CEC FY2010 final results presentation
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Transcript of CEC FY2010 final results presentation
2010 FINAL RESULTS
ANNOUNCEMENTS
PRESENTATION TO ANALYSTS9 MARCH 2011
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Outline Business Environment Performance Highlights Full year Financial Results Operational Overview Business Development Corporate Social responsibility Future Outlook Q & A
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Business Environment Zambia achieved a GDP growth of 7.1% in 2010 Growth was mostly driven by agriculture, construction and mining
sectors most of which are energy intensive sectors There was notable increase in copper production and copper
prices Inflation at year end was 8% Power supply during the year greatly improved due to completion
of rehabilitation works at Kariba by Zesco Government continued to promote investment in the energy
sector The need to implement cost reflective tariffs has been identified
and in line with this domestic, commercial and industrial tariffs were revised upwards by ZESCO (note: CEC tariff is negotiated separately)
CEC is currently in negotiations with its customers to review mine tariffs
Capital market also posted positive results with LuSE index closing at 19%; CEC’s share price posted a 43% gain
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CEC 2010 Performance Highlights
Revenue increased by 9%
Gross profit increased by 8.3 %
Earnings per share rose by 7%
Load sales volumes increased by 8%
Capital expenditure increased by 87% to US$13.7m
Reduction in working capital position impacted by
High Capex US$13.7m
Debt repayment US$ 7m
High effective tax payment us$6.5m
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2010 Full Year Financial Results
US$ 000 2010 2009 2008 2007 2006
Revenue 167,294 154,169
177,486 131,746
127,280
Gross Profit 45,856 42,371
49,526 38,746
37,383
EBITDA 30,293 28,682
26,419 22,152
21,293
PBIT 19,602 19,126
17,222 13,306
12,745
Net Profit 12,719 11,920
10,143 7,251
7,915
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Financial Results Increase in revenue to US$167.3 is attributed to:
8% increase in maximum demand by CEC customers Tariff indexation in line with US PPI
Cost of sales went up by 9% due to: An increase in power purchased from Zesco Indexation of Zesco tariff to CEC by US PPI
Gross profit increased by 8.3% to US$42.4 in line with increase in sales to CEC’s customers
Operating costs increased by 14.7% as a result, in part, of: 14% increase in depreciation of fixed assets Insurance costs remaining constant at US$1.5 million 35.5% increase in staff related cost
Significant factors were additional actuarial costs and lower capitalisation of labour on projects
47% increase in stores and maintenance Other operating expenses reduced by 30%
PBIT and net profit increased by 3% and 7% respectively EBITDA increased from US$28.6 million in 2009 to US$30.3 million Total capital expenditure for the year was US$13.8 million Key investments were made to both primary and secondary equipment of CEC’s transmission network
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Financial Results (continued) Finance expense reduced by 39% to US$1.1 million from
US$1.8 million due to Reduction in LIBOR rate applicable to the Company’s debt facilities Reduction in the quantum of outstanding loans compared to the
previous year
However negative working capital of US$7.1 million was recorded by year end. CEC has secured a loan of US$ 10 million to increase the Company’s current assets
Retained earnings rose by 8% to US$48.8 million
Total equity increased by 2% to US$161 million
The net book value of fixed assets was US$ 239.3 million at year end compared to US$236.2 million
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5 Year Revenue TrendRevenue
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
YEAR
US
$`0
00
Revenue
Revenue 122,164 127,280 131,746 177,486 154,169 167,294
2005 2006 2007 2008 2009 2010
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5 Year EBITDA/Net Profit Trend
EBITDA/NET PROFIT
0
5000
10000
15000
20000
25000
30000
35000
Year
US
$ M
illi
on
EBITDA Net Profit
EBITDA 21293 22152 26419 28682 30293
Net Profit 7915 7251 10143 11920 12719
2006 2007 2008 2009 2010
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Capital Market Performance CEC share price posted a 43% increase
(K430:2009; K615:2010) A total dividend paid remained constant at US$
10 million Total dividend per share for the year was US1.00
cents (equivalent to K48.19) Gross dividend yield based on year end share
price of K615 was 8% No final dividend is proposed in respect of this
financial year Weighted basic & diluted EPS was US1.27 cents,
an increase of 7% over 2009
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Operational Review Overall good operational performance was achieved. Customer demand increased and was mostly driven by
resumption of operations, return to full production and resumption of expansion projects by our mining customers
Only COSAK smelter has remained under care and maintenance (Chambishi Metals PLC)
High voltage transmission and distribution systems were maintained to satisfactory standard
However the country experienced another blackout in June 2010 which resulted in loss of power for about 5 hours
Industry’s response to the blackout was much better than the previous years
Another blackout occurred in a neighbouring country in August which ideally would have affected the Zambian system. However the Zambian network remained intact due to mitigating measures that have now been put in place
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Operational Review Customers maximum demand increased by 8% Energy sales also increased from 3,338GWH to 3,640GWH
in 2010 Increase in copper prices continues to spur on the
measurable demand ramp up by most customers Domestic wheeling for Zesco recorded a marginal increase
