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Copperbelt Energy Corporation Plc 2013 Annual Report


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Copperbelt Energy Corporation Plc 2013 Annual Report

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Copperbelt Energy Corporation Plc 2013 Annual Report

  1. 1. 2013 Annual Report Copperbelt Energy Corporation PLC & its Subsidiaries
  2. 2. CEC and its Subsidiaries Statement from the Executive Chairman Report from the Managing Director - Operations Report from the Chief Financial Officer Reports from the Subsidiaries Kabompo Hydro Power Project Report Corporate Responsibility Report Power Dynamos Football Club Consolidated Financial Statements for the year ended 31 December 2013 Directors & Management CONTENTS 2 6 10 14 18 32 36 38 40 110 PG2 PG9 PG36 PG38 PG110
  3. 3. COPPERBELT ENERGY CORPORATION PLC & ITS SUBSIDIARIES4 CEC & ITS SUBSIDIARIES The Copperbelt Energy Corporation PLC (CEC) is an independent power transmission and distribution company with interests in closely linked businesses in Zambia and the African region, including optic fibre based telecommunications. A member of the Southern African Power Pool and listed on the Lusaka Stock Exchange, CEC has a deep insight into the mining industry, enabling it to provide quality electricity and other power products and services to the majority of the mines in Zambia. Well positioned as a developer of energy infrastructure in Africa and respected in the region for its skills in designing and operating transmission systems, CEC is an emerging independent power generating company, with some strategic generating projects in the pipeline. • Over 50 years of experience in supplying power to the mines • Circa 1,000 kilometres of 220kV and 66kV transmission lines • 540 kilometres of optic fibre on power lines • 41 High Voltage substations and dedicated control centre • 80MW embedded thermal generation • Power transmission for national utilities – Zambia and Democratic Republic of Congo (DRC) • Owns Zambian part of the Zambia – DRC Interconnector line • Accounts for over 50% of power consumed in Zambia
  4. 4. ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2013 5 A joint venture between CEC and Realtime Technology Alliance Africa (RTAA), Realtime Zambia is an internet service provider, focused on the niche market of corporate customers. Its core business comprises provision of high speed internet services and private leased circuits using optic fibre technology. Realtime has been operational in Zambia for more than a decade, while RTAA, its 50% parent, has operated in the sub-Saharan African region for more than 30 years. Realtime Zambia has successfully implemented ICT connectivity projects from design to operation using the national and metropolitan fibre loops. Realtime has become the largest optic fibre network provider in Zambia and is connected to submarine fibre cables that connect the rest of the world. Realtime Zambia’s Unique Value Proposition • Trust • Client relationship • Abilities • Accountability • Availability • Uniqueness CEC Liquid Telecom owns and operates a national long haul broadband fibre based backbone from Chirundu to Kasumbalesa. Its business is the provision of competitive high quality product services through wholesaling of national and international fibre bandwidth capacity, terrestrial internet bandwidth and lease of dark fibre for both short and long haul, locally and internationally, and with access to submarine fibre cables. CEC Liquid Telecom’s market segment is in wholesale. The infrastructure is neutral and operated in a non- exclusive manner in Zambia, Zimbabwe, Lesotho, Botswana and South Africa. CEC Liquid Telecom is a joint venture company of CEC and regional fibre infrastructure builder and operator, Liquid Telecommunications of Mauritius. It has become the preferred wholesale broadband connectivity telecommunications company both at national level and within the region.
  5. 5. COPPERBELT ENERGY CORPORATION PLC & ITS SUBSIDIARIES6 CEC & ITS SUBSIDIARIES CEC Africa Investments Limited CEC Africa Investments Limited (CEC Africa) is an investments holding company established to develop, finance and operate power infrastructure projects across sub-Saharan Africa. A Pan-African power assets developer, CEC Africa provides access to an African power platform with attractive assets across sub- Saharan Africa and has a strong pipeline of both green field and brown field power projects in development across Africa. Riding on the opportunity presented by Africa’s significant infrastructure deficit and growing investment interest for infrastructure in Africa, CEC Africa offers an attractive investment vehicle in Africa’s energy infrastructure sector. CEC-Kabompo Hydro Power Limited CEC-KHPL is a special purpose vehicle, wholly owned by CEC, created to develop the Kabompo Gorge Hydropower Project, the Company’s forerunner in greenfield hydroelectric power generation. CEC-KHPL is developing the project the basis of a Build-Own-Operate (BOO) concession from the Government of the Republic of Zambia. The project is the first to be located and developed in the North-Western part of the country and will have a stabilizing effect on the grid. Commercial operations are expected to be achieved within 2017.
  8. 8. ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2013 9 2013 presented a real opportunity for the business to grow and step into unchartered waters with focus and determination, executing focused acquisitions and proving the caliber of a strong and experienced management team, and a winning, resilient and innovative culture that has backed the evolution of the business over the years. From a single entity in 1997, the Copperbelt Energy Corporation PLC (CEC) has transformed into a group entity with four subsidiaries. The transformation was wrought through strategic decisions in key areas that we have taken over the years. Those decisions have driven this change and will continue to drive growth and to create better outcomes for our investors, customers and the economies of the countries where we are investing. The results presented in this report cover four companies; being CEC PLC (the Company), Realtime Technology Alliance Africa Limited (Realtime Zambia), CEC Liquid Telecommunications Limited (CEC Liquid) and CEC Africa Investments Limited (CEC Africa); that presently make up the Copperbelt Energy Group (the Group). The CEC Group is on an expansion drive across Sub-Saharan Africa; set on its vision to pioneer Pan-African investments in energy and telecommunications. I am pleased to say that we continue to maintain the pace for reliable growth as a business due to the leadership’s demonstrated ability for delivering short-term commitments while balancing that with long-term growth investment decisions. CEC PLC Safety, Health and Environment We continue to derive encouragement and pride from our safety record, which has stretched three years, equivalent to 3.86 million hours, without a system injury resulting in lost work or productive time. This achievement has not occurred in a vacuum or without conscious effort but is rather an outcome of concerted efforts to change and shape the thinking, culture and approach to work in relation to safety in a way that staff and contractors alike are every time aware of the safety demands in their environment. This is not a one-time action but a continuous process that involves on-going training of staff, sensitization of communities and monitoring of processes and actions. Performance in both reactive and proactive SHE parameters was satisfactory and within set limits or above target except in three of these parameters; being departmental safety meetings, dangerous occurrences and road traffic accidents (RTAs). The sticking point, similar to 2012, was the number of RTAs recorded during the reporting period. Ten against a target of four is undeniably high and several measures have been put in place to ensure a shift from statistics that mar an otherwise commendable record. These measures include refresher driver training, intensified vehicle fleet monitoring, incorporation of road safety education in toolbox safety talks and road safety sensitization workshops. I am hopeful these and other interventions will produce notably positive changes, which will manifest in the coming periods. Financial Performance CEC Group consolidated revenue for the year ended 31st December 2013 was K1,706 million, a 26% increase over 2012 income (K1,359 million). Earnings per share rose over 100% to K0.46 compared to a 10% increase to K0.11 in 2012. Net earnings of K458 million give a return on equity of 18%, which is 50% higher than in 2012. This growth was mainly due to the one-off gain of K716 million on CEC Africa’s acquisition of assets in Nigeria. Our companies continued to perform well in 2013, with revenues attributable to Realtime Zambia increasing 17% from K33 million in 2012, while its net earnings increased by about 26% over the previous period. CEC Liquid equally posted increased revenues of K58 million against K39 million in 2012. Revenue of the Company increased by 8% ti K1,332 million. The copper price was not at its most buoyant in 2013 and teetered to find stability for the most part as did the global economy, generally. Seen in the context of the business, whose transmission and distribution operations are largely dependent on copper mining, we have demonstrated once more that the Company can perform even in uncertain circumstances. Our customers held steady and proceeded with their expansionary undertakings. The Company’s policy with respect to payment of dividends to its shareholders is a matter determined by the board in accordance with certain financial parameters. Since listing on the Lusaka Stock Exchange in 2008, CEC has declared and paid out dividends twice a year every year except for the year under review where a single dividend (K20 million) was paid out in April, owing to the need for cash investment into the various investments undertaken during the year. These investments are covered in the pertinent reports within this Report suffice to mention that during the year, we welcomed to the Group two entities acquired through CEC Africa in the Nigerian power privatisation process – Abuja Electricity Distribution Company and North South Power, which holds the Shiroro Hydropower concession. Cash injections in respect of the Kabompo Gorge Hydropower Project under development through CEC-KHPL also continued during the year as we did for the various organic investments under implementation. Clearly, these investments have created an imperative for the Company to raise capital from both debt and equity. Our focus, as we make the various investments, remains achieving a balance between dividend growth and capital growth, and we want investors to see the Group as a safe, long-term investment that is delivering long- term growth. We are intent on making investors view the Group in the context of the choices we make for purposes of creating value over the long haul. CEC PLC Board Operation Three directors exited the board during the year and were replaced by equally competent and experienced members, who have brought the necessary value to the board.
