CEC Rights Offer Circular 2014

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CEC Rights Offer Circular 2014

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CEC Rights Offer Circular 2014

  1. 1. RIGHTS OFFER CIRCULAR 2014
  2. 2. A copy of this Rights Offer Document has been delivered to PACRA for registration. PACRA has not checked and will not check the accuracy of the statements made and therefore accepts no responsibility for the financial soundness of the Company or the value of the securities concerned. THIS RIGHTS OFFER DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION The Definitions and Interpretations commencing on page 11 of this Rights Offer Document apply, mutatis mutandis, throughout this Rights Offer Document including this cover page. This Rights Offer Document is not an invitation to the public to subscribe for Shares in CEC, but is an offer to existing CEC Shareholders to acquire Shares in the Company on the terms and conditions set out in this Rights Offer Document. Shareholders are referred to page 8 of this Rights Offer Document, which sets out the action required of them with regard to the Rights Offer, full details of which are set out in this Rights Offer Document. If you are in any doubt as to the action that you should take, please consult your Broker, banker, legal adviser, accountant or other professional adviser immediately. If you have disposed of all of your CEC Shares, this Rights Offer Document should be forwarded to the purchaser to whom, or the Broker, banker or agent through whom you disposed of such Shares except that this Rights Offer Document should not be forwarded or transmitted by you to any person in any territory other than Zambia unless the Rights Offer can lawfully be made to such person or in such territory. The Rights that are represented by the Letter of Allocation are valuable and may be renounced or sold on the LuSE. Letters of Allocation can, however, only be traded in dematerialised form and, accordingly, CEC has issued all Letters of Allocation in dematerialised form. The record of holders of Certificated Shares is being maintained by the Transfer Secretary which has made it possible for holders of Certificated Shares to enjoy the same rights and opportunities as holders of Dematerialised Shares in respect of the Letters of Allocation. Instructions on how to renounce or sell the rights represented by the Letters of Allocation are set out in paragraph 1.3 of this Rights Offer Document. Only whole numbers of CEC Shares will be issued in terms of the Rights Offer and Shareholders will be entitled to rounded numbers of Shares once the Ratio of Entitlement has been applied. Excess applications will not be allowed. This Rights Offer Document is issued in compliance with the Listings Requirements for the purpose of providing information to Shareholders with regards to the Company. If you are in any doubt as to the action to be taken, you should contact your Broker, bank manager, legal advisor, accountant or other professional adviser.
  3. 3. Copperbelt Energy Corporation PLC (Incorporated in the Republic of Zambia) (Registration number 39070) Share code: CEC ISIN: ZM0000000136 (“CEC” or “the Company”) RIGHTS OFFER DOCUMENT TO CEC SHAREHOLDERS relating to: a Rights Offer of CEC Shares at an issue price of ZMW0.62 per share, in the ratio of 5 Rights Offer Shares for every 8 CEC Shares held at the close of business on 31 January 2014 and including: • revised listing particulars for purposes of providing information to the public on CEC, which complies with the Listings Requirements; and • a Letter of Allocation (to be completed by Qualifying Shareholders). Rights Offer opens at 10:00 on 03 February 2014 Rights Offer closes at 14:00 on 28 February 2014 DIRECTORS’ RESPONSIBILITY STATEMENT The Directors whose names appear on page 14 of this Rights Offer Document, collectively and individually accept full responsibility for the accuracy of the information given in this Rights Offer Document and certify that, to the best of their knowledge and belief, there are no facts the omission of which would make any statement in this Rights Offer Document false or misleading and that they have made all reasonable inquiries to ascertain such facts and that this Rights Offer Document contains all information required by law and by the Listings Requirements. Investment bank, Bookrunner and Transaction Adviser Standard Bank Legal Adviser to CEC Messrs Chibesakunda & Company Sponsoring Broker and Main Receiving Agent Stockbrokers Zambia Limited Independent Reporting Accountant PricewaterhouseCoopers Zambia Auditor Grant Thornton Date of issue: Monday, 03 February 2014 This Rights Offer Document is available in English only. Copies of this Rights Offer Document may be obtained from the registered office of CEC, the Sponsoring Broker and the Transfer Secretary whose addresses are set out in the “Corporate Information and Advisers” section of this Rights Offer Document and will be available from Monday, 03 February 2014 until Monday, 03 March 2014, both days inclusive. The Rights Offer Document will also be available in electronic form from the Company’s website (www.cecinvestor.com) from Monday, 03 February 2014. A copy of this Rights Offer Document, together with the Form of Instruction and other requisite documents referred to in section 126 of the Companies Act, was lodged with PACRA at Plot No. 8471 Mwayi House, Haile Selassie Avenue, Long Acres, Lusaka, Zambia and the Form of Instruction was registered by the PACRA at the same address on Friday, 31 January 2014 as required by section 123 of the Companies Act. 4 COPPERBELT ENERGY CORPORATION PLC
  4. 4. CERTAIN FORWARD-LOOKING STATEMENTS This Rights Offer Document includes certain “forward-looking information”. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements, including, without limitation those concerning: CEC’s strategy; financial results, growth prospects and outlook of CEC’s operations, individually or in the aggregate; CEC’s liquidity and financial position; and the outcome and consequences of any pending litigation proceedings. These forward-looking statements are not based on historical facts, but rather reflect CEC’s current expectations concerning future results and events and generally may be identified by the use of forward-looking words or phrases such as “believe”, “aim”, “expect”, “anticipate”, “intend”, “foresee”, “forecast”, “likely”, “should”, “planned”, “may”, “estimated”, “potential” or similar words and phrases. Similarly, statements that describe CEC’s objectives, plans or goals are or may be forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause CEC’s actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed or implied by these forward-looking statements. Although CEC believes that the expectations reflected in these forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. CEC Shareholders should review carefully all information, including the pro forma financial statements and the notes to the pro forma financial statements, included in this Rights Offer Document. The forward-looking statements included in this Rights Offer Document are made only as of the Last Practicable Date. The delivery of this Rights Offer Document does not at any time imply that the information contained herein is correct at any time subsequent to the Last Practicable Date or that any other information supplied in connection with this Rights Offer is correct as of any time subsequent to the date indicated in the document containing the same. CEC undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Rights Offer Document or to reflect the occurrence of unanticipated events. All forward-looking statements in this Rights Offer Document and all subsequent written and oral forwardlooking statements attributable to CEC or any person acting on its behalf have not been reviewed and reported on by CEC’s auditors in accordance with ISAE 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial Information included in a prospectus. RIGHTS OFFER DOCUMENT 2014 5
  5. 5. CORPORATE INFORMATION AND ADVISERS Company Secretary and Registered Office Transfer Secretary Julia C Z Chaila Corpserve Transfer Agents Limited Stand 3614, 23rd Avenue 6 Mwaleshi Road Nkana East Olympia Park Kitwe Republic of Zambia Republic of Zambia (PO Box 37522, Lusaka, Zambia) (PO Box 20819, Kitwe, Zambia) Investment Bank,Transaction Adviser and Bookrunner Sponsoring Broker & Main Receiving Agent The Standard Bank of South Africa Limited Stockbrokers Zambia Limited 30 Baker Street Second Floor Rosebank Exchange Building / Central Park 2196 Cairo Road / Church Road Republic of South Africa Lusaka (PO Box 61150 Marshalltown, 2107, Republic of South Republic of Zambia Africa) (PO Box 38956, Lusaka, Zambia) Legal Adviser Independent Reporting Accountant Messrs Chibesakunda & Company PricewaterhouseCoopers Zambia Maanu Centre Stand 2374, Thabo Mbeki Road Stand 4647 Beit Road Lusaka Addis Ababa Roundabout Republic of Zambia Lusaka (PO Box 30942, Lusaka, Zambia) Republic of Zambia (PO Box 30279, Lusaka, Zambia) 1.1.1.1 Receiving Agents African Alliance Securities Equity Capital Resources The Colosseum, Block A Ground Floor House No. 12 Mushemi Road Bwinjimfumu Road, Rhodes Park Longacres Lusaka Lusaka Republic of Zambia Republic of Zambia Intermarket Securities Madison Asset Management Farmers House, Central Park Dar-es-Salaam Place Cairo Road / Church Road South of Main Post Office Lusaka Cairo Road / Church Road Republic of Zambia Lusaka Republic of Zambia Pangaea Securities 3rd Floor Farmers House, Central Park Cairo Road Lusaka Republic of Zambia 6 COPPERBELT ENERGY CORPORATION PLC
  6. 6. TABLE OF CONTENTS CERTAIN FORWARD-LOOKING STATEMENTS 5 CORPORATE INFORMATION AND ADVISERS 6 ACTION REQUIRED BY CEC SHAREHOLDERS 8 SALIENT DATES AND TIMES 10 DEFINITIONS AND INTERPRETATIONS 11 DIRECTORS OF CEC 14 1. 14 RIGHTS OFFER DOCUMENT 1.1 Introduction 14 1.2 Rationale of the Rights Offer and use of proceeds 14 1.3 Particulars of the Rights Offer 17 1.4 Pro forma financial information 23 1.5 Estimated expenses in relation to the Rights Offer 24 1.6 Information on CEC 24 1.7 Material changes 29 1.8 Litigation statement 29 1.9 Working capital statement 29 1.10 Directors’ responsibility statement 29 1.11 Consents 29 1.12 Documents available for inspection 30 ANNEXURE 1: TABLE OF ENTITLEMENT 31 ANNEXURE 2: INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF CEC 32 ANNEXURE 3: INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE HISTORICAL FINANCIAL INFORMATION OF CEC 35 ANNEXURE 4: TRADING HISTORY OF CEC SHARES ON THE LUSE (REBASED) 67 ANNEXURE 5: DIRECTORS AND SENIOR MANAGEMENT OF CEC 68 ANNEXURE 6: DIRECTORS AND SENIOR MANAGEMENT OF CEC SUBSIDIARIES 74 ANNEXURE 7: CORPORATE GOVERNANCE 81 ANNEXURE 8: REVISED LISTING PARTICULARS 85 LETTER OF ALLOCATION AND ACCEPTANCE FORM 96 RIGHTS OFFER DOCUMENT 2014 7
