Sept 1st, 2003

CUC Responds to Government Statements Regarding CUC's 3% Rate Increase

Caribbean Utilities Company, Ltd. (“CUC” or “the Company”) submitted its 2003 Final Return to the Cayman Islands Government (“Government”) in July 2003 confirming that it is entitled to a 3% rate increase effective August 1, 2003 pursuant to its Licence with Government. This return was filed after CUC’s independent auditors, PricewaterhouseCoopers, provided written confirmation that the rate increase was computed in accordance with the terms of the Licence.

Government responded to the Final Return by requesting a voluntary rollback of the rate increase effective immediately and threatening to seek injunctive relief against CUC if it did not comply. The Company indicated to Government following its request that it was prepared to partially roll back the rate increase to 1.5% effective immediately, with the appropriate credit to be applied to those customer accounts with bills rendered since August 1, 2003. This offer was made without prejudice to its position that it is entitled to the full rate increase as permitted by the Licence. CUC made this proposal in the spirit of goodwill and considered it a fair and reasonable compromise that, if accepted, would enable both parties to move forward in a positive way regarding the upcoming Licence extension negotiations.

Government has rejected this good-faith offer and reiterated that it will accept nothing less than a 100% unconditional rollback of the rate increase. CUC will defend its position vigorously should Government choose to seek injunctive relief, an alternative that will benefit neither party.

CUC has now suspended all Licence extension negotiations until the legal aspects of this matter are fully resolved. The Company submitted to Government in July 2002 a proactive, 12-point Licence extension proposal that included, among other things, a “price cap” rate-setting mechanism to replace the existing rate of return formula. The proposal sought to ensure the continued least-cost electricity supply at equitable pricing while preserving the Company’s continued financial integrity.

CUC will continue to operate, as it has stated many previous times, under the terms of its current Licence. We will also continue to respond to customers’ expectations of providing world-class service at fair, stable and transparent pricing that is regionally competitive while responding to any challenges to our contractual rights under our Licence.

Queries? Please contact:
Caren Thompson
Manager Corporate Communications
Phone : 345 914 1107
Email: cthompson@cuc.ky