RATING DRIVERS

Supporting Factors:

• Stable and predictable revenue stream underpinned by firm long-term contracts with strategically important Jamaican entities
• NFE SPH’s underlying asset consists of a modern, efficient electricity and steam generating plant, with good operating efficiency
• Stable operating profits support comfortable debt servicing capacity
• Credit enhancements in the form of a parent company guarantee and reserve accounts also support the rating

Constraining Factors:

• Unproven track record of consistent plant performance
• High leverage of Parent can hamper timeliness of financial support, if needed

Rating Sensitivity Factors

Factors that could, individually or collectively lead to an improvement in the ratings and/ or outlook include:

• Successful operations of the CHP plant over the next two to three years, in accordance with design specifications and on time compliance with the PPA and SSA deliverables over the period.
• An improvement in the creditworthiness of the guarantor (NFE), sustained over 2 consecutive years
• 2 consecutive years of reported profit after tax of the Company, leading to an improvement in its financial position and TNW

Factors that could, individually or collectively lead to a lowering of the ratings and/or outlook include:

• Deterioration in the creditworthiness of the guarantor (NFE), thereby reducing its ability to honor its guarantee commitment to NFE SPH in a timely manner, if so required
• Breach of contract by the O&M counterparty, Caribbean Blue Skies Energy, that may have a negative impact on operations
• Any material litigation which may affect NFE or NFE SPH
• Breach of any of the bond covenants
• A material reduction in the CHP plant’s availability which would impair its ability to deliver output stipulated in the PPA and SSA
• Failure by NFE or NFE SPH to capitalize the principal reserve account, at the appropriate time
• Failure by Jamalco to resume full operations
• The inability of NFE SPH to refinance the bullet payment

COMPANY BACKGROUND

NFE South Power Holdings Limited (NFE SPH or the Company), a wholly owned subsidiary of New Fortress Energy Incorporated (NFE or the Parent)^[1], was established in 2016 to own and operate a new modern, energy-efficient combined heat and power (CHP) plant in Clarendon, Jamaica, which commenced commercial operations in the first quarter of 2020. The CHP plant is fuelled by natural gas, with the ability to run on diesel as a backup fuel source. It can generate up to 100 MW of electricity and approximately 50 MW equivalent of steam.

NFE SPH has in place long-term contracts to sell 100% of the electricity and steam produced by the CHP Plant for the next 18½ years to Jamaican counterparties. NFE SPH sells all electricity produced by the CHP Plant to the sole power distribution utility company in Jamaica, the Jamaica Public Service Company Limited (JPS), rated jmAA+ by CariCRIS, pursuant to a long-term Power Purchase Agreement (PPA). NFE SPH also sells all steam produced by the CHP Plant to the Jamalco bauxite refinery^[2] under a long-term Steam Supply Agreement (SSA) with its owners, General Alumina Jamaica Limited and Clarendon Alumina Production Limited (collectively known as Jamalco). Throughout 2020, the CHP Plant had the highest dispatch factor of 95% relative to all other Jamaican power generators. For the financial year ended December 2020, NFE SPH recorded total revenue of US $94.4 million and total assets stood at US $241.9 million as at that date.

As a start-up entity, NFE SPH financed the construction of its CHP Plant through a shareholder loan and borrowings from related parties. The Company is now seeking to put more appropriate long-term debt financing in place given the long-term nature of its assets and repay amounts due to its shareholders and related parties. As such, NFE SPH intends to issue a bond in the amount of US $285 million, the proceeds of which will be used as follows:

 ^[1] New Fortress Energy Incorporated, founded in 2014 in Delaware, USA, is a gas-to-power infrastructure business that focuses on converting existing power generation to run on natural gas, building new gas-fired power generation plants, operating downstream gas-to-power assets, and supplying such assets with natural gas. NFE is a publicly traded company on the NASDAQ exchange with a market capitalization of approximately US $8.3 billion, and is currently rated at BB- (stable outlook) by both Standard and Poor’s and Fitch, the equivalent rating of which is CariA- on the CariCRIS regional rating scale.

^[2] This refinery was damaged by fire in August 2021 and repairs have been ongoing with resumption of full operations expected in H1 2022.