  9. 9. COPPERBELT ENERGY CORPORATION PLC & ITS SUBSIDIARIES10 Neil Croucher, who served as Managing Director - Operations left the Company to join AEDC in Nigeria in August 2013 while Hampande Hachongo, a ZCCM- IH representative, was replaced by Mildred Kaunda. The special shareholder also changed its representation on the board with Charity Mwansa, as Permanent Secretary in the Ministry of Mines, Energy and Water Development, replacing George Zulu who has moved to another ministry. I wholeheartedly thank the members that have left the board for the invaluable contributions made during their tenure and wish them well in their future endeavours. Each of the new directors possesses valuable experience that the board and the Company will no doubt benefit from. Outlook Globally, renewables and smart energy should be expected to be a recurring theme in 2014. A lot more attention is beginning to be paid to possibilities for developing and exploiting renewable energy sources in Zambia and we will be keenly watching and getting involved in that space. We are particularly eager to develop identified solar power opportunities going into the next period. Energy prices should trend upwards as the case supporting that movement is very strong, not least for the continued economic viability of commerce and industry in the country. Cheaper energy sources across and off the grid are not likely to be attainable just yet owing to the fact that the country is starved of and is seeking to attract investment in this key economic area. However, improved efficiencies at all consumption levels should contribute to better management of the country’s supply-demand gap amid actual and anticipated introduction of additional generation from both independent and state producers. CEC will continue on its growth trajectory, consolidating its position by allocating capital in a balanced and disciplined manner by investing in opportunities that are at the core or closely related to our core. We do not take leave of ensuring we acquire and invest in the right human and technological capabilities to drive and support this growth. We will also be looking to create deeper customer relationships, aligning our service and product offerings with our customers’ expectations so as to improve their productivity. We view ourselves as a responsive supplier and it remains in our interest to anticipate customer requirements and help improve their outcomes. We look forward to the next financial year with anticipation. Investments made in 2013 will begin to contribute to Group earnings even as we pursue other opportunities. Overall, we remain committed to working on behalf of the Group’s investors. Hanson Sindowe Executive Chairman >>> STATEMENT FROM THE EXECUTIVE CHAIRMAN
  12. 12. ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2013 13 The electricity market environment in the year under review was characterised by a number of opportunities and indeed challenges. Deficits on the supply side, which had begun to manifest earlier in 2012, continued as the country sustained significant demand growth rates; mostly driven by increased mining activities. This situation persisted for the most part of the year as demand remained higher than supply. The supply gap threatened system security as it occasionally precipitated a low voltage challenge on the power system, necessitating load management as a critical tool under the circumstances to manage and stabilise the system. This situation, however, drastically improved towards the end of the year when the demand- supply balance took a positive turn with the commissioning of the 50MW HFO plant by Ndola Energy Company and a portion of the Kariba North Bank extension project by ZESCO. The power situation was mirrored at regional level across the majority of the Southern Africa Power Pool (SAPP) as generally, demand continued to surpass supply. While this created regional power trading opportunities, inadequate generation capacity in the region and transmission constraints ensured that CEC could not fully supply the possible addressable regional market. It is worth noting that in most cases, affected customers resorted to more expensive on-site distillate generation. Despite the above challenges, I am happy to report that the company fulfilled its mandate of sustainably operating and investing in power infrastructure so as to deliver a reliable and efficient service to its customers, contributing to the social and economic development of Zambia and delivering enhanced shareholder value. The Company’s key business activities included power supply to its mine customers, domestic wheeling or transportation of power on behalf of ZESCO Limited (ZESCO), and international wheeling and power trading. Safety, Health and Environment Stewardship (SHE) In keeping with the Company policy of SHE first, our safety performance continues to be maintained at satisfactory levels. The Company extended the man hours without a power system related lost-time accident (LTA) from 2.98 million at the end of 2012 to 3.86 million at the end of 2013. The last system based LTA was recorded in December 2010. This is an important achievement as the Company has now gone three consecutive years with no lost time due to system caused injury. This achievement reflects the importance that CEC places on SHE matters in its pursuit to achieving a world class culture of SHE excellence. The main contributing factors to this achievement were risk assessments and toolbox safety talks aimed at proactively addressing task specific safety concerns in advance of commencing the work tasks in addition to good housekeeping assessments, community and public high voltage awareness programmes in areas where CEC infrastructure is located, SHE visibility tours and SHE training/ inductions. The one blot on an otherwise remarkable record was the unfortunate occurrence at our Kabompo project site in April, where a Sinohydro Corporation Limited (the EPC contractor) employee died. Although, the Contractor is responsible for safety, health and environment at the project site, CEC recognizes that overall, the performance of its contractors is the Company’s responsibility. In order to enhance compliance, CEC has strengthened SHE procedures at site and a SHE committee comprising CEC and Sinohydro Corporation senior staff has been set up to oversee all SHE matters at site. Environmental Stewardship CEC continued to monitor all regulated sites in relation to various environmental aspects including air emissions, transportation/disposal of non-hazardous waste, and generation/ storage and transportation of hazardous waste. CEC achieved 100% compliance with statutory emission limits for the emergency power plants and all other requirements for reporting. Further, mandatory regulatory approvals for various projects were secured. The Company is also proud to report on its sponsorship of a tree planting exercise that took place at various locations in Kitwe and Luanshya as a pre-World Environment Day activity. CEC considers this an important sustainability undertaking, which it is committed to carry forward. Power supply to mine customers Meeting the increasing power needs of our mine customers remains a top objective of the business. In 2013, we saw further increases in the power volumes demanded by mine customers and our forecast, based on planned expansionary and new mine projects, is that demand growth by this customer category will continue over the next five years. It is, therefore, important that we continue to reassess our strategies to enable us continually meet this increasing demand.
  13. 13. COPPERBELT ENERGY CORPORATION PLC & ITS SUBSIDIARIES14 In the year under review, power purchases from ZESCO under the bulk supply agreement (BSA) were pivotal in meeting supply requirements of our mine customers under the various power supply agreements (PSA). Our extensive power supply infrastructure on the Copperbelt, which extends into the premises of each of our mine customers, provides a robust platform to ensure the Company is able to consistently deliver on this critical objective. During the year, the Company added China Copper Mine (CCM) to its portfolio of mine customers, which now includes the following: a. Konkola Copper Mines Plc (KCM) b. Mopani Copper Mines Plc (MCM) c. NFC Africa Mining Plc (NFCA) d. CNMC Luanshya Copper Mines Plc (CLM) e. Chambishi Metals Plc (CMP) f. Lubambe Copper Mines (LCM) g. Chibuluma Mines (CMP) h. China Copper Mine (CCM) Annual power sales to the mine customers totalled 4,281GWh compared to 4,044GWh in 2012. This represents a year-on-year increase in energy sales of about 6%. Expectedly, average capacity sales to the mine customers also posted a robust performance as they increased to 554MW in 2013 from the 527MW recorded in 2012. The copper price was closely watched by all stakeholders as it remained under pressure for the most part of the year due to slower global economic growth. The annual average copper price, which hovered around USD7,300 compared to an average of about USD8,000 in 2012, was still above the marginal production cost of most of the mines on the Copperbelt; therefore, little or no price- related impact was recorded on mine operations. Overall, the copper price generally held off from further potential weakening, consistent with the global economic performance which avoided a further slowdown. On the technical front, the challenge of occasional low voltages on the power network, which initially surfaced in 2012 continued for the large part of 2013 due to soaring demand both on the Copperbelt and the country in general. A number of strategies have been deployed to ride through this challenging period before commissioning of on-going new generation projects. These include load management requiring all customers to contribute possible curtailable loads especially during peak periods and full deployment of all available voltage support equipment on the system. All mine customers have been called upon to implement power factor improvement projects to comply with power factor requirements in the PSAs. Improved power factors will contribute to improved voltage performance of the power system. On a positive note, towards the end of the year, the situation significantly improved as the planned 50MW HFO plant by Ndola Energy Company and one 150MW generator, which is part of the Kariba North Bank extension project by ZESCO, were commissioned. Unfortunately, further occasional voltage fluctuations were experienced on the power system during the year. These emanated from the wider interconnected system, in particular the Democratic Republic of Congo (DRC), which is facing a considerable supply gap and causing system operation stability issues in that country with some of the effects being felt in Zambia. These operational problems, at times, dictated the opening of the interconnector between the two countries to preserve system integrity but more importantly, called for much closer engagement with SNEL (the national utility of the DRC) in order to resolve the challenges. The consistent engagement of SNEL resulted in the fast-track commissioning of a static var compensator (SVC) on the SNEL system. This sophisticated piece of equipment with flexible operating characteristics has been instrumental in providing relief to some of these challenges while a more disciplined operational regime was also put in place by the parties before the end of 2013. Domestic wheeling Domestic wheeling remained largely steady during 2013. Energy volumes of 1,545GWh recorded in 2013 equal quantities wheeled in 2012. The continued load shedding of domestic customers, which formed part of the load management programmes during the year, ensured little prospects for growth in this area. It is, however, evident that with the number of housing and commercial projects taking place around the Copperbelt, reasonable growth potential can be expected from this activity in the near future. International wheeling and power trading Volume energy sales under international wheeling improved considerably, up 27% from 577GWh in 2012 to 730GWh in 2013. This increase is mostly attributed to the re-opening of Frontier mine, which returned to commercial operations following its acquisition by ENRC. Of the total of 730GWh, Frontier mine accounted for 155 GWh while the rest was SNEL’s direct uptake from regional sources. A total of 85GWh was sold under the international power trading activity where CEC supplies power from regional sources through SNEL to mining companies in the DRC. This activity started towards the end of 2012 when 67GWh of trade was recorded and if unhampered by wheeling constraints through the Zambian system, further growth can be expected in traded volumes. Asset Management As we have previously reported, a significant proportion of the Company’s electrical infrastructure is relatively ‘aged’ as it includes equipment that has been in service for over 30 years. In this regard, CEC’s asset management strategies focus on all aspects of managing these assets from a far reaching perspective on ageing and its impact on the system’s performance to reliably meet customer needs. The Company continues to fund sufficient capital required to enhance asset management processes and procure replacement units for all equipment due for replacement on the basis of a 10 year rolling capital plan. Notably, in 2013, the Company implemented a state-of-the-art computerized maintenance management system and invested in a transformer oil regeneration plant that will give CEC the ability to restore oil characteristics before it reaches full deterioration. Commensurate with determined requirements, asset replacements were implemented for various pieces of equipment including transformers, circuit breakers and protection, control >>> MANAGING DIRECTOR’S REPORT- OPERATIONS
