copperbelt energy corporation limited fy 2015 financial results presentation

Copperbelt Energy Corporation plc

Annual earnings presentation for the year ended 31 December 2015

30 March 2016

www.cecinvestor.com

Contents

Zambia review Pg 5 Economic overview 6

Health safety environment & social 7

Overview: Zambian operations 8

CEC plc sales & power trading 9

Nigeria review Pg 10 Economic overview 11

Regulatory events 12

Overview AED Plc business model 13

Financial results Pg 16 CEC Group

- Long term financial snapshot 17

- Statement of profit or loss 18

- Statement of financial position 19

- Debt and capital expenditure 20

- Going concern 21

CEC plc

- Long-term financial snapshot 22

- Other financial extracts 23

Telecommunications financial extracts 24

AED Plc financial extracts 25

NSP financial extracts 26

Project pipeline Pg 27

Outlook and strategy Pg 29

www.cecinvestor.com 1

Your presenters


Owen Silavwe Managing Director

Mutale Mukuka Chief Financial Officer

Statements in this presentation (including all other media) that are not historical facts or

information may be forward-looking statements.

These forward-looking statements are based on information available at the time the

statements are made and/or management's belief as of that time with respect to

future events and involve risks and uncertainties that could cause actual results and

outcomes to be materially different. Important factors that could cause such

differences include, but are not limited to the loss of key customers, the disruption to

operations, economic conditions, political conditions, regulatory issues and reduction in

demand.

Forward looking statements

3

CEC Group structure


KANN Utility

SPV

Shiroro Hydro (NG)

CECA SL Generation

SPV

Abuja Disco Generation Project

CEC Africa

CEC Plc

Zambian Energy Corp

Ireland (ZECI) ZCCM – IH

Institutional & Retail

Investors

75%

60%

100%

50.1%

100%

100%

20% 52% 28%

Nigeria Mauritius

Sierra Leone

Projects in development Operating assets

Key:

North South Power

20%

CEC Liquid Telecom

Hai Telecoms

Kabompo Hydro 50%

100%

100%

CEC Africa Hydro

100%

Investment assets

CEC Group

ZAMBIA

Summary Economic & Business Overview


Health, safety, environment and social (HSES)

– CEC plc clocked 5.57 million man hours without a system related lost time

accident

– Continued improvements in safety metrics

– In AED Plc compliance is becoming an integral part of operations contributing

to our objective of HSES excellence.

– 30% reduction in fatalities during the year was positive but any fatality is

unacceptable

– In addition to AED Plc Fatality Prevention Plan HSES Initiatives include: -

Close collaboration with stakeholders

Continuous network infrastructure improvement

Access restriction

Community awareness programmes

Dedicated customer service centres for quick fault resolution


Overview: Zambian operations

– Drought imposed generation constraints nationwide compounded by commodity price falls (copper). CEC accessed a proportion of its power from SAPP for its mining clients during the year when ZESCO could not meet power requirements as a result of drought

induced generation challenges

– YOY energy sales were down 3%. Domestic wheeling for ZESCO down 4% on account of load shedding and commodity prices. Mines are cost cutting and restructuring to promote long term sustainability

– Solid performance from CEC Plc particularly in power trading which is one of the key focus areas going forward (20% of revenues). Increased off-take by DRC mines recorded

– Tariff increment +29% passed by Energy Regulation Board in April 2014 remained unresolved however fresh tariff adjustment process commenced end 2015 and uniform tariff of USc10.35 kWh to all mines driven

– Realtime now 100% subsidiary of CEC Liquid Telecom and renamed to Hai Telecoms - broadens CEC internet offering to the retail market. CEC Liquid Telecom turned profitable.