  7. 7. ACTION REQUIRED BY CEC SHAREHOLDERS The Definitions and Interpretations commencing on page 11 of this Rights Offer Document apply mutatis mutandis to this section. Please take careful note of the following provisions regarding the action required by Shareholders: • If you are in any doubt as to what action you should take arising from this Rights Offer Document, please consult your Broker, banker, legal advisor, accountant or other professional advisor immediately. • If you have disposed of all of your CEC Shares, this Rights Offer Document should be handed to the purchaser of such Shares or to the Broker, banker, legal advisor or other agent through whom the disposal was effected. • This Rights Offer Document contains information relating to the Rights Offer. You should carefully read through this Rights Offer Document and decide how you wish to treat the Rights allocated to you in terms of the Rights Offer. Action to be taken by CEC Shareholders In order to participate in the Rights Offer, you need a copy of this Rights Offer Document and your Letter of Allocation, detailing your name, the number of CEC Shares that you held as at the Record Date, which was 31 January 2014, and the number of Rights Offer Shares that you are entitled to purchase on the basis of 5 Rights Offer Shares for every 8 CEC Shares held on the Record Date – and then follow the courses of action provided in section 1.3 of this Rights Offer Document and summarised below. If you are a Qualifying Shareholder and wish to buy more Rights Offer Shares, over and above your entitlement on the Record Date, you should contact your Broker to purchase LA Options listed on the LuSE during the period from 27 January 2014 to 21 February 2014, at the then prevailing market price, and thereafter proceed to subscribe for the Rights Offer Shares associated with the purchased LAs, at the Rights Offer Price of ZMW 0.62 per Rights Offer Share. Pursuant to this Rights Offer, Qualifying Shareholders may elect one of four courses of action to follow. The four options are summarised below. Should you have any questions about the appropriate action to take, please consult your financial advisor or your Broker, or the Sponsoring Broker to the Rights Offer. o SUBSCRIBE for the Rights Offer Shares offered (acceptance) Complete Section A of the Letter of Allocation / Acceptance Form (at the end of this Rights Offer Document) and send to your Broker to effect payment for the Rights Offer Shares being subscribed for. Alternatively, if you do not have a broking relationship, you can deposit or transfer your payment to the Sponsoring Broker at the following bank account: BANK : Cavmont Bank Ltd ACCOUNT NAME : CEC RIGHTS OFFER MAIN ACCOUNT NUMBER : 800000182308 SORT CODE : 130001 SWIFT CODE : CVMCZMLU And send the completed Acceptance Form, together with your certified Deposit Slip as proof of payment, or a Cheque or Bank Draft, in favour of “CEC RIGHTS OFFER”, crossed “not negotiable” and “not transferable” by no later than 12h00 on Wednesday, 26 February 2014 (being the last day to receive postal acceptances). 8 COPPERBELT ENERGY CORPORATION PLC
  8. 8. o SELL all your rights through the LuSE (renunciation) Complete Section B of the Letter of Allocation (at the end of this Rights Offer Document) and send it to your Broker or alternatively to the Sponsoring Broker with the instructions to “sell the rights”. Participants will be permitted to sell their rights over the LuSE between Friday, 27 January 2014 and Friday, 21 February 2014 at the then prevailing market price. o SUBSCRIBE in part for Rights Offer Shares AND SELL the remaining rights through the LuSE Complete Section B of the Letter of Allocation (at the end of this Rights Offer Document) and deposit or transfer your payment to either your Broker, or alternatively to the Sponsoring Broker at the following bank account: BANK : Cavmont Bank Ltd ACCOUNT NAME : CEC RIGHTS OFFER MAIN ACCOUNT NUMBER : 800000182308 SORT CODE : 130001 SWIFT CODE : CVMCZMLU Send the completed form to your Broker, or to the Sponsoring Broker with the instructions to “subscribe for a number of Rights Offer Shares and sell the balance”, together with your certified Deposit Slip as proof of payment, or a Cheque or Bank Draft, in favour of “CEC RIGHTS OFFER”, crossed “not negotiable” and “not transferable” by no later than 12h00 on Thursday, 20 February 2014 to the Sponsoring Broker whose details are given on page 4. Participants will be permitted to sell their rights over the LuSE between Monday, 27 January 2014 and Friday, 21 February 2014 at the then prevailing market price. o Non Action Shareholders not selecting any of the foregoing options by Friday, 28 February 2014, the closing of the Offer Period, will have deemed to have selected none of the available options and such rights pertaining to the Rights Offer will lapse. The Bookrunner will, on a best endeavours basis, procure purchasers for unsubscribed shares in a rump placement process as contemplated in paragraph 1.3 herein. Neither CEC, nor any of the advisors to the transaction, take any responsibility and will not be held liable for failure on the part of a Broker to notify the Sponsoring Broker of a shareholders’ course of action in relation to the Rights Offer. RIGHTS OFFER DOCUMENT 2014 9
  9. 9. SALIENT DATES AND TIMES The Definitions and Interpretations commencing on page 11 of this Rights Offer Document apply mutatis mutandis to this section. 2014 CEC Shares commence trading ex-entitlement at 10:00 on Monday, 27 January Listing of and trading in the LA Options from commencement of business on Monday, 27 January Last day to trade in CEC Shares in order to participate in the Rights Offer (cum entitlement) on Tuesday, 28 January Record Date in order to be entitled to participate in the Rights Offer on Friday, 31 January Rights Offer opens at 10:00 on Monday, 03 February LA Options credited to an electronic account held at the CSD Monday, 03 February Last day for trading LA Options on the LuSE on Friday, 21 February Listing of Rights Offer Shares and trading therein on the LuSE commences at 10h00 on Last day to receive postal acceptances Monday, 24 February Wednesday, 26 February Rights Offer closes at 14:00 on Friday, 28 February Payment to be made and Letter of Allocation to be lodged with the Transfer Secretary on Friday, 28 February Rights Offer Shares issued on or about Monday, 03 March CSD accounts in respect of Qualifying Shareholders debited and updated with Rights Offer Shares Monday, 03 March Results of the Rights Offer announcement released on SENS on Monday, 03 March Results of Rights Offer published in press on or around Wednesday, 05 March Notes: 1. No physical share certificates will be issued in respect of Rights Offer Shares. 2. If you are a Qualifying Shareholder holding Dematerialised Shares you are required to duly complete the Letter of Allocation Form with payment in the manner and time stipulated on the Letter of Allocation Form and deliver this to your Broker. 3. Unless otherwise indicated, all times are Zambian times and are subject to change. Any such change will be published in the Zambian press. 10 COPPERBELT ENERGY CORPORATION PLC
  10. 10. DEFINITIONS AND INTERPRETATIONS Throughout this Rights Offer Document and the Annexures hereto, unless the context indicates otherwise, the words in the column on the left below shall have the meaning stated opposite them in the column on the right below, reference to the singular shall include the plural and vice versa, words denoting one gender include the other and words and expressions denoting natural persons include juristic persons and associations of persons: “Acceptance Form” “Act” or “Securities Act” “AEDC” the form in this Rights Offer Document that must be completed in order to subscribe for the Rights Offer Shares; the Securities Act Chapter 354 of the Laws of Zambia; Abuja Electricity Distribution Company PLC (Registration number RC 638681), a company registered in Nigeria; “Aflife” African Life Financial Services Zambia (Registration number 35932), a company registered in Zambia; “African Alliance African Alliance Zambia Securities Limited (Registration Number 69735), a company incorporated in Securities” Zambia; “Articles” the Articles of Association of the Company; “the Board” or “the the board of directors of CEC as at the date of this Rights Offer Document and “Director” shall be Directors” construed accordingly; “Bookrunner” refers to The Standard Bank of South Africa Limited; “Broker” “Business Day” “CEC” or “the Company” any person registered as a broking member (equities) in terms of the Rules of the LuSE made in accordance with the provisions of the Securities Act; any day of the week, excluding Saturdays, Sundays and all official Zambian public holidays; CEC PLC (Registration number 39070), a public company incorporated in accordance with the laws of Zambia, the entire issued share capital of which is listed on the LuSE; “CEC Group” or “the Group” CEC and its subsidiaries, as defined under the Companies Act Chapter 388 of the Laws of Zambia; “CEC Liquid” CEC Liquid Telecom Limited (Registration number 92298), a company registered in Zambia; “CEC Shareholders” or “Shareholders” “CEC Shares” or “Shares” “Certificated Shares” registered holders of CEC Shares; ordinary Shares of CEC with a par value of ZMW0.01 each in the authorised and issued share capital of the Company; CEC Shares which have not yet been dematerialised in terms of the requirements of CSD, title to which is represented by a share certificate or other documents of title; “the Companies Act” the Companies Act, Chapter 388 of the laws of Zambia; “Copperbelt” the mining area of Zambia, which is centred around the Copperbelt Province of Zambia; “Corporate Governance Code” “CSD” or “LuSE CSD” “Dematerialised Shareholders” “Dematerialised Shares” “Documents of Title” the corporate governance code of the LuSE; the Central Securities Depository maintained by the LuSE; CEC Shareholders who hold Dematerialised Shares in CEC; CEC Shares which have been incorporated into the CSD system and which are no longer evidenced by a share certificate or other documents of title; share certificates, certified transfer deeds, balance receipts, or any other documents of title to CEC Shares; “DPS” dividend per share; “DRC” Democratic Republic of Congo; “Earnings Per Share” or earnings attributable to each CEC share, calculated by dividing the Company's profit attributable to “EPS” Shareholders by the weighted average number of issued CEC Shares; “EGM” or “Extraordinary General Meeting” “ECR” or “Equity Capital Resources” the extraordinary general meeting of CEC Shareholders held on 26 July 2013; Equity Capital Resources PLC (Registration Number 60559), a company incorporated in Zambia; means a form of instruction in respect of the Letter of Allocation reflecting the rights of Certificated “Form of Instruction” Shareholders and on which Certificated Shareholders are entitled to indicate whether they wish to take up, dispose of or renounce all or a portion of their Rights; RIGHTS OFFER DOCUMENT 2014 11
  11. 11. “Golden Share” or “Special Share” is a share in CEC that may only be issued to, held by and transferred to “Golden Share” the Minister responsible for finance or his successor or a nominee on his behalf or any other Minister or other Person acting on behalf of GRZ the Special Shareholder; “GRZ” Government of the Republic of Zambia; the Board member appointed by GRZ, pursuant to the Golden Share, usually the Permanent Secretary “GRZ Nominated Member” of the Ministry of Mines, Energy and Water Development as shall be designated as such by the Minister from time to time; means the International Financial Reporting Standards and Interpretations adopted by the “IFRS” International Accounting Standards Board (“IASB”) and the International Financial Reporting Interpretations Committee of the IASB; “Independent Reporting Accountant” PricewaterhouseCoppers Zambia (Registration number 4808), a company incorporated in Zambia; “Intermarket” Intermarket Securities Limited (Registration number 32901), a company incorporated in Zambia; “Investment Bank” means Standard Bank or such other bank as the company may appoint; “Irrevocable Letter of Undertaking” the agreement entered into between CEC and a significant shareholder in terms of which that shareholder agrees, subject to certain conditions, to confirm that they will follow their rights pursuant to the Rights Offer; “Kabompo” CEC Kabompo Hydro Power Limited (Registration number 99488), a company registered in Zambia; “KANN” KANN Utility Company Limited (Registration number RC 920561), a company registered in Nigeria; being the rights arising under the Letters of Allocation to subscribe for shares, which rights are “LA Options” represented by a book entry kept by the CSD; “Last Practicable Date” 31st December 2013; the legal advisers to the Company with respect to the Rights Offer, being Messrs Chibesakunda & “Legal Advisers” Company; “Letter of Allocation” “Listings Requirements” a renounceable letter of allocation to be issued to CEC Shareholders in electronic form relating to the Rights Offer; the Listings Requirements of the LuSE, as amended from time to time; the Lusaka Stock Exchange Limited (Registration number 30495), a