Message Lun 9 Sep 2019 19:06

KCM liquidation shrinks CEC’s cashflows, slashes profits

KCM liquidation shrinks CEC’s cashflows, slashes profits
By Stuart Lisulo on 8 Sep 2019

https://diggers.news/business/2019/09/08/kcm-liquidation-shrinks-cecs-cashflows-slashes-profits/

Copperbelt Energy Corporation (CEC) Plc has recorded a negative cash flow generated from its operating activities of nearly K34 million in its 2019 financial half-year, triggered by Konkola Copper Mines’ (KCM) Plc delayed or non-payment of invoiced amounts.

And CEC revealed that its customers consumed around 10 per cent less energy at 1,636GWh compared to 1,817GWh during the same period in 2018 on account of the ongoing KCM liquidation challenges and the 2019 mining fiscal regime.

Meanwhile, the power utility has warned that the winding-up proceedings currently affecting KCM will financially constrain its business and the entire electricity value chain.

In a statement announcing its unaudited results for the six-month period to June 30, 2019, CEC disclosed that it incurred a negative cash flow generated from its operating activities of K33.952 million in its financial half-year, triggered by KCM’s delayed or non-payment of invoiced amounts in the wake of its provisional winding-up ordered by the Lusaka High Court.

This compares with positive cash flows of K131 million in the corresponding period last year, data shows.

“Cash generated from operations for the period was recorded at negative ZMW33.952 million compared to positive ZMW130.971 million the previous year. The drop was as a result of the delayed and/or non-payment by KCM of invoiced amounts. Profit after tax came in at ZMW97 million compared to ZMW246 million in the comparable period last year,” CEC stated in its results.

And data revealed that CEC’s customers consumed consumed around 10 per cent less energy at 1,636GWh compared to 1,817GWh during the same period in 2018 on account of the ongoing KCM liquidation challenges and the 2019 mining fiscal regime.

“Our customers consumed about 10 per cent less energy at 1,636GWh compared to 1,817GWh during the same period in 2018. This is attributed to operational constraints experienced by some of them; triggered by unrelated factors that include the time it is taking for them to adjust to changes to the mining tax regime introduced in 2019, the winding-up proceedings affecting KCM, following the appointment of a Provisional Liquidator by an order of Lusaka High Court, and the on-going short-term overhaul of part of the plant at Mopani Copper Mines Plc (MCM),” it disclosed.

Meanwhile, the power utility, whose main business is to sell electricity to the mining sector, expressed concern on the power sub-sector’s outlook in view of the 2019 mining fiscal regime, which had dampened productivity among some companies.

“In the short-term, a rather mixed performance is envisaged; with the business and the entire electricity sector facing headwinds emanating mainly from the following: the challenge of suppressed demand as the mining companies slowly adjust their operations to the new tax regime and ramp up demand at their new and/or expansion projects. The winding-up proceedings currently affecting KCM will financially constrain the business and the entire electricity value chain. The company is working very closely with all relevant stakeholders to minimize, as far as possible, the adverse impact of this situation. More importantly, we remain hopeful that a lasting solution will be found to allow the mine to return to full commercial operation in the shortest time possible,” stated CEC.

CEC’s core business is the supply of power to the mines on the Copperbelt Province in Zambia, and Haut-Katanga and Lualaba Provinces in the Democratic Republic of Congo (DRC), where it works with SNEL, the DRC’s State-owned power utility.

CEC also provides wheeling services to third-parties, including Zesco Ltd, and operates the Zambian section of the interconnector into the DRC.