CEC 2017 Review
Copperbelt Energy Corporation Plc, Energy

Chairman of CEC Mr. Hanson Sindowe has every right to be a proud man. His company is in the spotlight following an approach from CDC for a substantial stake in the company. However, that’s not the only reason. The Company recently recorded a profit after tax of ZMW534 million compared to a loss of ZMW1,161 in 2016. Although the loss that was recorded in 2016 was attributed to a declaration of an impairment, the company has continued to remain profitable despite the changes being faced in the electricity industry in Zambia.

Sindowe believes that the global economy has been good to them. Their business operations showed stronger recovery and better performance, with global GDP closing the year around 3%. According to the ‘energy maestro’, “In our sectors of interest, energy and mining, we saw copper prices and production ticking up while the growth in renewables, not only in terms of capacity development and availability but also in technologies and the cost thereof, was positive.”

Source: Computed from Annual Report

According to their 2017 annual report, CEC reviewed their strategy for the five-year period 2017 to 2021. Its management presented a seven-pillar  strategy that sought to modernise and efficiently manage the CEC network by consolidating their regional market position, realising multiple power sources, enhance stakeholder engagement, supporting the realisation of a robust  tariff setting and migration path, providing management services and investing in viable generation and transmission projects aligned to our core business.

In 2017, CEC’s revenue increased by 1% in Zambian Kwacha terms (ZMW) to ZMW3,697 million due to the increase in mining customers’ end-user tariffs. The Company recorded a profit after tax of ZMW534 million. Power trading revenue decreased by 22% in USD terms from 2016. The reduction was attributable to improvements in the power situation in the Southern African Power Pool (SAPP) which resulted in tariff reductions. This is not withstanding that volumes sold increased during the year.

The total energy import into the network in 2017 was 4,957.926GWh, out of which 3,620.156GWh (73%) constitutes purchases for the mines while 1,337.770 GWh (27%) was wheeled for ZESCO .

CEC’s revenue has grown on average by 10% over the last 5 years. EBITDA has grown by 21% on average. However, there has been a downward trend as depicted in the Chart.

Furthermore, the company has increased its investment in non-current assets by investing through acquisition of plant and equipment. They maintain low staff numbers not exceeding 400 over the last 5 years. This has seen the company have a year on year upward improvement in revenue per employee.

Source: Computed From Annual Report

In terms of margin analysis, the company has averaged operating margins of 11%. Its return on capital is on average 12%. Gearing has seen a downward trend to 21% in 2017 from a high of 56% in 2013.  This signals the company’s intention to strengthen its balance sheet.

With the CDC deal now on the table, Sindowe’s CEC set poised for an interesting new chapter. However, it will be interesting to see how the regulator and various stakeholders view the deal that hinges on conditions precedents that include the renewal of their Bulk Supply Agreement with the national power company. No doubt their new owners will want to ensure that competitive advantage is protected. Therefore, in order for the impressive year on year performance to continue, there must be parity with the economic fundamentals that were responsible for past performance.

CEC Fact File

The Copperbelt Energy Corporation Plc is a Zambian electricity generation, transmission, distribution and supply company with operations in Zambia and Nigeria. In addition, the company also owns a renewables business, Projects, CEC Liquid and Hai Telecommunications. Its primary business is bulk transmission and distribution to the mines. The company is also listed on the Lusaka Stock Exchange and currently has 345 employees.

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