of 0.2% PSAs for two of our mining customers, Chibuluma Mine and
NFCA which are due to expire in 2012 were extended by a further 10 and 15 years respectively
A cost of service study was commissioned during the year The study will help CEC to establish correct customer tariffs
based on cost of finance and asset base CEC commenced discussions with Zesco and its customers
with a view to migrating tariffs to cost reflective levels
13
2010 Trends in Power sales and Copper Price
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Load
505 514 521533
436
470
0
50
100
150
200
250
300
350
400
450
500
550
600
2005 2006 2007 2008 2009 2010
YEAR
LO
AD
(M
W)
Load
5 Year Load Trends
15
Growth Prospects
1616
Expansion in Core Business These projects relate to the supply of power to new mining
operations on the Copperbelt: CEC signed up a new customer, Konnoco, for supply of
power to its Konkola North Mine. The mine will take up an initial 40MW with potential to increase 100MW in future
Progress was made on the development of the Muliashi Project in Luanshya, that will require 30MW
Other projects progressed during the year include: The Synclinorium project by Mopani Copper Mine in
Kitwe CRO project by Konkola Copper Mine in Chingola
On completion of these projects are expected to require in excess of 100MW additional power
1717
Kabompo Gorge Hydro Project The final feasibility report indicated that that the project is
feasible, provided that tariffs can be adjusted to cost reflective levels and geological and hydrological risk allocation is managed
Design requires: dam 47.5m high, 123m long, reservoir created of 3,485 Hectares
Proposed output is 40MW, 166GWh per annum The EIA was completed in December 2010 and final report
submitted to the Environmental Council of Zambia CEC engaged Greengate LLC of USA as financial advisor and
GBO as tax advisor for the project Land acquisition and Concession Agreements are being
discussed with Government The Government and local leadership have been engaged at
various stages, pro-active CSR policy Following Expressions of Interest, a short list of 5 contractors
has been formed to submit full bids
1818
Projects Under Development 2nd DRC – Zambia Inter-Connector
Construction of the new double circuit 220kV inter-connector between Zambia and DRC is ongoing
The cost for the Zambian portion is US$16 million (including $4m already incurred)
Luapula River & Supply to Luapula Province Luapula River holds potential for five different hydro schemes,
with estimated potential of circa 850MW Transmission line from Copperbelt to Luapula Province will
have a positive developmental effect to the economy CEC submitted a request to the PPP Unit of Ministry of Finance
to undertake feasibility study on hydro sites on Luapula River The request was granted by the Government Studies on the river schemes commenced during 2010
1919
Renewable Projects
A unit has been created in the company to focus on development of renewable energy projects
Key developments include: Commissioning of a bio-diesel plant in Kitwe,
capable of producing 1000 litres / annum Grant funding secured to evaluate bio-mass
generation in Copperbelt and NorthWestern province
Development of solar facility at Kabompo Gorge
2020
Telecommunications CEC consolidated its investment in optical fibre
infrastructure by purchasing the underground fibre in Lusaka and other commercial centres from Realtime
The total network now operated by CEC is 770KM The network is currently being extended to cover
new towns including Livingstone, Kabwe and Solwezi
Customer base includes banking, mining companies, mobile and internet service providers
2121
Governance Good corporate governance and social
responsibility practices continue to be implemented
CEC benchmarks its corporate governance practices against the LuSE code
Board Committees chaired by non-Exec Directors Audit SHE Employee Remuneration & Development Executive Business Development
Audit of communication recently completed, suggested improvements being implemented
2222
Various health intervention programmes were implemented which include Rollback Malaria programme HIV/AIDS awareness programme and ARV provision
Social projects undertaken include: Monetary and material donation to Namianga Secondary
School Renovation of the Arthur Davies stadium Commissioning of new gym in Kitwe Support to UNZA school of engineering through
seconding a senior manager
2011 emphasis on: Development of social facilities at Kabompo Gorge Ongoing support for higher education, youth and health
Corporate Social Responsibility
2323
Recognition CEC was awarded an international prize for the
quality of its on-line financial reporting by London based World Finance
CEC was also recognised by the Africa Investor of South Africa as ‘Developer of the Year 2010’
The ZRA awarded CEC for good performance in maintaing tax records and timely submission of tax payments
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Summary – Shareholder Issues Core Business – key issues:
Increasing sales volumes and unit tariffs increasing above inflation
Increasing capital investment required Maybe power shortages in 2 to 3 years if economy grows
faster than power generation, improve when new large plants are commissioned
Kabompo Gorge Good progress in design and tendering, environmental,
financing and concession agreements Commencement will require formation of a SPV which
will impact CEC’s balance sheet Developmental benefits – last new significant hydro was
constructed >30 yrs ago in Zambia
2525
Summary – Shareholder Issues New Power Developments
Focus on investment in strategic generation projects Development of renewables unit Creation of an SPV for greenfield developments to
ringfence and share development risks
Telecoms Focus on fibre rollout and sales Open fibre network available to other operators
Dividends Reduction in payout % to provide capacity to re-invest
and grow Consistent dividend payout policy to be retained