Message Ven 20 Sep 2013 09:24

first semester results ... 5bzzICo%3D

Financial Highlights
• The Revenue for the Group has increased by 11% compared to the half year 2012.
This is mainly due to higher sales volumes to the mines, which increased from
1,912 GWh to 2,133 GWh during the period.
• The Group has increased its net profit by 4% compared to the same period last
• There has been a reduction in the profit attributable to shareholders and the
earnings per share due to increased finance costs. This is mainly due to financing
for new investments.
CEC Profile
CEC’s core business remains the supply of power to the mines based on the Copperbelt, it
continues to wheel power through its network on behalf of ZESCO Ltd [ZESCO] on the
Copperbelt, and to operate an interconnector with the Democratic Republic of Congo
In addition to power supply, CEC has interests in the telecommunications industry with a
50% joint venture interest in Realtime Technology Alliance Africa Limited (‘Realtime’), an
internet service provider. CEC also holds a 50% joint venture interest in CEC Liquid
Telecommunication Limited, a company that provides wholesale optical fibre
communications services.
CEC has incorporated two fully owned subsidiaries, CEC Kabompo Hydro Power Limited
(‘CECKHP’) and CEC Africa Investments Limited (‘CEC Africa’). CECKHP is a special
purpose vehicle through which the 40MW Kabompo Gorge hydro project will be developed
in Mwinilunga District of North-Western Province of Zambia. CECKHP has concluded
discussions with Sinohydro as EPC contractor for the project, and a contract to commence
advanced works for site preparation has been signed. Standard Bank of South Africa has
been appointed as Mandated Lead Arranger to raise the debt financing for the project.
Appropriate environmental consents have been obtained from Zambia Environmental
Management Agency, and CECKHP is working closely with the local community to address
local requirements for infrastructure and job creation.
CEC Africa acquired a 75% interest in KANN Utility Company Limited (‘KANN’), the
preferred bidder to acquire a 60% interest in the Abuja Electricity Distribution Company
(‘AEDC’) in Nigeria. AEDC has a franchise for distributing electricity in four states,
comprising the Federal Capital Territory of Abuja, Niger State, Kogi State and Nasarawa
State. The overall consideration for the acquisition was US$164 million, payable to the
Bureau of Public Enterprises (‘BPE’) in accordance with a Share Sale Agreement signed on
21st February 2013 between KANN, BPE and the Ministry of Finance of the Federal
Government of Nigeria
Takeover of AEDC is expected to occur before the end of the third quarter of 2013,
following which the financial results of AEDC will be consolidated into the Group. Dividends Proposed and Paid
During the period under review, a dividend of ZMW20,000,000 was proposed and paid,
which represented a dividend of ZMW0.02 per share.
Operations Update
CEC’s core business involves use of its extensive power transmission and distribution
infrastructure in and around the Copperbelt to reliably and efficiently supply power to its
mine customers and wheel power on behalf of ZESCO. The Company also continues to
wheel power on behalf of the Southern African Power Pool (SAPP) parties through its
interconnector linking Zambia and the DRC.
On the safety, health and environment (SHE) front, the Company extended the number of
man hours without a power system lost time accident from 2.98 million at the end of 2012
to 3.19 million at the end of the first half of 2013. This is an important achievement as we
continue with the push for SHE excellence in all our operations. Performance in other SHE
indices such as system breaches and environmental stewardship were generally good, with
the only area of concern being the number of road traffic accidents, which at 5 was higher
than the target of 1 set at the beginning of the year. Further measures are being implemented
to try to foster significant performance improvement in this area by the end of the year.
Power sales to the mines posted good performance for the first half of the year, contributing
to the good overall Group performance. At 2,133 GWh, power sales to the mines were
better than the same period in 2012 when 1,912 GWh were sold. This represents a 12%
growth in energy sales driven by demand growth in our existing customers’ power uptake.
Further, we are happy to report the addition of China Copper Mine (CCM) to our mine
customer portfolio. Following the completion of projects for the power and mine
infrastructure, CCM commenced commercial operations with demand expected to ramp up
gradually to about 5MW by December 2013. CCM has invested into a leach plant that will
treat slug dumps at the Fitula dumps in Chingola.
The energy volumes wheeled for ZESCO under domestic wheeling continue to be impacted
by load shedding, being experienced nationwide, due to the supply side continuing to trail
power demand in the country. This, coupled with some of the system reconfigurations
ZESCO is undertaking on its network, has resulted in increased levels of load shedding on
the Copperbelt. A monthly average of 255MW was being wheeled in the first half of 2013,
compared to a monthly average of 258MW recorded during the same period in 2012.
The international wheeling business saw a total of 353 GWh, of which only 20% is attributed
to the CEC power trading transaction, wheeled in the first half of 2013 under a regional
opportunity to supply mining companies in the DRC, which is faced with a dire power
deficit. The CEC transaction has, at times, faced wheeling path challenges but has for the
most part worked well.
Operationally, CEC’s electrical network performance was in line with set benchmarks with
internal faults and circuit down times keeping to international norms and trends. However, overall security of supply continues to be threatened by the low voltage challenge, which the
Zambian electrical system is experiencing as a consequence of the national supply deficit.
Load management remains a critical tool for system management under the circumstances.
ZESCO continues to load shed, mostly domestic customers, while mine customers have
been requested to contribute to this effort by curtailing their demand especially during peak.
Other efforts in this area include a number of short and long term solutions that are being
worked on by various parties. Customers have been asked to begin to abide by their power
factor obligations as stipulated in the Power Supply Agreements (PSAs) while utilities have
either already implemented or are implementing voltage support projects. The medium to
long term solution requires the introduction of new generation capacity. Furthermore, the
Energy Regulation Board has directed utilities to implement the penalties that are provided
for in the various agreements to customers not complying with power factor requirements.
During the first half of 2013, a number of capital commitments were made under our asset
replacement programme, for which the total budget in 2013 is circa US$12.2 million. This is
an on-going project with an average annual budget of US$15 million. Various system
equipment is being procured as part of the equipment replacement programme, including
transformers, switchgear, protection and control equipment, as well as equipment required
to expand some of the supply points to ZESCO.
The Company has a number of projects under its organic business development programme.
During the first half of 2013, the CCM project, mentioned earlier, was fully commissioned
and is already delivering power to the CCM leach plant. Other projects that include the
Synclinorium and the South East Ore body are advancing and are aimed at supplying power
to new projects at Mopani Copper Mines (MCM) and NFCA respectively. These projects are
important as they not only seek to expand our customers’ operations but will also
significantly extend the life of these mines.
Future Developments
The Company is seeking to consolidate its investments in Zambia and Nigeria, and will
continue to develop other projects, including the completion of feasibility studies for
potential hydro projects on the Luapula River.
Events subsequent to the reporting date
The Shareholders of CEC approved the Company calling for a Rights Issue to provide
additional equity funding for CEC’s expansion projects in Zambia and Nigeria. The
timing and details of the Rights Issue will be announced by the CEC Board during
September 2013.
In August 2013, the Company entered into a US$55 million short term loan agreement
with Standard Bank of South Africa. This brings the total short term borrowing from
Standard Bank and Stanbic Bank Zambia in the year to date to US$95 million.
The Company is in the process of engaging financiers for long term financing to realign
the short term borrowing. By Order of the Board
Julia C. Z. Chaila (Mrs.)
Company Secretary