  14. 14. ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2013 15 and metering equipment. This on-going programme is being strictly followed to ensure sustainable delivery on the Company’s mission of providing reliable and seamless power supplies. Organic Growth Projects In the period under review, the mining industry continued to grow through establishment of new mines and expansion of existing mining operations, which will not only result in demand growth but will also substantially extend mining life. Mopani Synclinorium Project (MSP) This project, which commenced late in 2012, saw the first of the required power infrastructure being commissioned in the fourth quarter of 2013. The project involves expansion of the existing Nkana substation in Kitwe by installation of an addition of 3 x 30MVA 66/11kV transformers in order to service the new demand due to the installation of a new deep shaft and associated plants by Mopani Copper Mines. Two of the new transformers and associated equipment were commissioned in the period under review while the third transformer was commissioned in the first quarter of 2014. China Copper Mine (CCM) Project The project, which involved construction of a 66kV transmission line and a 66/11kV substation was, commissioned during the year. CCM will extract copper from the Fitula dumps in Chingola by way of heap leach process. When in full operation, the mine is expected to uptake up to 6MW. NFC South East Project This important project by NFCA involves the establishment of a new underground copper mine and associated processing operations at the former Mukulumpe Farm. On the power side, the project scope involves construction of a 220/11kV substation and two 10km 220kV transmission lines. Project works in respect of the substation commenced in 2013 and considerable progress has been achieved. Contract negotiations for the transmission line package are in progress alongside processing of statutory approvals for the resettlement plan for the affected persons in the transmission line route. The project is scheduled to be completed at the end of 2014 and when in full commercial operation will require about 45MW. Upgrade of CEC Supply points to ZESCO Working with ZESCO, CEC is in the process of upgrading a number of its supply points to ZESCO to meet increasing demand by ZESCO customers on the Copperbelt. In the period under review, works to upgrade Luanshya Munic substation commenced while similar works for Kabundi and Dola Hill substations were at design phase. Second Zambia-DRC Interconnector Project This project is intended to expand the capacity of the interconnector between Zambia and the Democratic Republic of Congo. Preliminary works commenced during the year though the full scope of the works is expected to commence by the end of quarter two 2014 as contractors for both transmission line and substation works mobilise. Owen Silavwe Managing Director - Operations
  16. 16. ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2013 17 The Group experienced significant change in its financial performance, most of the changes being attributed to the incorporation of CEC Africa Investments Limited (CEC Africa) and its investment in Nigeria. The impact has mainly been positive on the Group performance. The Group‘s financials have been prepared in the rebased Zambian Kwacha, the functional currency for the year 2013. The CEC Africa financials have been translated from both United States Dollars (USD) and Nigerian Naira. The Group’s total revenue increased by 26%, from K1,359 million to K1,706 million. The increase was mainly due to the K253 million revenue from CEC Africa and the 80% increase in telecoms revenue, against an increase of 8% in electricity revenue. However, the Group’s cost of sales increased by 41% resulting in a reduction in the Group’s gross profit from K383 million in 2012 to K336 million. This reduction was further compounded by a 24% decline in other income and 81% increase in operating costs. The increase in operating costs was mainly due to a rise in staff costs at Group level (48%); higher Group audit fees; provision for bad debts and Group project costs. However, the Group operating loss of K116 million was mitigated by a one- off gain of K716 million on CEC Africa’s purchase of the assets in the Abuja Electricity Distribution Company (AEDC). As a consequence, the Group net profit increased from K158 million in 2012 to K600 million in 2013. The Group’s finance costs increased from K332 thousand in 2012 to K43 million in 2013. This increase was due to the financing costs relating to the borrowing by The Group for investment. The Group’s total assets grew from K1,606 million to K4,661 million. This growth was mainly on the acquisition of the transmission and distribution assets of AEDC (K2,442million). The Group has increased its return on equity to 18% (2012: 12%); return on assets at 10% (2012: 7%) and Earnings per share of K0.46 (2012: K0.11). Irene L. Chibesakunda Chief Financial Officer
  17. 17. COPPERBELT ENERGY CORPORATION PLC & ITS SUBSIDIARIES18 >>> REPORT FROM THE CHIEF FINANCIAL OFFICER REVENUE K’000s 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2011 2012 2013 GROSS PROFIT K’000s 450 400 350 300 250 200 150 100 50 0 2011 2012 2013 Profit before Interest and Taxes K’000s 700 600 500 400 300 200 100 0 2011 2012 2013
  18. 18. ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2013 19 EARNINGS PER SHARE K’000s 0.50 0.45 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0 2011 2012 2013 RETURN ON EQUITY K’000s 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 2011 2012 2013
  19. 19. COPPERBELT ENERGY CORPORATION PLC & ITS SUBSIDIARIES20 CEC Africa Investments Limited (CECA or CEC Africa) was incorporated as an investment holding company on 07 February 2013. The company holds a Category 1 Global Business Licence under the Mauritius Companies Act and is governed by the Financial Services Act 2007. The principal activity of CEC Africa is to operate as an investment holding company. Its primary focus is to develop and operate power projects in Sub-Saharan Africa, covering the full value chain in the power sector – Distribution, Transmission, Generation (both hydro and thermal) and renewable energy. The Company will consider investment in projects at different stages of development, ranging from greenfield generation projects to the acquisition of operating assets that may be available for sale through privatization or sale by private equity investors. During the year, the company made two investments in the Nigerian power sector as part of the first phase of the Nigerian power sector privatization, and made significant progress in developing three other projects – two generation projects in Namibia, and one in Sierra Leone. Each of these projects is described below. CEC Africa also intends to support the project development activities of its parent, company CEC PLC, in the development of hydro and transmission projects in Zambia. CEC Africa is an active investment company, and seeks to identify projects where it can provide operational and management services and leadership with respect to governance, operational efficiency, selection and training of competent business unit managers and employees and the establishment of policies and procedures with respect to social, safety, health and environmental management that are consistent with international best practice. Given the highly capital intensive and developmental nature of the power sector in Sub-Saharan Africa, CEC Africa has developed close links with Multi- Lateral Banks and Development Finance Institutions that typically provide the debt required for the development of projects (typically around 70% of the overall project cost). Equally important are relationships with commercial banks active in the African economies in which CEC Africa operates. UBA Plc of Nigeria provided acquisition finance for KANN Utility to acquire Abuja Electricity Distribution Company (AEDC), Zenith Bank of Nigeria provided acquisition finance for North South Power to acquire the Shiroro hydro concession and Standard Bank of South Africa provided bridge finance and advisory services to facilitate the initial capitalization of CEC Africa through shareholder loans from CEC PLC. At 31st December 2013, CEC Africa had only one shareholder in CEC PLC. However, a process had commenced to identify and negotiate with other investors to subscribe for equity and/or shareholder loans in the company. REPORTS FROM THE SUBSIDIARIES MICHAEL J. TARNEY CEC AFRICA MANAGING DIRECTOR
  20. 20. KANN Utility Company Limited / Abuja Electricity Distribution Company Limited (‘AEDC’) KANN Utility is a Joint Venture between CEC Africa and XerXes Global Investments Limited of Abuja. The two partners joined together to bid for a controlling interest in AEDC in 2011, ultimately submitting a bid in July 2012 and being declared preferred bidder in October 2012. In accordance with the bidding rules, payment was made to the Bureau of Public Enterprises (BPE) in accordance with a Share Sale Agreement of USD41 million in March 2013 and USD123 million in August 2013 (total USD164 million). KANN Utility took over operational control of AEDC on 1st November 2013, and has since proceeded to implement the business plan submitted to BPE at the start of the bidding process. Key aspects of the business plan include: • Reduction of Aggregate Technical, Commercial and Collection losses; • Rehabilitation of the network; • Implementation of modern metering, billing, vending and enterprise management systems; • Investment in customer service centers; • Improvement in environmental, health and safety performance; • Network expansion. ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2013 21
