Lusaka Stock Exchange – LuSE listed power trading Copperbelt Energy Corporation (ZM: ISIN0000000136) FY20 financial performance revealed earnings resilience at top line, cost and bottom line levels despite the hurdles faced in the year. Despite being a pandemic year, the energy trader was in the labyrinth of upside risks to include a volatile regulatory environment that saw the pronouncement of statutory instrument No.57 – the common carrier – that disadvantaged its operations and extended uncertainty around the controversial Bulk Supply Agreement (BSA) renewal following its expiry, CEC was still able to churn out $311.0million in revenues, a 9% ebb from previous year while its after tax earnings halved to $5.7million.
Other finance metrics that outperformed include a 6.5% climb in cash position to $83.0million while adjusted EBITDA rose 19.0% to slightly under $110million as cash costs remarkably slowed 23.0% to $27.0million.
SILVERLINGS FOR COPPERBELT ENERGY CORPORATION
A booming mining environment locally and in DRC continue to drive increased demand for power supported by the motivation provided by bullish metal prices on the London Metal Exchange (LME). Global red metal prices continue to be rallied by an electric car era, forecast infrastructure bill in the US, global deficits and full economic recovery from the COVID19 pandemic in China. CEC recorded a 5% increase in demand to 3,28GWh supporting the top line.
Other silver linings for the CEC stock were the 2020 liberalization of the power market following the Electricity Act Amendment permitting direct sales of power by Independent Power Producers (IPPs) to consumers which was a massive breakthrough. The energy trader also modernized its power assets and recently was granted a judicial ruling that thwarted the SI.57 and its associated provisions.
CAUTIOUSLY OPTIMISTIC OUTLOOK
Outlook for the stock remains cautiously optimistic with rising demand in the mines versus the nations generation capacity while political risk factors still price in the stock stemming from the way forward vis the BSA expired agreement and termination of the Konkola Copper Mine contract in light of the recent reorganization of the mine and new shareholder.
As at close of business on Friday April, 10 CEC stock traded for K1.26 on the Zambian bourse.
The Kwacha Arbitrageur
