Ascendant profits rise even as revenue falls
Ascendant Group's profits rose in the first half of the year even as electricity sales fell.
Core earnings from operations, before corporate expenses, were $8.7 million compared to $7.5 million for the same period in 2019.
Total revenue dipped by $15.9 million during the January-to-June period to $91.28 million, compared to $107.18 million a year earlier.
Ascendant is the parent company of power utility Belco, whose earnings for the six-month period jumped by $2.8 million.
This was despite a decrease of $9.6 million in net electric sales revenues, due largely to the impact of the Covid-19 pandemic and lower fuel tariffs.
In a statement, Ascendant explained: “The lower sales were more than offset by savings in fuel and salary expenses.”
Ascendant's non-utility businesses were negatively impacted by the pandemic, with earnings decreasing by $1.4 million as compared to the first six months of 2019.
Corporate expenses decreased by $1 million from the comparable period in 2019 due to decreased salary, consulting and legal expenses.
Core earnings in 2020 were $4.9 million, or 50 cents per share compared to $2.7 million, or 28 cents per share for the same period in 2019.
In addition to the changes in core earnings from operations described above, corporate expenses decreased $1 million in the first six months of 2020 as cost saving measures led to reduced personnel costs, consultants' and legal fees.
In addition, chargeouts to affiliates decreased by $1.2 million in this period.
Net earnings year-to-date in 2020 were $4.9 million, or 50 cents per share compared to a loss of $1.9 million, or 20 cents per share, for the same period in 2019. Reported earnings were impacted by the same changes to core earnings described above and the 2019 results included $4.6 million in costs associated with the restructuring of the company, primarily financial advisory and legal fees.
Cashflow from operations (excluding the effect of working capital changes) totalled $16 million for the first half of 2020 compared to $9.8 million in the same period of 2019.
This change in cashflow from operations reflects the changes to core earnings from operations described above. Capital expenditures for the first half of 2020 were $26 million compared to $73.1 million for the same period of 2019, reflecting the commissioning of the North Power Station on March 31, 2020.
Construction of 56 megawatts of replacement generation was completed in the first half of the year. The rate case that was submitted in April 2019 to the Regulatory Authority in respect of the retail tariff methodology released by the Authority in October 2018 which provided clarity on future rate-setting methods and timing was approved and the new rate structure became effective on January 1, 2020.
Work continues on Belco's more than $50 million capital investment programme for its three-year grid enhancement project that will see a much more robust transmission and distribution grid as well as the ability to safely bring more renewables onto the system.
Ascendant stated: “With these accomplishments, the company has laid the groundwork for Bermuda's energy future.”
The statement also mentioned the proposed takeover of Belco by Canadian-based Algonquin Power and Utilities Corp. The Regulatory Authority announced yesterday that it had approved the change of control of Belco, but that other approvals are still required.
The $36-a-share deal is worth around $365 million.
Algonquin has North American assets worth more than $11 billion and owns and operates 54 energy facilities, of which 90 per cent are renewable.
Ascendant stated: “As part of their proposal Algonquin has committed to continue to run all Ascendant companies locally with current Bermudian management, to support Belco in its collaboration with the Authority in implementing the Integrated Resource Plan for Bermuda and introducing modern energy technologies to accelerate the introduction of renewables, conservation and battery storage for the island.
“The board of directors takes the view that Algonquin can provide the resources and experience required to build on the foundation it has established and for Ascendant to realise its strategy of providing a strong future for its staff and customers.”
The company added that the total interests of all directors and executive officers of the company totals 527,804 shares, worth $19 million at the proposed takeover price.
Share awards outstanding, related to long-term incentive schemes for senior managers, amount to another 340,582 shares, or $12.26 million at Algonquin's offer price.