impacting our generating plant, our results are in line with expectations," said Garry A. Madeiros, President and Chief Executive Officer.
"As we move through the second half of the year, we will benefit from our efforts of the first six months, as less generation maintenance will be required, sales are expected to increase with the warmer weather and Bermuda Gas is due to fulfill some large commercial contracts. We continue to work on our initiatives for 2004, including streamlining critical processes within our organization for greater efficiencies and productivity, and expect to see the benefits from this efforts," Mr. Madeiros said.