The Bermuda Stock Exchange last month launched its “Own Your Share of Bermuda” campaign to raise awareness of opportunities to invest in the island’s public companies. The Royal Gazette is supporting the effort by publishing weekly features on each of the 13 domestic companies listed on the BSX. In the second of the series, Raymond Hainey looks at the Ascendant Group.

The Ascendant Group has grown from its 1908 origins as simply suppliers of electricity to Bermuda.

Although Belco remains the most visible, biggest part of Ascendant’s empire, it also includes AG Holdings Ltd, which is made up of Air Care, iFM, iEPC and Ascendant Properties.

Belco is facing headwinds familiar to many regulated power utilities around the world as it deals with a worldwide trend towards greener energy, an ageing oil-burning plant, as well as the high cost of introducing alternative fuels like liquid natural gas on the island, which will cost hundreds of millions of dollars to implement.

But 109-year-old Belco appears to be aware that the world of power generation is changing — and has put forward its own vision of what the future of the island’s electricity supply could look like in its Integrated Resource Plan, submitted to the Energy Commission last June.

In its first-half report for last year, the latest figures available, Ascendant posted operating earnings, excluding the impact of discontinued operations, of $6 million — a $3.5 million jump compared to comparable earnings in of $2.6 million.

Ascendant attributed the increase to a $3.1 million or 59.1 per cent increase in Belco’s net earnings because of higher electricity sales revenues and lower operating costs.

The operating earnings excluded the financial results of Bermuda Gas, which was sold in April last year to fuel firm Rubis for $17.7 million.

A year before, Bermuda Gas exited retail appliance sales and its parts and repair business to focus on propane gas distribution — but, after the Rubis opportunity came up, it “provided an opportunity for the company to reserve capital for anticipated new energy infrastructure investments in Bermuda and other needs”.

The company at present has a market capitalisation of more than $77 million and total assets and regulatory deferral account debit balances of more than $379 million.

Quarterly dividends have been 7.5 cents per share since March 2014 when they were reduced from 21.25 cents per share.

Over the same period, the share price has dropped from $31.20 at the start of March, 2012 to $7.20 at the start of this month.

The six-year recession accompanied by a sharp population decrease hit Belco’s electricity sales hard and Ascendant’s profitability, share price and dividend payout suffered as a result.

But since bottoming at $4.11 in May last year, the stock has rallied strongly, rising 75 per cent through yesterday.

Senior management declined to be interviewed, but then-president and chief executive officer Walter Higgins said in the 2016 half-yearly report that the firm would use some of the cash from the sale of Bermuda Gas to embark on a plan to repurchase up to 1.5 million shares, around 41.1 per cent of outstanding shares.

He added: “The primary objective of the share buyback programme is to provide liquidity and to stimulate interest in the company’s shares, which appear to be appreciably undervalued.

“The remaining funds will enable Ascendant to invest in new and existing initiatives throughout the group as we evolve to meet Bermuda’s future energy needs.”

Mr Higgins’s claim that the shares were undervalued were backed up by the company’s book value, which at the end of 2015 was $23.24 per share — more than three times yesterday’s share price.

Mr Higgins said that its integrated resource plan, submitted last June, suggested a move to LNG instead of oil, the implementation of “utility scale” solar energy, battery energy storage for reserves and to support the intermittent nature of renewable generation, as well as “aggressive energy efficiency initiatives and widespread promotion of conservation”.

He added: that the future of energy supply “requires a new approach to energy demand, supply, usage and management”.

Mr Higgins said: “This is a critical time for developing Bermuda’s energy future and the Ascendant group of companies stand ready, willing and able to play their parts.”

Disclaimer: This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Past performance is no guarantee of future results.