  21. 21. COPPERBELT ENERGY CORPORATION PLC & ITS SUBSIDIARIES22 Structuring of Acquisition The total amount payable for the 60% share acquisition was USD164m of which USD122m was provided by UBA Plc through a 7 year acquisition debt facility, which is guaranteed by CEC Africa. CEC Africa has funded the following amounts, and incurred the following liabilities with respect to KANN Utility: USD41m loan in March 2013 from CEC Africa to KANN Utility USD23m loan in August 2013 from CEC Africa to KANN Utility USD28m loan in May 2014 from CEC Africa to KANN Utility Guarantee of the outstanding obligations to UBA Plc under the USD122.8m Facility Agreement Project Development Costs and interest of approximately USD20m The distribution network in the Abuja Federal Capital Territory (FCT) is relatively modern, with a significant proportion of the circuits being underground cable. The other areas in the distribution zone, however, are dominated by long lines at relatively low voltages of 33kV, resulting in appreciable technical losses. A significant portion of the power is delivered through unmetered connections. This means that billing is estimated in many cases and there is a dearth of specific loss related data. The AEDC distribution zone covers 133,014km² with a population of 10.5 million people in 2.3 million households. There were approximately 614,000 customers at the point of takeover in November 2013, which places the electrification rate at about 27%. Approximately 80% of the power consumed in the AEDC distribution area is consumed in the Abuja FCT. The Aggregate Technical, Commercial and Collection losses at the point of takeover were 52.8%. AEDC has been issued with a distribution license by the regulator, which expires in 2028. The Transition Electricity Market (TEM), a mode of market operation devised by the regulatory authorities, including the Nigerian Electricity Regulatory Commission (NERC), is yet to commence; therefore, the entire electricity market is operating under the interim rules, which were drafted by the regulator awaiting fulfillment of the conditions precedent to commencement of the TEM. Under these rules, Key: DSR means Debt Service Reserve, DSRA means Debt Service Reserve Account, [Equity**] was equity falling due 6 months following financial close on 21st August 2013 >>> MANAGING DIRECTOR’S REPORT- CORPORATE DEVELOPMENT 60% Equity 40% Equity USD164m Equity Contribution Guarantor USD121.8m USD12m USD28m CEC Africa 75% XERXES 25% Bureau of Public Enterprises Ministry of Finance Abuja Disco DSRA UBA KANN Sources Uses Debt 121.8 Shares 164 Equity 81.4 DSR at FC 12 Equity** 28.0 DSR at 6 28 months Costs 27.2 231.2 231.2
  22. 22. ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2013 23 AEDC officially receives 11.5% of the national generation to serve its market, although there has been a recent trend for AEDC to receive a higher allocation. CEC Africa provides management and operations services to AEDC to drive the business plan and ensure that the performance targets set in the business plan and performance agreement with the Federal Government of Nigeria are achieved. CEC Africa has seconded the executive management of AEDC. Other technical and operational services, including the change management and business reengineering process will be provided by CEC Africa. A high level summary of the AEDC business model is shown below: GOVERNANCE SUPPORTING PROCESSES SUPPORTING SYSTEMS PURCHASE ENERGY RETAIL PLANNING NEW CONNECTIONS REVENUE MANAGEMENT CUSTOMER INTERACTIONS
  23. 23. COPPERBELT ENERGY CORPORATION PLC & ITS SUBSIDIARIES24 North South Power Limited (NSP) / Shiroro Hydro Concession (Shiroro) In August 2013, CEC Africa subscribed for 20% equity in NSP through its subsidiary, CEC Lenux Limited, for a consideration of USD23m. Acquisition finance facilities for the acquisition were secured through Zenith Bank of Nigeria, and the amount outstanding on the Zenith loan at 31st December 2013 was Naira 11.1 billion (USD69m). Details of Concession NSP has a 30 year concession to operate the 600MW Shiroro Hydro Power Plant, located about 65km North-East of Minna, in the Niger State of Nigeria. Commissioned in 1990, it remains Nigeria’s newest hydroelectric power plant and provides about 15% of grid connected and available generation capacity in Nigeria at the current time. The hydro plant was officially taken over by NSP on 1 November, 2013. There are performance obligations on NSP in the concession agreement, which include maintenance of 600MW capacity during the concession period. The company is also obliged to investigate capacity enhancement measures. NSP has appointed a management team, supervised by a Management Committee of the Board. CEC Lenux has seconded a technical director, an operational finance manager and a compliance and quality officer to NSP. The management team has so far assessed the status of the plant and established appropriate technical, commercial and compliance processes for the plant to operate in the new Nigerian Electricity Supply Industry. A business process reengineering process is underway to re-focus the organization going forward. Capital expenditure of approximately USD50m is anticipated within the first 5 years to upgrade the existing plant, and additional projects to enhance the capacity of the plant and develop additional renewable energy resource in the Shiroro environment are being considered. Details of Shiroro Hydroelectric Plant The dam across the Shiroro gorge is a concrete face rock fill (CFRD) dam with a crest length of 700m rising 125m above the original river bed. The width of the dam at its toe is over 300m, whilst its crest accommodates a 7.5m wide service road. The plant has an installed capacity of 600MW from four generating units rated at 150MW each at a head of 97m. Each unit comprises of a vertical Francis type hydraulic turbine controlled by an electro hydraulic governor system. The turbine drives a synchronous generator of salient pole construction having a net output of 150MW. Power is generated at a voltage level of 16kV. A generator steps up the voltage to 330kV for connection to the national grid via a 330kV switchyard. The reservoir was capable of 7 billion cubic metres of water when constructed, and the annual power generation in 2011 was 2,700 GWh. A 44m x 15m x 60m high reinforced concrete tower for the power intake is located on the right bank in the proximity of the spillway structure. The four inlets are 5.5m wide and 10m high and transition into four steel lined penstocks, which are 6.3m in diameter and have an approximate length of 300m each, finally conveyed to the turbines in the Power House. There is also a 1.5m diameter water release outlet to maintain the environmental flow requirements when the turbines are not operating. The intakes are controlled by means of gates operated by an overhead crane located on top of the Intake Tower.
  24. 24. ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2013 25 Kudu Power Project The Kudu Power Project is an 800 – 1050 MW gas-to-power project being developed in the South-West of Namibia at Uubvley, a coastal township, approximately 25km north of Oranjemund. The gas for the project will be sourced from a new gas field to be developed 170km offshore and will be supplied by the Kudu Upstream Consortium comprising the following companies: • NamCor (State owned Oil company) – currently it has a stake of 54%; • Tullow Kudu, a subsidiary of Tullow Oil of the UK (31%); • Itochu of Japan through a subsidiary Cieco E&P Limited (15%). The project is strongly supported by the Government of the Republic of Namibia (GRN), which regards it as a strategic development whose success would trigger interest from oil majors to carry out extensive exploration for oil and gas in Namibian waters. Official Photo from Signing of Joint Development Agreement for Development of Kudu Gas-to-Power Project on 7th February 2014 Power Project Structure The Kudu Power Project is one of three distinct but interrelated projects; • development of the offshore Kudu Gas Field; • development of the gas fired Kudu Power Station project; and • transmission integration into the Namibian grid. The Gas Field development is estimated to cost USD1.3Bn. The Power Station development is estimated to cost USD1.2Bn, 70% of which is planned to be funded through debt. Expansion of the transmission network in Namibia, Zambia and South Africa will be required in order to evacuate the power from the project. NamPower will be the lead developer and investor in the power project with a majority shareholding of 51%. In addition to NamPower and CEC Africa, an additional investor with experience in operations and maintenance of gas generation projects is being sought. NamPower will sign a PPA with Kudu Power and will be the off-taker of all the power from the Kudu Power Station of which 400MW is for consumption in Namibia. Out of the 400MW balance, 300MW will be sold to CEC PLC through a Power Export Agreement (PXA) and the remaining 100MW is expected to be exported to Eskom of South Africa through a similar PXA arrangement. The power generated will be a combination of base load and mid-merit power. The CEC Group will participate in the project on two levels, namely, as an off-taker (through CEC PLC) and equity holder (through CEC Africa). CEC PLC will purchase 300MW on a long term basis (15 years) and CEC Africa will hold 30% equity in the project. The CEC Africa equity contribution to the project is expected to be around USD112m, with a possible requirement to provide additional guarantees to ensure completion of construction of the project.
  25. 25. COPPERBELT ENERGY CORPORATION PLC & ITS SUBSIDIARIES26 Arandis Power The project comprises the construction of a hybrid thermal and renewable generation plant in the town of Arandis in Namibia. The thermal plant consists of 120MW generated by reciprocating diesel engines using Heavy Fuel Oil, with associated fuel storage and processing facilities. The renewable component comprises 20MW of solar generation situated on the same site. The project has secured land rights, and an appropriate generation license from the Electricity Control Board. Power Purchase Agreement (PPA) negotiations with NamPower have progressed to an advanced stage, based on a 20 year off- take agreement. CEC Africa Sierra Leone CEC Africa SL Generation Limited – a consortium comprising CEC Africa and TCQ Power Ltd, signed a PPA with the Government of Sierra Leone on the 14th of May 2014. The PPA, which governs the terms of investment in a power generation plant and the provision of the generated power to Sierra Leone, was ratified by the Parliament of Sierra Leone on 29th May 2014. The project is expected to be one of the largest private sector investments in Sierra Leone to date. It consists of the building and operation of a 128MW power plant over a concession period of 20 years. The project will be built over 3 phases with the first 50MW coming online at the end of 2015. The second phase (consisting of 39MW) will come online 18 months after the completion of phase 1, whilst the final phase (also 39MW) will come online 18 months after phase 2. The project is being conducted to the highest international standards, which require due care to be exercised to minimize environmental and social impacts, both in the construction and operation phases of the project. To this end, the consortium has already begun the environmental and social impact assessment studies. The process of detailed design of the plant has also commenced and the tender process for the project engineering, procurement and construction contract is planned to be launched in June 2014. Financing Strategy for CEC Africa CEC Africa seeks to provide equity financing for projects, with the debt financing being provided on a non- recourse basis to the sponsors. Debt to equity ratios are typically 70/30, but can vary based on the risk profile of the project. CEC Africa itself will be financed primarily from equity from its principal shareholders in the initial years of operation, but will seek to issue debt instruments in future years once the investment returns from underlying assets become constant and predictable. Ultimately, an Initial Public Offering of the shares of CEC Africa on an international stock exchange will be considered. Future Plans CEC Africa intends to pursue further projects in the markets where the CEC Group has already established a presence – namely Zambia, Nigeria, Namibia and Sierra Leone. Over time, CEC Africa will seek to establish a presence in new markets. One such market is the Katanga Province of the Democratic Republic of Congo, which has an emerging mining sector seeking new sources of cost effective grid connected power to support new mining expansion programmes. CEC Africa is a new company, having been formed in February 2013. The management team to drive its future growth is currently being established, drawing on skills from CEC Africa’s parent company and from other power sector professionals with requisite experience. Ultimately, CEC Africa aims to be the employer of choice for those seeking to develop their careers in the power sector, with the ability to offer career experience covering different projects utilizing different technologies in different countries.