Analytical Contacts:

Maxwell Gooding

Tel: 1-868-627-8879 Ext. 235

E-mail: mgooding@caricris.com

Keith Hamlet

Tel: 1-868-627-8879 Ext. 244

Mobile: 1-868-487-8356

E-mail: khamlet@caricris.com

Website: www.caricris.com

Email: info@caricris.com

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

Sage Power Limited – Withdrawal of Issue Credit Ratings

Caribbean Information & Credit Rating Services Limited (CariCRIS), the region’s credit rating agency, wishes to inform the public of the withdrawal of Sage Power Limited’s credit ratings and outlook for the US $285 million Fixed Rate Secured Bond issued and reported on by CariCRIS on July 16, 2021.

These ratings were withdrawn following CariCRIS’ receipt of notice in December 2021, informing that Sage Power Limited will no longer be issuing the instrument.  As a result, the ratings will not be kept under annual surveillance and as such there will be no further updates on these ratings.

December 29, 2021

RATING DRIVERS

Strengths

• Fiscal consolidation continues despite COVID-19 pressures and other unanticipated shocks
• Comfortable and growing foreign currency reserves
• Good financial sector stability indicators
• Strong tourism fundamentals suggest robust post-COVID-19 rebound potential

Weaknesses

• High debt to GDP
• Uncertain economic recovery

Rating Sensitivity Factors 

Factors that could lead to an improvement in the Ratings and/ or Outlook:

• A decrease in the total public sector debt to below 120% of GDP
• A fiscal surplus above 3% of GDP sustained over 2 consecutive years

Factors that could lead to a lowering in the Ratings and/ or Outlook:

• Import cover below 12 weeks with no likely sources to increase reserves
• Delays in the construction of tourism-related investment projects scheduled for completion in 2022
• Derailment in any material way of the BERT plan

ABOUT THE SOVEREIGN

Barbados is the most easterly island of the Lesser Antilles in the Caribbean. The island is twenty-one (21) miles long and has a maximum width of fourteen (14) miles, covering a total area of 167 square miles. The island is relatively flat and rises gently to the central highland region known as Scotland District, with the high point being Mount Hillaby (1,120 ft above sea level). The land slopes in a series of terraces in the west and goes into an incline in the east. A large proportion of the island is circled by its ecologically important coral reefs. Erosion of limestone in the northeast has resulted in the formation of caves and gullies. The population of Barbados is 287,000 (2019 estimate) and is one of the world’s most densely populated islands making it susceptible to environmental impact pressures as it has a lower than world average biocapacity.

Barbados gained independence from the United Kingdom on 30 November 1966 and 55 years later became a Republic. The Head of State is Dame Sandra Mason and the Prime Minister is the Honourable Ms. Mia Mottley.

Historically, the economy of Barbados was dependent on sugarcane cultivation; however, from the 1980s it transitioned to tourism, financial services and manufacturing. More recently, offshore finance and information services have become important sectors and foreign exchange earners.

Analytical Contacts:

Stefan Fortuné

Tel: 1-868-627-8879 Ext. 228

E-mail: sfortune@caricris.com

Maxwell Gooding

Tel: 1-868-627-8879 Ext. 235

E-mail: mgooding@caricris.com

Website: www.caricris.com

Email: info@caricris.com

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.

RATING DRIVERS

 Supporting Factors:

• Strong competitive position in property management supported a diversified and resilient real estate portfolio
• Continued high occupancy levels support revenue growth, while ‘business interruption’ insurance reduces the risk of lower income from property damage
• Financial performance negatively impacted by COVID-19 pandemic, as expected with a slight rebound in the 2^nd quarter of 2021
• Adequate liquidity and debt servicing capability supported by sufficient cash balances and sizeable portfolio of marketable assets
• Seasoned management team alongside a strong board of directors

Constraining Factors:

• Continued high reliance on dividend income from associated companies
• Challenging economic conditions in Jamaica present significant downside risks to PanJam’s financial operations

 Rating Sensitivity Factors:

Factors that can lead to an improvement in the ratings and/or outlook include:

•  An improvement in the ratings of the Government of Jamaica

Factors that can lead to a lowering of the ratings and/or outlook include:

•  Fall in occupancy below the break-even level of 50%
• Continued economic uncertainty leading to ongoing losses in investment income and a pause on ongoing construction projects which can result in a fall in total operating revenue by over 65%
• A significant decline of 60% or greater in SGJL’s dividend income.
• A sustained effective DSCR of less than 1.5 times over a 2-year period

