RATING DRIVERS
Supporting Factors:
- Monopoly position as the sole energy transmission and distribution company in Saint Lucia, with continued focus on renewable energy development
- Continued good financial performance
- Good operating efficiency supported by continued focus on system enhancement and network improvements
Constraining Factor:
- Significant risk retention via self-insurance of T&D assets
Rating Sensitivity Factors:
Factors that could, individually or collectively, lead to an improvement in the ratings and/or outlook include:
- An improvement in the credit rating of the sovereign over the next 12-15 months
- Continued improvements in economic and business conditions over the next 12 months in Saint Lucia, thereby leading to increased electricity sales
Factors that could, individually or collectively, lead to a lowering of the ratings and/or outlook include:
- A decline in gross profit margin to 35% or lower
- The occurrence of any event risk that may lead to the financial parameters deteriorating beyond the range for the current rating level
- A change in the monopoly position afforded by regulation
COMPANY BACKGROUND
Saint Lucia Electricity Services Limited (LUCELEC or the Company) was established on November 9, 1964, as a private limited liability company with the purpose of electricity generation, transmission, and distribution for Saint Lucia. The Company became public on August 22, 1994. The top five shareholders of LUCELEC are Emera (St. Lucia) Limited (20%), First Citizens (20%), National Insurance Corporation (20%), Castries Constituency Council (15.5%) and the Government of Saint Lucia (10.05%).
LUCELEC operates under an exclusive statutory license, under the Electricity Supply Act (ESA) of 1994, which gives the Company the exclusive right to generate electricity from fossil fuels, as well as transmit and distribute electricity to domestic, commercial, and industrial users in Saint Lucia. Inter alia, the Act provides the legal framework for maintaining a targeted Rate of Return on Average Contributed Capital (ROR) which varies annually. The fuel surcharge provision of the Act is the mechanism used for maintaining the ROR. A fuel price adjustment clause was structured to allow all deviations from the established base price of EC $0.2977 per gallon of fuel to be passed on to the consumers.
In December 2015, the ESA was amended to provide for the regulation of the electricity supply service by the National Utilities Regulatory Commission (NURC). The NURC was established following the passing of the National Utilities Regulatory Commission Bill. The Commission is the official authority for the regulation of the water and electricity sectors in Saint Lucia. The NURC is mainly responsible for (i) ensuring the economic regulation of utility supply services, (ii) establishing, approving, monitoring, and reviewing tariff schemes and tariffs, (iii) monitoring and ensuring compliance with standards, (iv) promoting the economic regulation of utility supply services, (v) ensuring the protection of the interest of consumers in relation to the provisions of the utility supply service, (vi) promoting competition and monitoring anti-competitive practices in the utility supply service, and (vii) reporting to and advising the Minister with responsibility for Public Utilities on the economic, financial, legal, technical, environmental and social aspects of the utility supply services sector[1].
Based on the new regulatory framework[2], independent power producers (IPPs) may be granted licenses by the NURC to generate electricity from renewable sources. However, LUCELEC maintains the exclusive license to distribute and transmit electricity in Saint Lucia. The Company presently operates two electricity generation facilities – the Cul de Sac Power Station with 10 generators for a total installed capacity of 86.2 megawatts (MW), and the Belle Plaine Power Station with 2 generators for a total installed capacity of 2.2 MW, as well as seven substations throughout the island, linked by a 66-kilovolt (kV) transmission network. In April 2018, LUCELEC completed the construction of a 3 MW solar farm, which generates 7 million kilowatt-hours (kWhs) of electricity per year. This project marked the beginning of LUCELEC’s transition towards electricity being generated from a renewable source rather than solely from diesel.
[1] Source: National Utilities Regulatory Commission.
[2] National Utilities Regulatory Commission Act, No. 3 of 2016.
Analytical Contacts:
Megan Dass
Tel: 1-868-627-8879 Ext. 239
E-mail: [email protected]
Keith Hamlet
Tel: 1-868-627-8879 Ext. 244
Cell: 1-868-487-8356
E-mail: [email protected]
Website: www.caricris.com
E-mail: [email protected]
Disclaimer: CariCRIS has taken due care and caution in compilation of data for this product. Information has been obtained by CariCRIS from sources which it considers reliable. However, CariCRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. No part of this report may be published/reproduced in any form without CariCRIS’ prior written approval. CariCRIS is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/transmitters/distributors of this product.