CEO, Owen Silavwe, commented:
“I am pleased to announce our half year results for the period ended June 30th 2023. Our performance for the period is against a backdrop of our strong focus on a growth strategy over the next five years, addressing and conclusively resolving all historic risks and pursuing identified key initiatives aimed at driving customer demand growth across our markets. 2023 being the first year over this planning horizon, the half year results we have announced reflect the strength and resilience of our business, delivering on our expectations for profitability and other financial metrics.
Demand for power overall remains strong, this is mostly on account of the power trading and transmission services business segments which continue to demonstrate resilience and strong growth. However, the supply business in Zambia is currently reflecting suppressed demand due to interim softening in Zambia’s copper output (in part, on account of yet to be resolved sector matters impacting operations at Mopani Copper Mines and Konkola Copper Mines), while newly connected mines are yet to ramp up demand to full capacity in line with forecasts. Total energy demanded across our customer categories was 3,140 GWh, covering all business segments including mine supply, domestic and international wheeling, transmission use of system and power trading.
As we progress on our growth agenda, we are also focused on ensuring that we close off all historic issues. In this regard, I am thrilled to report that CEC and Konkola Copper Mines (KCM) agreed a solution to address the long outstanding KCM payment default. Therefore, a part reversal of the previously impaired amount of USD171.6 million was made to the books of accounts. Additionally, an impairment of USD 35.4 million was taken on the investment in the Kabompo Hydropower Project. Furthermore, and most importantly a one off payment was made as part of the settlement relating to the two year period CEC and ZESCO operated without an agreement. This exceptional (one-off) payment resulted in a drop in cash generation from operations, which when adjusted for was comparable to the prior year. These solutions significantly de-risk the business and restore its balance sheet.
We continue to make significant progress in the integration of clean energy in our generation portfolio, while diligently pursuing other key strategic infrastructure investments. We commissioned our flagship 34MW Riverside solar plant, while implementation of the 60MW Itimpi solar plant is on course. This affirms our strategic intent to play our role in mitigating climate change through gradual integration of clean energy sources. We are also investing in other strategic infrastructure at pace. For example, we commissioned a very important transmission line to supply the 40MW Lonshi mine and have commenced works aimed at expanding the existing Democratic Republic of Congo (DRC) Interconnector to achieve a usable capacity of 400MW from the current 230 MW.
Performance of our Safety, Health and Environment (SHE) in the period was strong, achieving 1.187m man hours without a Lost Time Accident compared to 0.581m in the same period in 2022. Sustaining this level of performance requires that we continue to embed sustainable HSES practices in all operations.
Looking to the future, we are confident of a demand resurgence underpinned by a highly improved macroeconomic environment, increased mining activities driven by increasing investments and buoyant “green” metal prices over the medium term. We will continue to prioritize investments in strategic infrastructure and technology that will support the company’s expansionary and sustainability strategy. Additionally, we will be capitalizing our subsidiary CEC Renewables, with green project financing to support further investment in clean energy, to deliver an energy mix that will form the basis for meeting growing customer demand across our markets.’’
Revenue for the 6-month period to 30th June 2023 was USD 186.6 million up from USD183.5 million, a 2% growth on account of regional and local power sales increase.
Profit for the period was USD113.0 million representing a 277% increase over the USD30.0 million profit after tax reported in the prior period. The results were positively impacted by the settlement agreement reached between CEC and KCM which saw the immediate writeback through the income statement of USD171.6 million, being a portion of the KCM debt previously impaired. The details of the transaction were made public through a cautionary announcement circulated through SENS dated 14th July 2023. Further, the Profit After Tax also includes another exceptional specific impairment of USD35.4 million relating to the early works spend or investment in the Kabompo Hydropower project.
The cash balance as of 30th June 2023 stood at USD83.7 million (USD83.4 million December 2022), having invested USD15.1 million in prioritized capital expenditure and made payments inclusive of the exceptional one off payments as referred to in our CEO’s comment above during the period. The writeback of previously impaired amounts have significantly improved the net assets or shareholders’ funds to USD444.5 million compared to USD331.6 million as of December 2022.
Dividends Proposed and Paid
The CEC Group recognizes the need to reward its shareholders with dividends in addition to share appreciation which is a consequence of the financial and operational performance of the business. To this effect, our dividend policy provides for a guidance pay-out of about 50% of the earnings, subject to the availability of cash, and reserves, having provided sufficiently for working capital and other obligations. Similar to the financial year 2022 no dividend was declared and paid during the period under review.
Cautionary on Forward-looking Information
This summary results announcement contains financial and non-financial forward-looking statements about the Company’s performance and position. We believe that while all forward-looking information contained herein is realistic at the time of publishing this report, actual results in future may differ from those anticipated. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause CEC’s actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed or implied by these forward-looking statements. Although CEC believes that the expectations reflected in these forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. We take no obligation to revise or update these forward-looking statements to reflect events or circumstances that arise after the statements have been made.
About the Company
CEC’s core business is the supply of power to the copper mines in the Copperbelt Province of Zambia and the DRC. CEC provides the Transmission Use of System and wheels power through its network on behalf of ZESCO Ltd and other users in Zambia and the Southern Africa Power Pool. The Company operates a transmission interconnection with the DRC.
CEC has four subsidiaries and two associate companies – CEC-Kabompo Hydro Power Limited (CEC-KHPL), CEC DRC Sarl, CEC-InnoVent Garneton South Solar Limited, InnoVent CEC Garneton North Solar Limited, CEC Renewables Limited and Power Dynamos Sports Limited (PDSL). CEC-KHPL is the special purpose vehicle through which CEC has been pursuing the development of the Kabompo Gorge hydroelectric power project in Mwinilunga District of the North-Western Province of Zambia, while CEC-DRC Sarl is a special purpose vehicle incorporated to secure the power trading segment and grow the Company’s interest in the DRC market. PDSL is a special purpose vehicle which runs Power Dynamos Football Club.
By Order of the Board
Julia C Z Chaila (Mrs.)
First issued: 25 August 2023
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