company incorporated in Zambia “LuSE” and licensed to operate as a stock exchange under the Securities Act, Chapter 354 of the Laws of Zambia; Madison Asset Management Company Limited (Registration number 68406), a company incorporated in “MAM Co” Zambia; “Main Receiving Agent” Stockbrokers Zambia Limited or such other person as the Company may appoint; “NAV” Net asset value; “Net Asset Value Per CEC Shareholders' equity, as determined by deducting liabilities from assets, divided by the weighted Share” or “NAV per share” average number of CEC Shares in issue; the period between Monday, 03 February at 10:00 (Zambian time) when the Rights Offer will open and “Offer Period” Friday, 28 February at 14:00 (Zambian time) when the Rights Offer will close; The Patents and Companies Registration Agency of Zambia, established pursuant to section 366 of the “PACRA” Companies Act as amended; “Pangaea” Pangaea Securities Limited (Registration Number 33424), a company incorporated in Zambia; “PAT” profit after tax; “PBT” profit before tax; “Person” a natural individual or body corporate with legal capacity; a registered holder of CEC Shares included on the register of Shareholders of CEC as at the Record Date “Qualifying Shareholder” and which does not have its registered address in any jurisdiction in which it would be unlawful to make the Rights Offer; the number of Rights Offer Shares to which Shareholders are entitled in terms of the Rights Offer, being “Ratio of Entitlement” 5 Rights Offer Shares for every 8 CEC Shares held on the Record date for the Rights Offer, and/or such proportionate lower number of Shares in respect of a holding of less than 8 CEC Shares held on the Record Date; “Realtime” 12 Realtime Technology Alliance Africa Limited (Registration number 46358), a company registered in Zambia; COPPERBELT ENERGY CORPORATION PLC
  12. 12. “Receiving Agents” “Record Date” “Register” Stockbrokers Zambia, Pangaea, Intermarket, African Alliance, MAM Co and ECR; the last day for Shareholders to be recorded in the register in order to participate in the Rights Offer, being close of business on Friday, 31 January; means the register of Certificated Shareholders maintained by CEC and the sub-register of Dematerialised Shareholders maintained by the Transfer Secretary; “Revised Listing means the revised listing particulars of the Company contained in this Rights Offer Document as set out Particulars” in this Rights Offer Document and including all annexures thereto; “Rights” “Rights Offer” “Rights Offer Document” means the renounceable and transferable right of Existing Shareholders to subscribe for a prescribed number of shares of CEC which number is set out in the Letter of Allocation; this Rights Offer of Shares in CEC at the Rights Offer price of ZMW0.62 in the ratio of 5 Rights Offer Shares for every 8 CEC Shares held on the Record Date; means this bound document, dated Monday, 03 February 2014, incorporating a Form of Instruction, where applicable; “Rights Offer Share Price” the price per new CEC share to be offered to CEC Shareholders in terms of the Rights Offer being or “Subscription Price” ZMW0.62 per CEC share; “the Rights Offer Shares” the 625,000,000 CEC Shares, which are the subject of the Rights Offer; “Rump Shares” the Rights Offer Shares not allocated where less than 100 percent of the number of Rights Offer Shares available are subscribed for in the Rights Offer; the Southern African Power Pool formed pursuant to the Intergovernmental Memorandum of “SAPP” Understanding signed on 28th August 1995; which was replaced by the Inter-Utility Memorandum of Understanding of 21st July 2006, and is an arrangement for, inter alia, co-operation in matters of electricity generation and distribution between member states including Zambia; “the SEC” the Securities and Exchange Commission Zambia, a statutory body established under the Securities Act; “SENS” Securities Exchange News Service of the LuSE; “Sponsoring Broker” Stockbrokers Zambia Limited or such other person as the Company may appoint; “Stanbic Zambia” Stanbic Bank Zambia Limited (Registration number 6559), a company registered in Zambia and a registered bank; The Standard Bank of South Africa Limited (Registration number 1962/000738/06), a public company “Standard Bank” incorporated in accordance with the laws of the Republic of South Africa and a registered bank; or; Stanbic Bank Zambia Limited; “Stockbrokers Zambia Limited” or “Stockbrokers Zambia” Stockbrokers Zambia Limited (Registration number 52224), a company registered in Zambia and a member of LuSE and licensed by the SEC as a dealer; “Transaction Advisor” Standard Bank or such other person as the Company may appoint; “the Transfer Agent” Corpserve Transfer Agents Limited (Registration number 74349), a company registered in Zambia “UK” United Kingdom; “USD” or “$” United States Dollars; “Xerxes” Xerxes Global Investments Limited (Registration number RC 647178), a company registered in Nigeria; “Zambia” the Republic of Zambia; “ZCCM” Zambia Consolidated Copper Mines Limited “ZCCM-IH” ZCCM Investments Holdings PLC (Registration number 771), a company registered in Zambia; “ZECI” Zambia Energy Corporation (Ireland) Limited (Registration number 1045) a company registered in Ireland; the legal tender of Zambia until 30 June 2013 and whose equivalent face value to ZMW is multiplied by “ZMK” or “ZK” or “K” a multiplicand of one thousand and which is no longer used for ordinary transactions as at 30th June 2013; and the legal tender of Zambia in which all monetary amounts in this Rights Offer Document are expressed “ZMW” unless otherwise indicated and whose equivalent face value to the ZMK is divided by a multiple of one thousand. RIGHTS OFFER DOCUMENT 2014 13
  13. 13. Copperbelt Energy Corporation PLC (Incorporated in the Republic of Zambia) (Registration number 39070) Share code: CEC ISIN: ZM0000000136 (“CEC” or “the Company”) Non-Executive Directors Executive Directors Jean Madzongwe Hanson Sindowe Munakupya Hantuba Michael J. Tarney Reynolds Bowa Abel Mkandawire Pius H Maambo Charity Mwansa Edson Hamakowa Klaas Bleeker Mildred T Kaunda 1. RIGHTS OFFER DOCUMENT 1.1 Introduction On 10 July 2013, CEC announced its intention to raise equity capital by way of a renounceable Rights Offer to Qualifying Shareholders. On 26 July 2013, at an Extraordinary General Meeting, Shareholders authorised the Board to proceed with the Rights Offer. In this regard, Shareholders approved the creation of an additional 1,000,000,000 ordinary Shares and resolved to place these Shares under the control of the Board for purposes of implementing the Rights Offer. Pursuant to the terms of the Rights Offer, 625,000,000 CEC Shares will be offered for subscription to Qualifying Shareholders recorded in the Register at the close of trade (Zambian time) on Friday, 31 January 2014. CEC Shareholders will receive Rights to subscribe for Rights Offer Shares on the basis of 5 Rights Offer Shares for every 8 CEC Shares held, at a subscription price of ZMW0.62 per Rights Offer Share. 1.2 Rationale of the Rights Offer and use of proceeds CEC strives to build a pan-African energy infrastructure platform. In this regard, the Company seeks to expand its operations within Zambia and the rest of Africa. The Company has identified a number of growth opportunities within select countries in sub-Saharan Africa and has undertaken critical feasibility work to develop robust business plans with respect to each opportunity. In addition, CEC has invested preliminary capital with respect to these projects and has engaged with select investors to partner with the Company to launch these projects in the near term. The Board seeks to use the Rights Offer proceeds, net of expenses, to fund these select growth opportunities. In addition, the Board intends to use a portion of the Rights Offer proceeds to reduce the Company’s overall debt levels. The strengthening of the Company’s overall financial position is expected to provide additional support to realising its growth strategy. 14 COPPERBELT ENERGY CORPORATION PLC
  14. 14. 1.2.1 Overview CEC seeks to develop energy generation and transmission projects across a range of energy sources. The Company seeks to expand its current generation and transmission capacity within existing operations whilst launching new projects across sub-Saharan Africa. It is in this context that the Company has created a unique investment vehicle, CEC Africa, through which these various projects will be developed and launched. 1.2.2 Use of proceeds The proceeds of the Rights Offer will be applied (i) to undertake a number of capital projects and investments detailed below and (ii) to re-finance part of a bridge facility of USD45m from Standard Bank taken out in August 2013 to acquire interests in the Nigerian power sector. The main focus of investment going forward will be the development of transmission, hydro generation and renewable energy in Zambia. CEC will also support the development of its joint ventures in telecommunications, CEC Liquid and Realtime, to further the network roll-out and provision of services based on fibre optic technology. The main areas of capital expenditure and investment are detailed in the table below. It should be noted that CEC will have access to additional sources of funding from retained earnings, corporate debt and project specific finance where projects are being undertaken through subsidiaries and the subsidiary has acquired limited or non-recourse debt finance as, for example, is expected to be the case with Kabompo. In selecting projects for future investment, CEC takes the following factors into account: i. The need to maintain and expand its core transmission and distribution network on the Copperbelt, and continually deliver a high quality of service to its customer base; ii. The need to secure reliable future sources of supply for its core customer base, and therefore make investments into viable sources of power generation; iii. The Social, Health and Environmental impacts of the projects such that impacts are managed in accordance with both local and international standards, including the Equator Principles of the World Bank Group; iv. The overall financial returns on projects, so that the return requirements of debt and equity providers are satisfied; v. The competence within the organisation to successfully deliver projects, taking into account the expertise of staff, training requirements and the overall governance framework of the project. Item Description 1 Core Business Capital Expenditure The CEC transmission network being one of the oldest in the country requires continuous reinvestment to renew ageing assets and expand system capacity to meet growing customer demand. CEC operates a capital expenditure policy where: • Customer dedicated infrastructure is co-financed between CEC and its customerss • Assets common to more than one customer are financed by CEC Within the next two years, CEC will be required to upgrade the capacity of some of its common assets. These expansion works mostly include replacement of ageing and provision of additional transformer capacity at CEC’s main 220kV substations that include Michelo, Luano and Kitwe substations. RIGHTS OFFER DOCUMENT 2014 15