COMPANY BACKGROUND

PanJam Investment Limited (PanJam or the Company) is an investment holding company, incorporated and domiciled in Jamaica and listed on the Jamaica Stock Exchange (JSE).  Jamaica Property Company Limited (Jamaica Property) was formed in 1964 by Mr. Cecil Facey and the Facey family, with a focus on real estate development in Kingston.  During that same year, Pan-Jamaican Investment Trust Limited (PanJam) was formed by Mr. Clinton Hart, with the dual purpose of investing in a wide range of Jamaican businesses and providing ordinary Jamaicans with the ability to participate in those investments.  In 1965, PanJam was listed on the Kingston (Jamaica) Stock Exchange and raised £200,000 through a public offering.  In 1966, Jamaica Property became a wholly-owned subsidiary of PanJam and Mr. Maurice Facey became its Managing Director and eventually its Chairman.  The merged entity embarked upon the development of high-rise commercial and residential properties which included: the Air Jamaica Building in downtown Kingston, the Imperial Life Building on Knutsford Boulevard, and the Abbey Court Apartments on Hope Road.

In the 1980s, PanJam began diversifying its portfolio and invested in the manufacturing and trading industry with the acquisition of Wherry Wharf.  The Company also expanded its investments into the tourism and export markets with the acquisition of Sans Souci Hotel and Resort and Jamaica Floral Exports, as well as a controlling interest in Scott’s Preserves Limited.  During this period PanJam also made investments in the financial services industry with the establishment of First Life Insurance Company and the acquisition of a 20% stake in Pan Caribbean Merchant Bank.  These two transactions have since evolved, through a series of strategic restructurings, into a 30.2% holding of Sagicor Group Jamaica Limited (SGJL), one of the Company’s largest investment holdings as at September 30, 2021. To date, PanJam’ executives inclusive of the Chief Executive Officer (CEO) and Deputy CEO have an average tenure of 17 years at PanJam.

PanJam engages in a wide range of real estate activities, takes actively managed positions in public and private companies, and trades equities and fixed income assets for its proprietary portfolio.  The Company’s revenue consists mainly of rental income and management fees from its property holdings; this accounted for 80.1% of total revenue over the 2018-2020 period.  PanJam also derives income from dividends, interest income, and other fee income from its subsidiaries (Table 1) and other financial investments. 

Analytical Contacts:

Jeffrey James

Tel: 1-868-627-8879 Ext. 236
E-mail: jjames@caricris.com

 Anelia Oudit

Tel: 1-868-627-8879 Ext. 226
Mobile: 1-868-487-8364

E-mail: aoudit@caricris.com

 Website: www.caricris.com

Email: info@caricris.com

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.

RATING DRIVERS

Supporting Factors

• Good asset quality and diversified real estate portfolio underpins a strong competitive position
• Business operations supported by adequate occupancy levels and tenant retention rate, albeit at a reduced level
• Stable financial performance supported by good operating profits, though at a lower level
• Loss of rent insurance reduces the risk of lower income from property damage

Constraining Factors

• Challenging economic environment could lead to deterioration in EHL’s financial performance
• Refinancing Risk applies, given the bond’s structure

Rating Sensitivity Factors

Factors that could, individually or collectively, lead to an improvement in the ratings and/or Outlook include:

• An improvement in the ratings of the Government of Trinidad and Tobago
• Occupancy levels rising to above 95%

Factors that could, individually or collectively, lead to a lowering of the ratings and/or Outlook include:

• A 10% decline in annual rental income
• Occupancy levels declining to below 75%
• The inability to refinance the bond/balloon payment at a rate below 7.5%
• Trade receivables in days outstanding deteriorating to 95 days and over

COMPANY BACKGROUND

Endeavour Holdings Limited (EHL or the Company) is a private commercial real estate holding company incorporated in Trinidad and Tobago (T&T) in 2001.  Its majority shareholders, Endeavour ABRA Holdings Limited and Pelican Investment Limited, each owns 50%. As of December 12, 2019, EHL was listed on the Small and Medium Enterprises (SME) stock market of the Trinidad and Tobago Stock Exchange (TTSE). EHL owns 9 commercial properties and caters to the office, retail, and light industrial/warehousing rental segments.

Analytical Contacts:

Musa Abdullah

Tel: 1-868-627-8879 Ext. 223

E-mail: mabdullah@caricris.com

Anelia Oudit

Tel: 1-868-627-8879 Ext. 226

Mobile: 1-868-487-8364

E-mail: aoudit@caricris.com

 Website: www.caricris.com

Email: info@caricris.com

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.