  27. 27. COPPERBELT ENERGY CORPORATION PLC & ITS SUBSIDIARIES28 SAMSON LONGWE REALTIME ZAMBIA MANAGING DIRECTOR Overview Realtime Technology Alliance Africa Limited (“Realtime Zambia”) is an integrated communications service provider providing fast speed internet service and inter-office connectivity to a niche market of institutional customers using optic fibre as its core technology. Although Realtime Zambia was established in Zambia in 2001, the company only came to prominence following formation of the joint venture between Copperbelt Energy Corporation Plc (CEC) and Realtime Technology Alliance Africa (Pty) in February 2009. The joint venture allowed CEC to acquire 50% equity in Realtime Zambia. The joint venture combined the strengths of CEC’s world class optic fibre network and know-how, with Realtime’s best- of-breed service offering to deliver optic fibre solutions to a wide array of customers. The significance of this was to offer an opportunity to customers to access CEC’s and other interconnected optic fibre networks for their communication needs across Zambia and the surrounding region, using a medium that is secure, reliable and fast. Consequently, the company pioneered the provision of fibre to the premises (FTTP) in Zambia. In the delivery of its service, Realtime Zambia as a retailer, leases bulk capacity from CEC Liquid Telecommunications (another telecommunications subsidiary of CEC, with a wholesale licence) and other carriers of carriers. Over the last few years, Realtime Zambia has progressively grown and ultimately positioned itself as one of the county’s foremost communication solutions providers in the Internet Service Providers (ISP) sector. Business Environment The macroeconomic and business environment for the country during the year 2013 was generally stable and was particularly favourable to the sector. Demand for ICT services was on the upswing, mainly as a result of market developments attributable to sustained growth of the national economy. Another important factor that influenced the increase in demand was the reduction in broadband prices following the opening up of more international fibre gateways. Competition in the industry further heightened due to the increase in the number of license holders. However, service providers competed mainly on the basis of price on one hand and quality of service on the other. Consequently, some tendencies of market consolidation were observed in the sector as some ISPs joined hands with strategic partners. Financial and Operational Performance The company was on course to attain its strategic objectives for the year, which included improving its revenue and profitability, growing its market share and enhancing network operational efficiency. During the financial year 2013, Realtime Zambia achieved turnover of K38.7 million indicating growth of about 17% compared to last year’s turnover of K33.1 million. The growth in turnover was attributed to the connection of more customers onto the network. Consequently, internet bandwidth on the network grew to 194Mb/s, indicating traffic growth of about 94% compared to the 2012 performance. The company posted a profit after tax of K2.6 million for financial year 2013, indicating growth of about 26% over 2012. The growth in profit is attributed to improvement in gross margins as cost of sales reduced significantly. However, the growth in turnover and profit was surpassed by growth in traffic volumes particularly because of the fall in retail internet prices during the year, a phenomenon typical of the telecommunications industry. As the margins thin out, it means that the sector thrives on increased sales of traffic volumes. In terms of its cash position, the company did not face significant difficulties in raising funds to meet commitments resulting from its normal business transactions. The company paid out a total of about K17 million to its key suppliers while its contribution to the national treasury during the year was about K6 million in taxes and regulatory fees. Optic fibre remained the company’s core technology for delivering its service to customers. Realtime Zambia’s fibre footprint grew across the country. Apart from providing service along the line of rail and all the way to Lumwana, >>> REPORTS FROM THE SUBSIDIARIES
  28. 28. ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2013 29 service was extended to new regions such as Chipata and Mpika. In terms of subordinate technologies, the company also upgraded its wireless access network, for metropolitan areas yet to be accessed by fibre. In this regard, the company further invested in a 4G WiMAX network so as to increase its network coverage to areas previously inaccessible by line of sight challenges and to replace the Proxim wireless network, which was nearing the end of its economic life. The company’s total investment in the WiMAX network was just under K1.0 million. Realtime Zambia has continued to exert its influence on the Zambian market and is steadily becoming a preferred provider of communication services to institutional customers, such as mining houses, mining contractors, financial institutions, manufacturing companies, quasi-government institutions and non- governmental organisations. In addition, the company has secured distributorship arrangements for a number of regional ICT players providing service to multinational corporations within Zambia. This has been made possible owing to the company’s extensive optic fibre access network. Accordingly, based on the sector’s revenues, the company’s market share has grown to about 33% in a sector comprising more than 15 internet service providers (ZICTA statistics 2013). Corporate Social Responsibility Realtime Zambia is party to the Engineering Partnership Initiative spearheaded by CEC in conjunction with the University of Zambia and Copperbelt University. The programme aims to support Zambia’s engineering training and development. In this regard, Realtime has continued to offer internship programmes to engineering and ICT students from time to time. In 2013, the company provided such internship to 12 students. 2014 Opportunities and Outlook It is anticipated Zambia’s ICT sector will continue on its positive growth path. The Government of the Republic of Zambia has been promoting the e-governance agenda and in addition has identified the ICT sector as one sector that should significantly contribute to economic growth. In this regard, the government has given incentives to the sector by broadening the range of ICT equipment that qualifies for import tax incentives. We, therefore, expect that this will be a demand-pull inducement for the sector. Other opportunities that will drive demand for bandwidth include the Zambia Revenue Authority’s introduction of the online tax system and generally all businesses’ realization that ICTs are a critical factor in improving their operational efficiencies. Demand will also be driven by individuals’ increased uptake of ICT services, where it is now becoming a norm to have more than one communication device per individual. We envisage that Realtime Zambia’s turnover will remain on its positive trajectory. The company has, therefore, estimated that in 2014, its revenue will peak at 15% to bring the turnover to K43.5 million. The company has also targeted to realise a profit after tax of K5.0 million, reflecting growth of about 100% in profit. The company’s investment plan during 2014 will focus on making the network more robust by improving network redundancy. This will include creating new connection routes on the physical layers as well as virtually. Related to this will be the need to improve backup power supplies for critical points of presence. Furthermore, the company will closely work with suppliers such as CEC Liquid Telecom in deploying technologies like G-Pon (fibre to the home) for its residential and SME (Small and Medium Enterprise) customers. With enhanced quality of service, better service delivery and for as long as the economic environment remains favourable, Realtime Zambia is confident to realise its set objectives for the financial year 2014.
  29. 29. COPPERBELT ENERGY CORPORATION PLC & ITS SUBSIDIARIES30 >>> REPORTS FROM THE SUBSIDIARIES ANDREW KAPULA CEC LIQUID MANAGING DIRECTOR Overview CEC Liquid Telecommunications Limited (CEC Liquid Telecom) has continued to consolidate its position in the market in all areas of its franchise. The company, in increasing both the revenue base and national footprint, has registered strong growth; posting revenues of K57.6 million in 2013 against K39.3 million in 2012. CEC Liquid Telecom has become the preferred wholesale broadband connectivity telecommunications company both at national level and within the region. The national backbone now runs from Chirundu to Kasumbalesa. CEC Liquid Telecom’s fibre footprint alongside inner town roads and highways in Zambia grew from 1,783km in December 2012 to 2,185km in December 2013. Corresponding to the rapid increase in revenue, the customer base has also increased to include all mobile operators, virtually all financial institutions (directly and indirectly), the top five internet service providers, Non-Governmental Organisations, quasi- Governmental institutions, educational institutions and foreign missions. The company’s outlook continues to be bright with services being availed in non-traditional areas away from the line of rail and into neighboring countries. The fiber to the premises (FTTp) project is under way with full rollout expected to begin in 2014. This will further consolidate both the market and financial position of the company. The commissioning of fiber cable with access to East Africa and co-located submarine cables has posed both threats in terms of competition and opportunities. The company’s solid foundation, with the support of both Shareholders, will enable the company withstand any potential threats, while initiatives are being taken to exploit the opportunities. Financial and Operational Performance During the period under review, the company posted gross revenue of K 57.6 million with a gross profit margin of 48.9% (2012: 47.5%). Whilst employee, operating and administration expenses were covered by the gross profit, the very high depreciation expense (on account of the large fixed asset base) caused a Loss before tax of K3.9 million. The loss for the period was worsened by the reversal of deferred tax provision and translation losses on foreign currency accounts. Infrastructure Build and Network Performance Local access fibre cables continue to expand the national footprint. New metropolitan networks in Chipata, Mansa, Kasama, Mazabuka, Choma, Monze and Mongu were installed during the year. Additions to the existing Multiprotocol Label Switching MPLS platform to facilitate next generation, scalable services to financial institutions were made as part of the continuous optimization programme. Network Management and various device monitoring systems were also installed to continuously improve customer experience. Network Performance All network performance parameters are well within international and Zambia Information and Communication Technology Authority (ZICTA) norms. Average monthly availability of international services was also within the norms of all Service Level Agreements (SLAs). Improvement of the already world class SLA’s was realized by additional physical redundant capacity leasing. FTTx Deployment The company continued with the strategic decision to rollout modern ICT services to high streets, malls, and social and economic centers through modern technology of fiber to the premises. Pursuant to this, the following activities were carried out: • Completion of the process to acquire customer demand data in order to compile market segment data • Determining the best possible design solutions for each market segment • Proof of concept and testing in Lusaka’s Rhodes Park residential area • Detailed planning for each phase of the project Deployment is expected to commence in 2014.