– CEC Liquid Telecom grew its fibre footprint from 2,494 km to 2,730 km in 2015 and continued its FTTH roll out (covering most parts of Lusaka) and this will be continued in other parts of Zambia


Max Demand Trend (Sales Units MW)

Power trading

CEC Group: CEC Plc operating statistics


• Improved sales over 2014 up to end of Q3 in 2015

• Sales dipped at the beginning of Q4 due to the following factors

• Declaration of force majeure resulted in ZESCO supplying

only 70%

• Balance of demand sourced from more expensive imports

from the region

• Falling copper prices forced mines to manage their costs

more stringently

• Mines put more efforts in energy efficiency and in some

cases scaled down operations

• Overall demand reduction of about 100MW by Dec 2015

• Significant growth in power trading + 87%

• Power trading more than made for the reduction in power sales

• Power trading has become a significant proportion of CEC

business

• CEC taking a long term view of this business activity

CEC Group

NIGERIA

Summary Economic & Business Overview


0.0040

0.0050

0.0060

0.0070

Jan

-11

Jun

-11

No

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1

Ap

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2

Sep

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Feb

-13

Jul-

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May

-14

Oct

-14

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-15

Au

g-1

5

Jan

-16

NGN/USD

0

50

100

150

Jan

-11

Jun

-11

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v-1

1

Ap

r-1

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May

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-14

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-15

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g-1

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Jan

-16

WTI Crude Oil ($/bbl)

2%

4%

6%

8%

10%

20

11

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E

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E

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E

20

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E

Nigerian GDP growth (%)

Inflation rate, 2011-20E

WTI Crude prices, 2011-16 YTD

GDP growth, 2011-20E

ZMW/USD, 2011-16 YTD

Economic Overview: Nigeria


Nigerian GDP is estimated to

grow at ~4.8% over 2017-20E

IMF estimates inflation rate to

decline by 2ppt to 7% by 2020E

Significant power generation

shortfalls persist

Nigeria continues to adopt

fixed forex policy

Commodity prices (oil) remain

depressed

Stabilisation in crude prices to

benefit oil based economies

Regulatory events: Revised Multi-Year Tariff Order 2.1

Summary: Approval of ten year tariff plan in 4Q15: -

First 2 years under-recovery: to moderate impact of significant short term

tariff increases for consumer

In recognition of period of under recovery, the Government of Nigeria and

NERC has provided a concession to AED Plc where only 65% of the power

purchased for re-sale from the Market Operator (pre-February 2015) and

NBET (post- February 2015) need be paid for immediately.

The balance of power purchase costs (35%) is accrued / recognised in

financial reporting for the year ,but settlement thereof is deferred for

settlement through: -

financial assistance (interest free and no fixed terms of repayment) from the

Central Bank of Nigeria (“CBN”) Market Stabilisation Facility (“NMSF”) for distribution companies of US$1.8bn and

increased tariffs, which tariffs are set at a level that enables repayment of the

NMSF funds as well as enables AED Plc to earn an acceptable equity return on

investment

.


10 year cost reflective tariff model

Minor reviews every 6 months and major reviews


Section 6.1 of MYTO methodology provides that minor review be carried out whenever a market participant has a grievance with the current inputs, but the participant must operate with said inputs for a certain period in order to empirically prove they need to be changed

Inflation rate

Foreign exchange rate

Gas price

Generation capacity

Capacity to evacuate generation capacity Minor Review

BI – Annual Minor Review

5 Year Major Review

According to Section 6.4 of the MYTO methodology, the major 5-yearly tariff review, will address the following variables:

Capital expenditure

Actual and projected sales

Customer numbers and consumptions

Operating costs

Fuel costs

Taxes and other payments

Forecasts of electricity demand

Interest rates

Reasonable industry WACC

Appropriate expansion of the transmission and distribution networks

Reasonable annual rates of reduction of industry losses, particularly non-technical losses.

