CEC Africa’s Nigerian operations have continued to be tempered by challenges it is facing in Nigeria where the company’s operations are domicile.
The group has faced a myriad of challenges that include non-cost reflective tariffs, partial implementation of the Power Sector Recovery Program and nonpayment of electricity bills by government agencies which has become a ubiquitous challenge for many energy utilities across Africa.
“The Group loss for 2018 at K3,072 million showed a 3% decline on 2017 results, in Kwacha terms on account of the depreciation of the Kwacha, and net finance costs saw a saving of 54% mainly due to a payment made for the debt owed to the Market Operator in Nigeria”, read a statement from the company’s SENS Announcement published 12th April 2019 on the Lusaka Securities and Exchange Website.
However, the company did record a 34% increase from 2017 mainly due to higher generation in Nigeria and improvements in collection rates at the Abuja Electricity Distribution Company (AEDC), according to the company.
A closer look at the company’s cash flow statement shows sharp reduction in net cash flows from operating activities which has led to it being in the red. However, the group increased is spending on investing activities by 83%. Furthermore, the service of obligations for debt and capital raised increased by 7.5 times over the 2017 to 2018 period indicating increases in current and non-current liabilities.
Solvency is a deep concern for the management team at CEC Africa. Current assets stood at 16% of total liabilities indicative of symptoms of financial distress. What does not help the situation further is total assets are at 61% of total current liabilities.
There is hope though through the disposal of the distribution asset. “North South Power Company Limited (NSP), an associate company, has expressed interest in purchasing a stake in Abuja Electricity Distribution Company Plc”, according to the SENS statement issued by the group. “Negotiations between NSP and UBA are progressing and successful completion of the transaction will result in the restructuring of the loan”. The fruition of this deal will inject much needed capital in the group.