RATING DRIVERS

Supporting Factors

• Long established player with strong brand equity and good market position
• Good capital adequacy supported by low risk retention and strong network of reinsurers
• Moderately diverse investment portfolio with good returns and good liquidity, notwithstanding the impact of COVID-19
• History of profitable operations
• Strong Enterprise Risk Management (ERM) framework

Constraining Factor

• Sluggish economic conditions could constrain growth

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 Government of Jamaica
• Sustained growth in PAT by >15% over the next 2 years without adversely impacting capital adequacy and asset quality

Factors that could, individually or collectively, lead to a lowering of the Ratings and/or Outlook include:

• A lowering of the credit rating of the Government of Jamaica
• A 2-notch deterioration of the credit rating of any of GENAC’s top 4 reinsurers by A.M. Best or Standard and Poor’s Ratings Services
• Loss of relationship with any of the Company’s major reinsurers
• A deterioration in the Company’s Minimum Capital Test Ratio below 175% sustained for 6 months
• A 10% fall in gross premium income for 2 consecutive years

COMPANY BACKGROUND

General Accident, located in Kingston, Jamaica, commenced operations in the 1920s, as agents for global insurer General Accident Fire and Life Assurance Corporation Limited (GAFLAC), headquartered in Perth, Scotland. In 1981, the majority shareholding^[1] of GAFLAC’s agency’s operations was acquired by Musson (Jamaica) Limited (the Musson Group)^[2], after which it was renamed and incorporated as General Accident Insurance Company Jamaica Limited (GENAC or the Company) and became a wholly owned subsidiary of the Musson Group. In 2011, 20% of GENAC’s shares were listed on the Jamaica stock exchange. With the exception of the Musson Group, the 2 largest shareholders as at September 2021 were Mayberry Jamaica Equities Limited and QWI Investments Limited, holding around 3.36% of the aggregate shareholdings of GENAC.

In September 2019, the GENAC Group acquired 55% of the share capital of Motor One Insurance Company Limited in Trinidad and Tobago (T&T) (Motor One) and subsequently raised its shareholding to 65% in June 2020. In October 2020, Motor One was formally renamed General Accident Insurance Company (Trinidad) Limited (GENACTT). In 2019, the Company also incorporated General Accident Insurance Company (Barbados) Limited (GENACBB), a subsidiary of GENAC, and commenced operations in May 2020. GENAC offers a range of general insurance products including motor, property, travel, engineering, bonds, public liability and marine cargo.

As at September 2021, the Company reported total assets of J $9.1 billion and over the last 5 years (2016-2020), its revenue and profit after tax averaged J $8.7 billion and J $346.4 million respectively.

^[1] The minority shareholder was General Accident, Perth.

^[2] The Musson Group is a manufacturing and merchandising group incorporated and domiciled in Jamaica.

Analytical Contacts:

Megan Dass

Tel: 1-868-627-8879 Ext. 239

E-mail: mdass@caricris.com

Keith Hamlet

Tel: 1-868-627-8879 Ext. 244

Cell: 1-868-487-8356

E-mail: khamlet@caricris.com

Website: www.caricris.com

E-mail: info@caricris.com

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.

RATING DRIVERS

Supporting Factors

• Strong presence in the Belizean commercial banking industry with a wide distribution network
• Robust Risk Management framework supported by digital initiatives
• Deposit base underpins stable funding costs and liquidity position
• Comfortable capitalization reflected in good coverage of total assets
• Continued profitable operations
• Improved asset quality

Constraining Factors

• High exposure to the heavily indebted Belize Government
• Financial system impacted by the loss of correspondent relationships with major international banks

Factors that could, individually or collectively, lead to an improvement in the ratings and/or outlook include:

•  Improvement in the ratings of the Government of Belize
• Increase in profitability to the order of 10% per annum over the next 2 years
• Improvement in asset quality with a NPL ratio of 2.5% over the next 2 years

Factors that could, individually or collectively, lead to a lowering of the ratings and/or outlook include:

•  Lowering of the ratings of the Government of Belize
• The occurrence of any factors that may contribute to the deterioration of the CAR below the 9% minimum requirement for the Bank sovereign risk profile

COMPANY BACKGROUND

The Belize Bank Limited (BBL or the Bank) was incorporated in Belize in July 1985 and is registered under the Domestic Banks and Financial Institutions Act, 2012. The Bank commenced its operations as Bank of British Honduras in 1903. In 1912, the Bank was purchased by the Royal Bank of Canada who eventually sold its shareholding in 1987 to a group of local investors and was subsequently rebranded as ‘The Belize Bank Limited’ in April 1987.