  15. 15. 2 CEC Kabompo Hydro Power Limited The Kabompo Hydro Project was awarded to a CEC-led consortium by the Zambian Government in 2008. The project is located in Mwinilunga District, in Zambia’s North-Western Province. The Kabompo Project is CEC’s first investment into hydroelectric power generation in Zambia. The project will comprise an underground power station with 40MW generation capacity and an annual energy output of 135GWh. The project is located approximately 35km from an extension to the national 330kV electricity grid being constructed to connect the Kalumbila mining project and town development being developed by First Quantum Minerals. Sinohydro has been selected as EPC contractor for the project, and an Early Works Agreement was signed to facilitate the commencement of the detailed scheme design, preparation of the project site including roads and accommodation for workers, and the construction of a diversion channel to facilitate access to the site where the proposed dam will be constructed. The project will cover a land area of approximately 12,000 hectares. The project design incorporates construction of a Roller Compacted Concrete Dam 60 metres in height, an underground power house and tunnelling of around 4km in total for the headrace, penstock and tailrace. Environmental approvals for the project have been granted by the Zambia Environmental Management Agency (‘ZEMA’) and environmental management and compliance processes have been implemented, including the development of a Resettlement Action Plan for affected communities. The project is currently wholly owned by the CEC Group. It is intended that CEC will retain a 60% interest in the project, with the remaining 40% to be held by CEC Africa. A debt to equity ratio of around 70/30 is envisaged. Standard Bank has been appointed as lead arranger for the project debt. The estimated project cost is USD215m, including the transmission lines, environmental works, construction of roads and social facilities and interest during construction. The current project plan envisages commissioning of the project in 2016. The initial stages of the project have been financed by CEC through equity contribution, and around USD14m has been spent on the project to date. A further USD17m (KMW94m) will be spent by CEC PLC as equity contribution. Kabompo was incorporated on 7th February 2013. 3 220kV Zambia-DRC Interconnector Project The project involves the construction of a 220kV double circuit transmission line parallel to the existing 220kV single circuit interconnector between Zambia and the DRC, near the Kasumbalesa border post. The interconnector has a total length of 142km; approximately 51km is located in Zambia and 91km is located in the DRC. The Zambian leg, at 51km, is being developed by CEC whilst the remaining 91km is being developed by Société Nationale d’Electricité in the DRC. Once completed, the interconnector will provide significant strategic benefits to the region by: Contributing to strengthening the central corridor which is currently the only gateway for north-to-south trade in the SAPP; • Enhancing the development of a reliable competitive electricity market in the SAPP; • Increasing the capacity of Zambia-DRC interconnection from 260MW to 500MW, thus significantly increasing north-to-south trade in the SAPP; • Securing firm electricity trade through the interconnector by addressing single circuit risk thereby reducing disruptions to regional trade; and • Significantly improving the reliability and security of electricity transmission and related trade channelled through the interconnector. The total project cost of the Zambian section of the project amounts to USD15.8m. 16 COPPERBELT ENERGY CORPORATION PLC
  16. 16. 4 CEC Liquid Fibre Rollout CEC Liquid was formed in 2011 as a 50/50 joint venture company between CEC and Liquid Telecom of Mauritius. The company operates under a ‘Carrier of Carriers’ Licence issued by ZICTA through which fibre optic connectivity is provided to organisations that possess ZICTA licenses – primarily comprising other telecommunications carriers, banks, large industrial and mining companies and Zambian Government institutions and agencies. CEC Liquid has constructed a fibre optic network within the main commercial centres in Zambia, and also provides two international links through Zimbabwe to South Africa which connects into international fibre cables linking to other African countries and other continents. CEC Liquid is one of Zambia’s main carriers of international internet traffic. The next stage of development for CEC Liquid is to roll out fibre more extensively in the main commercial and residential centres of Zambia using ‘GPON’ fibre technology. This initiative will extend the availability of fibre to a wider number of residential, commercial and business premises. The first area where GPON is being deployed is the Rhodes Park area of Lusaka. CEC Liquid is securing debt facilities of USD16m to undertake this investment, and CEC has been requested to provide a guarantee facility for half of this amount with the other half being provided by Liquid Telecom. In addition to the projects set out above, the Board seeks to use a portion of Rights Offer proceeds to develop a number of renewable energy projects. These include (i) completion of feasibility studies for the construction of a cascade of five hydro sites capable of generating 700MW on the Luapula River that defines the border between Luapula Province of Zambia and Katanga Province of DRC, (ii) construction of a 1 MW bio-gasification project on the Copperbelt (iii) development of a solar generation plant on the Copperbelt. The Board believes that the Rights Offer will allow the Company to withstand the impact of current global economic and financial markets and allow it to retain strategic flexibility in order to preserve and grow long-term shareholder value. 1.3 Particulars of the Rights Offer 1.3.1 Terms of the Rights Offer The Rights Offer will be made by way of renounceable Rights on the basis of: 5 Rights Offer Shares for every 8 CEC Shares held by Qualifying Shareholders on the Record Date, for subscription at a price of ZMW0.62 per Rights Offer Share. Qualifying Shareholders recorded in the Register at the close of business (Zambian time) on Friday, 31 January will be entitled to participate in the Rights Offer. The gross proceeds of the Rights Offer are expected to amount to approximately ZMW387,500,000. The Rights Offer subscription price represents a discount of 19.5 percent and 9.5 percent to the share price and 30 day volume weighted average price of CEC, respectively, as at the close of trading on Thursday, 16 January 2014. Three of CEC’s largest holders, as set out below, have undertaken to take up the following percentage of Rights pertaining to it: ZECI 100%, being 325,000,000 rights ZCCM-IH 100%, being 125,000,000 rights Aflife 100%, being 42,654,305 rights Irrevocable Letters of Undertaking have been obtained in this regard. Excess applications will not be allowed. Please find further detail in section 1.3.10 below. RIGHTS OFFER DOCUMENT 2014 17
  17. 17. The Rights Offer Shares will, upon allotment and issue, rank pari passu with all other existing CEC Shares and shall be fully paid up and freely transferable. The attached Letter of Allocation contains details of the rights to which Qualifying Shareholders are entitled, as well as the procedure for acceptance and/or sale and/or renunciation of all or part of those rights. The Subscription Price is payable in full, in Kwacha, by qualifying Shareholders holding Shares on acceptance of the Rights Offer. Qualifying Shareholders who have accepted the Rights Offer must ensure that the necessary funds are deposited with their Broker. No debentures have been issued or offered with respect to the Rights Offer and no other claims or rights have been offered or issued in respect of the Rights Offer. Rights Offer Statistics • The Rights Offer subscription price is ZMW0.62. • The Ratio of Entitlement is 5:8. • The number of CEC Shares in issue at the date of this Rights Offer Document is 1,000,000,000. • The number of Rights Offer Shares to be issued by the Company is 625,000,000. • The number of CEC Shares in issue immediately following completion of the Rights Offer is 1,625,000,000. • The Rights Offer Shares as a percentage of the enlarged issued Share Capital of the Company immediately following completion of the Rights Offer are in excess of 38 percent. • The estimated gross proceeds receivable by the Company before expenses are ZMW387,500,000. • The estimated expenses of the Rights Offer are ZMW15,760,000. • The estimated net proceeds receivable by the Company after expenses are ZMW371,740,000. 1.3.2 Rights Offer period The Rights Offer will open at 10:00 (Zambian time) on Monday, 03 February and will close at 14:00 (Zambian time) on Friday, 28 February. The LA Options will be listed on the LuSE from 12:00 (Zambian time) on Monday, 27 January until 12:00 (Zambian time) on Friday, 21 February under the Alpha Code CECLA ISIN: ZM0000000425. 1.3.3 Rights Qualifying Shareholders will receive Rights to subscribe for Rights Offer Shares on the basis of 5 Rights Offer Shares for every 8 CEC Shares held, for subscription at ZMW 0.62 per Rights Offer Share. The entitlement of each Qualifying Shareholder is to be reflected in the appropriate block in the Letter of Allocation, which is attached with this Rights Offer Document. CEC Shareholders will have their CSD or Broker accounts automatically credited with their Rights. 1.3.4 Particulars in respect of the Rights Offer Shares The Rights Offer Shares will rank for dividends equally with other ordinary Shares of CEC; and will rank pari passu with existing securities of the same class (ordinary Shares). The Company may, by resolution, convert all or any of its paid up shares into stock and reconvert any stock into paid up shares of any nominal value. There are no fixed date(s) on which entitlement to dividends arises. There is no arrangement under which future dividends are waived or agreed to be waived. 18 COPPERBELT ENERGY CORPORATION PLC
  18. 18. 1.3.5 Rights Offer entitlement The number of Rights Offer Shares to which Qualifying Shareholders will be entitled is set out in the Table of Entitlement in Annexure 1 to this Rights Offer Document. The entitlement of each Qualifying Shareholder is to be reflected in the appropriate block in the Letter of Allocation, which is enclosed with this Rights Offer Document. 1.3.6 Fractional Rights The whole number of Rights to subscribe for Rights Offer Shares to which Qualifying Shareholders will become entitled will be determined by the Ratio of Entitlement. Only whole numbers of Shares will be issued and Shareholders will be entitled to subscribe for rounded numbers of CEC Shares once the Ratio of Entitlement has been applied. Fractional entitlements of 0.5 or greater will be rounded up and fractional entitlements of less than 0.5 will be rounded down. 1.3.7 Holdings of odd lots in multiples other than 8 Shares Shareholders holding less than 8 CEC Shares, or not a whole multiple of 8 CEC Shares, will be entitled, in respect of such holdings, to participate in the Rights Offer in accordance with the Table of Entitlement in Annexure 1 to this Rights Offer Document. 1.3.8 Shareholder commitments ZECI, ZCCM-IH and Aflife, CEC’s largest shareholders, have entered into agreements with CEC pursuant to which they have irrevocably committed, for CEC’s benefit, to subscribe for not less than 492,654,305 CEC Rights Offer Shares (being approximately 78.8 percent of the CEC Rights Offer Shares). CEC has secured Irrevocable Letters of Undertaking from ZECI, ZCCM-IH and Aflife. 1.3.9 Minimum subscription The Irrevocable Letters of Undertaking, as discussed in paragraph 1.3.8 above, ensure that the Rights Offer will be subscribed at a minimum level of 78.8 %, amounting to ZMW 305,445,669 and is therefore not conditional on a minimum subscription. The Irrevocable Letters of Undertaking, in the opinion of the Directors, is sufficient to provide the amounts required for, preliminary expenses, commissions and proposed investments referred to in this Rights Offer Document. 1.3.10 Rights Offer applications No excess applications will be accepted for Rights Offer Shares not taken up pursuant to the terms of the Rights Offer. Rights not exercised will lapse and such unsubscribed Rights Offer Shares will be offered to new Shareholders in an accelerated placement as contemplated below. An announcement will be released on SENS and published in the Zambian press on or about Monday, 03 March, stating the results of the Rights Offer and the basis of allocation of any additional Rights Offer Shares for which application is made. The pool of Rights Offer Shares available will be dealt with as set out below: • if all the Rights Offer Shares are taken up in the Rights Offer, then no additional Rights Offer Shares will be made available for allocation to applicants or new investors; • if the Rights Offer Shares taken up in the Rights Offer are less than 100 percent of the number of Rights Offer Shares available, such Rights Offer Shares not subscribed for (the “Rump Shares”), will be offered by the Bookrunner at the direction of the Directors (on a reasonable endeavours basis), in an international and local placement, to institutional investors (“The Placement”); and • the Board shall allocate Rights Offer Shares to CEC Shareholders who have applied and paid for any Rights Offer Shares unless such allocation would: (a) result in fractional Shares, in which case such allocation shall be rounded to the nearest multiple of one Rights RIGHTS OFFER DOCUMENT 2014 19