AED Plc Business Model broadly on track


Operations

Reduced ATC&C losses

Improved billing efficiency

Increased Customer Connections –

Metering

Improved collection rate

Improved customer service levels

Human

Resources &

Technology

Operations

Safety

Customer

Service

Safety

HSES policy developed

Fence off of all exposed Infrastructure

Installed danger warning signs at all

AED Plc Sites

Conducting Public / Community

Sensitization Programmers

Stakeholder Engagement Team

Constituted

2015Q2 was the first quarter in history

where there were no loss time

accidents

Customer Service

Call centre established

Stakeholder engagement strategy

being implemented

Revenue protection unit established

Business information system installed

Human Resources & Technology

Right-sizing completed

Organisation redesign in progress

Regional structure initiated

Employee development plans

developed

IT infrastructure to support business

operations to be installed by Q12015

CEC Group: AED Plc operations insights


Improvements in ATC & C losses

Investments into ICT and systems continue

to sustain improvement

Challenges remain / more effort being

invested

10%

20%

30%

40%

50%

60%

70%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

ATC & C Losses %

ATC & C Losses 2014

ATC & C losses 2015

150,000,000

170,000,000

190,000,000

210,000,000

230,000,000

250,000,000

270,000,000

290,000,000

310,000,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

AED Plc Trend Energy billed MWh

Energy Billed 2014

Steady increase in power availability

Improvement in billing efficiency

CEC Group

Financial results


0.00

0.50

1.00

1.50

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Dividend Uc

Earnings from continuing operations, U$m, 2006-15

Dividend per share, 2009-16*

Revenue, U$m, 2006-15

EPS, USc, 2006-15

CEC Group: Long-term financial snapshot


Revenue increased in FY15

despite commodity down

cycle

Bad debt provision

(USD94.4m) & PPE impairment

(USD86.1m) write downs

masked AED Plc revenue

gains & positive CEC Plc

performance

Announced interim dividend

of USc1.01 in Jan 16

Paid dividend of USc0.86 in

Jan 15

CEC Group: Statement of profit or loss

18

Ch. 2015 2014 Comments/ Highlights

Revenue 6% 616.7 581.0 Revenue growth driven by tariff increase at Nigerian operations

Cost of sales 7% (459.4) (493.8)

Gross profit 80% 157.3 87.2 Increment in average billing efficiency at AED Plc

Cash operating expenses -2% (121.3) (118.4)

Bad debt provision -115% (94.5) (44.0) Change in bad debt provisioning policy

Other income 135% 32.4 13.8 International power sales up by ~150% y/y in DRC region

Op profit before dep. & impairment 57% (26.1) (61.4)

Impairment of property, plant & eq. - (86.1) -

Depreciation - (38.9) (38.6)

Operating loss -51% (151.2) (100.1)

Interest expense, total 6% (47.6) (50.5)

Interest & invest. Income 15% 1.5 1.3

Earnings before tax -32% (197.2) (149.3)

Income tax expense -58% (23.2) (14.7)

Earnings from cont. ops. -34% (220.4) (164.0)

Diluted EPS -28% -$0.055 -$0.043

CEC Group: Financial position

19

Ch. 2015 2014 Comments/ Highlights

Shareholders funds -33% 293.0 436. 9

Interest bearing debt 1% 235.6 237. 4

Non current assets 897.2 828.0

Current assets 279.4 278.7

Cash -41% 60. 9 102.4

Current liabilities -22% 459.2 377.6

Net current liabilities -82% (179.8) (98.9)

CEC Group: Debt and capital expenditure

20

Debt repayment profile

Capital expenditure & investment

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• Gearing at prudent and manageable levels

– Restructured U$122m loan (UBA)

– Capital repayment moratorium until Mar/17

– Weighted ave. debt maturity at 8.4 yrs vs. 7.2 yrs in 2014

• Capex: USD28.7m in 2015 vs USD25.8m in 2014

– Continued capex for replacement, expansion, operational and automation

– Retain capex for 2016 at similar levels

• Project investments at U$13m in 2015

– Investments at Heavy Fuel Oil project at Sierra Leone,

– Hydroelectric project in Zambia

– Feasibility study on solar project at Shiroro hydropower plant

CEC Group: Going concern

21

Current liabilities USD ‘ 000

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Net current liabilities & losses

Group loss USD220.35m (2014: USD164.02m)

Net current liabilities of USD 179.8m at year end (2014: USD226.9m).