  30. 30. ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2013 31 Marketing Competition The competitive landscape continues to be monitored and a few changes took place during the period under review. • Namibia Telecom has been offering competitive services in the hope of regaining its share of the market. We have had to review our pricing in order to remain equally competitive. • The opening up of the northern route through Tanzania has also paved way for competitively priced bandwidth via the East Coast and this has resulted in customers having a cheaper alternative. However, our competitive advantage is the high availability that we are able to guarantee on our service owing to the redundancy that has been built into the network. • Other local operators continue to contract capacity through foreign suppliers. We have since signed Master Service Agreements with these operators to pave way for them to directly transact with CEC Liquid Telecom. • The period under review saw ZESCO Limited (ZESCO) expanding their fibre network into new towns such as Kasama, Mongu, Mansa and Monze. Our response is to take advantage of this and rather than compete with ZESCO, we have expanded our metro footprint into these towns using ZESCO’s network as the backbone. • ZAMTEL increased their capacity and are also rolling out fibre in the residential areas, a service that is in direct competition to our FTTx deployment. We intend to compete with them in the provision of this service on the basis of quality of service. Product Development In addition to the existing dark fibre, last mile services, wholesale internet and international Layer 2 services, the product portfolio has been expanded to include local MPLS services and dedicated internet to enterprise customers. Advertising and Promotion In order to create brand awareness, CEC Liquid Telecom undertook outdoor advertising by putting up several
  31. 31. COPPERBELT ENERGY CORPORATION PLC & ITS SUBSIDIARIES32 billboards in Livingstone and Lusaka. This mode of advertising has resulted in an increase in enquiries being received about the services offered by CEC Liquid Telecom from members of the public. CEC Liquid Telecom participated in several conferences by sponsoring internet services. Foremost among them was the provision of Internet to the United Nations World Tourism Organisation (UNWTO) General Assembly, which took place jointly in Livingstone and Zimbabwe’s Victoria Falls towns. The internet service provided was of international standard and a first for the country. This has resulted in very positive publicity and exposure of the CEC Liquid Telecom brand. Additionally, as part of the UNWTO General Assembly, CEC Liquid Telecom set up wireless hotspots at the Lusaka and Livingstone international airports, providing travelers going through these two airports an experience of the internet service the company offers. CEC Liquid Telecom also sponsored the African Internet Summit (AIS), which was held in Lusaka, and provided internet services to the African Union Council of ICT Ministers, held in Livingstone. The company also provided internet during the ZICTA annual ICT Forum. Supply Chain Management Supplier Management We have reduced the supply base and identified preferred suppliers for our core materials and equipment, whilst developing long term strategic relationships with specified suppliers. We also entered into contracts with suppliers for frequently procured goods and services; this is both with local suppliers and Group approved and negotiated suppliers and contractors. Suppliers and contractors have been categorized into tiers and some activities such as cleaning, security and fleet management tracking have been outsourced. Inventory We developed strategic partnerships with our major suppliers, which led to a significant cost saving as most of the suppliers were able to reduce their prices after negotiations. Our estimated total annual spend was USD980,412 and mainly comprised optic fiber, ducting, manholes, networking equipment and services for excavation and laying of fiber. Human Resources Staff Compliment Nine people were recruited during the year under review, increasing labour strength from 28 employees as at 1 January, 2013 to 37 employees comprising 8 females and 29 males at the close of the reporting period. The industrial relations atmosphere in the company continued to remain calm and peaceful. There were no grievances raised by employees and there were no work stoppages during the period under review. Further, no issues of concern with regard to security arose at any of the CEC Liquid Telecom sites during the year. Safety A total of five (05) road traffic accidents were recorded during the year under review but did not result in any injuries to employees. All incidents were claimable under the insurance policies. Seven employees underwent defensive driving lessons at the Industrial Training Centre and CEC Plc during the period under review. Outlook Despite increasing market competition, the company is expected to continue generating more sales in most sectors, including government as the groundwork has already been done to meet the market challenges. The company remains in a sound position with regard to operations, finance and human resources. Further negotiations will be held with ZICTA to determine the way forward on price regulation, as well as the position with regard to non-Zambian companies selling international services in Zambia. The plan for the roll out of FTTx has been revised to reflect the actual status on the ground after conducting a more detailed survey. Success of this project will also depend on the market’s reaction to the product packaging. The plan for an integrated approach to rolling out LTE wireless data access is being reworked to include partnerships with re-sellers. We are working with ZICTA for an allocation of an efficient frequency spectrum for this project. The acquisition of Realtime is expected to be finalised in March 2014. With the acquisition and integration of Realtime into the business, the true synergistic approach to sales will become more apparent. The company is poised to grow through the introduction of new product lines and services for the mass market as the FTTx and LTE wireless data access projects begin to be rolled out. Quality of service and customer satisfaction are expected to improve as the first fully redundant routing out of Zambia is now in place, which makes CEC Liquid Telecom the absolute choice provider of international bandwidth. The company will continue with its drive to provide operational excellence by monitoring the effectiveness and efficiency of its embedded processes, the timeous acquisition of skills and retention of those skills by motivating our employees with the best work environment. We will continue to strengthen relationships with our key customers through regular interaction and updates especially on developments aimed at improving our service delivery and performance reviews. With the Zambian market now maturing, customers consider quality in the acquisition of services, and not only price. That being said, prices will continue to fall in the shorter to medium term. Nevertheless, CEC Liquid Telecom’s market approach of offering a wider range of high quality services, at an affordable price, will remain our key differentiator. >>> REPORTS FROM THE SUBSIDIARIES
  33. 33. COPPERBELT ENERGY CORPORATION PLC & ITS SUBSIDIARIES34 Project Overview and Background The Kabompo Hydro Power Project, located in Mwinilunga District of North- Western Province, was awarded to a CEC-led consortium by the Zambian Government in 2008. This project is the Company’s forerunner in green- field hydroelectric power generation. The basis for the award was that the developer would undertake a feasibility study and then negotiate with the Government of the Republic of Zambia a BOO (build-own-operate) concession to develop the project. The hydro power scheme proposed comprises an underground power station of 40MW generation capacity and an annual energy output of about 166 GWh. In addition, there is a dam of roller compacted concrete, approximately 50 metres high, and 4 kilometres of underground tunneling. Power will be evacuated through a 35 kilometer-long transmission line at 132kV that will join the national grid at Kalumbila mine. The key benefits anticipated from the project include alleviation of potential national power shortage, increased security of future power supplies and provision of emergency power supplies, especially for the mines. The project will also have a stabilising effect on the national grid due to its location as currently, all power sources are located in the country’s south. Other benefits expected through the successful implementation of the project include potential for electrification of parts of North-Western Province through the 33kV builder’s power line, creation of jobs especially during construction, and socio-economic empowerment plus capacity building for the local populations. Project Status More effort and focus was placed on the contractual, environmental and social, Engineering, Procurement and Construction (EPC), and financing processes of project development in the year under review. Negotiations with the Government on the Implementation Agreement (IA) were completed through the Office for Promoting Private Power Investments (OPPPI). The final IA was submitted to OPPPI in November 2013 for approval by the Attorney General’s Office. Similarly, negotiation meetings on the Investment Promotion and Protection Agreement (IPPA) were held with the Zambia Development Agency (ZDA) in December 2013. A plan of action to finalize the IPPA was agreed. Final drafts of the Finance Lease Agreement, Infrastructure Use Agreement and Project Management Agreement were produced and subjected to preliminary review by the Lenders’ advisers. EPC Contract and Implementation Pre-Commencement works being undertaken by the EPC Contractor, Sinohydro Corporation Limited, under the Early Works Agreement progressed well, reaching 75% completion at the end of the reporting period. Works completed include supplementary quarry exploration, construction of site access roads, construction of the Contractor’s office and main camp, partial works on the D273 main access road and partial construction of the diversion tunnel. Negotiations on the EPC contract reached an advanced stage, and the Parties agreed in principle to include the 132kV interconnection facilities in the scope of works. Execution of the EPC contract is expected to take place in quarter one of 2014. Transmission Lines Following successful negotiations with CONCO (RSA), the EPC contract for the 33/11kV substation construction project works was finalized, pending execution in January 2014. Substation civil works, under the scope of this contract, at Lumwana ZESCO substation were 90% complete by the close of the year; while substation works at Kabompo Gorge are scheduled to start in January 2014. EPC contract negotiations with Energya- PTS (Egypt) for the 33kV transmission Site Access road Contractor’s main camp KABOMPO HYDRO POWER PROJECT REPORT
  34. 34. ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2013 35 line project reached an advanced stage. At close of the review period, the contract was at final drafting stage with execution set for February, 2014. Financing Debt arranging commenced during the year and the Lenders’ advisers progressed with due diligence investigations related to the technical, legal and insurance aspects of the project. A draft term sheet was produced and discussions initiated with Industrial Commercial Bank of China, China Development Bank, China Export & Credit Insurance Corporation, African Development Bank and Export Credit Insurance Corporation of South Africa. The capitalised project expenditure, which may form part of CEC’s equity contribution, was K78.53 million [USD15.35m] by 31st December, 2013. Advance Infrastructure and Site Preparations Construction of the temporary CEC campsite, comprising pre-fab residential and office accommodation, first aid clinic, ablution blocks and a meeting/ dining hall was two-thirds complete at year-end. Adjudication and award of the contract to rehabilitate and complete outstanding works at the CEC campsite was done. Works are expected to commence in February, 2014 and be concluded by the end of March, 2014. Land Acquisition and Resettlement Activities The land acquisition process hit a snag following delays in signing of revised maps by a traditional leader and council authorities. As a result, little progress was made on the process despite the challenges having been escalated to the offices of the Permanent Secretary in the Ministry of Mines, Energy and Water Development and the Minister of Chiefs and Traditional Affairs. The ZDA did, during negotiations on the IPPA, pledge to help expedite the acquisition of project land. A revised Resettlement Action Plan was submitted to the Zambia Environmental Management Agency (ZEMA) for approval in December. The revision included an updated population and assets inventory schedule of persons directly affected by the project. Hydraform construction technology will be used in constructing the Resettlement Township. A programme, to be rolled out in 2014 after the rains, has already been developed and equipment purchased to implement the use of this technology. In efforts to enable local communities participate in the arising opportunities, a stakeholder sensitization workshop on Entrepreneurial Capacity Building was held in Solwezi, in collaboration with the ZDA and the Ministry of Commerce, Trade and Industry. The objective of the workshop was to sensitize government departments and agencies, as key stakeholders, on the possible areas of capacity building in the project area. D273 Main Access Road after partial repairs Diversion Tunnel inlet after rainfall Excavation of Diversion Tunnel inlet