  19. 19. Offer Share (unless the application of the Ratio of Entitlement results in a fractional share of less than 0.5, in which case such allocation will be rounded down to zero); (b) result in a violation of applicable law or the rules or regulations of a Zambian Governmental authority or the Listings Requirements; or (c) constitute a breach of the fiduciary duties of the Board (such allocation principles, the “Allocation Principles”). Cheques and/or refunding of monies in respect of unsuccessful applications for Rights Offer Shares by Shareholders will be posted to the relevant applicants, at their risk, on or about Friday, 07 March. No interest will be paid on monies received in respect of unsuccessful applications. 1.3.11 Rump Placement With respect to Rump Shares, these have been placed under the control of the Directors to be issued through the Bookrunner to such persons as the Directors in their absolute discretion may decide. Such Rump Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (“US Securities Act”) and, subject to certain exceptions, may not be offered or sold within the United States. The Rump Shares will either be (i) offered and resold outside of the Unites States to non-U.S professional and institutional investors, in reliance on Regulations of the US Securities Act and/or (ii) offered domestically in Zambia. The Rump Shares will be allocated at the absolute discretion of the Board. 1.3.12 Procedure for acceptance, renunciation or sale of Rights The attached Letter of Allocation reflects the number of Rights Offer Shares for which a shareholder is entitled to subscribe. Any instruction to accept, sell or renounce all or part of the Rights Offer Shares allocated to them may be made by means of confirmation of instruction to the holder’s Broker or the Sponsoring Broker. 1.3.12.1 Acceptance Full details of the procedure for acceptance of the Rights Offer are contained below. Please contact the Sponsoring Broker for further detail if required. It should be noted that: • acceptances are irrevocable and may not be withdrawn; • acceptances may be made only by means of confirmation with either a Receiving Agent or the Sponsoring Broker; • any instruction to sell or renounce all or part of the Rights Offer Shares may only be made by means of confirmation with either a Receiving Agent or the Sponsoring Broker; • confirmation with either a Receiving Agent or Sponsoring Broker together with a certified Bank Deposit Slip as proof of payment, or a cheque or Bank Draft, in favour of “CEC RIGHTS OFFER”, crossed “not negotiable” and “not transferable”, for the relevant Rights Offer Shares must be received by either a Receiving Agent or Sponsoring Broker at the addresses set out in the “Corporate information” section of this Rights Offer Document by no later than 12h00 on Friday, 28 February 2014, or Wednesday, 26 February 2014 if by way of postal acceptance; • confirmation with either a Receiving Agent or Sponsoring Broker to take up the Rights will be regarded as complete only when monies have been cleared for payment; • such payment will constitute an irrevocable acceptance of the Rights Offer upon the terms and conditions set out in this Rights Offer Document once monies have been cleared for payment; • if no instruction is received by the Sponsoring Brokers set out above, the Rights Offer will be deemed to have been declined and the Rights to purchase the Rights Offer Shares in terms of the Letter of Allocation will lapse regardless of who holds it; and • no acknowledgement of receipt will be given for monies received in respect of the Rights Offer. 1.3.12.2 Renunciation or sale of Rights • 20 CEC has issued the Letters of Allocation in dematerialised form. • The LA Options are negotiable and can be traded on the LuSE. COPPERBELT ENERGY CORPORATION PLC
  20. 20. • Qualifying Shareholders who do not wish to purchase all, or some of the Rights Offer Shares allocated to them as reflected in the Letter of Allocation, may sell or renounce or lapse their Rights. • In addition, Qualifying Shareholders who wish to sell the Rights allocated to them as reflected in the Letter of Allocation must confirm such action with the Sponsoring Broker in accordance with the instructions contained on page 8, to be received no later than 12h00 on Friday, 21 February 2014. • The Sponsoring Broker or Receiving Agent will endeavour to procure the sale of the Rights on the LuSE on behalf of such qualifying Shareholders and will remit the proceeds in accordance with the payment instruction reflected in the Acceptance Form, net of Brokerage charges and associated expenses. Neither the Sponsoring Broker nor the Company nor any Broker appointed by either of them will have any obligation or responsibility for any loss or damage whatsoever in relation to or arising out of the timing of such sales, the price obtained or any failure to sell such Rights. References in this paragraph to Shareholders include references to the person or persons executing the confirmation of action and any person or persons on whose behalf such person or persons executing the instruction is/are acting and in the event of more than one person executing the instruction, the provisions of this paragraph shall apply to them, jointly and severally. • Shareholders who do not wish to sell the Rights allocated to them as reflected in the Letter of Allocation, and who do not wish to purchase the Rights Offer Shares offered in terms of the Rights Offer but who wish to renounce their Rights, should instruct their Receiving Agent or the Sponsoring Broker in accordance with the instructions contained therein, to be received by no later than 12h00 on Friday, 21 February 2014. • Shareholders who wish to purchase only a portion of the Rights Offer Shares allocated to them must indicate on the Acceptance Form, the number of Rights Offer Shares which they wish to purchase. 1.3.12.3 Payment • Currency The amount due on acceptance of the Rights Offer is payable in Zambian Kwacha. • Payment terms The amount due on acceptance is payable in Zambian Kwacha by deposit or electronic funds transfer to your Broker / Receiving Agent, or alternatively to the Sponsoring Broker at the following bank account: BANK : Cavmont Bank Ltd. ACCOUNT NAME : CEC RIGHTS OFFER MAIN ACCOUNT NUMBER : 800000182308 SORT CODE : 130001 SWIFT CODE : CVMCZMLU Payment may also be in the form of manager’s cheques or bankers’ drafts (crossed “not negotiable”) in respect of subscriptions and should be made payable to “CEC RIGHTS OFFER”. Cheques and bankers’ drafts and completed Letters of Allocation should be lodged, with payment, with your Broker / Receiving Agent or the Sponsoring Broker at the addresses set out in the “Corporate information” section of this Rights Offer Document by no later than 12h00 on Friday, 28 February 2014. All cheques or drafts received by the Receiving Agents will be deposited immediately. In the event that any cheque or bank’s draft is dishonoured, CEC, in its sole discretion, may treat the relevant acceptance as void or may tender delivery of the relevant Rights Offer Shares to which it relates against payment in cash of the Rights Offer Price for such Rights Offer Shares. Payments received in respect of an application which is rejected or otherwise treated as void by CEC, or which is otherwise not validly received in accordance with the terms stipulated in this paragraph, will be posted by registered mail (without interest) by way of a cheque drawn in Zambian Kwacha to the applicant concerned, at the applicant’s risk on or about Friday, 07 March. If the applicant concerned is not a CEC Shareholder and gives no address in the Acceptance Form, then the relevant refund will be held by CEC with no interest payable to the applicant until collected by the applicant. RIGHTS OFFER DOCUMENT 2014 21
  21. 21. 1.3.12.4 Dematerialised Shares Shareholder’s LuSE CSD accounts will be credited with the Rights Offer Shares subscribed for in terms of the Rights on or about Monday, 03 March 2014. 1.3.13 Lapse of Rights 1.3.13.1 Qualifying Shareholders The Rights of Qualifying Shareholders who fail to instruct a Receiving Agent as to what action they intend to take or fail to comply with the procedures set out in this section, within the timelines stipulated will lapse and such Qualifying Shareholders will not be entitled to any payment under the terms of the Rights Offer. Neither CEC nor the Transfer Secretary, or any Broker appointed by them will be responsible for any loss or damage whatsoever suffered by such CEC Shareholders in relation to the lapsing of their Rights. 1.3.14 Applicable law All transactions arising from the provisions of this Rights Offer Document and the accompanying Form of Instruction will be governed by and be subject to the laws of Zambia. The distribution of this Rights Offer Document may be restricted by law in certain jurisdictions. Persons who are in possession of this Rights Offer Document are cautioned to familiarise themselves with, and observe, any such restrictions. The Rights Offer Shares have not been and will not be registered in any jurisdiction outside of Zambia. Any investor(s) from any jurisdiction outside of Zambia, is (are) required to comply with the laws of that jurisdiction in participating in this Rights Offer. 1.3.15 Tax consequences CEC Shareholders are advised to consult their tax and financial advisers regarding any taxation implications pertaining to them regarding the acceptance of their Rights in terms of the Rights Offer. 1.3.16 Documents of Title No new share certificates will be issued to Qualifying Shareholders in respect of those Rights Offer Shares to which they were entitled and for which they have subscribed. 1.3.17 Registration of documents The following documents, in English, have been lodged with, and registered by, PACRA on Friday, 31 January in terms of section 126 of the Companies Act for purposes of implementing the Rights Offer: • a signed copy of this Rights Offer Document; • the Letters of Allocation attached to this Rights Offer Document; • a signed Statutory Declaration by a Director and the Secretary of the Company, or in their absence a power of attorney signed by the respective Directors; • copies of the signed Irrevocable Letters of Undertaking; • the letters of consent from the Investment Bank and Transaction Adviser, Sponsoring Broker, Legal Adviser, Transfer Secretary and Receiving Agents to act in their respective capacities and to their names being stated in this Rights Offer Document; • 22 a copy of the application for listing of the Rights Offer Shares to be issued pursuant to the Rights Offer; and • a copy of the letter from the LuSE agreeing to the listing of the Rights Offer Shares and the Letters of Allocation. COPPERBELT ENERGY CORPORATION PLC