Interim Rules and NBET debt of USD264.2m, included in current net liabilities, recoverable in the medium term from

CBN funding

increased tariffs

Non-cash charges to earnings

Of the USD220.35m loss USD180.6m comprised

Impairment loss on property, plant and equipment USD86.1m (2014: Nil)

Bad debt provisions of USD94.5m (2014: 44.0m)

Analysis of non-cash charges

Total dividends, USD Revenue, USD’000, 2005-15

EPS, USc, 2005-15

CEC Plc: Long-term financial snapshot


Cash generated from operations USD 000

CEC Group: CEC Plc

USDm

CEC Plc 2015 2014 Ch. Comments/ Highlights

Revenue 291.1 291.9 0%

Gross Profit 86.5 88.7 -3%

EBITDA 80.0 60.6 32% - Up 32% y/y due to increased power trading and FX gains

Net Profit 39.5 33.6 18%

Margins:-

Gross margin 29.7% 30.4% -0.7%

EBITDA margin 27.5% 20.8% 6.7%

Net margin 13.2% 11.5% 1.7%

Financial position:-

Shareholders funds 381.5 279.5 36%

Cash 40.2 43.2 -7%

Debt 101.6 99.7 -2%

Net current assets 63.4 49.3 29%


CEC Group: Telecommunications: CEC Liquid Telecom


CEC Liquid Telecom USDm 2015 2014 Ch.

Revenue 14.7 13.3 11%

Gross Profit 10.0 7.3 37%

EBITDA 2.4 1.7 41%

Net Profit 1.5 (0.1) -

Margins:- Mvmt

Gross margin 3.4% 2.5% 0.9%

EBITDA margin 0.8% 0.6% 0.2%

Net margin 0.5% 0.0% 0.5%

Financial position:- Ch.

Shareholders funds 33.6 29.2 15%

Cash 0.46 4.9 -91%

Debt 8.5 11.0 -23%

Hai Telecoms USDm 2015 2014 Ch.

Revenue 6.4 7.0 -9%

Gross Profit 2.5 3.5 -29%

EBITDA (0.2) 1.1 -118%

Net Profit (0.3) 0.5 -161%

Margins:- Mvmt

Gross margin 0.9% 1.2% -0.3%

EBITDA margin -0.1% 0.4% -0.5%

Net margin -0.1% 0.2% -0.3%

Financial position:- Ch.

Shareholders funds 0.273 0.876 -69%

Cash 0.058 0.013 346%

Debt 0.300 0.285 -5%

CEC Group: Nigerian operations AED Plc


USDm

AED Plc 2015 2014 Ch. Comments/ Highlights

Revenue 322.1 289.0 12% Tariff increase and Improved billing efficiency (81% in 2015 vs. 67% in 2014)

Gross Profit 67.2 (1.5) - Reduced Aggregate Technical Commercial and Collection (ATC&C) losses to 50% in 2015 from 53% in 2014

Impairment PPE 82.2 -

EBITDA (106.1) (118.5) +10% Change in bad debt provisioning policy resulted in 1x increase to U$94m

Net loss (216.6) (197.3) -10%

Margins:-

Gross margin 23.1% -0.5% -


Shareholders funds 184.9 191. 9 -4%

Cash 9. 0 18.8 -52%

Debt 1.8 1.1 64%

Net current liabilities: (226.9) (123.3) -84%

Less: Market

Operator & NBET

amounts due

264.2 144.9 -82%

Net current assets 84.4 21.6 +291% - Proforma adjusted net current assets

CEC Group: Nigerian operations NSP


USDm

NSP 2015 2014 Ch. Comments/ Highlights

Revenue 61.7 63.2 -2% - Low water levels affected supply

Gross Profit 47.4 44.9 6% - Collections to billable revenue increased to 83% in 2015 from 65% in 2014