  35. 35. COPPERBELT ENERGY CORPORATION PLC & ITS SUBSIDIARIES36 Environmental Issues ZEMA granted approvals for the following Environmental Impact Statements: • Proposed 132kV power transmission line from Kabompo Gorge substation to Kalumbila mine substation (April 2013) • Proposed Township Complex and Resettlement housing scheme at Kabompo Gorge (May 2013) • Proposed Rehabilitation of the 34 kilometers D273 main access road in Mwinilunga (May 2013) • Proposed 33kV power transmission line from Lumwana mine substation to Kabompo Gorge substation (October 2013) Outlook and Conclusion Commencement of construction works under the EPC contract is still pending the fulfillment of the conditions precedent to financial close. The due diligence by the Lenders’ advisers has reached an advanced stage and there is concerted effort from all stakeholders for the project to reach financial close in 2014. In order to mitigate the impact of the delay in securing financing on the time for completion of the project, selected critical path activities have been earmarked for inclusion in the Early Works Agreement. The key objective is to achieve commercial operations in quarter one, 2017. >>> KABOMPO HYDRO POWER PROJECT REPORT
  37. 37. COPPERBELT ENERGY CORPORATION PLC & ITS SUBSIDIARIES38 CORPORATE SOCIAL RESPONSIBILITY Throughout 2013, CEC demonstrated its deep commitment to socially and economically contributing to the communities in which we live and work by acting responsibly and operating sustainably for the good of the present and future of both the Company and the communities. We continued to make efforts that demonstrate scale to grow our investments in the social arena, both in our traditional areas of support and others that may be regarded as either one-off or complementary. One of our continuing projects in the higher education sector is the construction of a high voltage laboratory at the University of Zambia (UNZA) School of Engineering. All the major civil works for the live demonstration power system were completed, while installation of electrical and mechanical equipment progressed significantly. It is envisaged that all remaining works with respect to construction of the two substations and transmission line would be completed by quarter two of 2014. A total sum of K970,000 was spent on the project in 2013. The project is aimed at enhancing practical learning for engineering students. Once completed, the laboratory will, for the first time in the history of UNZA, provide engineering students with a live demonstration power system, enabling a shift from an entirely theoretical approach to learning to a practical one. Students will be exposed to the actual electrical equipment/machinery used in industry, enabling them to acquire necessary skills and contributing to reducing the skills gap found among engineering students. The exposure will cover various aspects of the power system; including system maintenance, protection, control switching operations, safety and the associated communications facilities such as SCADA. Community schools play a vital role in providing supplemental education services to many underprivileged young persons in Zambia. CEC has over the years supported many community schools, at least two of which have now been taken over by the Zambian Government. In continuing to demonstrate the value of these schools to Zambia’s education sector, CEC once again partnered with British charity “Beyond Ourselves” in a drive to raise funds for the benefit of under privileged community schools in Zambia, particularly Ndola. The Company provided logistical support and security to British cyclists who undertook a fundraising bicycle ride of 473km from Lusaka to Livingstone. Following on the construction of a bridge to link Kitwe’s Nkana East and Ndeke townships previously reported on, the Company in 2013 embarked on a project to light up Central Street, one of the key roads in Kitwe’s Nkana East residential area. The project scope of work includes rehabilitation of existing infrastructure, replacement of vandalized cables, procurement and installation of solar
  38. 38. ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2013 39 lights and new ordinary light fittings. Fabrication of steel poles commenced in 2013 with the entire project expected to be finalized within the third quarter of 2014. Estimated budget for the project is K1,696,200 split K1,244,025 on solar lighting and K45,000 on conventional lights. Both solar and conventional lighting will be installed along Central Street from 27th to 1st Avenue. Solar lighting will be installed in the section from Ravens Country Club to the traffic lights while the remaining sections will have ordinary lights. Over the past few years, the Company has been erecting public shelters around Kitwe. At the close of 2013, a total of eight shelters had been put up in different locations around the city and one in Chingola. K25,000 was used to build one bus shelter in Chingola in 2013. With large numbers of the population still dependent on public bus transportation, the bus shelters have proved to be a valuable social amenity. The Company constructed and donated seven concrete refuse bins to Mufulira’s Kankoyo area in contribution to garbage disposal management efforts in the area, key to disease prevention and public health maintenance. Total cost of the seven refuse bins was K55,000. CEC recognises the importance of protecting both persons and property from any kind of damage and injury, whether through theft or vandalism, and has for many years partnered with and rendered support to the Zambia Police Service in the quest to improve the provision of security services to the community. The Company in 2013 invested K58,000 to renovate and refurbish the Ndeke Police Post, a facility initially put up by CEC in 2002 and which has since been providing a much valued service to the catchment communities. In the area of sport, CEC continued to sponsor super division side Power Dynamos Football Club, through grant funding of K5,605,570 in 2013. The Company also procured a 65-seater luxury bus for the team to meet their logistical requirements. Apart from football, the Company renovated and refurbished the Ndeke basketball court, a facility that forms part of the Arthur Davies Stadium sporting complex. The basketball court is a valued recreation facility for young people from the surrounding community who have limited access to sporting and recreation facilities to help develop their talents. The success and impact of the Company’s growth will, ultimately, be measured by how well the benefits are harnessed for the public good. Our commitment to better lives, communities and the environment did not waiver in 2013 and we are excited when the communities we are connected with can experience the efforts we put it to improve their access to improved health, education and other social amenities.
  39. 39. COPPERBELT ENERGY CORPORATION PLC & ITS SUBSIDIARIES40 POWER DYNAMOS FOOTBALL CLUB Power Dynamos Football Club (PDFC) has continued to be a force to reckon with in Zambian football. Despite a less than stellar showing in 2013, the side cannot be easily dismissed. During the season under the review, the Club’s on-the-pitch fortunes slumped, with the team failing to achieve its target of a top-three finish. 2013 was admittedly a very challenging season for everyone connected with PDFC, with sponsor and fan alike having to take the Club’s unusually low 8th position finish on the premier league log table. However, having endured a tumultuous start to the campaign, and at one point under threat of possible relegation, mid-table 8th finish was actually considered quite an effort. The unfamiliar position the Club found itself in spelt the need for some change. The technical bench was overhauled, with ex Zambian international, Tenant Chilumba being brought in from Zimbabwe’s Platinum Star, together with his two assistants – Anderson Phiri and Alex Namazaba. The sole surviving member of the previous technical staff was goal-keeping coach, Martin Mwamba. While the senior side struggled through the season, the fortunes of Young Power (PDFC’s academy side) differed greatly. The exceptional performance of the young lads the previous season saw then being promoted to the Football Association of Zambia’s (FAZ) Division 3 North for the 2013 season, where they made their presence felt, finishing in the top three bracket in only their maiden season. Financial performance CEC continues to fully sponsor the Club, with the 2013 total grant to fund Club operations standing at K5,605,570 an increase K560,570 or 11% over the previous year (2012: K5,045,000). This is in addition to incentives such as the acquisition of an ultra-modern luxury 65-seater Higer Coach. Relationship with fans To cater for a cross section of fans, Power Dynamos has now employed the use of social media platforms like Facebook and the Club’s official web site alongside traditional media like television, radio. Club officials have also been engaging with fans and helping to set up official fan clubs in various towns across the country. Squad strength and Outlook Following the departure of some key players like Mukuka Mulenga (to South Africa’s Mamelodi Sundowns), Simon Bwalya and Maybin Chishimba (to across-the-town arch rival Nkana F.C.), a number of new players were brought in to strengthen the squad and ensure PDFC is poised to reclaim super league top position. Nyambe Mulenga (former international defender), Patrick Kabamba, Richard
  40. 40. ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2013 41 Kasonde, Billy Mutale and Jimmy Njovu are the new legs that have joined the squad to boost the midfield, defence and strike force. Other players who were loaned to Nchanga Rangers F.C. (Alex Ng’onga and Felix Nyaende) and Forest Rangers F.C. (Chiyesu Sakafunya) respectively were brought back to further reinforce the squad. Further, some young players from the academy side (Young Power) graduated to the senior team, based on their impressive performance. These are Emmanuel Kabole (striker), Abraham Chileshe (midfielder), Dominic Nzala (goal keeper) and Matthews Musoni (midfielder). Another young star to watch is Robert Makandani, brought in from Airtel Rising Stars – Chipata. His talent and skill is after the likes of Mukuka Mulenga. The beginning of the 2014 season saw a forceful Tenant Chilumba-led technical bench hitting the ground running and sending a clear message of the team’s intent to reclaim top position and recover from the dismal 2013 performance. At the mid-season mark, signs of a return to greatness for the prestigious PDFC are showing. After 15 games played, PDFC is in the top 3 bracket on the log, and has qualified to compete in this year’s Barclays Cup tournament. The team also stands in a good position to challenge for the title. Executive Committee A new club Executive Committee, chaired by CEC’s Senior Management official, Ben Simukoko, was ushered in at the dawn of 2014. The Committee boasts an array of diverse skills, competences and capabilities in George Lungu (Vice Chairman), Ricky Mamfunda (Club Secretary) Eugene Mpolokoso, Precious Chisenga, Morton M’gemezulu, Muntanga Sibalwa, Andrew Kamanga, Freddie Chalenga and Edward Ngosa. The collective shoulders of this Committee bear the huge weight of expectation from both sponsors and fans. Club Licensing The Football Association of Zambia has set 2015 as the year for the implementation of club licencing as required by football world governing body, FIFA. Accordingly, CEC as the sole sponsor of PDFC, will work at positioning the Club in readiness for these changes. The main and key area of attention is the transformation of PDFC from its current form (fully sponsored outfit) to a stand-alone business entity. To actualise this, CEC is expected to make further investments in re-organising the club management, infrastructure development and commercialisation.