  22. 22. 1.3.18 LuSE listings The LuSE has approved the listings of: • the Letters of Allocation in respect of all of the Rights Offer Shares with effect from the commencement of trade on Monday, 27 January to the close of trade on Friday, 21 February, both days inclusive; and • 625,000,000 Rights Offer Shares with effect from the commencement of trade on Monday, 24 February. 1.4 Pro forma financial information The unaudited pro forma financial effects set out below have been prepared to assist CEC Shareholders to assess the impact of the Rights Offer on the Earnings Per Share and Net Asset Value Per Share of CEC. Due to the nature of these pro forma financial effects, they are presented for illustrative purposes only and because of its nature may not fairly present the Group’s financial position, changes in equity, results of operations or cash flows. The unaudited pro forma financial effects have been prepared in accordance with the Listings Requirements and the Guide on pro forma Financial Information issued by the Zambian Institute of Chartered Accountants. These unaudited pro forma financial effects are the responsibility of the Board. The material assumptions on which the pro forma financial effects are based are set out in the notes following the table. The unaudited pro forma financial effects set out below should be read in conjunction with the unaudited pro forma balance sheet at 30 June 2013 and income statement, which is included as Annexure 2 to this Rights Offer Document. Pro forma financial effects Pro forma Before EPS NAV per share Ordinary Shares in issue Weighted average number of ordinary Shares in issue adjustments After Percentage change (%) 0.056 -0.022 0.034 -39.3 0.92 -0.12 0.80 -13.0 1,000,000,000 +625,000,000 1,625,000,000 +62.5 1,000,000,000 +625,000,000 1,625,000,000 +62.5 Notes and assumptions: • Published June 2013 information relates to the Group results. • Net proceeds from the share issue of KMW371,740,000 have been adjusted against current assets and equity. • Per LuSE’s Listings Rules the EPS calculation is based on the weighted average number of issued shares adjusted as though the Rights Offer had taken place at the beginning of the 6 month period. RIGHTS OFFER DOCUMENT 2014 23
  23. 23. 1.5 Estimated expenses in relation to the Rights Offer The total costs of the Rights Offer, including advisory fees, regulatory costs, filing costs, marketing and printing costs is estimated at ZMW15,760,000 or 4.1 % of the Rights Offer. The table below sets out expenses incurred in relation to the Rights Offer. Amount ZMW’000 Financial Advisory and Bookrunner fees 13,563 Sponsoring Broker fees 662 Legal Adviser fees 320 Fees paid to Reporting Accountant 91 Transfer agent fees 50 Printing, posting and public relations 247 Advertising 45 Receiving Agent fees 310 LuSE listing fees 125 SEC registration fees 125 PACRA registration fees 222 Fees paid in respect of Irrevocable Undertakings Total 1.6 15,760 Information on CEC 1.6.1 General CEC is an independent power transmission and distribution company with core operations in Zambia and an expanding footprint in the rest of Africa. The Company operates and maintains power transmission, distribution and generation assets. CEC owns and operates approximately 900km of 220KV and 66KV transmission lines, 520km of optic fibre on power lines, and 250km in trenches, 40 major substations and 80MW of gas turbine generation. The Company accounts for approximately 50% of Zambia’s electrical power consumption. CEC is a key supplier to Zambia’s Copperbelt Province through long term power supply agreements with mining companies. In this regard, the Company’s services include generation backup services. CEC owns and operates 80MW generation capacities to provide emergency power to customers. CEC’s power wheeling activities span the Copperbelt of Zambia. The Company has over 50 years of experience in supplying power to the mines and is a member of the SAPP. In recent years, the Company has expanded its business to include investments in telecommunications through 50% joint ventures in CEC Liquid and Realtime. CEC Africa was incorporated to undertake international investments in the power sector in sub-Saharan Africa as its core business. CEC has been listed on the LuSE since January 2008. 1.6.2 Subsidiaries CEC Liquid (Joint Venture between CEC PLC and Liquid Telecommunications Holdings Limited) CEC Liquid is a 50:50 joint venture partnership between CEC and Liquid Telecommunications Holdings Limited. CEC Liquid provides wholesale telecommunications services in Zambia. Headquartered in Lusaka, CEC Liquid owns and operates a national long haul broadband fibre based backbone from Chirundu to Kasumbalesa. The company provides 24 COPPERBELT ENERGY CORPORATION PLC
  24. 24. competitive high quality product services through the wholesale of national and international fibre bandwidth. CEC Liquid has become the preferred wholesale broadband connectivity company in Zambia. Realtime (Joint Venture between CEC and Realtime Technology Alliance Africa) Realtime is an internet service provider that focuses on a niche market of corporate customers. Its core business is to provide high speed internet services and private leased circuits using optic fibre technology. The company is a 50:50 joint venture with Realtime Technology Alliance Africa. This joint venture has enabled Realtime to become a large fibre optic network provider in Zambia. CEC Africa CEC Africa was established by CEC to develop, finance and operate power projects across sub-Saharan Africa, covering distribution, transmission, thermal generation, hydro and renewable energy. The company is currently a wholly owned subsidiary of CEC, although a process has commenced to invite investment into CEC Africa from third parties including Development Banks, Private Equity Funds and Infrastructure Funds. CEC Africa has a strong pipeline of power projects in development across Africa, including projects in Namibia, Sierra Leone, Zambia and Nigeria. CEC Africa is incorporated in Mauritius. CEC Africa has approved four projects to date: i. Acquisition of a 75% interest in KANN Utility Company Limited, which has acquired a 60% interest in Abuja Electricity Distribution Company (‘AEDC’) through a process of international competitive tender. AEDC supplies power in Kogi, Abuja, Niger and Nasarawa States (the first letters of which the name ‘KANN’ is derived from) in which more than 10 million people live. The electrification rate is around 27%, and AEDC has around 600,000 customers. The total consideration paid to the Bureau of Public Enterprises, the privatisation arm of the Nigerian Government, for the 60% interest in AEDC was USD164m. The financing structure for the transaction incorporated an acquisition finance facility of USD121.8m from UBA in Nigeria to KANN Utility Company, and inter-company loans of USD65m between CEC and CEC Africa. In order to provide this inter-company loan to CEC Africa, CEC secured bridge finance facilities from Standard Bank. The financing structure incorporates the pre-funding of a debt service reserve account, and the funds raised were also used to cover transaction costs paid to legal, technical, financing and environmental advisors. The takeover of AEDC management by an experienced CEC led team took place on 1 November 2013. The priorities of the management team for the first few months include the reduction of technical and commercial losses, investment in urgent repairs, improvement in health and safety standards and the development of capital investment and performance improvement plans. AEDC has approximately 3,000 employees. The Federal Government of Nigeria supports private sector management of the power sector, and has established a regulatory system that facilitates cost reflective tariffs to be established for different segments of the sector. Although, there are expected to be initial challenges in transforming the previously state owned utilities, the growth prospects for the sector are good due to the strong correlation to expected robust growth in the Nigerian economy, and the positive impact the privatisation process is expected to have on the availability of power for AEDC to sell to its customers, linked to the investment in a new generation plant. ii. Acquisition of a 20% interest in North South Power, which has a long term concession to operate the 600MW Shiroro Hydro Plant in Niger State. This project was also secured through an international competitive tender administered by the Bureau of Public Enterprises, as was the case with AEDC. The plant is largely in good working order, and currently provides around 20% of the grid connected power capacity available in Nigeria. The plant has a long term Power Purchase Agreement with the Nigerian Bulk Electricity Trader, which is a Nigerian Government owned company that procures power on behalf of the distribution companies including AEDC. CEC Africa is providing operational services to the project. RIGHTS OFFER DOCUMENT 2014 25
  25. 25. An amount of USD22.5m was paid to secure the 20% interest in the project. Further development costs of around USD1.5m have been incurred. The financing for the share acquisition was provided through an inter-company loan between CEC and CEC Africa. CEC secured its funding for the inter-company loan through a bridge facility from Standard Bank. The takeover of management at Shiroro Hydro took place on 1st November 2013. There are around 450 employees, a number of whom are employed at social facilities such as the school and hospital at Shiroro. The plant has performed well for the first few weeks of operation. iii. An acquisition of a 55% interest in Nishati Investments Limited, which owns Arandis Power, the developer of a 120MW HFO Generation plant in Arandis, Namibia. The issuance of shares is based on CEC Africa providing funding for a bankable feasibility study / project development in accordance with agreed project milestones. iv. A Joint Development Agreement with TCQ Power, a company registered in Lebanon to acquire a controlling interest in a generation concession in Sierra Leone. The generation plant will be developed as an Independent Power Producer selling to the Government-owned ‘National Power Authority’ with appropriate credit and political risk support arrangements. CEC Kabompo Kabompo, one of the subsidiaries of CEC, was incorporated for the sole purpose of hydroelectric power generation as its business. CEC PLC owns 99% of Kabompo, with CEC Ventures owning the remaining 1%. Further detail on Kabompo can be found in section 1.2 herein. 1.6.3 Prospects CEC seeks to continue its positive growth trajectory through focused investments in a range of power generation opportunities in Zambia and the rest of Africa. The Company is well placed to benefit from the growth in the Zambian mining sector with the commissioning of new mines. As part of its growth strategy, CEC seeks to be a strategic partner in private power projects or public-private partnership power projects within the region and is focused on opportunities that create value for the Company and its investors. The Company has built a robust pipeline of power projects across Africa, including its flagship 40MW Kabompo Gorge Hydro Project in Zambia’s North Western Province. Other prospects in Zambia include possible hydro generation projects on the Luapula River. CEC has acquired critical skills with respect to developing infrastructure in Africa. Accordingly, the Company’s extensive design and operating expertise position CEC to launch projects in the rest of Africa most notably through prospects in Nigeria and Namibia. 1.6.4 Share capital information 1.6.4.1 Increase in authorised share capital Pursuant to the implementation of the Rights Offer, at the EGM held on 26 July 2013, Shareholders approved the increase of CEC’s authorised share capital by the creation of 1,000,000,000 ordinary Shares. Shareholders further resolved to place the newly issued Shares under the control of the Board in order to execute the Rights Offer. 1.6.4.2 Change of nominal value At the EGM, Shareholders also resolved to approve a conversion of the Company’s entire issued share capital into stock and subsequent conversion into Shares in order to accommodate the Kwacha rebasing that commenced on 1 January 2013. CEC’s share capital, previously denominated in United States Dollars, is now denominated in ZMW. Accordingly, CEC’s share capital comprises ordinary shares with a par value of ZMW0.01 per share and special share 26 COPPERBELT ENERGY CORPORATION PLC
