Zambia’s energy distribution and transmission company Copperbelt Energy Corporation Plc (ISIN0000000137) had a good 2018 with earnings 27.2% stronger than previous year at K584 million from K459 million a year ago. The Lusaka Stock exchange listed entity’s revenues rose 19% to K4,405 million from K3,697 million propelled by increased energy demand following healthy 2017/2018 rainfall which had dams almost to the brim. CEC benefited from the mines recovery from the energy poverty era of 2015/2016 that saw a depressed mining activity. Mining productivity increases correlates with appetite for energy usage on the grid.
What else fueled earnings boost?
Other drivers of the earnings boost for CEC Plc was the autopsy effects of the divestiture of the entity’s telecommunication assets which saw realization of its 50% stake in Liquid Telecoms that added a K115.8 million to the energy company’s bottom line and the deferred payment of the transaction weighed positively on the total asset base for CEC to K7.67 billion from K6.19 billion representing a 23% widening. (of this K363.9 million reflects a receivable relating to the disposal payment).
The agreement that CEC concluded last year relating to wheeling power to Frontier mine in DRC yielded fruit as the power export proceeds added onto those from domestic wheeling for ZESCO and SAPP pool added to the 2018 earnings. In electric power transmission, wheeling is the transportation of electric energy(megawatt-hours) from within an electrical grid to an electrical load outside the grid boundaries. Wheeling often refers to the scheduling of the energy transfer from one Balancing Authority to another.
Another interesting pointer is that the power supply agreements with the mines and DRC are in dollars to the extent that Kwacha depreciation works in favor of CEC’s earnings from a conversion and reporting perspective.
CECs EBITDA nudged 27.2% higher to K1,153 million from K972 million as its EPS rose to K0.36 from K0.28 in FY2017.
Just how much energy did CEC handle and wheel?
CEC handled in excess of 5,271 Gwh of which 3,761 Gwh was consumed by the mines and the remaining 1,459 Gwh was wheeled for ZESCO. Power sales to the mines rose 3,676 Gwh from 3,513 Gwh a 4.63% increase in appetite very close to the mining productivity increase of 6% reported for 2018. The largest wheeling drivers where ZESCO (1,476 Gwh) and Frontier mine in DRC (271 Gwh). Wheeling especially in the domestic market has seen a rising trajectory over the last 3 years.
And the Friday 15 March asset sell off?
It was merely a price correction. The CEC stock has been under pressure from the time the CDC transaction where the London based Development Finance entity bid to have controlling stake over CEC Plc. The energy stock rallied over 44% which tumbled as the transaction could not conclude. The stock has been in correction mode with various investors wanting out but for those that forecast higher earnings and subsequently a dividend. Ex dividend a few holders of the stock are exiting the stock. CEC Plc shares were 4.5% lower to K1.55 on Friday 15 March.
Outlook for the Energy Company
CEC will focus its efforts in renewable energy for 2019 to cover solar and hydro generation.