  41. 41. COPPERBELT ENERGY CORPORATION PLC & ITS SUBSIDIARIES42 CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 Directors’ report Statement of Directors’ responsibilities Report of the independent auditors Consolidated statement of comprehensive income Consolidated statement of changes in equity Company statement of comprehensive income Company statement of movements in equity Consolidated statement of financial position Company statement of financial position Consolidated statement of cash flows Company statement of cash flows Notes to the financial statements 42 58 59 60 61 62 63 64 65 66 67 68
  43. 43. COPPERBELT ENERGY CORPORATION PLC & ITS SUBSIDIARIES44 >>> CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 DIRECTORS’ REPORT The Directors have pleasure in submitting their report on the Group’s activities and its consolidated financial statements for the year ended 31 December 2013. The Group has grown considerably with the incorporation of CEC Africa. During the year the largest investment was in an electricity distribution company in Nigeria, whose operations were taken over with effect from 1 November 2013. This posed some challenges in the timing and consolidation of the Group financial statements. 1. The Group Copperbelt Energy Corporation PLC, (“The Company”) has direct shareholding in three companies, Realtime Technology Alliance Africa Zambia Limited (Realtime Zambia) and CEC Liquid Telecommunications Limited, and in the year 2013 invested in CEC Africa Investments Limited (CECA or CEC Africa). The Company’s shareholding in Realtime Zambia continues to be 50% based on a joint venture agreement entered into with RTAA (Proprietary) Limited on 11th February 2009. The Company also has a 50% shareholding in CEC Liquid based on a joint venture agreement entered into with Liquid Telecommunications Holdings Limited of Mauritius As already mentioned, during the year, The Company incorporated in Mauritius a 100% subsidiary investment company CEC Africa. This is the vehicle through which CEC Plc will undertake international investments in the power sector in sub-Saharan Africa to achieve its vision of becoming a leading investor, developer and operator of energy infrastructure in Africa. 2. Principal activities The principal activities of The Group are the generation, transmission, distribution and sale of electricity and telecommunications service provision. The Company’s core business remains the transmission, distribution, generation and sale of electricity primarily on the Copperbelt, whilst its joint venture companies focus on telecommunications. Realtime Zambia’s principal activity is provision of IP connectivity, which includes provision of internet service with associated services, corporate connectivity solutions (installation and operation of wide area network through provision of either optic fiber private leased circuits or virtual private networks), supply and installation of various information and communication technology (ICT) products and services and a host of other services typical of the ICT industry, whilst CEC Liquid’s principal activities are the provision of wholesale capacity and internet bandwidth to Zambia Information and Communications Technology Authority (ZICTA) licensed private and public operators. The principal activity of CEC Africa is to operate as an investment company. During the year ended 31 December 2013, CEC Africa made the following investments: • 75% equity investment in KANN Utility Company Limited, a Nigerian investment holding company, which during the year acquired 60% of the Abuja Electricity Distribution Company, also a Nigerian Company. • 100% equity investment in CEC Lenux Investments Limited, a Mauritian Investment Company, which during the year acquired 20% equity interest in North South Power Limited, a company holding a 30 year concession in the operation of Shiroro Hydro power plant. 3. Share Capital The authorised and issued and fully paid share capital of the Group is: 2013 Number of shares 2012 Number of shares 2013 Value 2012 Value Authorised Issued Authorised Issued KM KM The Company 2,000,000,000 1,000,000,000 1,000,000,000 1,000,000,000 10,000 140 CEC Africa 1,000 1,000 0 0 5 0 RTAA 5,000 4,000 5,000,000 4,000,000 4 4 CEC Liquid 10,000,000 10,000,000 10,000,000 5,000,001 10 10 The authorised share capital of The Company is K20,000 thousand, divided into 2,000,000,000 Ordinary shares of a par value of K0.01 each and 1 Special Share of K1.40 held in the Company by the Government of the Republic of Zambia.
  44. 44. ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2013 45 >> DIRECTORS’ REPORT cont... As at 31 December 2013, the shareholding in The Company was as follows: Zambian Energy Corporation (Ireland) Limited 520,000,000 ZCCM Investments Holdings Plc 200,000,000 Private Individuals/Institutions 280,000,000 Government of the Republic of Zambia (Golden Share) 1 Special Share 4. Significant Shareholding in the Company As at 31 December 2013 substantial shareholding (5 per cent or more) in the Company’s share capital was as follows: Zambian Energy Corporation (Ireland) Limited: 52% ZCCM Investments Holdings Plc: 20% African Life 8% 5. Activity on the Lusaka Stock Exchange The Company continues to be listed and actively traded on the Lusaka Stock Exchange. The stock opened the year under review trading at K0.68 a share (2012: K0.66), hitting a high of K0.85 (2012 highest: K0.69) in April but ended the year at K0.66.Total number of shares traded in the year was 95,610,106 (2012: 25,700,000).
  45. 45. COPPERBELT ENERGY CORPORATION PLC & ITS SUBSIDIARIES46 >> DIRECTORS’ REPORT cont... 6. Financial Results Highlights of the financial performance of the Group over the last two years are tabulated below. The consolidated results have incorporated; 100% of The Company; 50% of Realtime Zambia, 50% of CEC Liquid and 100% of CEC Africa. The results of CEC Africa are a consolidation of the results of all its investments. Key Statistics Consolidated The Company RTAA CEC Liquid CEC Africa * 2013 2012 2013 2012 2013 2012 2013 2012 2013 Revenue (K’000) 1,706,730 1,358,747 1,436,816 1,332,021 38,685 33,088 57,569 39,309 252,703 Gross profit/ ( Loss) (K’000) 335,935 383,548 405,931 365,718 19,694 16,373 28,190 18,659 (296,064) Profit/(Loss) before interest and taxes (K’000) 599,949 158,571 196,750 157,776 3,338 2,567 (3,956) (2,947) 490,272 Net profit/(loss) (K’000) 457,644 109,322 125,187 109,159 2,551 2,016 (5,727) (2,947) 430,967 Equity (K’000) 2,476,010 935,658 994,550 889,363 2,592 140 150,472 149,248 1,497,018 Total Assets (K’000) 4,660,639 1,606,525 2,166,792 1,584,927 15,037 12,593 197,393 166,123 3,095,278 Current Assets (K’000) 572,591 351,250 607,068 328,993 6,928 5,945 30,195 15,502 279,045 Inventory (K’000) 37,051 19,973 20,575 16,689 863 478 2,650 1,871 14,720 Current Liabilities (K’000) 1,224,151 351,639 842,745 328,231 10,735 5,500 42,640 13,351 900,033 Acid test ratio (times) 0.44 0.94 0.70 0.95 0.56 0.99 0.65 1.02 0.29 Return on equity (%) 18% 12% 13% 13% - - - - 29% Return on assets (%) 10% 7% 6% 7% 17% 17% (4%) (2%) 14% EBITDA (K’000) 686,032 230,689 250,393 225,373 6,228 4,759 (15,399) 4,540 526,563 Earnings per share (Kwacha) 0.46 0.11 0.13 0.11 - - - -- - * CEC Africa was incorporated in February 2013; therefore there are no comparative amounts for the year 2012. 7. Going Concern The Group’s current liabilities exceeded its current assets by K652 million, which would realise into concern about the Group’s going concern. This net liability position is a consequence of all the companies within the Group having current liabilities exceeding their current assets. The most significant being CEC Africa (net liability of K623million) and the Company (K236million). CEC Africa CEC Africa consolidates the financial statements of KANN Utility Company Limited (which itself consolidates the results of Abuja Electricity Distribution Company Limited) and CEC Lenux Investments Limited. CEC Africa was capitalized by CEC Plc during the course of the year through short term inter-company loans for the primary purpose of investing in KANN Utility Company Limited and CEC Lenux Investments Limited. The total amount outstanding on these inter-company loans was USD95.1m [K524million] at 31st December 2013. CEC Plc will consider capitalizing these short term loans into long term loans or equity during 2014 as the investment in CEC Africa is intended to be a long term investment of the Group. Abuja Electricity Distribution Company (AEDC) Abuja Distribution Company Limited is consolidated into the financial statements of CEC Africa, which are then consolidated into the financial statements of CEC PLC. Abuja Electricity Distribution Company based on the existing interim rules. >>> CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013