  26. 26. capital of ZMW1.40, comprising 1 special share of ZMW1.40 per share. Pursuant to the redenomination of the Company’s share capital, Shareholders resolved that the Company’s retained profits be debited with ZMW9,860,000. 1.6.4.3 Authorised and issued share capital The authorised and issued share capital of CEC before and after the Rights Offer is set out below: Before the Rights Offer Authorised share capital After the Rights Offer Ordinary Shares Special Share Ordinary Shares Special Share 2,000,000,000 1 2,000,000,000 1 ZMW0.01 ZMW1.40 ZMW0.01 ZMW1.40 Share capital ZMW20,000,000 ZMW1.40 ZMW20,000,000 ZMW1.40 Issued share capital Ordinary Shares Special Share Ordinary Shares Special Share 1,000,000,000 1 1,625,000,000 1 ZMW10,000,000 ZMW1.40 ZMW16,250,000 ZMW1.40 N/A N/A N/A N/A Number of Shares Nominal value of each share Number of Shares Share capital Share Premium 1.6.4.4 Securities listed on LuSE CEC’s ordinary shares are the only Shares listed on the LuSE. There are no Shares listed on any stock exchange other than the LuSE. 1.6.5 Shareholder spread As at the Last Practicable Date, Shareholders (other than Directors) who are beneficially interested, directly and indirectly, in 5% or more of the Company’s ordinary Shares and their holdings after the Rights Offer, are set out below: Before the Rights Offer Shareholder Number of Shares held After the Rights Offer % holding Number of Shares held % holding ZECI 520,000,000 52.0% 845,000,000 52.0% ZCCM-IH 200,000,000 20.0% 325,000,000 20.0% 68,246,888 6.8% 110,901,193 6.8% Subtotal 788,246,888 78.8% 1,280,901,193 78.8% Other Shareholders 211,753,112 21.2% 344,098,807 21.2% 1,000,000,000 100% 1,625,000,000 100% Aflife Total shares in issue RIGHTS OFFER DOCUMENT 2014 27
  27. 27. Directors’ interests in CEC As at 31 December 2012, the interests of Directors in CEC, as recorded in the register and on the LuSE, were as follows: 2012 Total ordinary issued Shares of the Company 2011 2010 1,000,000,000 1,000,000,000 1,000,000,000 Hanson Sindowe 2,092,000 2,092,000 3,092,000 Michael J Tarney 1,838,000 1,230,000 549,000 Neil Croucher* 5,269,000 4,581,000 4,000,000 19,000 19,000 - 9,218,000 7,922,000 7,641,000 Hanson Sindowe 110,802,000 110,802,000 83,792,000 Michael J Tarney 61,513,000 61,513,000 34,502,000 Abel Mkandawire 56,584,000 56,584,000 29,574,000 228,899,000 228,899,000 147,868,000 Direct shareholding Munakupya Hantuba Indirect shareholding *Mr Neil Croucher left the Board of CEC on 27th August 2013 Mr Hanson Sindowe sold 1,000 shares of his direct holding post 31 December 2012. 1.6.6 Changes in Directors’ interests before and after the Rights Offer Before the Rights Offer Director After the Rights Offer Direct Indirect Direct Indirect Hanson Sindowe 2,091,000 110,802,000 1,306,875 180,053,250 Michael Tarney 1,838,000 61,513,000 2,986,750 99,958,625 19,000 - 30,875 - - 56,584,000 4,324,500 91,949,000 3,948,000 228,899,000 8,649,000 371,960,875 Munakupya Hantuba Abel Mkandawire 1.6.7 Changes in remuneration of Directors The remuneration of Directors, in their capacity as the Board, will in no way be affected as a result of the Rights Offer. 1.6.8 Corporate governance The Corporate Governance practices of CEC are set out in Annexure 7 of this Rights Offer Document. 1.6.9 Trading history of CEC Shares on the LuSE A table setting out the price history of CEC Shares on the LuSE has been included in Annexure 4 of this Rights Offer Document. 28 COPPERBELT ENERGY CORPORATION PLC
  28. 28. 1.7 Material changes The Directors report that to their knowledge there have been no material changes in the financial or trading position of the Company since 31 December 2012, the date of the last audited financial statements as set out in Annexure 3 of this Rights Offer Document. No material property has been disposed of in the last five years as at the date of this Rights Offer Document. 1.8 Litigation statement As at the Last Practicable Date, the Directors are aware that the Company faces a possible arbitration action following a claim by one of its customers as damages for loss of equipment, allegedly due to its supply of low quality electricity. CEC is confident of its defence to the claim. CEC has since notified its insurers of the claim and expects a third party settlement in the event of the claim succeeding. 1.9 Working capital statement The Directors are of the opinion that the working capital available to CEC is sufficient for the Group’s present requirements, for at least the next 12 months from the date of issue of the Rights Offer Document. The Directors believe that the Company has adequate resources to continue in operational existence for the foreseeable future. 1.10 Directors’ responsibility statement The Directors whose names appear on page 14 of this Rights Offer Document, collectively and individually accept full responsibility for the accuracy of the information given in this Rights Offer Document and certify that, to the best of their knowledge and belief, there are no material facts the omission of which would make any statement in this Rights Offer Document false or misleading and that they have made all reasonable inquiries to ascertain such facts and that this Rights Offer Document contains all information required by law and by the Listings Requirements. The Directors confirm that the listing particulars include all such information within their knowledge (or which it would be reasonable for them to obtain by making enquiries) as investors and their professional advisers would reasonably require and reasonably expect to find for the purpose of making an informed assessment of the assets and liabilities, financial position, profits and losses and prospects of the Company and of the rights attaching to the securities to which the listing particulars relate. 1.11 Consents Each of the advisers, whose names appear in the “Corporate Information and Advisers” section of this Rights Offer Document have consented and have not, prior to the Last Practicable Date, withdrawn their written consent to the inclusion of their names and, where applicable, reports in the form and context in which they appear in this Rights Offer Document. RIGHTS OFFER DOCUMENT 2014 29
  29. 29. 1.12 Documents available for inspection Copies of the following documents will be available for inspection at the registered offices of CEC in Kitwe and Lusaka and Stanbic Zambia during normal business hours (excluding Saturdays, Sundays and public holidays) from the date of issue of this Rights Offer Document up to and including Friday, 7 March 2014: • the Articles of Association of CEC and each of its operating subsidiaries; • the audited annual financial statements of CEC for the three financial years ended 31 December 2012; • copies of service agreements with Directors, managers or secretary/ies entered into during the last three years; • Statutory Declaration of the Directors of CEC; • the pro forma financial statements of CEC for the six months to 30th June 2013; • agreements in respect of CEC’s material loans; • the Irrevocable Letters of Undertaking; • written consents of the investment bank, Bookrunner, Transaction Advisor, Sponsoring Broker & Main Receiving Agent, Legal Advisers, Reporting Accountant and Transfer Secretary to the inclusion of their names in this Rights Offer Document in the context and form in which they appear; and • a signed copy of this Rights Offer Document and Letters of Allocation. Company Secretary: Julia C Z Chaila Signed at CEC Offices, Republic of Zambia BY THE DIRECTORS on the 24th day of January 2014 Name Signature Hanson Sindowe Signed Michael J. Tarney Signed Jean Madzongwe Signed by Mr Hanson Sindowe (by power of attorney given on 31 May 2013) Reynolds Bowa Signed Munakupya Hantuba Signed Abel Mkandawire Signed Pius H Maambo Signed Edson Hamakowa Signed Klaas Bleeker Signed by Mr Hanson Sindowe (by power of attorney given on 31 May 2013) Charity Mwansa Signed Mildred T Kaunda Signed 30 COPPERBELT ENERGY CORPORATION PLC
  30. 30. ANNEXURE 1: TABLE OF ENTITLEMENT The number of Rights Offer Shares to which qualifying Shareholders will be entitled is set out below, based on the assumption that CEC Shareholders will be entitled to 5 Rights Offer Shares for every 8 CEC Shares held. Shareholders’ entitlements will be rounded up or down, as appropriate with fractions of 0.5 and above being rounded up, and only whole numbers of Rights Offer Shares will be issued, in accordance with the Listings Requirements. Number of CEC Rights Offer Shares Number of CEC Rights Offer Shares Number of CEC Rights Offer Shares Shares held entitlement Shares held entitlement Shares held entitlement 1 1 41 26 81 51 2 1 42 26 82 51 3 2 43 27 83 52 4 3 44 28 84 53 5 3 45 28 85 53 6 4 46 29 86 54 7 4 47 29 87 54 8 5 48 30 88 55 9 6 49 31 89 56 10 6 50 31 90 56 11 7 51 32 91 57 12 8 52 33 92 58 13 8 53 33 93 58 14 9 54 34 94 59 15 9 55 34 95 59 16 10 56 35 96 60 17 11 57 36 97 61 18 11 58 36 98 61 19 12 59 37 99 62 20 13 60 38 100 63 21 13 61 38 22 14 62 39 23 14 63 39 24 15 64 40 25 16 65 41 26 16 66 41 27 17 67 42 28 18 68 43 29 18 69 43 30 19 70 44 31 19 71 44 32 20 72 45 33 21 73 46 34 21 74 46 35 22 75 47 36 23 76 48 37 23 77 48 38 24 78 49 39 24 79 49 40 25 80 50 RIGHTS OFFER DOCUMENT 2014 31
  31. 31. ANNEXURE 2: INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF CEC INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT TO THE DIRECTORS OF COPPERBELT ENERGY CORPORATION PLC ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION Report on the compilation of pro forma financial information We have completed our assurance engagement to report on the compilation of the pro forma financial information of Copperbelt Energy Corporation PLC (the “Company”) by its Directors. The pro forma financial information consists of the proforma summary statement of comprehensive income for the six month period ended 30 June 2013 and the proforma summary statement of financial position as at 30 June 2013 as set out on page 34 herein. The applicable criteria on the basis of which the Directors have compiled the pro forma financial information are specified in Section 8 of the LuSE Listing rules. The pro forma financial information has been compiled by the Directors to illustrate the impact of the Rights Offer set out in Note 1.4 of the prospectus document on the Company’s financial position as at 30 June 2013 and its financial performance for the six month period ended 30 June 2013 as if the Rights Offer had taken place at 30 June 2013. As part of this process, information about the Company’s financial position and financial performance has been extracted by the Directors from the Company’s summary of unaudited results for the six months ended 30 June 2013. For the purposes of this engagement, we are not responsible for updating or re-issuing any reports or opinions on any historical financial information used in compiling the proforma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the proforma financial information. Directors’ Responsibility for the pro forma Financial Information The Directors are responsible for compiling the pro forma financial information on the basis of Section 8 of the LuSE Listing rules. Reporting Accountant’s Responsibilities Our responsibility is to express an opinion, as required by the LuSE Listing rules about whether the pro forma financial information has been compiled, in all material respects, by the Directors on the basis of the LuSE Listing rules and in a manner consistent with the Company’s accounting policies. We conducted our engagement in accordance with International Standard on Assurance Engagements (ISAE) 3420, Assurance Engagements to Report on the Compilation of pro forma Financial Information Included in a Prospectus, issued by the International Auditing and Assurance Standards Board. This standard requires that the practitioner comply with ethical requirements and plan and perform procedures to obtain reasonable assurance about whether the Directors have compiled, in all material respects, the pro forma financial information on the basis of the LuSE Listing rules. The purpose of pro forma financial information included in a prospectus is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the entity as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the event or transaction at 30 June 2013 would have been as presented. A reasonable assurance engagement to report on whether the pro forma financial information has been compiled, in all material respects, on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the Directors in the compilation of the pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether: a. The related pro forma adjustments give appropriate effect to those criteria; and b. The pro forma financial information reflects the proper application of those adjustments to the unadjusted financial 32 COPPERBELT ENERGY CORPORATION PLC
