Ascendant Group Limited Reports 2009 Financial Results

Hamilton, Bermuda – 29 April, 2010 – Ascendant Group Limited (AGL.BH) today reported 2009 financial results for its Group of companies, comprising Bermuda Electric Light Company Limited (BELCO), Bermuda Gas & Utility Company Limited, PureNERGY Renewables, Ltd., and BELCO Properties Limited, as well as InVenture Limited, incorporated in mid-2009.

Ascendant Group’s consolidated net earnings declined from 2008 restated results of $20,099,108 to $19,506,881 in 2009.  As a result, earnings per share from operations decreased 3.59 percent in 2009 to $1.88, down from $1.95 in 2008.  The 2009 highlight was significantly improved net income results reported by Bermuda Gas of $1,268,408, as compared to 2008 net income of $419,383. BELCO results fell approximately $392,833 to $19,655,639, from 2008 results of $20,048,472, adjusted for a change in accounting policy for major overhauls. PureNERGY experienced a challenging year in 2009, reporting an operating loss of $1,100,539, compared to a loss of $580,217 in 2008. BELCO Properties Limited recognised a net income of $255,771 compared to $311,308 in 2008.

The market price of Ascendant’s shares declined in 2009 from an opening value of $18.00 to a year-end price of $15.05.   Management continues to believe that the share price is undervalued, as the book value per share at year end was $31.05, better reflecting the long-term value of the organisation. The 2009 cash dividend of $0.85 per share was unchanged from 2008. The 2009 dividend yield was 5.64 percent compared to 4.73 percent in 2008.

BELCO

Sales of electricity, net of fuel adjustment revenue, increased $6,519,297 in 2009 to $150,633,797, up from the $144,114,500 achieved in 2008. Basic tariff rates and facility charges increased an overall average of 2.75 percent in 2009, providing additional revenue of $4,026,660. The balance of the increase, $2,492,637, is the result of a 1.72 percent increase in the number of kilowatt hours (kWh) sold. Fuel adjustment revenue decreased $22,171,692 to $76,374,743 in 2009, from $98,546,435 in 2008, as fuel costs declined dramatically. This savings was passed on to the customer.

Residential kWh sales increased 1.17 percent in 2009, following a decrease in 2008 of 2.58 percent. Average consumption per customer increased marginally by 0.53 percent during the year to an average monthly consumption of 698.59 kWh.  Sales in the Commercial sector were up 2.42 percent, or 7,709,702 kWh, compared to an increase of 1.49 percent in 2008.  Increased demand from active commercial customers, along with sales to new customers, offset lost commercial sales due to business closures and decreased operating activity by various other commercial businesses, most notably hotels.

Fuel costs are the most significant of BELCO’s Energy Supply expenses. In 2009, total fuel costs decreased $20,644,179, from $129,487,548 in 2008 to $108,843,369, largely due to the lower cost of fuel, as noted earlier. The average cost of a barrel of fuel decreased $25.25, or 20.02 percent, from $126.11 in 2008 to $100.86 in 2009, resulting in a savings of $25,747,324 in fuel costs. Lube oil costs, however, rose dramatically in 2009 due to increases in prices, which doubled from 2008.  Maintenance support contract costs rose in 2009 $2,193,526, as new five-year service contracts were entered into.  These costs were offset by saving on material costs.

BELCO Energy Supply costs increased in 2009, as the loss of the E7 engine caused labour- and materials-related costs to increase by $1,129,779. These additional costs are ones which BELCO cannot claim under its deductible provisions.

BELCO’s administration costs increased 15.56 percent, or $4,288,381, from 2008. Notably, defined benefit pension plan costs increased $2,028,230 in 2009, following significant declines in returns from pension fund investments, a direct result of the challenging investment market in 2008.  Also during 2009, $1,467,402 in costs were incurred due to inventory write offs of $1,127,075 and property, plant and equipment write offs of $340,327. The inventory write offs are represented largely by parts specifically supporting engine D2, which was decommissioned during the year in advance of expectations, largely a result of having to run this older plant because of the failure of E7. Property, plant and equipment write offs relate to the early decommissioning of four gas turbine engines during the year. Space utilised by these older engines was needed to erect three new gas turbine engines required to meet capacity requirements, as BELCO was forced to adjust its expansion plans when the decision to allow the addition of slow-speed diesel plant was deferred.

BELCO invested $36,811,866 in capital projects in 2009, compared to $23,409,763 in 2008.  Energy Supply capital expenditures in 2009 totalled $15,803,276. Under the Central Plant development plan, $12,035,457 was spent as construction commenced on installation of three gas turbines.  A total of $406,881 was also spent on extending the useful service lives of generation units D3, D8 and D10 to 2014, as part of BELCO’s overall strategy to meet future demand requirements. Project costs incurred to date represent a portion of a redesigned two-year plan estimated to cost approximately $2,750,000 and considered necessary to meet future demand in the absence of Government approval to proceed with a new diesel plant.

BELCO incurred costs totalling $2,514,393 on improving security of supply of both high and low voltage networks. In addition, a total of $2,109,488 was spent completing Phases 1 and 2 of the transmission system protection strategy, $2,289,491 on replacing 22kV and 4kV switchboards throughout the Island, continued work on the Pender-to-Boaz Island project cost an additional $1,495,324, and $283,231 was spent on Phase 4 of  Court Street undergrounding.

Bermuda Gas

As previously mentioned, Bermuda Gas’ net earnings for the year increased to $1,268,408 from $419,382 in 2008.  Results in 2008 had been negatively impacted by high wholesale prices paid for propane gas, costs related to increased staff training, union negotiation, and office moving, as well as reduced sales given economic uncertainty. The increase in 2009 net income is primarily due to improved profit results from the Company’s propane gas sales division. The benefits realised were offset by a total decline of 11.21 percent in gas sales revenues during the year compared to 2008. Commercial gas sales volumes were down 3.45 percent on 2008, while residential gas sales declined 1.71 percent. A decrease in division operating costs also contributed to increased gas division profits.  Appliance units sold in 2009 were up 12.7 percent as compared to the number of appliances sold in 2008, contributing to a $383,501 or 30.94 percent increase in appliance sales gross profit.  The operating results from the services and parts division improved by $40,256 or 26.27 percent.

PureNERGY

PureNERGY was unable to achieve its business plan budget results due in part to a number of external factors. Amongst these, the Company anticipated duty relief from Government on import of the energy-efficient and small-scale renewable products it sells, which are core to its business plan.   PureNERGY is encouraged to see some Customs duty relief for energy-efficient products and requirements that future buildings be “green” mentioned in Government’s 2010 budget. However, the lack of specifics in this area, as well as reduced funding the Ministry of Energy will receive in 2010, are causes for concern.

Ascendant Group Limited’s complete 2009 annual report can be found at www.ascendantgroup.bm and on BELCO’s newly redesigned web site, www.belco.bm.