EBITDA 36.4 41.4 -12%

Net Profit (13.3) (5.1) -161% - FX losses increased to U$13m (vs. U$5m) due to delay in activation of PPA

tariffs

Margins:-

Gross margin 16.3% 15.4% 0.9%

EBITDA margin 12.5% 14.2% -1.7%

Net margin -4.6% -1.7% -2.9%


Shareholders funds 27.8 45.0 -38%

Cash 6.3 6.8 -7%

Debt 63.1 66.3 5%

Project pipeline


Project pipeline


MW Country

CECA SL (thermal) 128 Sierra Leone

Kabompo Gorge (hydro) 40 Zambia

Luapula (hydro) 700 Zambia/DRC

2nd Zambia – DRC interconnector 550 Zambia

Prospects:-

• Feasibility studies on renewable energy generation by investigating solar parks in Zambia

• Expansion of generation capacity at Shiroro (with solar) underway

Outlook & strategy


CEC Group: Segment overview


Zambia Nigeria

Country Strategy

Cautious view of capital expenditure

Seek alternative generation sources & diversify revenue base

Interest rate and exchange rate hedging

Pursuit of cost saving measures

Stabilisation strategy

Pursue operational improvements: reducing ATC & C losses, business process re-engineering, improve revenue collection and customer service delivery

Establishing steady cash flows from NSP

Group strategy

oCEC Group equity is undervalued - strategies to unlock value will be pursued and this

includes a capital raise in CECA

oActively pursue target projects including renewables

oProgress development of the 128MW HFO power plant in Sierra Leone

oActive participation in evolution of regulatory environments



Energy Telecommunication

Business CEC Plc, AED Plc, NSP CEC Liquid Telecom, Hai Telecoms

Outlook

o Estimate 10-15% average reduction in mining power uptake in Zambia; to recover in medium term

o U$1.8bn Nigeria Electricity Market Stabilization Facility to provide liquidity to

distributors & reduce net liabilities

o Tariff increase in Nigeria in Feb 2016 @ 20% and continued tariff reviews

o Tariff discussions in Zambia continue

o Positive outlook for Zambia’s ICT sector

o Retail growth through wider services and products

o Increased countrywide presence

o Restructured Telecoms businesses will increase market share

2016 Focus/

objectives

o Continue to source power from the region to meet shortfall in Zambia

o Continue with the AED Plc turn around strategies

o AED Plc capex allocation for capacity expansion and AT&C loss reduction measure

o Significant progress at 128MW CECA Sierra Leone thermal power project

o Kabompo Gorge (hydro) power project. Zambia-DRC 220kV Interconnector project

o Generation capacity expansion at Shiroro hydropower plant with solar generation

o Copperbelt fiber expansion

o Expand FTTH expansion to other parts of the country other than Lusaka

o Improve profitability and benefit from synergies

o Consolidate market position

o Improve quality and affordability of the services

o Focus on Branding



Energy Telecommunication

Business CEC Plc, AED Plc, NSP CEC Liquid Telecom, Hai Telecoms

Drivers

oMove toward market related tariffs

oLess uncertainty in regulatory environment

oAbility to leverage alternate generation sources regionally

oGrowth in international power trading & wheeling

oImproved AED Plc collections & operational performance

oLeverage nationwide infrastructure

oCommissioning of fiber cable with access to East Africa and co-located sub cables

oInfrastructure build: Expand Fiber to the Home (FTTH) service

oUpgraded its Multiprotocol Label Switching (MPLS) and the Gigabit Passive Optical Networks (GPON) fiber solutions

Q&A


Thank You


copperbelt energy corporation limited fy 2015 financial results presentation

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