  32. 32. information. The procedures selected depend on the practitioner’s judgment, having regard to the practitioner’s understanding of the nature of the company, the event or transaction in respect of which the pro forma financial information has been compiled, and other relevant engagement circumstances. The engagement also involves evaluating the overall presentation of the pro forma financial information. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion, the pro forma financial information has been compiled, in all material respects, on the basis of the LuSE Listing rules. PricewaterhouseCoopers, Zambia Chartered Accountants Lusaka 17 January 2014 RIGHTS OFFER DOCUMENT 2014 33
  33. 33. Copperbelt Energy Corporation PLC Summary of unaudited statement of comprehensive income for the six month period ended 30 June 2013 June 2013 Published information ZMW’000 Revenue Proforma adjustments ZMW’000 June 2013 Proforma information ZMW’000 723,852 Other comprehensive income 723,852 - - Profit before interest and tax 89,784 89,784 Net finance (costs)/income (4,259) (4,259) (29,934) (29,934) 55,592 55,592 Income tax expense Profit attributed to shareholders Earnings per share (Kwacha) 0.056 -0.022 0.034 Summary of unaudited statement of financial position as at 30 June 2013 June 2013 Published information ZMW’000 Total non-current assets Total current assets Proforma adjustments ZMW’000 1,498,230 June 2013 Proforma information ZMW’000 1,498,230 283,055 371,740 654,796 Total assets 1,781,285 371,740 2,153,026 Total equity 924,955 371,740 1,296,695 Total non-current liabilities 343,294 Total current liabilities Total Equity and Liabilities Net assets per share 343,294 513,036 513,036 1,781,285 371,740 2,153,026 0.92 -0.12 0.80 Sources: 1. June 2013 Published information: Extracted from Summary Consolidated unaudited results for the six month period ended 30 June 2013 as published by the Company. 2. Pro forma adjustments: Compiled per terms of the Rights Offer as detailed in Paragraph 1.3 of the Rights Offer document and summarised effects per Paragraph 1.4. 34 COPPERBELT ENERGY CORPORATION PLC
  34. 34. ANNEXURE 3: INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE HISTORICAL FINANCIAL INFORMATION OF CEC The Directors Copperbelt Energy Corporation PLC 23rd Avenue P.O. Box 20819 Nkana East Kitwe Dear Sirs Subject: Reporting Accountants’ report We have examined the audited financial statements of Copperbelt Energy Corporation PLC (the “Company”) for the three years ended 31 December 2010, 2011 and 2012. Grant Thornton Chartered Accountants, Zambia is the auditor of the Company and has issued an unmodified audit report on the financial statements from which the information set out below was extracted. No audited financial statements have been prepared for any period subsequent to 31 December 2012. The financial information set out is based on the audited financial statements of the Company after taking into account any adjustments we believe were necessary. The audited financial statements are prepared on the basis of the accounting policies set out below which conform to operative International Financial Reporting Standards (IFRS). Directors’ responsibility for the historical information The financial statements on which the following information is based are the responsibility of the directors who approved them for issue. The directors are responsible for the contents of the prospectus in which this report is included. Our report has been prepared in accordance with the Zambia Securities Act 1993 and the Third Schedule to the Securities (Registration of Securities) Rules, 1993. We are a firm of accountants with partners who hold practising certificates issued by the Zambia Institute of Chartered Accountants under the Accountants Act, 1982. Reporting Accountants’ responsibility for the historical information Our work included an assessment of evidence obtained by the Company’s auditor relevant to the amounts and disclosures in the financial information for the years ended 31 December 2010, 2011 and 2012. It also includes an assessment of significant judgements and estimates made by those responsible for the preparation of the financial statements underlying the financial information and whether the accounting policies are appropriate to the company’s circumstances, consistently applied and adequately disclosed. Basis for qualified opinion Copperbelt Energy Corporation PLC has a policy of not recognising deferred income tax on revaluation surplus on property, plant and equipment. In our opinion, this policy is not in accordance with IAS 12 ‘Income taxes.’ Applying the provisions of IAS 12 using the enacted tax rate of 35% would result in additional deferred tax liabilities of K186million, K180million and K175million for the years ended 31 December 2010, 2011 and 2012 respectively. Accordingly the revaluation reserve should be reduced by the same amount for the respective years. In order to reflect the annual usage of the assets, an adjustment between the depreciation charge and deferred tax will need to be made which will result in increased net profit by K1.5million, K5.5million and K5.5million for the years ended 31 December 2010, 2011 and 2012 respectively. Qualified opinion In our opinion, except for the effects of the matter described in the basis for qualified opinion paragraph, the information set out on pages 36 to 66 below gives, for the purposes of the prospectus, a true and fair view of the results of the company for the years ended 31 December 2010, 2011 and 2012 and the assets and liabilities as at 31 December 2010, 2011 and 2012 in the manner required by the Zambia Securities Act 1993. PricewaterhouseCoopers has given and has not withdrawn its written consent, prior to the issue of this Offer Document, with its statement included in the form and context in which it is in as fact, included under Annexure 2, Reporting Accountants’ Report. PricewaterhouseCoopers, Zambia Chartered Accountants Lusaka 17 January 2014 RIGHTS OFFER DOCUMENT 2014 35
  35. 35. Below is the historical financial information of Copperbelt Energy Corporation PLC for the three years ended 31 December 2010, 2011 and 2012. All the numbers are in rebased Zambian Kwacha (ZMW). The Financial Statements have been prepared in accordance with IFRS. Statement of Comprehensive Income YEARS ENDED 31 DECEMBER In ZMW'000 2012 2011 2010 Revenue 1,332,021 960,435 802,509 Cost of sales (966,303) (703,714) (582,538) 365,718 256,721 219,971 50,875 98,118 24,585 (258,761) (183,672) (168,917) 157,832 171,167 75,639 6,990 5,034 2,873 Finance expense (7,046) (6,769) (5,488) Net finance cost (56) (1,735) (2,614) Profit before tax 157,776 169,432 73,025 Income tax expense (48,617) (69,209) (23,966) Profit for the year 109,159 100,223 49,059 Gross gains on cash flow hedges - - 18,392 Income tax relating to other comprehensive income - - (6,438) 109,159 100,223 61,013 109.16 100.22 61.01 56.12 60 48.19 Gross profit Other operating income Operating expenses Results from operating activities Finance income Other comprehensive income: Total comprehensive income for the year Earnings per share (Kwacha) Dividends per share Source 1: audited financial statements 36 COPPERBELT ENERGY CORPORATION PLC
  36. 36. Copperbelt Energy Corporation PLC Statement of financial position as at 31 December 2012 2011 2010 1,177,436 1,128,545 1,127,732 78,498 4,659 9,318 1,255,934 1,133,204 1,137,050 16,689 20,127 13,467 292,189 252,407 115,392 20,115 76,539 42,176 328,993 349,073 171,035 1,584,927 1,482,277 1,308,085 Share capital 140 140 140 Share premium 207 207 207 Revaluation reserve 499,630 515,476 531,322 Retained earnings 389,386 320,474 287,891 889,363 836,297 819,560 93,972 118,643 119,631 103,073 51,941 53,619 Deferred employee benefits 34,258 26,066 18,867 Deferred income 48,387 - - Deferred tax liability 87,643 94,974 87,945 367,333 291,624 280,062 55,201 51,124 34,335 243,727 244,629 165,309 1 1,023 - 29,302 57,580 8,820 328,231 354,356 208,463 695,564 645,980 488,525 1,584,927 1,482,277 1,308,085 0.89 0.84 0.82 In ZMW'000 ASSETS Non-current assets Property, plant and equipment Investments in joint ventures Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets EQUITY AND LIABILITIES Equity Non-current liabilities Interest-bearing loans Non-current trade and other payables Current liabilities Current portion of interest-bearing loans Trade and other payables Amounts due to related party Tax payable Total liabilities Total equity and liabilities Net assets per share (Kwacha) RIGHTS OFFER DOCUMENT 2014 37
  37. 37. NOTES TO THE FINANCIAL STATEMENTS Dividends The policy of the Company in respect of the payment of dividends is a matter to be determined by the Board in accordance with the principles outlined below: The Company’s actual accumulated profits arising from the business of the Company in respect of each year after: • provision of working capital as determined by the Board; • transfer to reserves as in the opinion of the Board ought reasonably to be made; • service of all debts and full compliance with any financing agreements to which the Company is party at the relevant time of payment; • taking into account the interests of the shareholders in minimizing taxation liabilities; and • shall be distributed by the Company to the shareholders by way of dividend. The Company has a policy of declaring dividends twice a year; in March and August. Dividends of ZMW 21,093 thousand and ZMW 35,000 thousand were paid on 06th April and 21st September, 2012 respectively. General Information The Company Copperbelt Energy Corporation PLC is a Company domiciled in Zambia. The Company’s principal business is the generation, transmission, distribution and sale of electricity. Principal accounting policies The principal accounting policies applied by the Company in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. The Financial Statements have been prepared in accordance with International Financial Reporting Standards and the Zambia Companies’ Act CAP 388 (as amended). a) Going Concern At the reporting date loan amounts repayable within twelve (12) months amount to ZMW 55,201 thousand. After reviewing the available information including the Company’s strategic plans and continuing support from the Company’s working capital funders, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. b) Basis of presentation The financial statements are prepared in accordance with the provisions of the Zambia Companies Act and International Financial Reporting Standards (IFRS). The financial statements are presented in accordance with IAS 1 “Preparation of financial statements” (Revised 2007). The company has elected to present the “Statement of Comprehensive income” in one statement, namely the “Statement of Comprehensive Income”. IAS 1 also requires the presentation of a comparative statement of financial position and related notes at the beginning of the first comparative period. Management consider that this is not necessary as the December 2010 statement of financial position is the same as that previously published. The financial statements have been prepared under the historic cost convention, as modified by the revaluation of property, plant and equipment, available-for-sale financial assets, and financial assets and liabilities at fair value through profit or loss. 38 COPPERBELT ENERGY CORPORATION PLC

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