The Bank’s ultimate parent company, Caribbean Investment Holdings Limited (CIHL or the Company), was incorporated and registered in Belize under the International Business Companies Act, 1990 of Belize as amended by the International Business Companies (Amendment) Act, 1995 of Belize. The Company is currently listed on the Bermuda Stock Exchange.

In March 2021, CIHL acquired the operations of Scotiabank Belize Limited (SBL) following approval from the Central Bank of Belize. SBL was subsequently rebranded as Belize Bank Corporation Limited (BBCL) and will remain a subsidiary of CIHL until BBL and BBCL  are merged to form a single entity, which is expected to happen in the first quarter of 2022.

As at June 2021, BBL held the position of the second-largest bank in Belize by assets with a market share of 26.2%, behind the largest bank with a 37.9% share^[1]. BBL has a wide branch network that comprises 11 branches across all districts in Belize and a network of 28 ATMs.

^[1] Atlantic Bank Limited (ABL) is the largest bank in Belize by assets, which stood at BZ $1.6 billion as at June 2021

Analytical Contacts:

Khadine Tavares

Tel: 1-876-618-8800 Ext. 9813

E-mail: ktavares@caricris.com

Keith Hamlet

Tel: 1-868-627-8879 Ext. 229

E-mail: khamlet@caricris.com

Website: www.caricris.com

Email: info@caricris.com

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.

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: mdass@caricris.com

Keith Hamlet

Tel: 1-868-627-8879 Ext. 244

Cell: 1-868-487-8356

E-mail: khamlet@caricris.com

Website: www.caricris.com

E-mail: info@caricris.com

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.

RATING DRIVERS

Supporting Factors

• The Company operates in an environment that is characterized by a strong institutional framework with effective regulatory oversight
• Continued profitable operations
• Adequate capitalization, underpinned by growing asset base
• Competitive advantage lies in strong affiliation with NCB Financial Group

Constraining Factor

• Current market conditions may challenge NCBKY’s profitability

Rating Sensitivity Factors

Factors that could, individually or collectively, lead to an improvement in the ratings and/ or Outlook include:

• 2 consecutive years of improved profitability as a result of higher income earned from investments and/or loans, thereby contributing to sustained earnings growth of around 10-15%.

Factors that could, individually or collectively lead to a lowering of the ratings and/ or Outlook include:

• A decline in investment yield leading to a contraction in the net interest rate spread to below 1% over the next 12 to 15 months.
• Gross loans to gross NPLs ratio of above 15% sustained for the next 12 months
• Deterioration in the credit rating of NCB Jamaica (the Parent of NCBKY) that could materially impact the extent of support available to NCB

COMPANY BACKGROUND

NCB (Cayman) Limited (NCBKY or the Company) was incorporated in the Cayman Islands on September 23, 1992 as an exempt company and operates under trust and unrestricted Class ‘B’ banking licenses^[1] issued by the Cayman Islands Government. The Company is a wholly-owned subsidiary of National Commercial Bank Jamaica Limited (the Parent company or NCBJ), Jamaica’s largest commercial banking group, and offers banking and trust services from the Cayman Islands to clients in Jamaica and the wider Caribbean. The Company is regulated and supervised by the Cayman Islands Monetary Authority (CIMA).

As a boutique operation, NCBKY has grown to become a highly reputable private banking and wealth management service provider, offering a suite of services to high net worth individuals and corporate entities. The Company’s principal activities consist of the provision of banking and financial services to overseas clients. These products and services include investment advisory and management, wealth management and investment banking solutions, as well as other financial services for individual and institutional investors.

^[1] As at September 2021 the Cayman Islands Monetary Authority (CIMA) listed 98 financial institutions as Class B Banks. – Source: Cayman Islands Monetary Authority – Banking Statistics. “Under the Banks and Trust Companies Law, holders of this license are permitted to carry on banking business anywhere in the world except in the Cayman Islands. Business may be carried on from the Cayman Islands for clients outside the jurisdiction and all management and other functions may be carried on in Cayman. This type of licence will also normally be granted only to a branch or subsidiary of a major international bank.” Source: Guide to Banks and Trust Companies in the Cayman Islands (Appleby)

Analytical Contacts:

Keith Hamlet

Tel: 1-868-627-8879 Ext. 244

Mobile: 1-868-487-8356

E-mail: khamlet@caricris.com

Samuel Raphael

Tel: 1-868-627-8879 Ext. 234

E-mail: sraphael@caricris.com

Website: www.caricris.com

Email: info@caricris.com

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.

RATING DRIVERS

Supporting Factors

• Strong market position in Jamaica and an emerging player in the Caribbean with strong support from the NCB Financial Group
• Comfortable capitalization reflected by adequate capital adequacy ratios and good coverage of total assets
• Continued good financial performance characterized by good profitability and asset quality metrics

Constraining Factors

• Continued short-term liquidity risk because of asset/liability mismatch
• Prevailing macroeconomic challenges in key territories could impact revenue growth

Rating Sensitivity Factors

Factors that could, individually, or collectively lead to an improvement in the ratings and/ or Outlook include:

• Improving profitability as a result of higher income earned from its asset management and investment banking segments
• Improvement in the GoJ’s credit rating leading to an improved credit risk profile of NCBJ

Factors that could, individually, or collectively lead to a lowering of the ratings and/ or Outlook include:

• Worsening of NCBCML’s short-term J$ liquidity measures over a 24-month period
• A downgrade in the GoJ’s credit rating leading to a deteriorated credit risk profile of NCBJ
• A reduction in NCBCML’s capital adequacy ratio to below the Systematically Important Financial Institution (SIFI) regulatory minimum of 14%

COMPANY BACKGROUND

NCB Capital Markets Limited (NCBCML or the Company) is a full-service securities company, licensed by the Financial Services Commission of Jamaica (FSC) and is the wealth and asset management arm of National Commercial Bank Jamaica Limited (NCBJ).

In 2002, the Company became a wholly owned subsidiary of NCBJ when the latter acquired Edward Gayle and Company Limited, later rebranding it as NCBCML in 2003. The Company’s products and services include debt and equity securities brokerage, investment advisory and management, investment banking solutions, and other financial services for individual and institutional investors. NCBCML is one of the largest stockbrokers in Jamaica consisting of 19 branches, with 2 being added over the last year, and has 3 active subsidiaries: 1 in Trinidad and Tobago, 1 in the Cayman Islands, and 1 in Barbados^[1].

In March 2017, NCBJ and its subsidiaries completed its corporate restructuring forming a holding company called NCB Financial Group Limited (NCBFG or the Group or the NCB Group). This re-organization better facilitated the Group’s regional aspiration of becoming a leading financial services group in the Caribbean. NCBCML and its subsidiaries remain a subsidiary of NCBJ and as such, the formation of NCBFG did not impact NCBCML’s commercial operations.

In July 2020, NCBCML incorporated Stratus Alternative Funds SCC^[2] (Stratus) as a segregated cell company under the Barbados Companies Act. It was created to facilitate the establishment of a variety of alternative portfolios for investments in the Caribbean and Latin America. The objective of Stratus is to provide above average returns while making non-traditional types of investments more accessible to institutional and retail investors across the range of the risk spectrum.

^[1] The subsidiaries are NCB Capital Markets (Cayman) Ltd, NCB Capital Markets (Barbados) Limited and NCB Merchant Bank (T&T) Limited. Notably, the consolidated financial statements used in CariCRIS’ analysis relate directly to the company’s wealth management segment and includes NCB (Cayman) Limited.

^[2] Stratus has established four funds in its first phase: Infrastructure Fund, Caribbean Mezzanine Fund II, Regional Opportunity Fund and Tourism Response Impact Portfolio. The Directors of Stratus include: Robert Bermudez – chairman of Massy Holdings Limited, Patrick Hylton – President and Group Chief Executive Officer of NCB Financial Group Ltd, and Dennis Cohen – Group Chief Financial Officer and Deputy Chief Executive Officer of NCB Financial Group Ltd.

Analytical Contacts:

Keith Hamlet

Tel: 1-868-627-8879 Ext. 229

E-mail: khamlet@caricris.com

Maxwell Gooding

Tel: 1-868-627-8879 Ext. 229

E-mail: mgooding@caricris.com

Website: www.caricris.com

E-mail: info@caricris.com

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.